UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE
13a-16 or 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2015.
Commission File Number 001-36204
ENERGY FUELS INC.
(Translation of registrants name into English)
2 Toronto Street, Suite 500
Toronto, Ontario,
Canada
M5C 2B6
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F
Form 20-F [
]
Form 40-F [X]
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [
]
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an attached
annual report to security holders.
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [
]
Note: Regulation S-T Rule 101(b)(7) only permits the
submission in paper of a Form 6-K if submitted to furnish a report or other
document that the registrant foreign private issuer must furnish and make public
under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrants home country), or under the
rules of the home country exchange on which the registrants securities are
traded, as long as the report or other document is not a press release, is not
required to be and has not been distributed to the registrants security
holders, and, if discussing a material event, has already been the subject of a
Form 6-K submission or other Commission filing on EDGAR.
INCORPORATION BY REFERENCE
Exhibit 99.1 included with this report on Form 6-K is expressly
incorporated by reference into this report and is hereby incorporated by
reference as an exhibit to the Registration Statement on Form F-10 of Energy
Fuels Inc. (File No. 333-194916), as amended or supplemented.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
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ENERGY FUELS INC. |
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/S/ David C. Frydenlund |
Date: May 26, 2015 |
David C. Frydenlund |
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Senior Vice President, General Counsel &
Corporate |
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Secretary |
-2-
INDEX TO EXHIBITS
-3-
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ENERGY FUELS INC. |
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AMENDED NOTICE OF ANNUAL AND SPECIAL MEETING OF
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SHAREHOLDERS |
TO BE HELD ON THURSDAY, JUNE 18, 2015 |
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AMENDED MANAGEMENT INFORMATION CIRCULAR |
May 21, 2015 |
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This Amended Notice and Amended Management Information
Circular amends and supersedes the Notice and Management Information Circular
dated May 6, 2015 (the Original Notice and Circular) for the Meeting. Under
the Original Notice and Circular, the Meeting was to be held at 10am Toronto
time on Tuesday June 16, 2015, to consider items 1-4 as set out in this amended
Notice and Management Information Circular. As set out herein and the
accompanying amended circular, the Meeting is now to be held at 10am Toronto
time on Thursday June 18, 2015 to consider items 1-5 as set out in the
accompanying amended circular.
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ENERGY FUELS INC.
AMENDED NOTICE OF ANNUAL AND SPECIAL
MEETING
OF SHAREHOLDERS TO BE HELD
THURSDAY, JUNE 18, 2015 |
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TO THE HOLDERS OF COMMON SHARES:
Notice is hereby given that the annual and special meeting of
the holders of common shares of Energy Fuels Inc. (the
Corporation) that was called to be held at the offices of Borden Ladner
Gervais LLP, 44th Floor, Scotia Plaza, 40 King Street West, Toronto, Ontario,
Canada, M5H 3Y4 on Tuesday, June 16, 2015 at 10:00 am (Toronto time) to consider
items 1-4 below, will now be held on the 44th Floor at the same location, but on
Thursday, June 18, 2015 at 10:00 am (Toronto time) (the Meeting)
for the following purposes:
1. |
to elect directors of the Corporation; |
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2. |
to appoint the auditors of the Corporation and to
authorize the directors to fix the remuneration of the auditors; |
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3. |
to consider and, if deemed appropriate, pass an ordinary
resolution approving the extension of the Corporations existing
Shareholder Rights Plan for a further three-year term, as more
particularly described under Particulars of Matters to be Acted Upon
at the Meeting other than the Transaction Extension of Shareholder
Rights Plan in the accompanying amended management information
circular of the Corporation dated May 21, 2015 (the
Circular); |
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4. |
to consider and, if thought advisable, to pass an
ordinary resolution ratifying and approving the Corporations 2015 Omnibus
Equity Incentive Compensation Plan and approving unallocated options and
restricted shared units, as more particularly described under
Particulars of Matters to be Acted Upon at the Meeting other than the
Transaction Approval of 2015 Omnibus Equity Incentive Compensation
Plan in the Circular; |
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5. |
to consider and, if thought advisable, pass an ordinary
resolution authorizing the issuance of common shares of the Corporation
pursuant to an acquisition by the Corporation of Uranerz Energy
Corporation (Uranerz) by way of a merger of the Corporations
wholly owned subsidiary EFR Nevada Corp. with and into Uranerz under the
terms of an agreement and plan of merger dated January 4, 2015, as amended
on May 8, 2015, pursuant to which, among other things, the Corporation
will issue common shares to the shareholders of Uranerz in exchange for
all issued and outstanding shares of Uranerz common stock on the basis of
0.255 common shares of the Corporation for each whole share of Uranerz
common stock, all as more particularly described in the Circular;
and |
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6. |
to transact such other business as may properly be
brought before the Meeting or any adjournment
thereof. |
The Circular provides additional information relating to the
matters to be dealt with at the Meeting and forms part of this amended Notice.
The Corporation has elected to use the notice-and-access
provisions under National Instrument 54-101 Communication with Beneficial
Owners of Securities of a Reporting Issuer (the "Notice-and-Access
Provisions") for the Meeting. The Notice-and-Access
Provisions are a set of rules developed by the Canadian Securities
Administrators that reduce the volume of materials that must be physically
mailed to shareholders by allowing the Corporation to post the Circular and any
additional materials online. Shareholders will still receive this amended Notice
of Meeting and a form of proxy and may choose to receive a paper copy of the
Circular. The Corporation will not use the procedure known as 'stratification'
in relation to the use of Notice-and-Access Provisions. Stratification occurs
when a reporting issuer using the Notice-and-Access Provisions provides a paper
copy of the Circular to some shareholders with this notice package. In relation
to the Meeting, all shareholders will receive the required documentation under
the Notice-and-Access Provisions, which will not include a paper copy of the
Circular.
1
Please review the Circular carefully and in full prior to
voting, as the Circular has been prepared to help you make an informed decision
on the matters to be acted upon. The Circular is available on the website of the
Corporations transfer agent, CST Trust Company, Inc. at
www.meetingdocuments.com/cst/EFR, and under the Corporations SEDAR profile at
www.sedar.com. Any shareholder who wishes to receive a paper copy of the
Circular, should contact CST Trust Company, Inc., at 1-888-433-6443 or
fulfilment@canstockta.com by June 4, 2015. Shareholders may also use the
toll-free number noted above to obtain additional information about the
Notice-and-Access Provisions.
Shareholders who cannot attend the Meeting in person may vote
by proxy. Instructions on how to complete and return the proxy are provided with
the proxy form and are described in the Circular. To be valid, proxies must be
received by CST Trust Company, Inc. by mail at c/o Cover-All, P. O. Box 721,
Agincourt, Ontario, Canada, M1S 0A1 or by fax to 1-866-781-3111 (toll free) or
416-368-2502 or by email to proxy@canstockta.com, no later than 5:00 p.m.
(Toronto time) on June 16, 2015, or if the Meeting is adjourned, no later than
10:00 a.m. (Toronto time) on the last business day preceding the day to which
the Meeting is adjourned.
Dated at Lakewood, Colorado, USA this 21st day of May, 2015.
BY ORDER OF THE BOARD |
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(Signed) Stephen P. Antony |
President and Chief Executive Officer
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2
AMENDED MANAGEMENT INFORMATION CIRCULAR OF ENERGY FUELS INC.
TABLE OF CONTENTS
GLOSSARY OF TERMS |
1 |
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GENERAL INFORMATION |
3 |
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APPOINTMENT AND REVOCATION OF PROXIES |
3 |
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VOTING OF SHARES REPRESENTED BY MANAGEMENT
PROXIES |
3 |
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VOTING BY NON-REGISTERED SHAREHOLDERS |
4 |
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DISTRIBUTION OF MEETING MATERIALS TO NON-
OBJECTING BENEFICIAL OWNERS |
5 |
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VOTING SECURITIES AND PRINCIPAL HOLDERS OF
VOTING SECURITIES |
5 |
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PARTICULARS OF MATTERS TO BE ACTED UPON AT
THE MEETING - THE TRANSACTION |
5 |
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Cautionary Statement Regarding
Forward-Looking Information and Statements |
5 |
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Cautionary Notice to Shareholders in the
United States Regarding Mineral Reserves and Mineral Resources |
7
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Reporting Currencies and Accounting
Principles |
8 |
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Exchange Rates |
9 |
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The Transaction |
10 |
Background to the
Transaction |
10 |
Recommendations of the EFI Board; EFIs Reasons for the Transaction
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20 |
EFI Financial
Advisors and Roth Fairness Opinion |
21 |
Securities Issuable by EFI Pursuant to the Transaction |
22 |
EFI Shareholder
Approval |
23 |
Uranerz Shareholder Approval |
23 |
Dissent Rights |
23 |
Material Agreements Relating to the Transaction |
23 |
Amendment of the
Merger Agreement |
44 |
Support Agreements |
45 |
Litigation
Relating to the Transaction |
46 |
Regulatory Approvals Required for the Transaction and Other
Regulatory Matters |
46 |
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Risk Factors |
50 |
Risks Relating to
the Combined Company |
52 |
Risks Related to EFIs Business |
60 |
Risks Related to
Uranerz Business |
60 |
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Information About EFI |
60 |
EFR Nevada Corp. |
60 |
Trading Price and
Volume |
61 |
EFI Prior Sales |
63 |
EFI Documents
Incorporated by Reference |
63 |
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Information About Uranerz |
64 |
Uranerz Documents Incorporated by Reference |
65 |
Interest of
Certain Persons in the Transaction |
65 |
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Change of Control Provisions under Employment Agreements |
66 |
Change of Control
Payments |
71 |
Dividends |
74 |
Consolidated
Capitalization and Options to Purchase Securities |
74 |
Prior Sales |
74 |
Price Range and
Trading Volumes of Uranerz Shares |
75 |
Legal Proceedings and Regulatory Actions |
76 |
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Uranerz Material Mineral Properties |
76 |
Nichols Ranch
Property |
76 |
Arkose Property |
87 |
West North Butte
Satellite Properties |
91 |
North Rolling Pin Property |
95 |
Reno Creek
Property |
99 |
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Information About EFI After Giving Effect to the
Transaction |
104 |
General |
104 |
Pro Forma
Financial Information |
104 |
Authorized and Issued Share Capital |
106 |
Principal Holders
of Common Shares |
107 |
Board of Directors and Management After the Transaction |
107 |
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Interest of Experts |
108 |
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Consent of Expert |
110 |
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PARTICULARS OF MATTERS TO BE ACTED UPON AT
THE MEETING OTHER THAN THE TRANSACTION |
111 |
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Election of Directors |
111 |
Cease Trade Orders
and Bankruptcies |
115 |
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Appointment of Auditors |
116 |
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Extension of Shareholder Rights Plan |
116 |
Purpose of the Rights Plan |
116 |
Summary of the
Rights Plan |
117 |
Shareholder Approval |
120 |
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Approval of 2015 Omnibus Equity Incentive
Compensation Plan |
121 |
Summary of Equity
Incentive Plan |
121 |
Shareholder Approval and Ratification of Equity Incentive Plan |
126 |
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Executive Compensation |
127 |
Compensation
Governance |
127 |
Compensation Discussion and Analysis |
129 |
Summary
Compensation Table |
133 |
Incentive Plan Awards |
134 |
Pension Plan
Benefits and Deferred Compensation Plans |
135 |
Termination and Change of Control Benefits |
135 |
Director
Compensation |
137 |
Incentive Plan Awards |
138 |
Securities
Authorized For Issuance under Equity Compensation Plans |
140 |
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AUDIT COMMITTEE DISCLOSURE |
142 |
ii
CORPORATE GOVERNANCE DISCLOSURE |
143 |
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INTEREST OF CERTAIN PERSONS IN MATTERS TO
BE ACTED UPON |
143 |
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INTEREST OF INFORMED PERSONS IN MATERIAL
TRANSACTIONS |
143 |
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INDEBTEDNESS OF DIRECTORS AND EXECUTIVE
OFFICERS |
143 |
SCHEDULE A TRANSACTION RESOLUTION
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SCHEDULE B MERGER AGREEMENT |
SCHEDULE C FAIRNESS OPINION |
SCHEDULE D PRO FORMA FINANCIAL STATEMENTS |
SCHEDULE E CORPORATE GOVERNANCE
DISCLOSURE |
SCHEDULE F SHAREHOLDER RIGHTS PLAN AGREEMENT |
SCHEDULE G 2015 OMNIBUS EQUITY
INCENTIVE COMPENSATION PLAN |
iii
GLOSSARY OF TERMS
Unless the context indicates otherwise, in addition to terms
parenthetically defined in this Circular, the following terms shall have the
meanings set out below when used in this Circular.
Cantor means Cantor Fitzgerald Canada Corporation, the
Corporations financial advisor in respect of the Transaction;
Circular means this amended management information
circular of the Corporation, including the Notice of Meeting and all schedules
attached hereto and all amendments thereof;
Effective Time means the time at which the Transaction
shall become effective;
EFI or the Corporation means Energy
Fuels Inc., a corporation existing under the laws of Ontario;
EFI Board means the board of directors of EFI;
EFI Common Shares means common shares in the capital
of the Corporation;
EFI Shareholders means the holders of EFI Common
Shares;
Exchange Ratio means the rate of exchange of EFI
Common Shares for Uranerz Shares specified in the Merger Agreement, being 0.255
EFI Common Shares for each one Uranerz Share;
Fairness Opinion means the opinion of Roth Capital
Partners LLC dated January 2, 2015, a copy of which is attached to this Circular
as Schedule C, to the effect that, based upon and subject to the various
assumptions, limitations and qualifications contained therein, the Exchange
Ratio pursuant to the Transaction is fair, from a financial point of view, to
EFI and its shareholders;
FIRPTA means the United States Foreign Investment
in Real Property Tax Act of 1980;
IFRS mean International Financial Reporting Standards
as issued by the International Accounting Standards Board;
ISR means in-situ recovery, a method of mining and
processing uranium;
Meeting means the special meeting of EFI Shareholders
to be held on June 18, 2015, and any adjournment thereof;
Merger Agreement means the Agreement and Plan of
Merger dated as of January 4, 2015 by and among EFI, Merger Sub and Uranerz, as
amended by an amendment dated as of May 8, 2015;
Merger Sub means EFR Nevada Corp., an indirect
wholly-owned subsidiary of EFI incorporated under the laws of the State of
Nevada;
NI 43-101 means National Instrument 43-101
Standards of Disclosure for Mineral Projects adopted by the Canadian
Securities Administrators;
NI 54-101 means National Instrument 54-101 -
Communication with Beneficial Owners of Securities of a Reporting Issuer
adopted by the Canadian Securities Administrators;
Notice of Meeting means the amended notice of the
special meeting of EFI Shareholders delivered to EFI Shareholders forming part
of this Circular;
OBCA means the Business Corporations Act
(Ontario);
Record Date means the close of business on April 20,
2015, being the time for determining EFI Shareholders entitled to vote at the
Meeting;
Roth means Roth Capital Partners LLC;
1
SEC means the United States Securities and Exchange
Commission;
SEDAR means the System for Electronic Document
Analysis and Retrieval located at www.sedar.com;
Transaction means the acquisition of all of the
Uranerz Shares, Uranerz Warrants and Uranerz Options by the Corporation on the
terms and subject to the conditions set out in the Merger Agreement;
TSX means the Toronto Stock Exchange;
Uranerz means Uranerz Energy Corporation, a
corporation organized under the laws of the State of Nevada;
Uranerz Board means the board of directors of Uranerz;
Uranerz Options means options to purchase Uranerz
Shares granted pursuant to the Uranerz 2005 Nonqualified Stock Option Plan;
Uranerz Shareholder Meeting means the meeting of
Uranerz Shareholders to be held to consider and approve the Transaction;
Uranerz Shareholders means the holders of Uranerz
Shares;
Uranerz Shares means shares of common stock in the
capital of Uranerz;
Uranerz Warrants means currently outstanding warrants
to purchase Uranerz Shares; and
Uranerz Special Committee means the special committee
of independent directors of Uranerz established to advise management of Uranerz
and the Uranerz Board on specific transaction terms relating to the Transaction.
2
GENERAL INFORMATION
The information contained in this Circular is furnished in
connection with the solicitation of proxies to be used at the Meeting to be held
at the offices of Borden Ladner Gervais LLP, 44th Floor, Scotia Plaza, 40 King
Street West, Toronto, Ontario, Canada, M5H 3Y4 on Thursday, June 18, 2015 at
10:00 am (Toronto time), and at all adjournments thereof, for the purposes set
forth in the accompanying Notice of Meeting. It is expected that the
solicitation will be made primarily by mail but proxies may also be solicited
personally by directors, officers or regular employees of EFI. The
solicitation of proxies by this Circular is being made by or on behalf of the
management of EFI. The total cost of the solicitation will be borne by EFI.
The Meeting was initially scheduled for June 16, 2015, but has been changed to
June 18, 2015. The management information circular dated May 6, 2015 has been
updated and amended by this Circular.
Except as otherwise indicated, information in this Circular is
given as of May 21, 2015.
This Circular amends and supersedes the Management
Information Circular dated May 6, 2015 (the Original Circular) for the
Meeting. Under the Original Circular, the Meeting was to be held at 10am Toronto
time on Tuesday June 16, 2015, to consider items 1-4 as set out in this
Circular. As set out herein, the Meeting is now to be held at 10am Toronto time
on Thursday June 18, 2015 to consider items 1-5 as set out above in this
Circular.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the form of proxy accompanying this
Circular are officers and/or directors of EFI. A shareholder of EFI has the
right to appoint a person other than the persons specified in such form of proxy
and who need not be a shareholder of EFI to attend and act for the shareholder
and on the shareholders behalf at the Meeting. Such right may be exercised
by striking out the names of the persons specified in the proxy, inserting the
name of the person to be appointed in the blank space provided in the proxy,
signing the proxy and returning it in the reply envelope in the manner set forth
in the accompanying Notice of Meeting.
A shareholder of EFI who has given a proxy may revoke it by an
instrument in writing, including another completed form of proxy, executed by
the shareholder or the shareholders attorney authorized in writing, deposited
at the registered office of EFI, or at the offices of CST Trust Company, Inc. by
mail at c/o Cover-All, P.O. Box 721, Agincourt, Ontario, Canada, M1S 0A1 or by
fax to 1-866-781-3111 (toll free) or 416-368-2502 or by email to
proxy@canstockta.com, up to 5:00 p.m. (Toronto time) on the second business day
preceding the date of the Meeting, or any adjournment thereof, or with the Chair
of the Meeting prior to the commencement of the Meeting on the day of the
Meeting or any adjournment thereof, or in any other manner permitted by law.
VOTING OF SHARES REPRESENTED BY MANAGEMENT PROXIES
The persons named in the enclosed form of proxy will vote the
shares in respect of which they are appointed by proxy on any ballot that may be
called for in accordance with the instructions thereon. If a shareholder of EFI
specifies a choice with respect to any matter to be acted upon, the shares will
be voted accordingly. In the absence of such instructions, such shares will
be voted in favour of each of the matters referred to herein.
The enclosed form of proxy confers discretionary authority upon
the persons named therein with respect to amendments to or variations of matters
identified in the Notice of Meeting and with respect to other matters, if any, which may properly come before the Meeting. At
the date of this Circular, the management of EFI knows of no such amendments,
variations, or other matters to come before the Meeting. However, if any other
matters which are not known to management should properly come before the
Meeting, the proxy will be voted on such matters in accordance with the best
judgement of the named proxy holder.
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VOTING BY NON-REGISTERED SHAREHOLDERS
Only registered shareholders or the persons they appoint as
their proxies are permitted to vote at the Meeting. However, in many cases,
common shares owned by a person (a non-registered owner) are registered
either (a) in the name of an intermediary (an Intermediary) that the
non-registered owner deals with in respect of the common shares (Intermediaries
include, among others, banks, trust companies, securities dealers or brokers and
trustees or administrators of self-administered registered savings plans,
registered retirement income funds, registered education savings plans and
similar plans); or (b) in the name of a clearing agency (such as The Canadian
Depository for Securities Limited (CDS)) of which the Intermediary is a
participant.
In accordance with the notice and access requirements of
National Instrument 54-101 Communication with Beneficial Owners of Securities
of a Reporting Issuer ("NI 54-101"), non-registered owners who have
advised their Intermediary that they do not object to the Intermediary providing
their ownership information to issuers whose securities they beneficially own
(NOBOs) will receive by mail: (i) a voting information form which is
not signed by the Intermediary and which, when properly completed and signed by
the non-registered holder and returned to the Intermediary or its service
company, will constitute voting instructions (often called a Voting
Instruction Form); (ii) a letter from EFI with respect to the notice and
access procedure; and (iii) the request for financial statements form
(collectively, the Notice and Access Package). The Circular and the
Notice of Meeting may be found at and downloaded from
www.meetingdocuments.com/cst/EFR.
NOBOs who have standing instructions with the Intermediary for
physical copies of the Circular will receive by mail the Notice and Access
Package, the Circular and the Notice of Meeting.
Intermediaries are required to forward the Notice and Access
Package to non-registered owners who have advised their Intermediary that they
object to the Intermediary providing their ownership information (OBOs)
unless an OBO has waived the right to receive them. Very often, Intermediaries
will use service companies to forward proxy-related materials to OBOs.
Generally, OBOs who have not waived the right to receive proxy-related materials
will either:
(a) |
be given a form of proxy which has already been signed by
the Intermediary (typically by a facsimile stamped signature), which is
restricted as to the number and class of securities beneficially owned by
the OBO but which is not otherwise completed. Because the Intermediary has
already signed the form of proxy, this form of proxy is not required to be
signed by the non-registered owner when submitting the proxy. In this
case, the OBO who wishes to vote by proxy should otherwise properly
complete the form of proxy and deliver it as specified; or |
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(b) |
be given a Voting Instruction Form which the Intermediary
must follow. The OBO should properly complete and sign the Voting
Instruction Form and submit it to the Intermediary or its service company
in accordance with the instructions of the Intermediary or its service
company. |
In either case, the purpose of this procedure is to permit
non-registered owners to direct the voting of the common shares they
beneficially own. Should a non-registered owner who receives either form of
proxy wish to vote at the Meeting in person, the non-registered owner should
strike out the persons named in the form of proxy and insert the non-registered
owners name in the blank space provided. Non-registered owners should carefully follow the instructions of
their Intermediary including those regarding when and where the form of proxy or
Voting Instruction Form is to be delivered.
4
Management of EFI does not intend to pay for Intermediaries to
forward the Notice and Access Package to OBOs. An OBO will not receive the
Notice and Access Package unless the Intermediary assumes the cost of
delivery.
DISTRIBUTION OF MEETING MATERIALS TO NON-OBJECTING BENEFICIAL
OWNERS
The Notice and Access Package is being sent to both registered
and non-registered owners of the securities using notice and access pursuant to
NI 54-101. Electronic copies of the Circular and the Notice of Meeting may be
found and downloaded from www.meetingdocuments.com/cst/EFR. If you are a
NOBO, and EFI or its agent has sent the Notice and Access Package directly to
you, your name, address and information about your holdings of securities have
been obtained in accordance with applicable securities regulatory requirements
from the Intermediary holding on your behalf.
EFI (and not the Intermediary holding on your behalf) has
assumed responsibility for (i) delivering the Notice and Access Package to you,
and (ii) executing your proper voting instructions. Please return your voting
instructions as specified in the request for voting instructions.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The authorized capital of EFI consists of an unlimited number
of common shares, an unlimited number of preferred shares issuable in series,
and an unlimited number of Series A preferred shares. On November 5, 2013, EFI
consolidated the then outstanding common shares on the basis of one
post-consolidation share for every fifty pre-consolidation shares (the
Consolidation). All share information in this Circular for periods
prior to Consolidation have been adjusted to give effect to the Consolidation.
No fractional common shares were issued pursuant to the Consolidation. As of May
21, 2015, the Corporation had issued and outstanding 19,677,552 EFI Common
Shares and no preferred shares.
The Corporation made a list of all persons who are registered
holders of EFI Common Shares as of the close of business on April 20, 2015 (the
Record Date) and the number of EFI Common Shares registered in the name
of each person on that date. Each shareholder as of the Record Date is entitled
to one vote for each EFI Common Share registered in his or her name as it
appears on the list on all matters which come before the Meeting.
To the knowledge of the directors and senior officers of the
Corporation, as of May 21, 2015, no shareholder beneficially owns or exercises
control or direction over securities carrying more than 10% of the voting rights
attached to any class of outstanding voting securities of the Corporation
entitled to be voted at the Meeting.
PARTICULARS OF MATTERS TO BE ACTED UPON AT THE MEETING - THE
TRANSACTION
Cautionary Statement Regarding Forward-Looking Information
and Statements
This Circular and the documents referred to or incorporated by
reference herein contain forward-looking statements that involve risks,
uncertainties, and assumptions that are difficult to predict. Words and
expressions reflecting optimism, satisfaction, or disappointment with current
prospects, as well as words such as believes, hopes, intends, estimates,
expects, projects, plans, anticipates, and variations thereof, or the
use of future tense, identify forward-looking statements, but their absence does
not mean that a statement is not forward-looking. Such forward-looking
statements are not guarantees of performance and actual results could differ materially from
those contained in such statements. Such forward-looking statements include but
are not limited to statements and information regarding:
5
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the expectation that the Transaction will be
completed; |
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the expected benefits and synergies of the
Transaction; |
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the expected financial condition, results of
operations, earnings outlook and prospects of EFI, Uranerz and the
combined company; |
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the terms of any potential funds loaned from
EFI to Uranerz; |
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the terms of any amendments to change of
control agreements which may be entered into among members of Uranerz
management and EFI; and |
|
|
|
the prospective information regarding the
properties of EFI and Uranerz. |
Factors that could cause or contribute to differences to the
forward-looking statements include, but are not limited to: the occurrence of
any event, change or other circumstances that could give rise to the termination
of the Merger Agreement, the failure to satisfy any of the closing conditions,
the failure to obtain the necessary regulatory approvals on conditions
permissible under the Merger Agreement; risks related to disruption of
managements attention from Uranerz or EFIs ongoing business operations due to
the Transaction; the effect of the announcement of the Transaction on the
ability of Uranerz and EFI to retain customers and retain and hire key personnel
and maintain relationships with suppliers, operating results and business
generally; Uranerz and EFIs ability to raise outside capital and to repay debt
as it comes due; Uranerz and EFIs ability to maintain compliance with the
listing requirements of, and thereby maintain the listing of their common stock
or common shares, as applicable, on, the NYSE MKT, or the TSX; and the other
concerns identified in the Risk Factors below.
Although EFI believes the assumptions upon which these
forward-looking statements are based are reasonable, any of these assumptions
could prove to be inaccurate and the forward-looking statements based on these
assumptions could be incorrect. The underlying expected actions or Uranerz or
EFIs results of operations involve risks and uncertainties, many of which are
outside of either companys control, and any one of which, or a combination of
which, could materially affect Uranerz and EFIs results of operations and
whether the forward-looking statements ultimately prove to be correct.
In addition to other factors and matters contained or
incorporated in this document, EFI believes the following factors could cause
actual results to differ materially from those discussed in the forward-looking
statements:
|
the occurrence of any event, change, or other
circumstances that could give rise to the termination of the Merger
Agreement and the possibility that EFI could be required to pay a fee to
Uranerz in connection therewith; |
|
|
|
risks that the regulatory approvals required to
complete the Transaction will not be obtained in a timely manner, if at
all; |
|
|
|
the inability to complete the Transaction due to the
failure to obtain approval of either EFI Shareholders or Uranerz
Shareholders of the Transaction or failure to satisfy any other conditions
to the completion of the Transaction; |
|
|
|
business uncertainty and contractual
restrictions during the pendency of the Transaction; |
|
|
|
adverse outcomes of pending or threatened
litigation or governmental investigations; |
6
|
the failure of the Transaction to close for any
other reason; |
|
|
|
the amount of the costs, fees, expenses and
charges related to the Transaction; |
|
|
|
the outcome of shareholder class- action
complaints relating to the Transaction; |
|
|
|
diversion of managements attention from
ongoing business concerns; |
|
|
|
the effect of the announcement of the Transaction on
Uranerz and EFIs business, creditor and customer relationships,
operating results, and business generally, including the ability to retain
key employees; |
|
|
|
risks that the proposed Transaction disrupts
current plans and operations; |
|
|
|
the possible adverse effect on Uranerz and EFIs
business and the prices of their respective common stock if the
Transaction is not completed in a timely fashion or at all; |
|
|
|
risks that the combined company may be unable to
successfully integrate Uranerz business and personnel with EFIs business
and personnel; |
|
|
|
risks that the expected benefits of the
Transaction may not be realized; and |
|
|
|
other risk factors relating to the businesses of each of
Uranerz and EFI, as detailed from time to time in each of Uranerz and
EFIs reports filed with the SEC and, in the case of EFI, the applicable
Canadian securities regulatory authorities. |
Many of the factors that will determine Uranerz and EFIs
future results are beyond EFIs ability to control or predict. EFI cannot
guarantee any future results, levels of activity, performance, or achievements.
In light of the significant uncertainties inherent in the forward-looking
statements, readers should not place undue reliance on forward-looking
statements.
Additional information about these factors and about the
material factors or assumptions underlying such forward-looking statements may
be found in this Circular, as well as in Uranerz Annual Report on Form 10-K for
the fiscal year ended December 31, 2014 and in EFIs Annual Information Form for
the year ended December 31, 2014. See EFI Documents Incorporated by Reference
and Uranerz Documents Incorporated by Reference. These important factors also
include those set forth under the section entitled Risk Factors.
Readers are cautioned that any forward-looking statement speaks
only as of the date of this Circular, and it should not be assumed that the
statements remain accurate as of any future date. EFI does not undertake any
obligation to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise, except as may be required
by law. EFI cautions further that, as it is not possible to predict or identify
all relevant factors that may impact forward-looking statements, the foregoing
list should not be considered a complete statement of all potential risks and
uncertainties.
Readers should carefully consider the cautionary statements
contained or referred to in this section in connection with any subsequent
forward-looking statements that may be issued by Uranerz or EFI or persons
acting on behalf of either party.
Cautionary Notice to Shareholders in the United States
Regarding Mineral Reserves and Mineral Resources
This Circular incorporates by reference documents that have
been prepared by EFI and Uranerz which have been prepared in accordance with the
requirements of Canadian provincial securities laws, which differ from the requirements of U.S. securities laws. Unless
otherwise indicated, all reserve and resource estimates included or incorporated
by reference in this Circular have been prepared in accordance with Canadian NI
43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the
CIM) - CIM Definition Standards on Mineral Resources and Mineral
Reserves, adopted by the CIM Council, as amended. NI 43-101 is an instrument
developed by the Canadian Securities Administrators that establishes standards
for all public disclosure an issuer makes of scientific and technical
information concerning mineral projects. The terms mineral reserve, proven
mineral reserve and probable mineral reserve are Canadian mining terms as
defined in accordance with NI 43-101 and CIM standards. These definitions differ
from the definitions in the SECs Industry Guide 7 under the United States
Securities Act of 1933, as amended (the US Securities Act).
7
Under United States standards, mineralization may not be
classified as a reserve unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the
time the reserve determination is made. Under SEC Industry Guide 7 standards, a
final or bankable feasibility study is required to report reserves, the
three-year historical average price is used in any reserve or cash flow analysis
to designate reserves and the primary environmental analysis or report must be
filed with the appropriate governmental authority.
In addition, the terms mineral resource, measured mineral
resource, indicated mineral resource and inferred mineral resource are
defined in and required to be disclosed by NI 43-101; however, these terms are
not defined terms under SEC Industry Guide 7 and are normally not permitted to
be used in reports and registration statements filed with the SEC. Investors are
cautioned not to assume that all or any part of mineral deposits in these
categories will ever be converted into reserves. Inferred mineral resources
have a great amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. It cannot be assumed that all or any
part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may not form the
basis of feasibility or pre-feasibility studies, except in rare cases. Investors
are cautioned not to assume that all or any part of an inferred mineral resource
exists or is economically or legally mineable. Disclosure of contained pounds
in a resource is permitted disclosure under Canadian regulations; however, the
SEC normally only permits issuers to report mineralization that does not
constitute reserves by SEC Industry Guide 7 standards as in place tonnage and
grade without reference to unit measures.
Accordingly, information contained in this Circular and the
documents incorporated by reference herein contain descriptions of mineral
deposits that may not be comparable to similar information made public by United
States companies subject to the reporting and disclosure requirements under the
United States federal securities laws and the rules and regulations thereunder.
Reporting Currencies and Accounting Principles
Unless otherwise indicated, all references to Cdn$ in this
Circular refer to Canadian dollars and all reference herein to US$ in this
Circular refer to U.S. dollars. EFIs financial statements that are incorporated
by reference herein are reported in U.S. dollars and are prepared in accordance
with IFRS. Uranerz financial statements are reported in United States dollars
and are prepared in accordance with accounting principles generally accepted in
the United States.
8
Exchange Rates
The following table shows, for the periods indicated,
information concerning the exchange rate between the Canadian dollar and the
U.S. dollar. The data provided in the following table are expressed in U.S.
dollars per Canadian dollar and are based on the noon exchange rates published
by the Bank of Canada for the Canadian dollar. This information is provided
solely for your information, and EFI does not represent that Canadian dollars
could be converted into U.S. dollars at these rates or at any other rate. These
rates are not the rates used by EFI in the preparation of its consolidated
financial statements included or incorporated by reference into this Circular.
On January 2, 2015, the last trading day before the Merger
Agreement was announced, the closing exchange rate between the U.S. dollar and
the Canadian dollar expressed in U.S. dollars per Canadian dollar as reported by
the Bank of Canada was 0.8502. On May 20, 2015, the closing exchange rate
as reported by the Bank of Canada was 0.8189 of a U.S. Dollar for each
one Canadian dollar.
Recent Monthly Data
|
Period-
End Rate(1) |
Average
Rate(2) |
High
|
Low
|
May (May 1 to May 20) |
0.8189 |
0.8278 |
0.8368 |
0.8189 |
April 2015 |
0.8252 |
0.8110 |
0.8365 |
0.7929 |
March 2015 |
0.7885 |
0.7924 |
0.8060 |
0.7811 |
February 2015 |
0.7995 |
0.8000 |
0.8063 |
0.7915 |
January 2015 |
0.7863 |
0.8254 |
0.8527 |
0.7863 |
December 2014 |
0.8620 |
0.8671 |
0.8815 |
0.8589 |
November 2014 |
0.8751 |
0.8829 |
0.8900 |
0.8751 |
October 2014 |
0.8869 |
0.8919 |
0.8980 |
0.8858 |
September 2014 |
0.8922 |
0.9081 |
0.9206 |
0.8922 |
August 2014 |
0.9210 |
0.9151 |
0.9211 |
0.9106 |
July 2014 |
0.9183 |
0.9312 |
0.9404 |
0.9167 |
June 2014 |
0.9367 |
0.9233 |
0.9367 |
0.9143 |
May 2014 |
0.9202 |
0.9180 |
0.9228 |
0.9113 |
April 2014 |
0.9127 |
0.9098 |
0.9172 |
0.9056 |
March 2014 |
0.9047 |
0.9003 |
0.9119 |
0.8888 |
February 2014 |
0.9029 |
0.9046 |
0.9130 |
0.8977 |
January 2014 |
0.8994 |
0.9139 |
0.9422 |
0.8952 |
Annual Data (Year ended December
31) |
|
|
|
|
2015 (to May 20, 2015) |
0.8527 |
0.8090 |
0.8527 |
0.7811 |
2014 |
0.8620 |
0.9054 |
0.9422 |
0.8589 |
2013 |
0.9402 |
0.9710 |
1.0164 |
0.9348 |
9
(1) The period-end rate is the
noon exchange rate for the Canadian dollar on the last business day of the
applicable period, as published by the Bank of Canada.
(2) The average rates for the monthly periods
were calculated by taking the simple average of the daily noon exchange rates
for the Canadian dollar, as published by the Bank of Canada. The average rates
for the transition periods and annual periods were calculated by taking the
simple average of the noon exchange rates on the last business day of each month
during the relevant period, as published by the Bank of Canada.
The Transaction
On January 4, 2015, EFI, Merger Sub and Uranerz entered into
the Merger Agreement pursuant to which, among other things, EFI agreed to
acquire all of the outstanding Uranerz Shares through a transaction (the
Transaction) in which Merger Sub will merge with and into Uranerz, with
Uranerz surviving as an indirect wholly-owned subsidiary of EFI, and (i) EFI
will issue 0.255 EFI Common Shares for each outstanding Uranerz Share (the
Exchange Ratio), (ii) each outstanding Uranerz Option will
automatically be converted into an option to acquire EFI Common Shares, provided
that the number of EFI Common Shares subject to each such option and the
exercise price thereof will be adjusted to reflect the Exchange Ratio; and (iii)
each outstanding Uranerz Warrant will entitle the holder to acquire, in lieu of
one Uranerz Share on exercise thereof, 0.255 EFI Common Shares with the exercise
price to be adjusted based on the Exchange Ratio.
At the Meeting, EFI Shareholders will be asked to consider and,
if thought advisable, to pass, the resolution (the Transaction
Resolution) attached as Schedule A to this Circular, to approve the
Transaction, including the issuance of the EFI Common Shares to be issued in
exchange for all of the outstanding Uranerz Shares, the potential issuance of
EFI Common Shares on the exercise of Uranerz Options and Uranerz Warrants
following the Effective Time and the issuance of EFI Common Shares to each of
(i) Cantor in satisfaction of the advisory fee payable to Cantor for acting as
financial advisor to EFI in connection with the Transaction and (ii) Haywood
Securities Inc. (Haywood) in satisfaction of the balance of the
advisory fee payable to it for acting as financial advisor to Uranerz in
connection with the Transaction. The EFI Board unanimously recommends that
Shareholders vote FOR the Transaction Resolution.
Descriptions in this Circular of the terms of the Merger
Agreement and related documents are summaries of the terms of those documents.
EFI Shareholders should refer to the full text of the Merger Agreement for
complete details of that document. The full text of the Merger Agreement may be
viewed on SEDAR at www.sedar.com and is appended hereto as Schedule B.
In order to complete the Transaction, the Transaction
Resolution must be approved by the affirmative vote of a simple majority of the
votes cast by EFI Shareholders at the Meeting. Unless otherwise directed, it
is EFI managements intention to vote for the Transaction Resolution. If
you do not specify how you want your EFI Common Shares voted, the persons named
as proxyholders will cast the votes represented by your proxy at the Meeting in
favour of the Transaction Resolution.
Background to the Transaction
Since the Fukushima nuclear accident in March 2011, which
significantly and adversely impacted the uranium price environment as well as
the market valuations of publicly-traded uranium companies, EFI has regularly been considering and evaluating business and
strategic opportunities, including consolidating with other industry players, as
evidenced by its acquisition of Titan Uranium Inc. in February 2012, the US
assets of Denison Mines Corp. in June 2012 and Strathmore Minerals Corp. in
August 2013.
10
Similarly, the Uranerz Board, together with certain members of
Uranerz senior management, periodically reviews and considers various strategic
alternatives available to Uranerz, including, from time to time, whether the
continued execution of Uranerz strategy as a stand-alone company, possible
strategic acquisitions or the possible sale of Uranerz to, or a combination of
Uranerz with, a third party would offer the best avenue to maximize stockholder
value.
EFIs and Uranerz management teams have known one another for
many years. In November 2012 and November 2013, EFIs President and Chief
Executive Officer, Stephen Antony and Uranerz Executive Chairman, Dennis Higgs
spoke briefly about the general benefits of consolidation in the U.S. uranium
sector.
On April 28, 2014, the Corporation retained Cantor to provide
financial advisory services in connection with a variety of potential merger and
acquisition (M&A) transactions, including a potential transaction with
Uranerz.
Mr. Antony first approached Mr. Higgs on June 16, 2014 to
discuss a potential business combination. On June 17, 2014, Mr. Antony
telephoned Mr. Higgs to express EFIs interest in evaluating a business
combination with Uranerz. Mr. Higgs reported the interest of EFI to the other
executive members of the Uranerz Board, being Glenn Catchpole and Paul Goranson,
and the execution of a confidentiality agreement with EFI was discussed.
On June 19, 2014, Mr. Antony sent to Mr. Higgs an initial draft
of a confidentiality agreement proposed by Mr. Antony to be entered into between
Uranerz and EFI.
On June 24, 2014, EFI and Cantor had preliminary discussions to
evaluate potential ISR uranium producers for a potential M&A transaction.
Following those discussions, Cantor and EFI reviewed publicly available
information on various companies and prepared certain analyses. From these
analyses and discussions, Uranerz was identified as an attractive counter-party,
due to Uranerz producing assets, existing term contracts, portfolio of other
assets with identified resources, extensive land position with exploration
potential, ISR expertise and perceived ability to successfully integrate the
management teams and boards of directors of the two companies.
EFI and Uranerz entered into a confidentiality agreement
effective July 3, 2014.
On July 8, 2014, the executive members of the Uranerz Board and
executive management of EFI held a conference call to discuss preliminary ideas
and the potential for a business combination, as well as other potential joint
endeavors. Participants in the call included Mr. Higgs, Mr. Catchpole and Mr.
Goranson from Uranerz and Mr. Antony, Mr. Daniel Zang, the Chief Financial
Officer of EFI, and Mr. Graham Moylan of Cantor.
On July 11, 2014, Mr. Antony advised Mr. Higgs that EFI
proposed to engage Cantor as its financial advisor in connection with the
evaluation of a possible business combination transaction with Uranerz.
On July
25, 2014, the executive members of the Uranerz Board held a conference call and
discussed various matters relating to a potential business combination with EFI,
including EFI production levels, the potential synergies between EFI and Uranerz, and the
outcome of Mr. Goransons meeting with EFIs then Senior Vice-President of
Corporate Marketing, Gary Steele and the current Vice-President of Marketing and
Corporate Development of EFIs US subsidiaries, Curtis Moore.
11
On August 5, 2014, EFI, together with its Canadian legal
counsel, Borden Ladner Gervais LLP (BLG) and Cantor reviewed certain
financial and market analyses and began drafting a non-binding letter of intent
that contemplated the business combination of Uranerz and EFI by way of an
acquisition by EFI of all of the issued and outstanding Uranerz Shares (the
LOI).
On August 6, 2014, EFI provided Uranerz with the initial draft
LOI that proposed the acquisition of Uranerz by EFI on the basis of an exchange
ratio of 0.17 EFI Common Share for each Uranerz Share.
The executive members of the Uranerz Board had a number of
discussions relating to the terms of the proposed business combination reflected
in the LOI, both among themselves and with Haywood. Following discussions among
the Uranerz Board and Haywood, on August 8, 2014 Mr. Higgs advised Mr. Antony by
telephone that the financial terms reflected in the LOI were not acceptable to
Uranerz. On August 9, 2014, Haywood likewise informed EFI and Cantor on behalf
of Uranerz that the terms of the initial LOI were unacceptable, with the primary
issue being the proposed exchange ratio.
On August 11, 2014, Mr. Higgs and Mr. Antony discussed various
issues relating to the proposed business combination, including the requirement
of Uranerz of a higher premium.
On August 26, 2014, Haywood, acting on behalf of Uranerz, sent
Cantor a modified non-binding LOI that included a proposed exchange ratio of
0.30 EFI Common Shares for each Uranerz Share. Haywood communicated that the
exchange ratio proposed by EFI did not recognize the decline in the price of the
Uranerz common shares following the prospectus offering of common shares
completed by Uranerz in July 2014. Uranerz proposed a higher exchange ratio that
reflected a base price unaffected by the financing plus a standard change of
control premium.
On September 2, 2014, EFI and Cantor reviewed and discussed
additional financial information concerning Uranerz. On September 2, 2014,
management of EFI held a conference call with representatives of Cantor, BLG and
EFIs U.S. counsel, Dorsey & Whitney LLP (Dorsey & Whitney), to
discuss the structure of the potential transaction.
On September 3, 2014, Uranerz provided additional operational
and financial information to EFI via Haywood.
On September 8, 2014, Mr. Antony sent a further revised draft
of the LOI to Mr. Higgs for review by Uranerz. The revised draft LOI reflected a
proposed exchange ratio of 0.24 EFI Common Shares for each Uranerz Share. This
revised draft LOI was circulated to Uranerz senior management for
discussion.
On September 12, 2014, Uranerz, with Haywood as its financial
advisor, and EFI, with the assistance of Cantor, held a multi-hour negotiation
session over several phone calls to discuss the exchange ratio and other
transaction terms. Participants in the discussions included, at various points,
Mr. Higgs, Mr. Catchpole, Mr. Goranson and Ben Leboe from Uranerz and Mr.
Antony, Mr. Zang and Mr. David Frydenlund (Senior Vice President, General
Counsel and Corporate Secretary) from EFI. Haywood and Cantor negotiated, based
on instructions from the Uranerz management participants and the EFI management
participants, respectively, several potential deal terms back and forth. After
several calls and proposals over several hours, the general terms of a LOI were
concluded. Haywood then updated the LOI to reflect the agreed upon terms and circulated to EFI. EFI
responded with minor changes to the LOI on September 15, 2014.
12
On September 15, 2014, EFI and Uranerz executed the non-binding
LOI, which was expressly subject to negotiation of a binding definitive
agreement to be entered into between the parties and the approval of the
definitive agreement by each partys respective board of directors. The executed
LOI set forth the indicative transaction structure contemplated by the parties,
which included the following terms which were to be set forth in the definitive
agreement: (i) the acquisition of Uranerz by EFI to be completed by way of the
Transaction based upon an agreed exchange ratio of 0.265 EFI Common Shares for
each Uranerz Share, (ii) the appointment of three directors of Uranerz to the
post-Transaction board of directors of EFI, which board would be comprised of
nine or more members, (iii) the execution of support agreements, and (iv) mutual
deal protection mechanisms, including a mutual break fee of $5.0 million payable
by either party to the other upon the occurrence of certain events,
non-solicitation provisions and a right to match any superior proposal. The LOI
provided for the binding agreement of the parties to negotiate exclusively with
one another (the Exclusivity Provisions) until October 30, 2014. The
LOI expressly provided that neither party would be under any obligation of any
kind whatsoever to complete the Transaction until such time as a definitive
transaction agreement was executed.
Following execution of the LOI, Uranerz and EFI (along with
their professional advisors and technical consultants) continued with their
respective due diligence activities, which, amongst other things, included
reciprocal project site and office tours. In addition, Uranerz and EFI and their
advisors began considering, and had numerous discussions regarding how to
structure the transaction and draft the Merger Agreement.
On September 23, 2014, Cantor forwarded a due diligence request
list on behalf of EFI, to Haywood, on behalf of Uranerz. Also on that same day,
Uranerz engaged McMillan LLP (McMillan) to advise on the potential
transaction with EFI. On September 30, 2014, Uranerz delivered its due diligence
request list to EFI.
Throughout September and October 2014, Cantor had numerous
telephone discussions with EFI regarding financial and operating assumptions
related to EFIs various assets based on certain commodity price assumptions. In
addition, EFI and Cantor reviewed and discussed financial and operational
information of Uranerz. EFI, Uranerz, Cantor and Haywood also participated in
conference calls to discuss both companies businesses.
On October 1, 2014, Uranerz executive management, including Mr.
Higgs, Mr. Catchpole, Mr. Leboe and Mr. Goranson, and independent director Paul
Saxton held a conference call with representatives of McMillan and a
representative of Haywood and discussed, among other things: (i) the fiduciary
duties of the board of directors in connection with evaluation of the potential
transaction, (ii) the advisability of forming the Special Committee of
independent directors, (iii) the proposed mandate for the Uranerz Special
Committee, (iv) the arrangement for an independent fairness opinion by the
Uranerz Special Committee, (v) the engagement of Haywood as an advisor to
Uranerz, (vi) the engagement of SRK Consulting (SRK) for technical due
diligence, (vii) the engagement of additional tax and litigation/environmental
legal counsel, (viii) the due diligence process, and (ix) the process of
negotiating the Transaction. On October 1, 2014, Uranerz engaged SRK to complete
a technical and engineering due diligence review on the material EFI
properties.
On October 2, 2014, Dorsey & Whitney delivered to EFI a
memorandum outlining two possible structuring proposals whereby Uranerz and EFI
could effect a business combination transaction, together with an assessment of various corporate, securities and tax
issues. A copy of the structuring memorandum was delivered to Uranerz, Haywood
and McMillan on October 2, 2014.
13
On October 6, 2014, Uranerz and its financial and legal
advisors and Uranerz tax counsel Davis Wright Tremaine LLP (DWT) held a
conference call to discuss the structure and tax consequences of the proposed
transaction, as outlined in the structuring memorandum.
On October 7 and October 8, 2014, Uranerz and EFI executive
management conducted joint site visits of the Nichols Ranch, Sheep Mountain,
Canyon Mine, Pinenut Mine and White Mesa Mill properties.
On October 15, 2014, the Uranerz Board resolved to (i) form the
Uranerz Special Committee consisting of independent directors Arnold Dyck
(Chair), Paul Saxton and Gerhard Kirchner for the purpose of advising management
and the board of directors, as requested from time to time, on specific
transaction terms relating to the proposed business combination Transaction, and
(ii) authorize management to proceed with negotiating and drafting a definitive
Merger Agreement. The Uranerz Board authorized Uranerz management to engage
Hein & Co. for the purpose of conducting financial due diligence on EFI.
Following the board of directors meeting that day, Mr. Higgs confirmed to Mr.
Antony that the Uranerz Board had met that day and determined to proceed with
drafting and negotiating a definitive agreement.
On October 17, 2014, the Uranerz Board approved the mandate of
the newly-formed Uranerz Special Committee, namely: (i) to advise management and
the board of directors on the terms of the proposed transaction; (ii) to
evaluate and advise the board of directors as to the fairness of the Transaction
and, in connection with this duty, to retain an independent financial advisor to
prepare a fairness opinion; (iii) to consider and make recommendations to the
board of directors with respect to any potential conflicts of interest of any
director or officer of Uranerz; and (iv) to make any other recommendations to
the Uranerz Board as requested from time to time. In connection with the
discharge of its duties, the Uranerz Special Committee was empowered to (i)
engage legal counsel of its own choosing to advise it on the discharge of its
duties, (ii) engage an independent and qualified financial advisor of its
choosing to prepare the fairness opinion, (iii) negotiate appropriate
compensatory arrangements with its financial advisor and legal counsel and (iv)
take such further action as the Uranerz Special Committee considered necessary
or desirable to carry out its duties.
On October 20, 2014, Mr. Zang, Chief Financial Officer of EFI,
visited the Uranerz Casper office in connection with EFIs financial due
diligence and met with members of Uranerz management.
On October 27, 2014, the Uranerz Special Committee interviewed
Euro Pacific Canada, Inc. (Euro Pacific) as a prospective financial
advisory firm candidate.
On October 30, 2014, DWT confirmed its advice to the Uranerz
Board on the tax consequences of completing the proposed transaction.
On October 30, 2014, Uranerz and EFI agreed to extend the
Exclusivity Provisions set forth in the LOI until November 21, 2014 in order to
provide for additional time to complete due diligence and negotiate the
definitive Merger Agreement contemplated under the LOI.
Also on October 30, 2014, Mr. Antony had a telephone call with
Mr. Higgs in which Mr. Antony stated that a lower exchange ratio may be required
by EFI and also proposed that the parties consider a potential change to the
composition of the Transaction consideration.
14
From October 30 to November 6, 2014, EFI, together with Dorsey
& Whitney and BLG, prepared a draft of the definitive Merger Agreement
contemplated under the LOI. There were numerous internal conferences among EFI,
Dorsey & Whitney and BLG to discuss the Merger Agreement during this time
period. The companies continued to exchange due diligence information.
On November 6, 2014, EFI provided the first draft of the Merger
Agreement to Uranerz and to McMillan. The initial draft of the Merger Agreement
reflected the deal protection provisions that had been contemplated in the
original LOI executed between Uranerz and EFI.
On November 12, 2014, Mr. Antony provided an update to the EFI
Board on the status of the proposed business combination.
On November 14, 2014, representatives of EFI management had a
telephone conference call with representatives of Uranerz management to discuss
outstanding technical issues. On that same day, the Uranerz Special Committee
retained Gibson Dunn & Crutcher LLP (GDC) as external legal counsel
to the Uranerz Special Committee. On November 17, 2014, Uranerz engaged
Wellborn, Sullivan, Meck & Tooley, PC (WSMT) as local U.S. counsel
to review and summarize the litigation and environmental exposure of EFI.
On November 19, 2014, EFI provided a three year financial
operations plan for the combined entity for consideration by Uranerz.
On November 20, 2014, legal counsel to the Uranerz Special
Committee provided the Uranerz Special Committee with an initial mark-up of the
draft Merger Agreement. The revised draft Merger Agreement included a provision
that the Transaction be subject to approval by both a majority of the
outstanding shares of common stock of Uranerz, as well as by the disinterested
shareholders of Uranerz (exclusive of any shares owned by directors and officers
of Uranerz). The revised draft also included proposed enhancements to the deal
protection provisions of the Merger Agreement and suggested that the inclusion
of a go shop provision be considered.
On November 21, 2014, Uranerz and EFI agreed to further extend
the Exclusivity Provisions of the LOI until December 18, 2014 in order to
provide for additional time to complete due diligence and negotiate the Merger
Agreement. Concurrently with the execution of the extension, Mr. Higgs and Mr.
Antony spoke, and Mr. Antony indicated that EFI wanted to lower the exchange
ratio. Messrs. Higgs and Antony agreed to defer discussion of the exchange ratio
until after the U.S. Thanksgiving weekend. Mr. Antony also advised Mr. Higgs
that the inclusion of a go-shop provision in the Merger Agreement would not be
acceptable to EFI.
Also on November 21, 2014, a conference call between Uranerz
management and inside legal counsel and EFIs management and inside legal
counsel was held to discuss environmental, litigation and regulatory due
diligence matters.
On November 24, 2014, the Uranerz Special Committee met with
Uranerz inside counsel and representatives of GDC and discussed the extension of
the LOI and the expressed desire of EFI to lower the exchange ratio. The Uranerz
Special Committee determined to advise Uranerz management that it required
confirmation from EFI as to the definitive exchange ratio to which EFI would
agree and the delivery of a five-year financial operations plan for the combined
company from EFI before proceeding to expend resources in connection with the
proposed Transaction.
15
Also on November 24, 2014, McMillan provided an updated draft
of the Merger Agreement to Dorsey & Whitney that reflected Uranerz comments
on the draft Merger Agreement and identified outstanding matters proposed to be
discussed, including the inclusion of a go-shop provision and other deal
protection mechanisms in the Merger Agreement.
Following receipt of such comments, Uranerz, EFI, and their
respective legal and financial advisors continued to negotiate the Merger
Agreement, including numerous calls to discuss key terms, such as tax structure
and deal protection provisions, and whether to include a go-shop provision in
the Merger Agreement. Concurrently, management of each company continued to
advance their due diligence investigations.
On December 4, 2014, Dorsey & Whitney sent a revised draft
of the Merger Agreement to McMillan and Uranerz.
On December 8, 2014, members of management of EFI and Uranerz
and representatives of Dorsey & Whitney, BLG, McMillan, Cantor and Haywood
held a conference call to discuss key outstanding provisions of the Merger
Agreement. Amendments to the deal protection provisions proposed by Uranerz were
discussed, including the proposals to include a separate approval of the
Transaction by disinterested shareholders of Uranerz and the inclusion of a go
shop provision. EFI again stated its opposition to inclusion of a go shop
provision.
On December 9, 2014, EFI received a draft engagement letter
from Roth with respect to acting as EFIs independent financial advisor in
connection with the Transaction to provide the Fairness Opinion. In addition, on
December 9, 2014, EFI forwarded to Uranerz a five-year financial operations
plan, reflecting EFI operations on a stand-alone basis.
On December 11, 2014, Mr. Antony contacted Mr. Higgs to
initiate discussions on a revised, lower exchange ratio. Mr. Antony advised Mr.
Higgs that as a result of EFIs due diligence since executing the LOI, EFI
continued to be interested in the transaction, but only on the basis of a
revised exchange ratio. Subsequently, Mr. Antony and Mr. Higgs continued
discussions as to a revised exchange ratio, with each party proposing revised
exchange ratios throughout the day. Mr. Antony then provided Mr. Higgs with
EFIs final proposed exchange ratio of 0.255. Mr. Higgs advised Mr. Antony that
he did not have approval from the Uranerz Board to accept that proposed exchange
ratio. At this point, counsel for both parties stopped work on the Merger
Agreement.
On December 12, 2014, the Uranerz Board met and resolved to
accept EFIs proposed exchange ratio of 0.255, based on EFIs position that
Uranerz wellfield development and production forecasts were lower than the
forecasts previously provided by Uranerz to EFI in its five-year financial model
for the fourth quarter of 2014, on the condition that the following items
promptly be delivered: (i) written confirmation of the 0.255 exchange ratio;
(ii) a five-year financial operations plan for the combined companies; and (iii)
a description of how the convertible debentures could be addressed, if
necessary, depending on the ultimate structure of the Transaction, to avoid a
negative impact on the combined company. Later that same day, Mr. Higgs advised
Mr. Antony as to the determinations of the Uranerz Board.
On December 13, 2014, Mr. Antony provided Mr. Higgs an outline
of possible strategies available to EFI to manage any potential redemption of
EFIs convertible debentures, depending on the ultimate structure of the
Transaction, and Mr. Higgs subsequently provided an update to the Uranerz Board
as to these strategies.
16
On December 14, 2014, McMillan circulated a further revised
draft of the Merger Agreement to Dorsey & Whitney, BLG and EFI. On the same
day, representatives of McMillan, BLG and Dorsey & Whitney held a conference
call to discuss outstanding matters relating to the Merger Agreement.
On December 16, 2014, the EFI Board held a meeting with Cantor
to discuss the potential transaction. The EFI Board discussed suitable
candidates to perform an independent analysis of the Exchange Ratio, alternate
structures to address any potential change of control concerns, potential
synergies and cost savings, and whether the transaction should be postponed to a
later date.
Also on December 16, 2014, the Uranerz Board (i) acknowledged
receipt of the proposals of EFI to address the EFI convertible debentures, if
necessary, in a manner to avoid a negative impact on the combined companies, and
(ii) resolved to accept EFIs proposed revised Exchange Ratio of 0.255 EFI
Common Shares for each Uranerz Share on the condition that EFI provide, by no
later than the close of business on December 18, 2014, both the written
confirmation of the 0.255 Exchange Ratio and the requested five-year financial
operations plan for the combined companies.
On December 18, 2014, EFI forwarded to Uranerz the five-year
financial operations plan prepared by EFI for the combined companies. Based on
the delivery of the five-year financial operations plan, the Uranerz Special
Committee determined to proceed with the engagement of Euro Pacific to prepare a
fairness opinion and executed an engagement agreement with Euro Pacific on
December 18, 2014.
Also on December 18, 2014, Uranerz and EFI agreed to further
extend the Exclusivity Provisions under the LOI until December 23, 2014, in
order to provide for additional time to complete due diligence and negotiate the
Merger Agreement, and to confirm the revised exchange ratio of 0.255.
Also on December 18, 2014, EFI engaged Roth to provide the EFI
Fairness Opinion in connection with the Transaction.
On December 19, 2014, BLG forwarded to McMillan a draft form of
the proposed support agreement to be entered into by each of the directors and
certain officers of Uranerz and EFI.
On December 20, 2014, representatives of BLG, Dorsey &
Whitney, McMillan and GDC held a conference call to discuss outstanding issues
including tax issues and deal protection provisions. Representatives of GDC
relayed the Uranerz Special Committees proposals on deal protection provisions,
including the request for inclusion of a go shop provision. Later that
evening, Dorsey & Whitney circulated a revised draft of the Merger
Agreement. The revised draft of the Merger Agreement reflected an exchange ratio
of 0.255 and included a separate approval of the disinterested shareholders of
Uranerz, as requested by the Uranerz Special Committee, but did not include a
go shop provision.
On December 21, 2014, Mr. Antony called Mr. Higgs and proposed
a further extension to the Exclusivity Period under the LOI to January 2, 2015
in order to facilitate finalizing the Merger Agreement during the holiday period
and allow sufficient time for the respective financial advisers to complete
their financial analyses.
From December 22 through December 24, 2014, management of EFI
and Uranerz continued negotiations regarding the deal protection provisions. Mr.
Antony confirmed to Mr. Higgs on December 22, 2014 that EFI would refuse to
proceed with the transaction if a go-shop provision was required by Uranerz.
On December 23, 2014, the Chairman of the Uranerz Special Committee advised
Uranerz management stating that it had discussed the importance of a go-shop
provision with its advisors, and that following those discussions, the Uranerz
Special Committee was willing to proceed in the absence of a go-shop based in part on analysis from Haywood suggesting that there
did not appear to be a viable alternative suitor. Also on December 23, 2014,
Uranerz and EFI agreed to further extend the Exclusivity Provisions under the
LOI until January 2, 2015 to provide for additional time to complete
finalization of the Merger Agreement.
17
On December 24, 2014, Uranerz executed an engagement letter
dated December 19, 2014 with Haywood to act as its financial advisor with
respect to the Transaction.
Discussions on outstanding issues continued among McMillan, BLG
and Dorsey & Whitney, with input from members of Uranerz and EFI management,
through to December 26, 2014, and included discussions on NI 43-101 technical
report issues, the provision of dissent rights to Uranerz shareholders, the
support agreements and the deal protection provisions. On December 26, 2014,
McMillan circulated a revised draft of the Merger Agreement to Dorsey &
Whitney and BLG. Later that same day, the draft Merger Agreement along with a
Notice of a Board Meeting was provided to the EFI Board for a meeting to be held
on January 2, 2015.
On December 29, 2014, McMillan circulated to BLG and Dorsey
& Whitney a revised draft of the form of support agreement.
On December 30, 2014, Dorsey & Whitney circulated a revised
draft of the Merger Agreement and members of Uranerz and EFI management and
representatives of McMillan, BLG and Dorsey & Whitney held a conference call
to discuss the Merger Agreement, the support agreements and the disclosure
schedules. Also on December 30, 2014, BLG circulated to McMillan a further
revised draft of the form of support agreement.
On the evening of December 30, 2014, EFI circulated a draft of
the EFI disclosure letter and schedule to McMillan. Later that evening, McMillan
circulated Uranerz draft disclosure schedules to EFI, BLG and Dorsey &
Whitney.
On December 31, 2014, management of both Uranerz and EFI, and
representatives of McMillan, BLG and Dorsey & Whitney held conference calls
in order to work towards finalization of the terms of the Merger Agreement, the
form of the support agreement and the disclosure schedules. During the course of
these discussions, the mechanism for withholding shares of EFI from certain
shareholders of Uranerz who were present or former 5% shareholders of Uranerz
and in respect of whom EFI would be subject to a withholding obligation under
the FIRPTA rules was discussed and agreed to. During the course of these
negotiations, Mr. Higgs contacted Mr. Antony and explained he was the only
Uranerz shareholder that was both restricted from selling any of his shares, as
required under his support agreement, and also subject to the FIRPTA withholding
tax. Mr. Higgs proposed and Mr. Antony indicated his agreement in principle for
EFI to withhold 10% of the EFI shares otherwise payable to Mr. Higgs in exchange
for his Uranerz shares, and that Mr. Higgs would have no obligation to EFI in
the event that such shares were sold at a lower price than the value of the
FIRPTA withholding tax, and EFI would have no obligation to Mr. Higgs if such
shares were sold at a higher price than the value of such withholding tax. It
was later agreed that this withholding process would apply to all holders of
Uranerz Shares (who do not also hold Uranerz Warrants) who are subject to FIRPTA
withholding, as more fully described in the section titled Merger Agreement
Amendment of the Merger Agreement.
On January 1, 2015, management of both Uranerz and EFI, and
representatives of McMillan, BLG and Dorsey & Whitney held conference calls
in order to finalize the terms of the Merger Agreement and the disclosure
letters. In addition, the parties circulated drafts of the joint press release
announcing the Transaction. Later that afternoon a further revised draft of
the Merger Agreement was circulated by Dorsey & Whitney and later that
evening the parties agreed to the forms of support agreements.
18
On January 2, 2015, revised drafts of Uranerz and EFI
disclosure letters were circulated. Later that afternoon, the EFI Board met to
consider the Merger Agreement. During this meeting, the EFI Board had
discussions with members of EFIs executive management team as well as
representatives of Cantor and Roth. Roth orally delivered the Fairness Opinion
and the EFI Board unanimously approved EFI entering into the Merger Agreement.
On January 3, 2015, the Uranerz Board held a meeting, which
included representatives from McMillan, GDC, Euro Pacific, Haywood and Uranerz
management. The Uranerz Special Committee stated the steps taken to maximize
shareholder value by the Uranerz Special Committee and confirmed the results of
the fairness opinion it received from Euro Pacific, and thereafter recommended
that the Uranerz Board approve the Transaction with EFI, including the Exchange
Ratio. The Uranerz Board discussed the reasons supporting the Transaction,
including the significance of the premium, the potential increase for liquidity
for shareholders, analyst coverage and market profile, the financial ability on
a combined versus stand-alone basis, the relative resource positions of each
company, the ability to grow through acquisitions on a combined versus a
stand-alone basis, management and operational synergies, the increased scale of
the business of the combined entity and the ability to leverage future uranium
prices. Following this discussion, the Uranerz Board unanimously approved
execution of the Merger Agreement with EFI.
On January 3, 2015, the parties executed an extension letter
agreement to extend the Exclusivity Provisions until January 5, 2015 to enable
the parties to finalize the Merger Agreement and related documents.
On the evening of January 4, 2015, EFI and Uranerz executed the
Merger Agreement.
On January 5, 2015, EFI and Uranerz issued a joint press
release before the market opened announcing the Transaction.
On April 27, 2015, management of Uranerz, including Messrs.
Higgs, Catchpole and Goranson, and Uranerz inside legal counsel, met in Denver
with management of EFI, including Messrs. Antony, Zang and Frydenlund, to
discuss operational plans. At that meeting, it was discussed that EFI might
advance to Uranerz a bridge loan in an amount up to $3,000,000 for the purpose
of funding wellfield development by Uranerz. The terms of the bridge loan,
including any security to be granted, applicable repayment obligations and
conversion terms have not been concluded as of the date of this Circular and
there is no assurance that the bridge loan will be advanced. At the meeting on
April 27 management of EFI also advised that it proposed to discuss with the
members of Uranerz management who would not continue as employees or officers of
EFI following completion of the Transaction an arrangement whereby the
management members would agree that the severance payments payable by EFI as a
result of the completion of the Transaction would be paid over a deferred
period. The terms of such arrangement, were subsequently agreed to by Messrs.
Higgs, Catchpole and Leboe whereby half of such severance payments will be paid
through the issuance of EFI Common Shares based on the five day volume weighted
average closing price of the EFI Common Shares on the NYSE MKT on the Closing
Date with the remaining amounts to be paid in cash at Closing. The parties also
discussed a further amendment to the Merger Agreement to provide for a uniform
withholding process of amounts required to be withheld under applicable tax laws
(including FIRPTA withholding amounts) with respect to shares of Uranerz common
stock. On April 29, 2015 Mr. Antony proposed to Mr. Higgs that an extension to
the termination date of the Transaction under the Merger Agreement
be considered by the respective boards of Uranerz and EFI.
19
On May 8, 2015, Uranerz and EFI entered into an agreement to
amend the Merger Agreement in order to (i) provide that the EFI Board following
the Merger would be comprised of eight directors, of whom two would be members
of the existing Uranerz Board, (ii) provide for withholding on account of
amounts required to be withheld under applicable tax laws with respect to the
Uranerz Warrants, and (iii) provide for a uniform withholding process of amounts
required to be withheld under applicable tax laws with respect to holders of
Uranerz Shares.
Recommendations of the EFI Board; EFIs Reasons for the
Transaction
EFIs Board has unanimously determined that the Transaction
and the related transactions contemplated by the Merger Agreement are advisable
and in the best interests of EFI and its shareholders.
Factors Considered by the EFI Board
In the course of their due diligence and evaluation of the
Merger Agreement and Transaction, the EFI Board consulted with EFIs executive
management team and legal counsel as well as with representatives of Cantor and
Roth. The EFI Board also received the Fairness Opinion, described below. The EFI
Board also reviewed a significant amount of information and considered a number
of factors related to the Transaction, and believes that the Transaction will
provide EFI and its shareholders with a number of benefits, including but not
limited to:
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providing EFI with ISR uranium production, which the EFI
Board believes is a particularly important benefit given the current
uranium price environment; |
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providing EFI with additional long-term uranium supply
contracts extending to 2020 at substantially higher selling prices than
the current uranium spot price, which the EFI Board believes is a
particularly important benefit given the current uranium price
environment; |
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positioning EFI as the only integrated conventional and
in-situ uranium mining company focused on the United States, which is
expected to improve EFIs competitive positioning with United States-based
utilities; |
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diversifying EFIs production centers by adding the
Nichols Ranch in- situ uranium mine and plant in Wyoming to its existing
production center at the White Mesa uranium mill in Utah,; |
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providing EFI with additional in-situ recovery uranium
resources on Uranerz land holdings, which may be developed into
additional future sources of ISR uranium production; |
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positioning EFI to continue to be an attractive platform
for further consolidation, including adding the expertise to evaluate and
integrate in-situ recovery opportunities, within the United States uranium
sector; and |
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providing EFI with the potential for cost
savings and synergies with additional potential for other operating
efficiencies. |
In the course of its due diligence and evaluation of the
Transaction and the Merger Agreement, the EFI Board also identified and
considered a variety of risks, including those described in greater detail under
Risk Factors.
20
Based on the foregoing analysis, EFIs board of directors has
unanimously determined that the Transaction and the transactions contemplated by
the Merger Agreement are advisable and in the best interests of EFI and its
shareholders.
The EFI Board unanimously recommends that Shareholders vote
FOR the Transaction Resolution.
The directors and officers of EFI and their associates
beneficially own, directly or indirectly, or exercise control or direction over,
an aggregate of 73,531 EFI Common Shares, representing approximately
0.37% of the outstanding EFI Common Shares. Each of the directors and certain
officers of EFI who beneficially own EFI Common Shares have entered into Support
Agreements with Uranerz, pursuant to which such directors and officers have
agreed to vote all of their EFI Common Shares in favour of the Transaction
Resolution.
EFI Financial Advisors and Roth Fairness Opinion
Cantor Engagement
On April 28, 2014, EFI retained Cantor to provide financial
advisory services in connection with potential M&A transactions pursuant to
an advisory agreement (the Cantor Agreement). In accordance with the
terms of the Cantor Agreement, Cantor provided various strategic and financial
advice in connection with the Transaction. Pursuant to the terms of the Cantor
Agreement, Cantor will receive a completion fee for its services on closing of
the Transaction equal to 1.5% of the first US$50 million of Aggregate
Consideration (as defined below) plus 0.75% of the Aggregate Consideration in
excess of US$50 million up to a maximum of US$2 million. Aggregate
Consideration is defined to include the aggregate value of all EFI Common
Shares issuable to Uranerz shareholders and issuable on exercise of Uranerz
Options and Uranerz Warrants. At EFIs election, such completion fee is payable
in either cash or EFI Common Shares based on the 5 day average trading price
prior to the Closing. Based on the trading price of EFI Common Shares of $4.89
on May 15, 2015, and 95,912,806 Uranerz Shares and $18.38 million debt assumed,
the completion fee, if calculated as of May 15, 2015, would be US$1.41
million.
EFI has also agreed to reimburse Cantor for reasonable
out-of-pocket expenses and to indemnify Cantor in respect of certain liabilities
that may arise out of its engagement.
Roth Engagement and Fairness Opinion
On December 18, 2014, EFI entered into an engagement letter
with Roth (the Roth Agreement) pursuant to which EFI retained
Roth to provide the EFI Board with the Fairness Opinion. At a meeting held on
January 2, 2015, Roth provided the EFI Board with a verbal opinion, subsequently
confirmed in writing to the EFI Board, to the effect that, based upon and
subject to the various assumptions, limitations and qualifications contained
therein, the Exchange Ratio pursuant to the Transaction is fair, from a
financial point of view, to EFI and its shareholders.
The full text of the Fairness Opinion, which sets forth, among
other things, the assumptions made, information reviewed and matters considered,
and limitations and qualifications on the review undertaken in connection with
the opinion, is attached to this Circular as Schedule C. The Fairness Opinion is
not intended to be and does not constitute a recommendation to any EFI
Shareholder as to how to vote or act at the Meeting. The Fairness Opinion was
one of a number of factors taken into consideration by the EFI Board in
considering the Transaction. This summary of the Fairness Opinion is qualified
in its entirety by reference to the full text of the Fairness Opinion. EFI
Shareholders are urged to read the Fairness Opinion in its entirety.
21
The Fairness Opinion was rendered on the basis of securities
markets, economic, financial and general business conditions prevailing as at
the date of the Fairness Opinion and the conditions, prospects, financial and
otherwise, of EFI and Uranerz, as applicable, as they are reflected in the
information and documents reviewed by Roth and as they were presented to Roth.
Subsequent developments may affect the Fairness Opinion. Roth has disclaimed any
undertaking or obligation to advise any person of any change in any fact or
matter affecting the Fairness Opinion which may come or be brought to the
attention of Roth after the date of the Fairness Opinion.
Roth received a fee of $125,000 upon delivery of the Fairness
Opinion. EFI has also agreed to reimburse Roth for reasonable out-of-pocket
expenses up to a maximum of $5,000 and to indemnify Roth in respect of certain
liabilities as may arise out of its engagement.
Securities Issuable by EFI Pursuant to the Transaction
Pursuant to the Merger Agreement, at the Effective Time, the
following will occur:
(a) |
EFI will issue EFI Common Shares in exchange for the
outstanding Uranerz Shares in accordance with the Exchange Ratio; based on
the number of Uranerz Shares outstanding as of the date of this Circular,
and assuming no Uranerz Shares are issued after the date hereof and prior
to the Effective Time, an aggregate of approximately 24,457,766 EFI Common
Shares will be issued pursuant to the Transaction resulting in Uranerz
shareholders owning approximately 55% of the EFI Common Shares outstanding
immediately following completion of the Transaction; |
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(b) |
All outstanding Uranerz Options will automatically be
converted into an option to acquire EFI Common Shares on the same terms
and conditions as the Uranerz Options, adjusted to give effect to the
Exchange Ratio; based on the number of Uranerz Options as of the date of
this Circular, and assuming no exercise of any such options prior to the
Effective Time, such options will be converted into options to acquire
2,051,266 EFI Common Shares as of the Effective Time; and |
|
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(c) |
Each outstanding Uranerz Warrant will entitle its holder
to acquire, in lieu of one Uranerz Share, 0.255 EFI Common Shares, with
the exercise price adjusted to give effect to the Exchange Ratio; based on
the number of Uranerz Warrants as of the date of this Circular, and
assuming no exercise of any such warrants prior to the Effective Time,
such warrants will be convertible into 2,690,250 EFI Common Shares as of
the Effective Time. |
If any Uranerz Options or Uranerz Warrants are exercised prior
to the Effective Date, the Uranerz Shares issued upon the exercise thereof will
be acquired by EFI for EFI Common Shares in accordance with the Exchange Ratio.
No fractional EFI Common Shares will be issued to Uranerz
Shareholders. In the event that a Uranerz Shareholder would otherwise be
entitled to a fractional share representing less than a whole EFI Common Share,
the number of EFI Common Shares to be issued to such former Uranerz Shareholder
shall be rounded up or down to the nearest whole EFI Common Share (and, if the
fraction is 0.5, such fraction shall be rounded up to the next highest whole
number of EFI Common Shares).
In addition, EFI may, at its option, satisfy the advisory fees
payable to Cantor pursuant to the Cantor Agreement and the balance of the
advisory fee payable to Haywood pursuant to the Haywood Agreement by issuing EFI
Common Shares. The fee payable to Haywood will be equivalent to the fee payable
to Cantor and the number of shares issuable thereunder will be calculated in
substantially the same manner.
22
EFI has agreed with certain members of Uranerz management who
would not continue as employees or officers of EFI following completion of the
Transaction, that half of the severance payments payable by EFI to such
individuals as a result of the completion of the Transaction will be paid by the
issuance of EFI Common Shares calculated based on the five day volume average
weighted closing price on the NYSE MKT as at the Closing Date with the remaining
amounts to be paid in cash at Closing.
EFI Shareholder Approval
The TSX requires that shareholder approval be obtained in those
instances where the number of securities issued or issuable in payment of the
purchase price for an acquisition exceeds 25% of the number of securities of the
listed issuer which are outstanding, on a non-diluted basis. Based on the number
of EFI Common Shares, Uranerz Shares, Uranerz Option and Uranerz Warrants
outstanding as of May 15, 2015, and assuming that EFI elects to satisfy the
advisory fees payable to both Cantor and Haywood in EFI Common Shares and using
the price of the EFI Common Shares of US$4.89 on May 15, 2015, for calculating
the number of EFI Common Shares issuable to Cantor, Haywood and members of
Uranerz management who are to receive EFI Common Shares to satisfy half of the
severance obligations owed to them, the number of EFI Common Shares issuable in
connection with the Transaction is 30,028,934 EFI Common Shares
representing dilution of approximately 153% based on the currently outstanding
EFI Common Shares on a non-diluted basis See Information about EFI after
giving effect to the Transaction Authorized and Issued Share Capital.
Accordingly, at the Meeting, EFI Shareholders will be asked to approve the
issuance of EFI Common Shares pursuant to the Transaction.
The Transaction Resolution must be approved by at least a
simple majority of the votes cast by EFI shareholders, in person or represented
by proxy, at the Meeting. The complete text of the Transaction Resolution is set
forth in Schedule A to this Circular. It is the intention of the persons named
in the enclosed form of proxy, if not expressly directed to the contrary in such
form of proxy, to vote the proxy in favour of the Transaction Resolution set
forth in the attached Schedule A.
Uranerz Shareholder Approval
The Transaction is also subject to approval by the Uranerz
Shareholders, who will be requested to vote and approve the Transaction at the
Uranerz Shareholder Meeting called to consider the Transaction. The requisite
approval by the Uranerz Shareholders will be (i) a majority of the issued and
outstanding Uranerz Shares as of the record date of the Uranerz Shareholder
Meeting and (ii) a majority of the Uranerz Shares cast at the Uranerz
Shareholder Meeting, exclusive of all Uranerz Shares owned, directly or
indirectly by EFI, Merger Sub and the officers and directors of Uranerz.
Dissent Rights
Uranerz Shareholders are entitled to exercise dissent rights
under applicable Nevada law in relation to the Transaction. If the Transaction
is completed, any such shareholder that strictly complies with its dissent
rights will be entitled to be paid by Uranerz the fair value of such holders
securities.
Material Agreements Relating to the Transaction
Merger Agreement
The following summary describes the material provisions of
the Merger Agreement. The provisions of the Merger Agreement are complex and not
easily summarized. This summary may not contain all of the information about the
Merger Agreement that is important to EFI Shareholders.
23
The Merger Agreement is included in this Circular to provide
EFI Shareholders with information regarding its terms and is not intended to
provide any factual information about Uranerz or EFI. The Merger Agreement
contains representations and warranties by each of the parties to the Merger
Agreement. These representations and warranties were made solely for the benefit
of the other parties to the Merger Agreement and (1) were not intended to be
treated as categorical statements of fact, but rather as a way of allocating the
risk to one of the parties if those statements prove to be inaccurate; (2) may
have been qualified in the Merger Agreement by disclosures that were made to the
other party in connection with the negotiation of the Merger Agreement; (3) may
apply contract standards of materiality that are different from materiality
under applicable securities laws; and (4) were made only as of the date of the
Merger Agreement or such other date or dates as may be specified in the Merger
Agreement.
EFI acknowledges that, notwithstanding the inclusion of the
foregoing cautionary statements, it is responsible for considering whether
additional specific disclosures of material information regarding material
contractual provisions are required to make the statements in this Circular not
misleading.
Accordingly, the representations and warranties and other
provisions of the Merger Agreement should not be read alone, but instead should
be read together with the information provided elsewhere in this Circular.
This summary is qualified in its entirety by reference to
the Merger Agreement a copy of which is included as Schedule
B to this Circular. EFI encourages EFI Shareholders to read the
Merger Agreement carefully in its entirety for a more complete understanding of
the Merger Agreement.
General; The Transaction
At the Effective Time, upon the terms and subject to the
conditions of the Merger Agreement and in accordance with the Nevada Business
Corporations Act, Merger Sub will merge with and into Uranerz, and the separate
corporate existence of Merger Sub will cease. Uranerz will continue as the
surviving corporation and as an indirect wholly-owned subsidiary of EFI.
When the Transaction Becomes Effective
If the Merger Agreement is approved, the parties intend to
close the Transaction as soon as practicable after the day on which the last
condition to the completion of the Transaction set forth in the Merger Agreement
is satisfied or validly waived (other than those conditions that by their terms
are to be satisfied at the closing, but subject to the satisfaction of those
conditions).
Merger Sub will file Articles of Merger with the Secretary of
State of the State of Nevada as soon as practicable after the satisfaction or
waiver of all the closing conditions to the Transaction but in no event prior to
the closing of the Transaction. The Transaction will become effective when the
Articles of Merger are filed with the Secretary of State of the State of Nevada
or at a later date and time as EFI and Uranerz agree and specify in the Articles
of Merger.
Consideration to be Received Pursuant to the
Transaction
The Merger Agreement provides that, at the Effective Time, all
issued and outstanding Uranerz Shares (other than shares owned by Uranerz as
treasury shares or Uranerz Shares owned by EFI), will be automatically converted
into the right to receive 0.255 EFI Common Shares for each Uranerz Share.
24
The Exchange Ratio will be adjusted to reflect any stock
dividend, distribution, subdivision, reorganization, reclassification,
recapitalization, split, combination or exchange of shares having a record date
after the date of the Merger Agreement and prior to the completion of the
Transaction.
Upon conversion in the Transaction as described above, all of
the Uranerz Shares will be retired, will cease to be outstanding and will
automatically be cancelled, and the holder of a certificate that, immediately
prior to the Effective Time, represented Uranerz Shares, will cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
the certificate, the EFI Common Shares as described above, without interest,
together with any dividends, if applicable.
Treatment of Stock Options
Each outstanding and unexpired and unexercised Uranerz Option
will be automatically converted into an option to purchase a number of EFI
Common Shares (rounded down to the nearest whole number of EFI Common Shares)
equal to the aggregate number of Uranerz Shares purchasable pursuant such
Uranerz Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, at an exercise price per EFI Common Share equal to the exercise
price per Uranerz Share specified in the Uranerz Option divided by the Exchange
Ratio (such price rounded up to the nearest whole cent). Such options shall
otherwise be subject to the same terms and conditions, including vesting and
expiry date, as Uranerz 2005 Nonqualified Stock Option Plan. EFI will assume
all obligations under the Uranerz Options as at the Effective Time and from and
after the Effective Time, and EFI will comply with all of the terms and
conditions of the Uranerz Options, including the obligation to issue EFI Common
Shares contemplated thereby upon the exercise thereof. For purposes of vesting
conditions, the date of grant of the Uranerz Option shall be deemed to be the
date on which the converted Uranerz Option was granted.
Uranerz Options held by independent directors of Uranerz who do
not become officers or directors of EFI on Closing shall expire on the earlier
of (i) the current expiry date of such Uranerz stock options (exclusive of the
operation of the early termination provisions of such Uranerz Options) or (ii)
six months after the closing date of the Transaction (the Closing
Date).
Treatment of Warrants
All Uranerz Warrants that are outstanding immediately prior to
the Effective Time shall become exercisable into a number of EFI Common Shares
equal to the number of Uranerz Shares issuable upon exercise of such Uranerz
Warrants immediately prior to the Effective Time multiplied by the Exchange
Ratio, at an exercise price per EFI Common Share equal to the exercise price per
Uranerz Share of the Uranerz Warrants in effect immediately prior to the
Effective Time divided by the Exchange Ratio. From and after the Effective Time,
EFI will comply with all of the terms and conditions set forth in each such
Uranerz Warrant.
Procedures for Exchange of Certificates; No Fractional
Shares
At or prior to the Effective Time, EFI will authorize one or
more transfer agent(s) to act as exchange agent with respect to the Transaction,
and will deposit with such exchange agent, as depositary for the EFI Common
Shares, or any successor depositary thereto, a number of EFI Common Shares equal
to the aggregate number of EFI Common Shares to be issued in exchange for the
Uranerz Shares pursuant to the Exchange Ratio.
No fractional EFI Common Shares will be issued upon the
surrender of Uranerz Shares. Each holder of Uranerz Shares exchanged pursuant to
the Merger Agreement who would otherwise have been entitled to receive a fraction of an EFI Common Share (after taking into
account all stock certificates delivered by such holder) will receive, in lieu
of such fractional share, the number of EFI Common Shares rounded to the nearest
whole number (and, if the fraction is 0.5, the number of EFI Common Shares shall
be rounded up to the next whole number). The rounding of fractional EFI Common
Shares was not separately bargained for consideration but merely represents a
mechanical rounding off for purposes of simplifying the corporate and accounting
problems that would otherwise be caused by the issuance of fractional EFI Common
Shares.
25
Representations and Warranties
Uranerz has made customary representations and warranties in
the Merger Agreement to EFI and Merger Sub, including, among other things, as
to:
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corporate organization and valid existence,
power to conduct business, qualification and good standing of Uranerz;
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validity of organizational documents and
absence of a breach of those documents; |
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capitalization of Uranerz; |
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Uranerz corporate authority to enter into and carry out
the obligations under the Merger Agreement, enforceability of the Merger
Agreement against Uranerz and the approval of the Uranerz Board;
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absence of a conflict with its articles of
incorporation, by-laws, or any laws or the creation of any liens or
payment obligations as a result of the Transaction; |
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compliance of documents filed by it with all applicable
requirements of the US Securities Act, the United States Exchange Act of
1934, as amended the (Exchange Act), and applicable Canadian
securities laws, as the case may be, and the applicable rules and
regulations promulgated thereunder and the accuracy and completeness of
the information in those documents; |
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financial statements; |
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absence of undisclosed liabilities; |
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off-balance sheet arrangements; |
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absence of any material adverse effect and
other selected changes since December 31, 2013; |
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tax matters; |
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litigation; |
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employee benefit plans; |
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environmental matters; |
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compliance with applicable laws and
regulations; |
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insurance; |
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properties and mining claims; |
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material contracts; |
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required shareholder vote; |
26
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accuracy and completeness of the information supplied for
use in the proxy statement/prospectus filed with the SEC relating to the
Transaction or any related filing; |
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intellectual property; |
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transactions with affiliates and related
parties; |
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brokers and other transaction fees; |
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the opinion of its financial advisor and its
board approvals; |
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related party transactions; |
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compliance with the U.S. Foreign Corrupt
Practices Act and other applicable anti- corruption laws; |
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maintenance of disclosure controls and
procedures; and |
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inapplicability of anti-takeover statutes and
rights agreements. |
The Merger Agreement also contains representations and
warranties made by EFI and Merger Sub to Uranerz, including, among other things,
as to:
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corporate organization and valid existence,
power to conduct business, qualification and good standing of EFI and its
subsidiaries; |
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validity of organizational documents and
absence of a breach of those documents; |
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ownership of Merger Sub; |
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capitalization of EFI; |
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EFIs corporate authority to enter into and
carry out the obligations under the Merger Agreement and enforceability of
the Merger Agreement against EFI; |
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absence of a conflict with its articles of
incorporation, by-laws, or any laws or the creation of any liens or
payment obligations as a result of the Transaction; |
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compliance of documents filed by it with all applicable
requirements of the US Securities Act and Exchange Act, as the case may
be, and the applicable rules and regulations promulgated thereunder and
the accuracy and completeness of the information in those documents;
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financial statements; |
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absence of undisclosed liabilities; |
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off-balance sheet arrangements; |
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absence of any material adverse effect and
other selected changes since December 31, 2013; |
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tax matters; |
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litigation; |
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employee benefit plans; |
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environmental matters; |
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compliance with applicable laws and
regulations; |
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insurance; |
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properties and mining claims;
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27
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material contracts; |
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required shareholder vote; |
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operations of Merger Sub; |
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accuracy and completeness of the information
supplied for use in the proxy statement/prospectus filed with the SEC
relating to the Transaction or any related filing; |
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EFI Common Shares; |
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the issuance of converted options and assumed
warrants; |
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intellectual property; |
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transactions with affiliates; |
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brokers and other transaction fees; |
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the opinion of its financial advisor and its
board approvals; |
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related party transactions; |
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compliance with the U.S. Foreign Corrupt
Practices Act and other applicable anti- corruption laws; |
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maintenance of disclosure controls and
procedures; and |
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inapplicability of anti-takeover statutes and
rights agreements. |
Many of the representations and warranties in the Merger
Agreement are qualified by the concept of material adverse effect. For the
purposes of the Merger Agreement, a material adverse effect means any effect
that is, or could reasonably be expected to be, material and adverse to the
business, condition (financial or otherwise), properties, assets (tangible or
intangible), liabilities (whether absolute, accrued, conditional or otherwise),
operations or results of operations of such party and its subsidiaries taken as
a whole, other than any effect: (i) relating to the Canadian or United States
economies, political conditions or securities markets in general; (ii) affecting
the uranium mining or milling industry or nuclear power generation industry in
general; (iii) resulting from changes in the price of uranium; (iv) relating to
a change in the market trading price of shares of Uranerz or EFI, either (a)
related to the Merger Agreement and the Transaction or the announcement thereof
or (b) related to such a change in the market trading price primarily resulting
from a change, effect, event or occurrence excluded from this definition of
Material Adverse Effect referred to in clause (i), (ii), (iii) above, or (v),
below or (v) relating to any generally applicable change in applicable laws
(other than orders, judgments or decrees against such person or any of its
subsidiaries) or in accounting principles or standards applicable to Uranerz or
EFI; provided, however, that the effect referred to in (i), (ii) or (v)
above does not primarily relate only to (or have the effect of primarily
relating only to) Uranerz, EFI or any subsidiary of EFI, taken as a whole, or
disproportionately adversely to Uranerz, EFI or any subsidiary of EFI, taken as
a whole, compared to other companies of similar size operating in the industry
in which it and its subsidiaries operate.
The representations and warranties contained in the Merger
Agreement do not survive the Effective Time.
Agreements Relating to Uranerz Operations Prior to
Completion of the Transaction
In the Merger Agreement, Uranerz has agreed that until the
completion of the Transaction, it will conduct its business in the ordinary
course consistent with past practice and will use commercially reasonable
efforts to preserve intact its business organizations and relationships with
third parties. In addition, Uranerz has agreed, subject to limited exceptions, that it will
not prior to the completion of the Transaction, do any of the following without
the prior written consent of EFI:
28
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amend or propose to amend its articles of
incorporation or bylaws or other organizational documents; |
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(i) declare, set aside or pay any dividend or other
distribution with respect to any shares of its capital stock, (ii)
repurchase, redeem or otherwise acquire any outstanding shares of its
capital stock or other securities, (iii) split, combine or reclassify any
shares of its capital stock or (iv) issue any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, except
for issuances of shares of common stock upon the exercise of its stock
options or warrants, in each case, in accordance with their terms at the
time of exercise; |
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issue, sell, pledge, dispose of or encumber any
securities (whether through the issuance or granting of options, warrants,
rights or otherwise, other than upon the exercise of its stock options
outstanding on the date of the Merger Agreement), or enter into any
amendment of any term of any outstanding security; |
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(i) incur or assume any indebtedness except indebtedness
incurred in the ordinary course of business and consistent with past
practice and in no event exceeding $1,500,000 in the aggregate or as
otherwise set out in the document titled 5- Year URZ Operating Summary
(the Uranerz Budget) provided by Uranerz to EFI, (ii)
modify the terms of any indebtedness, (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice and in no event
exceeding $200,000 in the aggregate or as otherwise set out in the Uranerz
Budget, (iv) make any loans, advances or capital contributions to, or
investments in, any other person (other than short-term investments of
cash in the ordinary course of business); |
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subject any assets to, incur, create or assume, any lien
other than a permitted lien or any liability as a guarantor or surety with
respect to the obligations of any person other than in the ordinary course
of business consistent with past practice; |
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increase the compensation payable, or to become payable,
or the benefits provided to its directors, officers or employees, except
for increases in the ordinary course of business in salaries or wages of
employees of Uranerz who are not directors or officers of Uranerz;
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adopt, amend or assume an obligation to contribute to any
employee benefit plan or arrangement of any type or collective bargaining
agreement or enter into any employment, severance or similar contract with
any person; |
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engage in any transaction which could subject Uranerz to
either a civil penalty assessed pursuant to specified sections of the
Employee Retirement Income Security Act of 1974, as amended (which are
sometimes refer to in this Circular as ERISA), or a tax penalty assessed
pursuant to specified sections of the Internal Revenue Code; |
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terminate any of its benefit plans, or take any
other action with respect to a benefit plan that could result in
liability; |
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take any action that could adversely affect
Uranerz compliance with the applicable requirements of ERISA; |
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fail to make full payment when due of all
amounts under Uranerz benefit plans; |
29
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fail to file, on a timely basis, all reports
and forms required by federal regulations with respect to any benefit
plans; |
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adopt or amend, or accelerate the payment or
vesting of benefits under, any benefit plan; |
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acquire, by merging or consolidating with, or by
purchasing an equity interest in or the assets of, or in any other manner,
any business or person, exceeding $1,000,000; |
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enter into any agreement, understanding or commitment
that materially restrains, limits or impedes its ability, or would
materially limit the ability of the surviving entity or any of its
affiliates after the Effective Time, to compete in or conduct any line of
business or compete with any person or in any geographic area or during
any period of time, provided Uranerz may enter into confidentiality
agreements and property acquisition agreements which contain area of
interest restrictions typical in the mining industry in connection with
transactions permitted under the immediately preceding bullet above;
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sell, lease, license or otherwise surrender, relinquish
or dispose of any assets with an aggregate fair market value exceeding
$1,000,000; |
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transfer, sell, pledge, encumber or dispose of any
capital stock or other equity interest in any subsidiary, other than in
connection with the immediately preceding bullet above; |
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incur or commit to any capital expenditures, or become
bound or obligated to participate in any operation, or consent to
participate in any operation other than in the ordinary course of
business, as contemplated in current mine plans or as otherwise previously
disclosed to EFI; |
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make any change to any material tax method of accounting,
make or change any material tax election, authorize any indemnities for
taxes, extend any period for assessment of any tax, file any request for
ruling or determination, amend any material tax return or settle or
compromise any material tax liability, except where the action would not
have a material effect on the tax position of Uranerz; |
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(i) pay, discharge or satisfy any material account
payable or other material liability beyond or in advance of its due date
or the date when the account payable or liability would have been paid in
the ordinary course of business and consistent with past practice or (ii)
compromise, settle, grant any waiver or release relating to any action,
suit or proceeding, other than settlements or compromises where the amount
paid or to be paid does not exceed $1,000,000 in the aggregate for all
claims; |
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change any method of accounting or accounting practice or
procedure except for any change required by U.S. GAAP; |
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enter into any joint venture, partnership or other
similar arrangement or materially amend or modify the terms of (or waive
any material rights under) any existing joint venture, partnership or
other similar arrangement; |
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enter into any agreement or transaction that would be
required to be disclosed by Uranerz pursuant to the Merger Agreement
regarding affiliate transactions if such agreement or transaction had been
entered into prior to the date of the Merger Agreement; |
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grant, or change, any severance or termination pay, other
than with respect to employment agreements entered into with new employees
in the ordinary course of business consistent with past practice;
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engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any
of its affiliates, including any transactions, agreements, arrangements
or understandings with any affiliate or other person covered
under Item 404 of Regulation S-K under the Securities Act, that would be
required to be disclosed under Item 404; |
30
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effectuate a plant closing or mass layoff, as those
terms are defined in the Worker Adjustment and Retraining Notification Act
of 1988, affecting in whole or in part any site of employment, facility,
operating unit or employee of Uranerz; |
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adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization; |
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enter into, amend, modify, or terminate, or make any
commitment in respect of, any contract or agreement that is material to
the business, properties, assets, financial condition or results of
operations of Uranerz, including, without limitation, any material
contract, except in the ordinary course of business consistent with past
practice, or (ii) enter into any contract or agreement that limits or
otherwise restrains Uranerz from competing in or conducting any line of
business or engaging in business in any significant geographic area;
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cause or allow any material insurance policies (or
substantial equivalents thereof) to lapse or terminate; |
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pay, discharge, settle or satisfy any lawsuit or threat
of any lawsuit or proceeding or other investigation against Uranerz or
relating to its business, properties or assets, other than (i) in the
ordinary course of business for amounts not in excess of $500,000 in any
case, and not to exceed $1,000,000 in the aggregate, (ii) pursuant to
existing contractual obligations, or (iii) workers compensation claims in
the ordinary course of business; |
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except as may be required by applicable law, settle any
material audit with respect to taxes or file any amended tax return that
would materially alter the tax obligation of EFI or its subsidiaries;
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take any action that would result in the breach of any
representation and warranty of Uranerz under the Merger Agreement (except
for representations and warranties made as of a specific date) such that
EFI would have the right to terminate the Merger Agreement; |
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enter into or make any loans to any of its officers,
directors or employees or make any change in its borrowing or lending
arrangements for or on behalf of any of such persons; or |
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agree or commit to do any of the foregoing.
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Agreements Relating to EFIs Operations Prior to
Completion of the Transaction
In the Merger Agreement, EFI has agreed that until the
completion of the Transaction, it will conduct its business in the ordinary
course consistent with past practice and will use commercially reasonable
efforts to preserve intact its business organizations and relationships with
third parties. In addition, EFI has agreed, subject to limited exceptions, that
it will not prior to the completion of the Transaction, do any of the following
without the prior written consent of Uranerz:
|
amend or propose to amend its articles of
incorporation or bylaws or other organizational documents; |
|
|
|
(i) declare, set aside or pay any dividend or other
distribution with respect to any shares of its capital stock, (ii)
repurchase, redeem or otherwise acquire any outstanding shares of its
capital stock or other securities or (iii) split, combine or reclassify
any shares of its capital stock; |
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issue, sell, pledge, dispose of or encumber any
securities (whether through the issuance or granting of options, warrants,
rights or otherwise, other than in the ordinary course of business,
upon the exercise of EFI stock options outstanding on the date
of the Merger Agreement), or enter into any amendment of any term of any
outstanding security; |
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(i) incur or assume any indebtedness except indebtedness
incurred in the ordinary course of business and consistent with past
practice and in no event exceeding $1,500,000 in the aggregate or as
otherwise set out in the document titled Energy Fuels Proposed Business
Plan and Budget 2015 Through 2017 (the EFI Budget) provided by
EFI to Uranerz, (ii) modify the terms of any indebtedness, (iii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person (other than a wholly owned subsidiary of EFI), except in the
ordinary course of business and consistent with past practice and in no
event exceeding $200,000 in the aggregate or as otherwise set out in the
EFI Budget, (iv) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned subsidiaries
of EFI, or by such subsidiaries to EFI and other than short-term
investments of cash in the ordinary course of business); |
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subject any assets to, incur, create or assume, any lien
other than a permitted lien or any liability as a guarantor or surety with
respect to the obligations of any person other than in the ordinary course
of business consistent with past practice; |
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engage in any transaction which could subject EFI to
either a civil penalty assessed pursuant to specified sections of the
Employee Retirement Income Security Act of 1974, as amended (which are
sometimes refer to in this Circular as ERISA), or a tax penalty assessed
pursuant to specified sections of the Internal Revenue Code; |
|
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terminate any of its benefit plans, or take any
other action with respect to a benefit plan that could result in
liability; |
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take any action that could adversely affect EFI
compliance with the applicable requirements of ERISA; |
|
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fail to make full payment when due of all
amounts under EFI benefit plans; |
|
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|
fail to file, on a timely basis, all reports
and forms required by federal regulations with respect to any benefit
plans; |
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adopt or amend, or accelerate the payment or
vesting of benefits under, any benefit plan; |
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acquire, by merging or consolidating with, or by
purchasing an equity interest in or the assets of, or in any other manner,
any business or person, exceeding $1,000,000; |
|
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enter into any agreement, understanding or commitment
that materially restrains, limits or impedes its ability, or would
materially limit the ability of the surviving entity or any of affiliate
of the surviving entity after the Effective Time, to compete in or conduct
any line of business or compete with any person or in any geographic area
or during any period of time, provided EFI may enter into confidentiality
agreements and property acquisition agreements which contain area of
interest restrictions typical in the mining industry in connection with
transactions permitted under the immediately preceding bullet above;
|
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sell, lease, license or otherwise surrender, relinquish
or dispose of any assets with an aggregate fair market value exceeding
$1,000,000; |
|
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transfer, sell, pledge, encumber or dispose of any
capital stock or other equity interest in any subsidiary other than in
connection with the immediately preceding bullet above;
|
32
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incur or commit to any capital expenditures, or become
bound or obligated to participate in any operation, or consent to
participate in any operation other than in the ordinary course of
business, as contemplated in current mine plans or as otherwise previously
disclosed to Uranerz; |
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make any change to any material tax method of accounting,
make or change any material tax election, authorize any indemnities for
taxes, extend any period for assessment of any tax, file any request for
ruling or determination, amend any material tax return or settle or
compromise any material tax liability, except where the action would not
have a material effect on the tax position of EFI and its subsidiaries
taken as a whole; |
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(i) pay, discharge or satisfy any material account
payable or other material liability beyond or in advance of its due date
or the date when the account payable or liability would have been paid in
the ordinary course of business and consistent with past practice or (ii)
compromise, settle, grant any waiver or release relating to any action,
suit or proceeding, other than settlements or compromises where the amount
paid or to be paid does not exceed $1,000,000 in the aggregate for all
claims; |
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change any method of accounting or accounting practice or
procedure except for any change required by IFRS; |
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enter into any joint venture, partnership or other
similar arrangement or materially amend or modify the terms of (or waive
any material rights under) any existing joint venture, partnership or
other similar arrangement in circumstances where the sum of (i) the assets
of EFI involved, and (ii) the amount of the obligations and liabilities
assumed or agreed to by EFI, is in excess of $5,000,000; |
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enter into any agreement or transaction that would be
required to be disclosed by EFI pursuant to the Merger Agreement regarding
affiliate transactions if such agreement or transaction had been entered
into prior to the date of the Merger Agreement; |
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engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any
of its affiliates, including any transactions, agreements, arrangements or
understandings with any affiliate or other person covered under Item 404
of Regulation S-K under the Securities Act, that would be required to be
disclosed under Item 404; |
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effectuate a plant closing or mass layoff, as those
terms are defined in the Worker Adjustment and Retraining Notification Act
of 1988, affecting in whole or in part any site of employment, facility,
operating unit or employee of EFI; |
|
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|
adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization; |
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(i) enter into, amend, modify, or terminate, or make any
commitment in respect of, any contract or agreement that is material to
the business, properties, assets, financial condition or results of
operations of EFI, including, without limitation, any material contract,
except in the ordinary course of business consistent with past practice,
provided that, a commitment will not be considered material unless the
amount of the obligations or liabilities assumed or agreed to by EFI under
such commitment are in excess of $5,000,000, or (ii) enter into any
contract or agreement that limits or otherwise restrains EFI from
competing in or conducting any line of business or engaging in business in
any significant geographic area; |
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cause or allow any material insurance policies (or
substantial equivalents thereof) to lapse or terminate;
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pay, discharge, settle or satisfy any lawsuit
or threat of any lawsuit or proceeding or other investigation against EFI
or relating to its business, properties or assets, other than (i) in the
ordinary course of business for amounts not in excess of $500,000 in any
case, and not to exceed $1,000,000 in the aggregate, (ii) pursuant to
existing contractual obligations, or (iii) workers compensation claims in
the ordinary course of business; |
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except as may be required by applicable law,
settle any material audit with respect to taxes or file any amended tax
return that would materially alter the tax obligation of EFI or its
subsidiaries; |
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take any action that would result in the breach
of any representation and warranty of EFI under the Merger Agreement
(except for representations and warranties made as of a specific date)
such that Uranerz would have the right to terminate the Merger Agreement;
or |
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agree or commit to do any of the foregoing.
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Non-Solicitation and Acquisition Proposals
The Merger Agreement provides that each of Uranerz and EFI and
their subsidiaries, and their respective officers, directors, investment
bankers, attorneys, accountants, financial advisors, agents and other
representatives, will not:
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solicit, assist, initiate, knowingly encourage or
facilitate (including by way of discussion (other than to state they are
not permitted to have discussions), negotiation, furnishing information,
permitting any visit to any facilities or properties of Uranerz or EFI or
their respective subsidiaries, or entering into any form of written or
oral agreement, arrangement or understanding, any inquiries, proposal or
offers regarding, or that may reasonably be expected to lead to, any
acquisition proposal; |
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engage or participate in any discussions (other than to
state they are not permitted to have discussions) or negotiations
regarding, or provide any information with respect to or otherwise
cooperate in any way with any person (other than Uranerz, EFI, and their
representatives) regarding any acquisition proposal or potential
acquisition proposal; |
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withdraw, modify or qualify, or propose publicly to
withdraw, modify or qualify, in any manner adverse to the other party, the
approval or recommendation of the Transaction by such partys board of
directors or any of its committees except where a material adverse effect
in respect of the other party has occurred and such partys board of
directors has determined that, as a consequence of such material adverse
effect, it would be inconsistent with the fiduciary duties of the
directors of such party to continue to recommend the Transaction;
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approve or recommend, or remain neutral with respect to,
or propose publicly to approve or recommend, any acquisition proposal;
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accept or enter into, or publicly propose to accept or
enter into, any letter of intent, agreement in principle, agreement,
arrangement or undertaking related to any acquisition proposal (other than
an acceptable confidentiality agreement as described below); or |
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release any person from or waive or otherwise forebear in
the enforcement of any confidentiality or standstill agreement or any
other agreement with such person that would facilitate the making or
implementation of any acquisition proposal. |
Under the Merger Agreement, Uranerz and EFI shall immediately
cease and cause to be terminated any existing solicitation, discussion,
negotiation, encouragement or activity with any person by Uranerz, EFI, or any
of their representatives with respect to any acquisition proposal or any
potential acquisition proposal. Uranerz and EFI will also immediately cease to
provide any person with access to information concerning Uranerz or EFI in
respect of any acquisition proposal or any potential acquisition proposal, and
request the return or destruction of all confidential information provided to
any person that has entered into a confidentiality agreement with Uranerz or EFI
relating to any acquisition proposal or potential acquisition proposal to the
extent provided for in such confidentiality agreement and shall use all
commercially reasonable efforts to ensure that such requests are honored.
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The Merger Agreement requires that Uranerz and EFI shall
promptly (and in any event within 24 hours) notify the other party of any
proposal, inquiry, offer or request received by Uranerz, EFI or their
representatives: (i) relating to an acquisition proposal or potential
acquisition proposal; (ii) for discussions or negotiations in respect of an
acquisition proposal or potential acquisition proposal; or (iii) for non-public
information relating to Uranerz or EFI, or any of their respective subsidiaries,
access to properties, books and records or a list of the holders of shares of
Uranerz common stock, EFI shares or the shareholders of any of their respective
subsidiaries.
However, under the Merger Agreement, following the receipt by
Uranerz or EFI of a bona fide written acquisition proposal made after the
date of the Merger Agreement that did not result from a breach of the Merger
Agreement, Uranerz, EFI, or their representatives may:
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contact the person making such acquisition proposal and
its representatives solely for the purpose of clarifying the terms and
conditions of such acquisition proposal and the likelihood of its
consummation so as to determine whether such acquisition proposal is, or
is reasonably likely to lead to, a superior proposal; and |
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if the board of directors of Uranerz or EFI, as
applicable, determines, after consultation with its outside legal and
financial advisors, that such acquisition proposal is, or is reasonably
likely to lead to, a superior proposal: |
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furnish information with respect to Uranerz or EFI and
its subsidiaries, as applicable, to the person making such acquisition
proposal and its representatives only if such person has entered into an
acceptable confidentiality agreement, provided that Uranerz or EFI, as
applicable, sends a copy of such confidentiality agreement to Uranerz or
EFI, as applicable, promptly following its execution and Uranerz or EFI,
as applicable, is promptly provided with a list of, and access to the
information provided to such Person; and |
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engage in discussions and negotiations with the person
making such acquisition proposal and its representatives provided that all
such information access and discussions shall cease during the match
period. |
The Merger Agreement also provides that Uranerz or EFI may (i)
enter into an agreement (other than an acceptable confidentiality agreement)
with respect to an acquisition proposal that is a superior proposal and/or (ii)
make an adverse recommendation change, provided:
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Uranerz or EFI shall have complied with its
non-solicitation obligations under the Merger Agreement; |
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the Uranerz Board or the EFI Board, as applicable, has
determined, after consultation with its outside legal and financial
advisors, that such acquisition proposal is a superior proposal;
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Uranerz or EFI has delivered written notice to the other
party of the determination of their board of directors that the
acquisition proposal is a superior proposal and of the intention of such
board of directors to approve or recommend such superior proposal and/or
to enter into an agreement with respect to such superior proposal, together with a copy of
such agreement executed by the person making such superior proposal and a
summary of the valuation analysis attributed by such board of directors, in good
faith to any non-cash consideration included in such acquisition proposal after
consultation with its financial advisors, and together with a summary analysis
articulating why the acquisition proposal is determined by such board of
directors to be a superior proposal (the "superior proposal notice"); |
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the match period has elapsed; |
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if EFI (or Uranerz) has offered to amend the
terms of the Transaction and the Merger Agreement during the match period,
such acquisition proposal continues to be a superior proposal compared to
the amendment to the terms of the Transaction offered by EFI (or Uranerz)
at the termination of the match period; and |
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Uranerz or EFI, as applicable, terminates the
Merger Agreement in compliance with the terms of the Merger Agreement and
Uranerz or EFI, as applicable, has previously paid or, concurrently with
termination, pays in cash a break fee of US$5 million to the other party.
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During the match period, EFI or Uranerz shall have the
opportunity, but not the obligation, to offer to amend the terms of the
Transaction and the Merger Agreement and Uranerz and EFI shall cooperate with
the other party with respect thereto, including negotiating in good faith with
the other party to enable the other party to make such adjustments to the
provisions of the Transaction and the Merger Agreement.
For purposes of the Merger Agreement, an acquisition proposal
means any proposal or offer, or public announcement of an intention to make a
proposal or offer, to such party or its security holders from any person or
group of persons "acting jointly or in concert" (within the meaning of
Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids) which
constitutes, or may be reasonably expected to lead to (in either case whether in
one transaction or a series of transactions):
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any take-over bid, issuer bid, amalgamation, plan of
arrangement, business combination, merger, tender offer, exchange offer,
consolidation, recapitalization or reorganization resulting in any person
or group of persons owning 20% or more of the issued and outstanding
equity or voting interests of Uranerz or EFI; |
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any sale of assets (or any lease, long-term supply
arrangement, licence or other arrangement having the same economic effect
as a sale) of Uranerz or EFI representing 20% or more of the consolidated
assets (based on the fair market value thereof), revenues or earnings of
Uranerz or EFI and for clarity includes (but not limited to) the sale of
(1) with respect to the Uranerz, any one of the Nichols Ranch project
(and/or processing plant), the Hank project, the Jane Dough project and
(2) with respect to EFI, any one of the White Mesa Mill and any
surrounding mineral properties described in EFI's latest filed annual
report on Form 40-F (other than properties described as being non-material
in such annual report on Form 40- F), the Roca Honda Project, Gas Hills
project or the Sheep Mountain project; |
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any sale or issuance of shares or other equity interests
(or securities convertible into or exercisable for such shares or
interests) in Uranerz or EFI representing 20% or more of the issued and
outstanding equity or voting interests of Uranerz or EFI; and |
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any arrangement whereby effective operating
control of Uranerz or EFI is granted to another party or person.
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For purposes of the Merger Agreement:
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(a) |
potential acquisition proposal means any proposal,
inquiry, offer or request received by Uranerz, EFI, or their
representatives that could reasonably lead or be expected to lead to an
acquisition proposal; |
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(b) |
acceptable confidentiality agreement means a
confidentiality agreement that contains provisions that are not less
favorable to Uranerz (or EFI) than those contained in the confidentiality
agreement between EFI and Uranerz dated June 30, 2014, as amended on
December 4, 2014; |
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(c) |
superior proposal means a bona fide acquisition
proposal that is made in writing after the date of the Merger Agreement
and did not result from a breach of the Merger Agreement by Uranerz, EFI,
or their representatives and that the board of directors of Uranerz or the
board of directors of EFI determines in good faith after consultation with
its legal and financial advisors: |
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is made to Uranerz (or EFI) or all the Uranerz common
shareholders (or EFI common shareholders) and in compliance with
applicable securities laws, and is made for all or substantially all of
the assets of Uranerz or EFI or all shares of Uranerz common stock, or EFI
shares not owned by the person making the acquisition proposal; |
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(ii) |
that funds or other consideration necessary for the
consummation of such acquisition proposal are available to ensure that the
third party will have the funds or other consideration necessary for the
consummation of the acquisition proposal; |
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(iii) |
if consummated in accordance with its terms would result
in a transaction financially superior for Uranerz or EFI and its security
holders than the transaction contemplated by the Merger Agreement, taking
into account the form and amount of consideration, the likelihood and
timing of completion and the other terms thereof; |
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(iv) |
is reasonably capable of completion in accordance with
its terms taking into account all legal, financial, regulatory and other
aspects of such acquisition proposal; |
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(v) |
is not subject to approval by the board of directors or
the equivalent of the third party, is not subject to the third party
receiving a fairness opinion or similar evaluation, and is not subject to
a due diligence condition; and |
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(vi) |
that the taking of action in respect of such acquisition
proposal is necessary for the Uranerz Board or the EFI Board in the
discharge of its fiduciary duties under applicable
laws; |
(d) |
match period means five business days after the date a
superior proposal notice was received by Uranerz or EFI; and |
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(e) |
adverse recommendation change is the withdrawal,
modification or qualification of Uranerz or EFI approval or recommendation
of the Transaction and the recommendation or approval of an acquisition
proposal that is a superior proposal. |
Employee Matters
The Merger Agreement provides that:
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on and after the closing of the Transaction (the
Closing ), until at least the 90th day after the Closing, EFI
shall cause the surviving entity to provide each employee of Uranerz who
is retained by the surviving entity with (i) salary that is not less than
the salary immediately prior to the Closing, and (ii) the benefit plans,
programs and arrangements that are currently provided to EFI employees
under EFI benefit plans, programs and arrangements; |
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upon the Closing, each Uranerz employee who is retained
by the surviving entity shall be immediately eligible to participate in
EFIs group health plan (as defined in Section 5000(b)(1) of the Code) and
credit such employee the amount of vacation time that such employee had
accrued under any of Uranerz vacation policies as of the Closing Date;
and |
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EFI shall, or shall cause the surviving entity to, assume
and honor in accordance with their terms all change in control and
termination agreements disclosed to EFI pursuant to the terms of the
Merger Agreement applicable to employees of Uranerz arising from
completion of the Transaction. Provided, however, that to the extent that
EFI or the surviving entity or any other affiliate of EFI offers
employment to any employee of Uranerz following completion of the
Transaction, such employment shall be on terms concerning future changes
of control and termination agreed to between the employee and EFI or its
affiliate that are consistent with the terms currently in effect for the
employees of EFI and its affiliates. |
Other Agreements
The Merger Agreement further provides that:
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from the date of the Merger Agreement until the
Effective Time, Uranerz will provide to EFI (and EFIs officers,
directors, employees, accountants, consultants, legal counsel, agents and
other representatives) and EFI will provide to Uranerz (and Uranerz
officers, directors, employees, accountants, consultants, legal counsel,
agents and other representatives) (i) reasonable access during normal
business hours, upon prior notice, to its officers, employees, agents,
properties, offices and other facilities and technology, processes, books,
business and financial records, business plans, budget and projections,
customers, suppliers and other information of Uranerz, and the work papers
of its independent accountants, and otherwise provide such assistance as
may be reasonably requested and (ii) promptly furnish any information
concerning the business, properties, contracts, assets, liabilities,
personnel and other information as reasonably requested; |
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subject to compliance with applicable law, from
the date of the Merger Agreement until the Effective Time, each of Uranerz
and EFI will confer on a regular and frequent basis with one or more
representatives of the other to report on their respective material
operational matters and the general status of ongoing operations; |
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each of Uranerz and EFI will make all required
filings in connection with the Merger Agreement, including with respect to
the United States Nuclear Regulatory Commission; |
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Uranerz and EFI will promptly notify the other
after becoming aware of the occurrence or non - occurrence of any event
which would be reasonably likely to cause any representation or warranty
of any party contained in the Merger Agreement to be untrue or inaccurate
in any material respect or otherwise cause any condition to the
obligations of any party not to be satisfied; |
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Uranerz and EFI will promptly notify the other
after becoming aware of any failure of Uranerz or EFI to comply with or
satisfy in any material respect any covenant or agreement to be complied
with or satisfied pursuant to the Merger Agreement; |
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Uranerz and EFI shall take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or
becomes applicable to the Transaction or if any state takeover statute or
similar statute or regulation becomes applicable take all action necessary
to ensure that such transactions may be consummated as promptly as
practicable and to minimize the effect of such statute or regulation on
the Transaction; |
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Uranerz will take steps to cause the Uranerz Shareholder
Rights Plan to terminate as of the Effective Time and any rights issued
under the Shareholder Rights Plan will terminate and be of no further
force or effect effective as of the Effective Time; |
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Uranerz shall take all steps necessary to ensure that, as
of the date which Uranerz files on SEDAR a Form 10-K in respect of its
financial year ended December 31, 2014, it has filed a technical report in
respect of each mineral property which is material to Uranerz and which
complies with the requirements of NI 43-101 and which is current as of the
filing of such Form 10-K; and |
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EFI shall take all steps necessary to ensure that as of
the date on which EFI files on SEDAR an annual information form in respect
of its financial year ended December 31, 2014, EFI has filed a technical
report in respect of each mineral property which is material to EFI which
complies with the requirements of NI 43- 101 and which is current as of
the filing of such annual information form. |
Indemnification and Insurance of Uranerz Directors and
Officers
The Merger Agreement provides that, prior to the Effective
Time, Uranerz will purchase customary tail policies of directors and
officers liability insurance providing protection no less favorable in the
aggregate to the protection provided by the policies maintained by Uranerz that
are in effect immediately prior to the Effective Time and providing protection
in respect of claims arising from facts or events which occurred on or prior to
the Effective Time.
EFI will, or will cause the surviving entity and its
subsidiaries to, maintain such tail policies in effect without any reduction in
scope or coverage for six (6) years from the Effective Time. If a tail policy is
not available, then EFI agrees that for the period of two years following the
Effective Time, EFI shall cause the surviving entity or any successor to the
surviving entity to maintain Uranerz current directors and officers insurance
policies or substantially equivalent policies subject in either case to terms
and conditions no less advantageous to the directors and officers of Uranerz
than those contained in the policies in effect on the date of the Merger
Agreement, for all present and former directors and officers of Uranerz,
covering claims made prior to or within such two year period, provided the EFI
shall not be required to spend annual premiums in excess of 300% of the premiums
paid by Uranerz.
Closing Conditions for Each Party
The obligations of Uranerz and EFI to complete the Transaction
are subject to the fulfillment, at or prior to the Effective Time of the
Transaction, of the following conditions:
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approval of the Uranerz Shareholders at the
Uranerz Shareholder Meeting; |
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the approval of the EFI shareholders at the
Meeting; |
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the absence of any statute, rule, regulation,
executive order, decree, temporary restraining order, injunction or other
order issued by a court or other governmental entity preventing the
completion of the Transaction; |
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the proxy statement/prospectus filed by EFI and Uranerz
with the SEC on May 8, 2015 must be effective in accordance with the
provisions of the Securities Act and no stop order suspending the
effectiveness of such proxy statement/prospectus may be in effect and no
proceeding for the purpose of suspending or stopping the effectiveness of
such proxy statement/prospectus may be pending before or threatened by the
SEC; |
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the issuance of the EFI Common Shares to be issued in the
Transaction and upon exercise of the converted options and assumed
warrants must be approved for listing on the NYSE MKT and the TSX, subject
to official notice of issuance or customary conditions; |
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all filings, consents, authorizations and approvals of
any governmental authority required to be made or obtained by EFI, Merger
Sub, Uranerz or any of their subsidiaries to consummate the Transaction,
including, without limitation, any required filings and or approvals of
the United States Nuclear Regulatory Commission and the State of Utah
Division of Radiation Control, shall have been made or obtained, other
than those that if not made or obtained would not, individually or in the
aggregate, have a material adverse effect on Uranerz, EFI or the surviving
entity (in each case, after giving effect to the Transaction); |
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there are no suits, actions, investigations, inquiries or
other proceedings instituted, pending or threatened by any governmental or
other regulatory or administrative agency or commission that seeks to
enjoin, prevent, materially delay or otherwise impose material limitations
on the consummation of the Transaction; and |
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the inter-agency Committee on Foreign
Investment in the United States (CFIUS) approval has been
obtained. |
Additional Closing Conditions for EFI
EFIs obligation to complete the Transaction is subject to
satisfaction or waiver, at or prior to the Effective Time of the Transaction, of
the following additional conditions:
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the representations and warranties of Uranerz set forth
in the Merger Agreement that are qualified by material adverse effect or
materiality must be true and accurate and the representations and
warranties of Uranerz set forth in the Merger Agreement that are not
qualified by material adverse effect or materiality must be true and
accurate in all material respects, in each case, as of the Closing Date
(except, in either case, to the extent that the representation or warranty
speaks as of another date); |
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Uranerz must have performed in all material respects all
obligations and complied in all material respects with all agreements and
covenants in the Merger Agreement to be performed and complied with by it;
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EFI must have received a certificate signed on behalf of
Uranerz to the effect that the conditions described in the preceding two
bullet points have been satisfied; |
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from the date of the Merger Agreement through the
Effective Time, no material adverse effect must have occurred with respect
to Uranerz and no event, change or circumstance that would reasonably be
likely to result in a material adverse effect with respect to Uranerz must
have occurred; |
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EFI must have received an opinion, dated the Closing
Date, of counsel to Uranerz, in form and substance reasonably satisfactory
to EFI, to the effect that the Uranerz Shares are regularly traded on an
established securities exchange within the meaning of Treasury Regulation
Section 1.897-9T(d) as of the Closing Date; |
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EFI must have received evidence reasonably satisfactory
to it that the aggregate amount of all unpaid costs and expenses incurred
by Uranerz in connection with the Transaction is not in excess of
$1,500,000 (excluding commissions and fees paid to Haywood or Euro
Pacific); |
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taxes required to be withheld by EFI or Merger Sub under
Section 1445 of the Code shall not exceed $2,000,000; |
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the number of dissenting shares held by shareholders of
Uranerz who have exercised dissent rights will comprise less than 5% of
the issued and outstanding Uranerz Shares; and |
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each consent, waiver and approval required under the
Merger Agreement must have been obtained, and Uranerz must provide EFI
with copies thereof. |
Additional Closing Conditions for Uranerz
Uranerz obligation to complete the Transaction is subject to
satisfaction or waiver, at or prior to the Effective Time of the Transaction, of
the following additional conditions:
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the representations and warranties of EFI and Merger Sub
set forth in the Merger Agreement relating to organization and valid
existence, authority to enter into and carry out the obligations under the
Merger Agreement and enforceability of the Merger Agreement (in each case,
read without giving effect to any materiality or material adverse effect
qualifiers set forth in those representations and warranties) must be true
and correct in all material respects as of the Closing Date except to the
extent that the representation or warranty speaks as of another date;
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EFI and Merger Sub must have performed in all material
respects all obligations and complied in all material respects with all
agreements and covenants in the Merger Agreement to be performed and
complied with by them; |
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Uranerz must have received a certificate signed on behalf
of EFI to the effect that the conditions described in the preceding two
bullet points have been satisfied; |
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from the date of the Merger Agreement through the
Effective Time, no material adverse effect must have occurred with respect
to EFI and no event, change or circumstance that would reasonably be
likely to result in a material adverse effect with respect to EFI must
have occurred; |
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Dennis Higgs and Glenn Catchpole must have been appointed
to the board of directors of EFI and the EFI Board must be comprised of
eight members; and |
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each consent, waiver and approval required under the
Merger Agreement must have been obtained, and EFI must provide Uranerz
with copies thereof. |
Circumstances Under Which Either Party May Terminate the
Merger Agreement
The Merger Agreement may be terminated by either party at any
time before the Effective Time:
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by mutual written agreement of EFI and Uranerz;
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if the Transaction is not completed on or before July 31,
2015 (however, the right to terminate will not be available to a party
whose failure to fulfill any obligation under the Merger Agreement or the
breach of any representation or warranty under the Merger Agreement has
been the cause of, or resulted in, the failure of the Transaction to have
been completed on or before July 31, 2015); |
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if any applicable law makes completion of the Transaction
illegal or if any judgment, injunction, order or decree of a court or
other governmental authority restrains or prohibits the completion of the
Transaction and such decision becomes final and non- appealable (however,
the right to terminate is not available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of or
resulted in court action); |
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if there has been a breach of any representation,
warranty, covenant or agreement set forth in the Merger Agreement that (i)
would give rise to the failure of selected closing conditions and (ii) if
susceptible to cure, has not been cured in all material respects prior to
the earlier to occur of (x) 20 business days following delivery and
receipt by the other part of written notice of the breach or (y) July 31,
2015; |
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by either party, if the other partys
shareholder approval has not been obtained because of the failure to
obtain such approval at such other partys shareholder meeting; |
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by either party, if the other party breaches or
fails to perform in any material respect its non- solicitation obligations
under the Merger Agreement; |
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by either party, if the other party fails to
hold or is otherwise in material breach of its obligations to hold its
shareholder meeting; |
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if the board of directors of the other party or
any committee thereof makes an adverse recommendation change; and |
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by either party, if (i) the other party delivers a
superior proposal notice of such partys intent to enter into a
Transaction, acquisition or other agreement (including an agreement in
principle) to effect a superior proposal and received by such party in
compliance with its non- solicitation obligations under the Merger
Agreement and (ii) such party pays to the other party the termination fee
as described below in Termination Fees and Expenses.
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Effects of Terminating the Merger Agreement
If the Merger Agreement is terminated, the Merger Agreement
becomes null and void and there will be no liability or obligation on the part
of EFI, Merger Sub or Uranerz except for the provisions relating to
confidentiality and other general provisions contained in Article XI of the
Merger Agreement. Provided however, such termination will not relieve any party
from any liability with respect to any willful, knowing or fraudulent breach of
any representation, warranty, covenant or other obligation contained in the
Merger Agreement.
Termination Fees and Expenses
Under the Merger Agreement, Uranerz has agreed to pay EFI a
termination fee of $5,000,000 in any of the following circumstances:
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EFI terminates the Merger Agreement because Uranerz
breached or failed to perform in any material respect its non-solicitation
obligations, the obligation of Uranerz to hold the special meeting of its
shareholders to approve the Merger Agreement or the Uranerz Board makes an
adverse recommendation change, provided however, no such fee will be
payable where the adverse recommendation change resulted from the
occurrence of a material adverse effect with respect to EFI and that the
board of directors of Uranerz determined, in connection with such material
adverse effect, it would be inconsistent with its fiduciary duties to
recommend the Transaction; |
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Uranerz terminates the Merger Agreement by
delivering to EFI a written notice of its intent to enter into an
agreement in order to consummate a superior proposal; |
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after the date of the Merger Agreement, and
prior to any termination, any person publicly proposes an acquisition
proposal to Uranerz and either Uranerz or EFI terminates the Merger
Agreement because Uranerz Shareholders fail to approve the Merger
Agreement. Provided, however, Uranerz will not be required to pay the
termination fee prior to entering into a definitive agreement and
consummating a transaction constituting an acquisition proposal, and in no
event be required to pay the termination fee if such consummation occurs
more than twelve months after the termination of the Merger Agreement; and
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after the date of the Merger Agreement, and
prior to any termination, any person publicly proposes an acquisition
proposal to Uranerz and EFI terminates the Merger Agreement because the
closing of the Transaction has not occurred on or before July 31, 2015.
Provided, however, Uranerz will not be required to pay the termination fee
prior to entering into a definitive agreement and consummating a
transaction constituting an acquisition proposal, and in no event be
required to pay the termination fee if such consummation occurs more than
twelve months after the termination of the Merger Agreement.
|
Under the Merger Agreement, EFI has agreed to pay Uranerz a
termination fee of $5,000,000 in any of the following circumstances:
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Uranerz terminates the Merger Agreement because EFI
breached or failed to perform in any material respect its non-solicitation
obligations, the obligation of EFI to hold the Meeting to approve the
Merger Agreement or the board of directors of EFI makes an adverse
recommendation change, provided however, no such fee will be payable where
the adverse recommendation change resulted from the occurrence of a
material adverse effect with respect to Uranerz and that the board of
directors of EFI determined, in connection with such material adverse
effect, it would be inconsistent with its fiduciary duties to recommend
the Transaction; |
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EFI terminates the Merger Agreement by delivering to
Uranerz a written notice of its intent to enter into an agreement in order
to consummate a superior proposal; |
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after the date of the Merger Agreement, and prior to any
termination, any person publicly proposes an acquisition proposal to EFI
and either Uranerz or EFI terminates the Merger Agreement because EFI
shareholders fail to approve the Merger Agreement. Provided, however, EFI
will not be required to pay the termination fee prior to entering into a
definitive agreement and consummating a transaction constituting an
acquisition proposal, and in no event be required to pay the termination
fee if such consummation occurs more than twelve months after the
termination of the Merger Agreement; and |
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after the date of the Merger Agreement, and prior to any
termination, any person publicly proposes an acquisition proposal to EFI
and Uranerz terminates the Merger Agreement because the closing of the
Transaction has not occurred on or before July 31, 2015. Provided,
however, EFI will not be required to pay the termination fee prior to
entering into a definitive agreement and consummating a transaction
constituting an acquisition proposal, and in no event be required to pay
the termination fee if such consummation occurs more than twelve months
after the termination of the Merger Agreement. |
For the purposes of the Merger Agreement and this Section
Merger Agreement - Termination Fees and Expenses only, the term acquisition
proposal has the same meaning as specified in Merger Agreement-Non-Solicitation and Acquisition Proposals with the exception
that references to 20% or more are deemed to be changed to 50% or more.
43
Unless otherwise described in the bullet points above, any
termination fee payable by either Uranerz or EFI is required to be paid within
one business day after termination of the Merger Agreement.
Governing Law
The Merger Agreement is to be governed by and construed in
accordance with the laws of the State of Nevada, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws.
Amendment of the Merger Agreement
At any time before or after approval of the Merger Agreement by
Uranerz Shareholders and/or EFI Shareholders and prior to the Effective Time,
the Merger Agreement may be amended or supplemented in writing by EFI and
Uranerz with respect to any of its terms, except as otherwise provided by law.
Following approval of the Merger Agreement by Uranerz Shareholders, there will
be no amendment or change to its provisions unless permitted by Chapter 92A of
the Nevada Revised Statutes without further approval by the Uranerz
Shareholders.
On May 8, 2015, Uranerz, EFI and Merger Sub entered into an
Amendment to the Agreement and Plan of Merger to amend Sections 1.3, 3.2(h),
4.23 and 7.13 of the Merger Agreement (the Amendment Agreement). The Amendment
Agreement modified the number of Uranerz nominees EFI is required to appoint to
the EFI Board and modified the total number of members of the EFI Board after
the closing of the Transaction. The Merger Agreement originally provided for the
appointment of three Uranerz nominees, being Dennis Higgs, Glenn Catchpole and
Paul Saxton, while the Amendment Agreement only requires the appointment of
Dennis Higgs and Glenn Catchpole. The execution of the Amendment Agreement
reflects a determination by EFI in March 2015 to adjust the size of its board of
directors following the completion of the Transaction such that the EFI Board
would be comprised of 8 members, versus a minimum of 9 directors as originally
contemplated. In order to reflect the reduced size of the board and to retain
substantial representation on the EFI Board, EFI requested, and Uranerz agreed,
to reduce the number of Uranerz nominees on the EFI Board post-Transaction from
three directors to two directors. The Amendment Agreement further requires the
EFI Board to be comprised of eight directors while the Merger Agreement
originally stated that the EFI Board would consist of at least 9 members.
In addition, the Amendment Agreement provides for withholding
of taxes for holders of Uranerz warrants who are subject to FIRPTA withholding
as well as a revised process for withholding of FIRPTA taxes for holders of
shares of Uranerz common stock (who do not also holder Uranerz warrants).
Pursuant to the Amendment Agreement:
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EFI and any holder of Uranerz Shares (who does not also
hold Uranerz Warrants) subject to FIRPTA withholding will direct the
exchange agent for the Transaction to withhold 10% of the EFI common
shares issuable to such holder of shares on completion of the Transaction
(the Withheld Shares) on account of the amount to be withheld
under the Internal Revenue Code and any other applicable tax laws (the
Withholding Amount); |
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The exchange agent for the Transaction will
sell the Withheld Shares to fund the Withholding Amount; |
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EFI will pay all Withholding Amounts to the IRS
and other government authorities under applicable tax laws;
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44
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Such holders will have no further interest in
the Withheld Shares; |
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Such holders will have no obligation to EFI in
the event that the amount realized is less than the Withholding Amount;
and |
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EFI will have no obligation to such holders to
remit to such holders any proceeds of sale derived from the sale of the
Withheld Shares and such holder will have no entitlement to such amounts.
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It is intended that the arrangement regarding FIRPTA
withholding described above will apply to all holders of Uranerz Shares, who do
not also hold Uranerz Warrants, and who are subject to FIRPTA withholding
requirements. Currently Uranerz believes that Dennis Higgs is the only
shareholder subject to FIRPTA withholding requirements. However, Uranerz cannot
be certain as to whether other shareholders may be subject to such withholding
requirements. Additional shareholders may become subject to FIRPTA withholding
requirements subsequent to the date of this registration statement and prior to
Closing. In order for a holder of Uranerz Shares who does not also hold Uranerz
Warrants to be subject to FIRPTA withholding, they must have held greater than
5% of the outstanding Uranerz Shares at any time in the 5 years preceding
Closing of the Transaction, unless during such five-years the holder had
disposed of all of Uranerz Shares which it held prior to Closing.
Support Agreements
As a condition and inducement to Uranerz willingness to enter
into the Merger Agreement, Uranerz entered into support agreements with each of
the directors and executive officers of EFI. In the aggregate, such persons own
or control the voting of 73,531 EFI Common Shares, representing 0.37% of the
outstanding EFI Common Shares.
According to the terms of the support agreements, each named
shareholder has agreed, among other things, to:
(a) |
vote such partys beneficially owned shares, in favor of
any resolutions approving the Transaction and other related
matters, |
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(b) |
not exercise any dissent rights, |
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(c) |
not exercise any shareholder rights or remedies available
at common law to delay, hinder, upset or challenge the
Transaction, |
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(d) |
not option, sell, assign, transfer, alienate, dispose of,
gift, grant, pledge, create or permit an encumbrance on, grant a security
interest in or otherwise convey any of such shareholders securities in
EFI, |
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(e) |
not grant or agree to grant any proxy or other right to
the shareholders securities in EFI, other than in support of the
resolution approving the Transaction and other related matters, |
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(f) |
not requisition or join in the requisition of any meeting
of the shareholders of Uranerz for the purpose of considering any
resolution, |
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(g) |
not, in any manner, directly or indirectly solicit,
initiate, or knowingly encourage any inquiries, proposals, offers or
public announcements (or the submission or initiation of any of the
foregoing) from any person regarding any acquisition proposals, engage in
any negotiations concerning, or provide any information to, or have any
discussions with or otherwise cooperate with, any person relating to an
acquisition proposal, or otherwise knowingly facilitate or knowingly
encourage any effort or attempt to make or implement an acquisition
proposal, |
45
(h) |
not deposit or cause to be deposited such shareholders
shares in EFI under any acquisition proposal, |
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(i) |
promptly notify EFI, at first orally and then in writing,
of all acquisition proposals currently under consideration or of which the
securityholder is aware. |
The support agreements will terminate at the earlier to occur
of (a) at any time by mutual consent of Uranerz and the shareholder party to the
support agreement; (b) completion of the Transaction in accordance with the
Merger Agreement; (c) termination of the Merger Agreement in accordance with its
terms; (d) by written notice of the shareholder if Uranerz has not complied in
any material respect with its covenants contained in the support agreement or if
any representation or warranty of Uranerz contained in the support agreement is
untrue and incorrect in any material respect; and (e) by written notice of
Uranerz if the resolution approving the Transaction is not approved by the
requisite majority of EFI shareholders.
Litigation Relating to the Transaction
Between January 6, 2015, and February 9, 2015, Uranerz, all of
its directors, EFI, and Merger Sub were named as defendants in the following
putative shareholder class action suits in the District Court of Clark County,
Nevada and the District Court of Washoe County, Nevada: Barrett v. Uranerz
Energy Corp., et al., No. A-15-711942-C (Clark Cnty.); Foreman v. Catchpole, et
al., No. A-15-712125-C (Clark Cnty.); Travirca v. Uranerz Energy Corp., et al.,
No. A-15-712318-C (Clark Cnty.); Heims v. Uranerz Energy Corp., et al., No.
A-15-712379 (Clark Cnty.); Bouch v. Uranerz Energy Corp, et al., No.
A-15-712441-B (Clark Cnty.); Toderash v. Higgs, et al., No. A-15-712433-C (Clark
Cnty.); Stern v. Uranerz Energy Corp., et al., No. A-15-712618-B (Clark Cnty.);
Lang v. Higgs, et al., No. CV-15-00115 (Washoe Cnty.); Zimmer v. Uranerz Energy
Corp., et al., No. A-15-712718-B (Clark Cnty.); Prewitt v. Uranerz Energy Corp.,
et al., No. A-15-713683 (Clark Cnty.). These suits generally allege claims for
breach of fiduciary duty and related claims regarding the Transaction and seek,
inter alia, prohibition and/or rescission of the Transaction, damages, and
attorneys fees and costs.
All of the cases in Clark County have been consolidated. On May
1, 2015, Uranerz and the directors filed a motion to transfer the Lang action to
Clark County, or alternatively to stay the Lang action pending the resolution of
the consolidated actions pending in Clark County. That motion remains pending.
On May 18, 2015, the lead plaintiffs in Clark County filed a
consolidated amended complaint, asserting claims similar to those brought in the
original complaints and adding claims relating to the disclosures included by
Uranerz and EFI in the Form F-4 registration statement filed by EFI with the
Securities & Exchange Commission on May 8, 2015.
Uranerz and EFI believe these suits are without merit, and
Uranerz and the Uranerz Board, and EFI and the EFI Board intend to vigorously
defend against them.
Regulatory Approvals Required for the Transaction and Other
Regulatory Matters
EFI and Uranerz have agreed to use their commercially
reasonable efforts to obtain all governmental and regulatory approvals required
to complete the Transaction as contemplated by the Merger Agreement.
46
US Nuclear Regulatory Commission
The uranium recovery operations of Uranerz are regulated by the
United States Nuclear Regulatory Commission (the NRC) pursuant to the
Atomic Energy Act of 1954, as amended. The NRCs primary function is to ensure
the protection of employees, the public and the environment from radioactive
materials as well as to regulate most aspects of the uranium recovery process.
The NRC regulations pertaining to uranium recovery facilities are codified in
Title 10 of the Code of Federal Regulations (10 CFR). Uranerz currently
holds a Materials License issued by the NRC for the Nichols Ranch ISR Project in
Johnson and Campbell Counties, Wyoming. Under 10 CFR, the transfer of the
Materials License is not permitted unless the NRC, after securing full
information, finds that the transfer is in accordance with the provisions of the
Atomic Energy Act and has given its consent in writing. The completion of the
Transaction will result in a change of control with respect to Uranerz that
triggers the requirement that the consent of the NRC be obtained. In order to
obtain this consent, Uranerz must file a Notice of Change of Control and
Ownership Information to the NRC (Notice). The Notice provides the NRC
with a complete description of the proposed Transaction including, but not
limited to, any transfer of stocks or assets or merger, any name change, any
changes in personnel or duties that relate to the licensed program, and any
changes in the organization, location, or procedures that relate to the licensed
program. Uranerz must also confirm that all records concerning the safe and
effective decommissioning of the facility will be transferred to the transferee
and confirm that the transferee will abide by all constraints, conditions,
requirements and commitments of the transferor under the Materials License.
Under the Atomic Energy Act, the NRC will be required to make a determination
that the Transaction will not be inimical to the common defense and security,
and would not constitute unreasonable risk to the health and safety of the
public. As part of this determination, the NRC will consider certain foreign
ownership, control and domination factors. In addition, the NRC may require EFI
to agree to certain commitments designed to ensure ongoing compliance with the
terms of the Materials License. Uranerz and EFI have submitted the Notice to the
NRC in connection with the Transaction.
Wyoming Department of Environmental Quality
The uranium operations of Uranerz in Wyoming are also regulated
by the Wyoming Department of Environmental Quality (the WDEQ). The WDEQ
exercises delegated jurisdiction from the United States Environmental Protection
Agency to administer the Clean Water Act and the Clean Air Act, and directly
administers Wyoming statutes on mined land reclamation. Uranerz has been issued
a number of permits for its operations at the Nichols Ranch ISR project,
including permits relating to wellfield operations, deep disposal wells and air
quality. Uranerz has discussed the change of control of Uranerz that will result
from the completion of the Transaction with the WDEQ and is of the understanding
that no approval of the WDEQ is required in connection with the Transaction as
Uranerz will be the surviving corporation in the Transaction.
Wyoming Bond Financing Agreement
Uranerz entered into a Financing Agreement dated November 26,
2013 (the Financing Agreement) with Johnson County, Wyoming (the
County) pursuant to which the County agreed to loan to Uranerz (the
Wyoming Loan) the proceeds from the sale of its $20,000,000 Taxable
Industrial Development Revenue Bond (Uranerz Energy Corporation Project), Series
2013, (the Bond) upon the terms and conditions set out in the Financing
Agreement, for the purpose of financing the Nichols Ranch Project. The Bond was
issued by the County pursuant to an indenture of trust dated as of November 26,
2013 between the County and UMB BANK, n.a. as trustee thereunder. The State of
Wyoming, acting by and through the Wyoming State Treasurer, agreed to purchase
the Bond subject to the terms and conditions specified under Wyoming Statute 9-4-715(m) and pursuant to the
terms and conditions set out in a Bond Purchase Agreement entered into on
November 26, 2013 among the State of Wyoming, acting by and through the Wyoming
State Treasurer (the State), the County and Uranerz.
47
Uranerz has initiated discussions with the County and the State
as to the appropriate documentation and acceptances that will be required in
connection with the completion of the Transaction. It is anticipated that
Uranerz will be required to execute and deliver to the County and the State an
executed assumption agreement pursuant to which it agrees to perform all of the
original covenants and conditions under the Financing Agreement, together with
an opinion of its legal counsel relating to the execution of the assumption
agreement as well as other additional assurances and covenants.
Utah Department of Environmental Quality
EFIs White Mesa Mill is regulated by the State of Utah
Department of Environmental Quality (UDEQ) pursuant to a Radioactive
Materials License, Groundwater Discharge Permit and Air Approval Order. EFI does
not believe the completion of the Transaction will result in a change of
control with respect to EFI that would trigger the requirement that the consent
of UDEQ be obtained in advance of completion of the Transaction. EFI has
requested confirmation from UDEQ that its consent will not be required, or,
alternatively, that UDEQ grant its consent should UDEQ determine that such
consent is required.
U.S. Antitrust Regulations
The completion of the Transaction is conditioned upon the
receipt of all required antitrust clearances, consents and approvals. Although
neither Uranerz nor EFI are required, in the United States or elsewhere, to make
pre-Transaction notification filings or to await the expiration of any statutory
waiting periods prior to completing the Transaction, the Federal Trade
Commission, the Department of Justice, a state attorney general, or an antitrust
enforcement authority in another country could challenge or seek to block the
Transaction at any time, either before or after closing under the antitrust
laws, as it deems necessary or desirable in the public interest. Moreover, a
competitor, customer or other third party could initiate a private action under
the antitrust laws challenging or seeking to enjoin the Transaction, before or
after it is completed. Neither EFI nor Uranerz believe that the completion of
the Transaction will result in a violation of any applicable U.S. or foreign
antitrust laws. However, there can be no assurance that a challenge to the
Transaction on antitrust grounds will not be made or, if such a challenge is
made, what the result will be.
U.S. National Security Review
Section 721 of the Defense Production Act of 1950, as amended
(Section 721) authorizes the President of the United States to
investigate, and to suspend or to prohibit, any transaction that could result in
control of a U.S. business by a foreign person (a Covered Transaction)
where the President determines that such transaction threatens to impair U.S.
national security, and no other adequate and appropriate means are available to
address that threat. In the exercise of Section 721 authority, the President
relies on CFIUS. CFIUS consists of representatives of several U.S. agencies,
including the Departments of Commerce, Defense, Energy, Homeland Security,
Justice, State, and the Treasury, as well as the U.S. Trade Representative and
other White House offices. The Treasury Department chairs and acts as the
secretariat for CFIUS. CFIUS is empowered to review and to investigate Covered
Transactions (i) where appropriate, to negotiate agreements to mitigate
identified national security threats; (ii) to monitor and to enforce such
mitigation agreements; (iii) to determine that no further action under Section
721 is necessary concerning a Covered Transaction based on the outcome of its
review or investigation (including conclusion of a mitigation agreement);
and (iv) to make recommendations to the President for a final decision if it is
unable itself to resolve issues concerning a Covered Transaction.
48
There is no requirement to file a notice of a Covered
Transaction with CFIUS, but CFIUS itself may self-initiate an investigation
without being notified by the parties. Further, even if the parties to a Covered
Transaction do not file a notice with CFIUS or if CFIUS does not self-initiate
an investigation, the President maintains the authority to conduct an
investigation into, and to suspend, to prohibit, and to reverse a Covered
Transaction. Accordingly, it is customary and generally considered prudent to
file a joint voluntary notice with CFIUS in order to secure timely CFIUS
consideration of a Covered Transaction.
Uranerz and EFI submitted a joint voluntary notice with CFIUS
on March 17, 2015, and on April 20, 2015, CFIUS approval was issued.
EFIs Status as a Foreign Private Issuer under the United
States Securities Exchange Act of 1934
EFI is considered a foreign private issuer under the rules of
the SEC. EFI is subject to the reporting requirements under the Exchange Act
applicable to foreign private issuers. EFI is required to file its annual report
on Form 20-F with the SEC within four months of its fiscal year end, or Form
40-F, if applicable, with the SEC at the time it files its annual information
form with the applicable Canadian securities regulatory authorities. In
addition, EFI must furnish reports on Form 6-K to the SEC regarding certain
information required to be publicly disclosed by EFI in Canada or filed with the
TSX, or regarding information distributed or required to be distributed by EFI
to its shareholders.
Moreover, although EFI is required to comply with Canadian
disclosure requirements, in some circumstances EFI is not required to file
periodic reports and financial statements with the SEC as frequently or as
promptly as U.S. companies whose securities are registered under the Exchange
Act. EFI is required to file financial statements in accordance with IFRS, and
therefore does not file financial statements prepared in accordance with U.S.
generally accepted accounting principles. Furthermore, EFI is not required to
comply with Regulation FD, which addresses certain restrictions on the selective
disclosure of material information, although it must comply with Canadian
disclosure requirements. In addition, among other matters, EFIs officers,
directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions of Section 16 of the Exchange Act and
the rules under the Exchange Act with respect to their purchases and sales of
EFI common shares. If EFI loses its status as a foreign private issuer, it will
no longer be exempt from such rules and, among other things, will be required to
file periodic reports and financial statements as if it were a company
incorporated in the United States. EFI does, however, file quarterly financial
information under Canadian periodic reporting requirements for public
corporations, which is accessible through the Internet at www.sedar.com, and
will furnish such quarterly financial information to the SEC under cover of Form
6-K, which is available at www.sec.gov. Insiders of EFI are generally required
to disclose their trading in EFI shares within 5 days of the date of the trade
and these trading activity reports can be accessed through the Internet at
www.sedi.ca.
EFI expects that, upon completion of the Transaction, it will
likely cease being considered a foreign private issuer under the rules of the
SEC effective at the beginning of its next fiscal year and will therefore be
required to comply with such rules for all filings on or after January 1, 2016,
including the filing of its annual report for the fiscal year ended December 31,
2015.
49
Risk Factors
The Exchange Ratio will not be adjusted in the event of
any change in either Uranerz stock price or EFIs share price.
In the Transaction, each Uranerz Share (other than those shares
with respect to which dissent rights are properly exercised and not withdrawn)
will be converted into the right to receive 0.255 EFI Common Shares (subject to
adjustment as described herein). This Exchange Ratio will not be adjusted for
changes in the market price of either Uranerz Shares or EFI Common Shares.
Changes in the price of EFI Common Shares prior to completion of the Transaction
will affect the value of the consideration that Uranerz shareholders will
receive on the date of the Transaction. Share price changes may result from a
variety of factors (many of which are beyond the control of EFI and Uranerz),
including the following:
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Changes in Uranerz and EFIs respective
businesses, operations, finances and prospects, or the market assessments
thereof; |
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Market assessments of the likelihood that the
Transaction will be completed, including related considerations regarding
regulatory approvals of the Transaction; and |
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General market and economic conditions,
including fluctuations in the spot price of uranium and other factors
generally affecting the price of Uranerz Shares and EFI Common Shares.
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The price of EFI Common Shares at the Closing may vary from the
price on the date the Merger Agreement was executed, on the date of this
Circular, and on the date of the Meeting. As a result, the market value
represented by the Exchange Ratio will also vary. For example, based on the
range of closing prices of EFI Common Shares on the NYSE MKT during the period
from January 2, 2015, the last trading day before public announcement of
execution of the Merger Agreement, through May 20, 2015, the last trading date
before the date of this Circular, the Exchange Ratio represented a market value
ranging from a low of $1.04 to a high of $1.57 for each Uranerz Share.
Because the Transaction will be completed after the date
of the Meeting, at the time of Meeting, EFI Shareholders will not know the exact
market value of the EFI Common Shares that Uranerz Shareholders will receive
upon completion of the Transaction.
If the price of EFI Common Shares increases between the time of
the Meeting and the Closing of the Transaction, Uranerz Shareholders will
receive EFI Common Shares that have a market value that is greater than the
market value of such shares at the time of the Meeting. If the price of EFI
Common Shares decreases between the time of the Meeting and the Effective Time,
Uranerz Shareholders will receive EFI Common Shares at Closing that have a
market value that is less than the market value of such shares at the time of
the Meeting. Therefore, because the Exchange Ratio will not be adjusted based on
the market value of Uranerz Shares or EFI Common Shares, shareholders cannot be
sure at the time of the Meeting of the market value of the consideration that
will be paid to Uranerz Shareholders upon completion of the Transaction.
The Transaction is subject to a number of conditions,
including the receipt of consents and clearances from regulatory authorities
that may not be obtained, may not be completed on a timely basis or may impose
conditions that could have an adverse effect on Uranerz or EFI.
Completion of the Transaction is conditioned upon the
satisfaction or waiver of, among other matters, the receipt of certain
governmental authorizations, consents, orders, clearances, or other approvals
necessary to permit all parties to perform their obligations under the Merger
Agreement and complete the Transaction, including, without limitation, the
Nuclear Regulatory Commission and Wyoming Department of Environmental Quality. There can be no assurance
that regulators will not impose conditions, terms, obligations, or restrictions
and that such conditions, terms, obligations, or restrictions will not have the
effect of delaying or preventing the completion of the Transaction or imposing
additional material costs on, or materially reducing the revenues of EFI
following the Transaction. In addition, such conditions, terms, obligations, or
restrictions may result in the delay or abandonment of the Transaction. If any
condition to closing is waived, no assurance can be given that the the
underlying condition will be met or that failure to meet such condition would
not have a material effect on EFI post-Closing.
50
Failure to complete the Transaction could negatively
impact EFIs business, financial condition, results of operations or stock
price.
Completion of the Transaction is conditioned upon the
satisfaction of certain closing conditions, as set forth in the Merger
Agreement. The required conditions to closing may not be satisfied in a timely
manner, if at all, or, if permissible, waived. If the Transaction is not
consummated for these or any other reason, EFIs ongoing business may be
adversely affected and will be subject to a number of risks and consequences,
including the following:
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EFI may be required, under certain
circumstances, to pay Uranerz a termination fee of $5 million; |
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EFI must pay the substantial fees and expenses that it
incurred related to the Transaction, such as legal, accounting, printing
and fees and expenses of other professionals retained in connection with
the Transaction, even if the Transaction is not completed and, except in
certain circumstances, EFI may not be able to recover such fees and
expenses from Uranerz; |
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under the Merger Agreement, EFI is subject to certain
restrictions on the conduct of its business prior to completing the
Transaction, which restrictions could adversely affect its ability to
realize certain of its business strategies, including its ability to enter
into additional acquisitions or other strategic transactions; |
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matters relating to the Transaction may require
substantial commitments of time and resources by EFIs management, which
could otherwise have been devoted to other opportunities that may have
been beneficial to EFI; |
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the market price of EFIs Common Shares may
decline to the extent that the current market price reflects a market
assumption that the Transaction will be completed; |
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EFI may experience negative reactions to the
termination of the Transaction from customers, clients, business partners,
lenders and employees; and |
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EFI would not realize any of the anticipated
benefits of having completed the Transaction. |
In addition, any delay in the consummation of the Transaction,
or any uncertainty about the consummation of the Transaction, may adversely
affect EFIs future business, growth, revenue, liquidity and results of
operations.
Lawsuits have been filed against Uranerz, EFI, and Merger
Sub relating to the Transaction, and an adverse ruling in any such lawsuit may
prevent the Transaction from being completed.
Since the Transaction was announced on January 5, 2015, a
number of putative shareholder class action complaints have been filed against
Uranerz, the Uranerz Board, EFI and Merger Sub in the District Court, Clark
County, Nevada and the District Court, Washoe County, Nevada, by purported
Uranerz Shareholders challenging the Transaction and seeking, among other
things, damages, attorneys and experts fees and injunctive relief concerning alleged breaches
of fiduciary duty and to prohibit defendants from consummating the Transaction.
The cases filed in Clark County have been consolidated, and a motion is pending
to transfer the case in Washoe County to Clark County. Uranerz and EFI believe
the claims asserted in the complaints have no merit, and EFI and Uranerz and all
of the members of the Uranerz Board intend to defend vigorously against them.
See The TransactionLitigation Related to the Transaction for more information
about the lawsuits related to the Transaction that have been filed. If Uranerz
and EFI are unsuccessful in defending the class action complaints, Uranerz and
EFI may not be able to proceed with the Transaction even if all required
approvals, including the approvals of the shareholders of Uranerz, are obtained.
In addition, Uranerz and EFI may become subject to awards of damages against
us.
51
The Merger Agreement contains provisions that could
discourage a potential competing acquiror of EFI.
The Merger Agreement contains provisions that, subject to
limited exceptions, restrict EFIs ability to solicit, encourage, facilitate or
discuss competing third-party proposals to acquire shares or assets of EFI. In
addition, certain shareholders holding approximately 0.37% of the issued and
outstanding EFI Common Shares have entered into support agreements with Uranerz
pursuant to which they have agreed to vote in favor of the Transaction. These
provisions and the support agreements could discourage a potential competing
acquiror that might have an interest in acquiring all or a significant part of
EFI from considering or proposing that acquisition, even if it were prepared to
pay consideration with a higher per share, cash or market value than the
Transaction consideration proposed to be received or realized in the
Transaction, or might result in a potential competing acquiror proposing to pay
a lower price than it might otherwise have proposed to pay because of the added
expense of the $5 million termination fee that may become payable in certain
circumstances.
If the Merger Agreement is terminated by EFI, it may not be
able to negotiate a transaction with another party on terms comparable to, or
better than, the terms of the Transaction.
The Fairness Opinion obtained by the EFI Board from its
independent financial advisor will not reflect subsequent changes.
In connection with the proposed Transaction, Roth delivered to
the EFI Board the an opinion dated January 2, 2015 to the effect that as of that
date, and based upon and subject to the various considerations set forth in the
opinion, the Exchange Rate was fair, from a financial point of view, to EFI and
its shareholders. The opinion does not reflect changes that may occur or that
have occurred after the date of the opinion, including changes to the operations
and prospects of EFI or Uranerz, fluctuations in the spot price of uranium,
changes in the market prices of the common shares of EFI or Uranerz, changes in
general market or economic conditions or regulatory or other factors. Any such
changes, or changes of other factors on which the opinion is based, may
materially alter or affect the relative values of Uranerz and EFI and the value
of the Transaction.
Risks Relating to the Combined Company
Current EFI Shareholders will have reduced ownership and
voting interests after the Transaction.
Based on 95,912,806 Uranerz Shares outstanding on May 15, 2015,
and the Exchange Ratio, it is anticipated that EFI will issue 24,457,766 EFI
Common Shares to the shareholders of Uranerz on completion of the Transaction.
Based on the number of EFI Common Shares outstanding on the Record Date, current
Uranerz Shareholders and current EFI Shareholders would own approximately 55.6%
and 44.4% of EFI Common Shares, respectively, upon the completion of the
Transaction, assuming no additional issuances of common shares by either EFI or Uranerz
between the Record Date and the Effective Time and excluding EFI Common Shares
issuable to Cantor and Haywood and to members of Uranerz management on account
of change of control severance payments. However, EFI could issue up to
1,824,941 EFI Common Shares upon the exercise of outstanding EFI warrants and
options prior to the Effective Time and Uranerz could issue up to 18,594,180
Uranerz Shares (equivalent to 4,741,516 EFI Common Shares) upon the exercise of
outstanding Uranerz Warrants and Uranerz Options prior to the Effective Time. In
addition, following the effective time, EFI may issue additional common shares
pursuant to the exercise of outstanding EFI warrants and options, including
pursuant to those Uranerz warrants and options assumed by EFI in connection with
the Transaction. Further, EFI may issue additional common shares in connection
with future financings or other transactions.
52
The Transaction will result in changes to EFIs board of
directors and management that may affect the strategy and operations of the
combined company as compared to that of Uranerz and EFI as they currently
exist.
If the Transaction is completed, the composition of the EFI
Board and its management team will change. Upon completion of the Transaction,
the EFI Board will be comprised of eight members. The EFI Board currently
consists of nine members, however Mr. Goodman is not standing for election at
the Meeting and on Closing two additional members of the EFI Board are
anticipated to resign and two additional board members designated by Uranerz
will be appointed to the EFI Board. These individuals are Dennis Higgs and Glenn
Catchpole.
In addition, Mr. Paul Goranson, current President and COO of
Uranerz is expected to become the Executive Vice President, ISR Operations of
EFI. Furthermore, EFI is currently in negotiations with Mr. Dennis Higgs to stay
on as an employee or a consultant following the closing of the Transaction.
There can be no assurance that the newly constituted board of directors and new
management of EFI will function effectively as a team and that there will not be
any adverse effect on EFIs business as a result.
Any delay in completing the Transaction may reduce or
eliminate the benefits expected to be achieved thereunder.
In addition to the required regulatory approvals and
clearances, the Transaction is subject to a number of other conditions beyond
shareholders control that may prevent, delay, or otherwise materially adversely
affect its completion. It is not predicable whether and when these other
conditions will be satisfied. Furthermore, the requirements for obtaining the
required clearances and approvals could delay the completion of the Transaction
for a significant period of time or prevent it from occurring. Any delay in
completing the Transaction could cause shareholders not to realize some or all
of the synergies and other benefits that are expected to be achieved if the
Transaction is successfully completed within its expected time frame.
Uncertainties associated with the Transaction may cause a
loss of management personnel and other key employees which could adversely
affect the future business and operations following the Transaction.
The combined company will be dependent on the experience and
industry knowledge of Uranerz and EFI officers and other key employees to
execute its business plans. EFIs success after the Transaction will depend in
part upon its ability to retain key management personnel and other key
employees. Uranerz and EFIs current and prospective employees may experience
uncertainty about their roles within EFI following the Transaction or other
concerns regarding its operations following the Transaction, any of which may
have an adverse effect on EFIs ability to attract or retain key management and
other key personnel. Accordingly, no assurance can be given that Uranerz
and EFI will be able to attract or retain key management personnel and other key
employees until the Transaction is consummated or following the Transaction to
the same extent that Uranerz and EFI have previously been able to attract or
retain such employees.
53
The expected benefits of the Transaction may not be
realized.
To be successful after the Transaction, EFI will need to
combine and integrate the operations of Uranerz and EFI. Integration will
require substantial management attention and resources and could detract
attention and resources from the day-to-day business of EFI. EFI could encounter
difficulties in the integration process, such as:
|
the potential inability to extract predicted
amounts of uranium from the Uranerz ISR operations and to achieve
anticipated sales under sales agreements; |
|
|
|
the potential inability to successfully carry out the
Uranerz plan of operations for the Nichols Ranch ISR Uranium Project,
including the planned wellfield and operating unit expansions; |
|
|
|
the potential inability to successfully combine Uranerz
business with EFIs business or difficulties in connection with the in
situ recovery mining method in a manner that permits it to achieve the
operational and cost synergies expected to be achieved as a result of the
completion of the Transaction and other benefits anticipated to result
from the Transaction; |
|
|
|
complexities associated with managing the combined
businesses, including difficulty addressing possible differences in
corporate cultures and management philosophies and the challenge of
integrating different hard-rock and in-situ recovery mining methods and
assets of each of the companies in a seamless manner that minimizes any
adverse impact on customers, clients, employees, lenders, and other
constituencies; |
|
|
|
the loss of key employees, customers,
suppliers, vendors and partners; |
|
|
|
insufficient capital and liquidity to achieve
the business plan; |
|
|
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the inability of the combined company to meet
its cost and production expectations; |
|
|
|
insufficient uranium prices to allow the
combined business to achieve its production goals; and |
|
|
|
potential unknown liabilities and unforeseen
increased expenses or delays associated with the Transaction.
|
If EFI cannot integrate Uranerz business successfully with its
own, EFI may fail to realize the expected benefits of the Transaction. In
addition, there is no assurance that all of the goals and anticipated benefits
of the Transaction will be achievable, particularly as the achievement of the
benefits are in many important respects subject to factors that neither EFI nor
Uranerz controls. These factors include such things as the reactions of third
parties with whom contracts are entered into and with which business is
undertaken and the reactions of investors and analysts.
In addition, Uranerz and EFI have operated and, until the
completion of the Transaction, will continue to operate independently. It is
possible that the integration process could result in diversion of the attention
of each companys management which could adversely affect each companys ability
to maintain relationships with customers, clients, employees, and other
constituencies or EFI ability to achieve the anticipated benefits of the
Transaction, or could reduce each companys operating results or otherwise
adversely affect EFI business and financial results following the
Transaction.
54
The obligations and liabilities of Uranerz, some of which
may be unanticipated or unknown, may be greater than anticipated, which may
diminish the value of Uranerz to EFI.
Uranerz obligations and liabilities, some of which may be
unanticipated or unknown, or may be greater than anticipated, may not be
reflected or reserved for in Uranerz historical financial statements. The
obligations and liabilities of Uranerz could have a material adverse effect on
Uranerz business, financial condition, or results of operations following the
Transaction. EFI will not be able to realize any indemnification from Uranerz
under the Merger Agreement with respect to obligations or liabilities of
Uranerz, whether known or unknown. Any such liabilities could substantially
reduce EFIs earnings and cash flows or otherwise materially and adversely
affect its business, financial condition, or results of operations following the
Transaction.
EFI has made a determination that the Transaction will
not constitute a change of control under its Convertible Debentures, and, like
any other determination, could potentially be challenged.
EFI currently has convertible debentures outstanding in the
aggregate principal amount of CDN$22 million. If there is a change of control
of EFI as such term is defined in the trust indenture, EFI would be obligated to
offer to redeem the convertible debentures. EFI has determined that the
completion of the Transaction will not constitute a change of control as
defined under the trust indenture and accordingly that EFI will not be obligated
to offer to redeem the convertible debentures on completion of the Transaction.
However, there can be no assurance that all holders of debentures will agree
with EFIs determination on this matter, and it is therefore possible that legal
action under the Indenture could result. If one or more holders brought such an
action, it could result in costs to EFI and a diversion of management attention.
Furthermore, if a court found, despite the language of the trust indenture, that
there was a change of control, then EFI may be required to redeem some or
possibly all of the convertible debentures. Such a redemption would adversely
impact the working capital and financial position of EFI, and EFI may be
required to seek additional financing to fund the redemption. While EFI believes
that it would be able to raise such additional financing, there can be no
assurance that it would be able to do so or on commercially reasonable terms. In
addition, the completion of any additional financing may be dilutive to the
shareholders of EFI. The inability of EFI to complete any additional financing,
if required, on commercially reasonable terms or at all, could adversely impact
its stock price.
EFIs future results following the Transaction may differ
materially from the unaudited pro forma financial information included in this
Circular.
The unaudited pro forma combined financial information
contained in this Circular is presented for purposes of presenting EFIs
historical consolidated financial statements with Uranerz historical
consolidated financial statements as adjusted to give effect to the Transaction
as though the Transaction had occurred on March 31, 2015, and is not necessarily
indicative of the financial condition or results of operations of EFI following
the Transaction. The unaudited pro forma financial information reflects
adjustments, which are based upon preliminary estimates, to allocate the
purchase price to Uranerz acquired assets and liabilities. The purchase price
allocation reflected in this Circular is preliminary, and final allocation of
the purchase price will be based upon the actual purchase price and the fair
value of the assets and liabilities of Uranerz as of the date of the completion
of the Transaction. In addition, the assumptions used in preparing the pro forma
financial information may not prove to be accurate, and other factors may affect
EFIs financial condition and results of operations following the Transaction.
See the section entitled Unaudited Pro Forma Condensed Financial
Statements.
55
Additional reporting requirements may apply if EFI loses
its status as a Foreign Private Issuer under the Exchange Act.
EFI is considered a foreign private issuer under the rules of
the SEC. However, following completion of the Transaction it is likely to lose
its foreign private issuer status effective at the beginning of its next
fiscal year and will therefore be required to comply with such rules for all
filings on or after January 1, 2016, including the filing of its annual report
for the fiscal year ended December 31, 2015. This change will require, among
other things, that EFI change from preparing its financial statements in
accordance with IFRS to preparing them in accordance with US GAAP. As a foreign
private issuer, EFI is subject to the reporting requirements under the Exchange
Act applicable to foreign private issuers. EFI is required to file its annual
report on Form 40-F with the SEC at the time it files its annual information
form with the applicable Canadian securities regulatory authorities. In
addition, EFI must furnish reports on Form 6-K to the SEC regarding certain
information required to be publicly disclosed by EFI in Canada or filed with the
TSX and which was made public by the TSX, or regarding information distributed
or required to be distributed by EFI to its shareholders. Moreover, although EFI
is required to comply with Canadian disclosure requirements, in some
circumstances EFI is not required to file periodic reports and financial
statements with the SEC as frequently or as promptly as U.S. companies whose
securities are registered under the Exchange Act. EFI is required to file
financial statements in accordance with IFRS, and therefore does not file
financial statements prepared in accordance with U.S. generally accepted
accounting principles. Furthermore, EFI is not required to comply with
Regulation FD, which addresses certain restrictions on the selective disclosure
of material information, although it must comply with Canadian disclosure
requirements. In addition, among other matters, EFIs officers, directors and
principal shareholders are exempt from the reporting and short-swing profit
recovery provisions of Section 16 of the Exchange Act and the rules under the
Exchange Act with respect to their purchases and sales of EFI common shares. If
EFI loses its status as a foreign private issuer, it will no longer be exempt
from such rules and, among other things, will be required to file periodic
reports and financial statements as if it were a company incorporated in the
United States. EFI does, however, file quarterly financial information under
Canadian periodic reporting requirements for public corporations, which is
accessible through the Internet at www.sedar.com, and will furnish such
quarterly financial information to the SEC under cover of Form 6-K, which is
available at www.sec.gov. Insiders of EFI are generally required to disclose
their trading in EFI shares within 5 days of the date of the trade and these
trading activity reports can be accessed through the Internet at
www.sedi.ca.
Uranerz and EFI expect to incur substantial expenses
related to the Transaction and the integration of the two companies.
EFI expects to incur significant transaction costs and
significant synergy planning and integration costs in connection with the
Transaction. While EFI has assumed that this level of expense will be incurred,
there are many factors beyond its control that could affect the total amount or
the timing of the Transaction and integration expenses. Moreover, many of the
expenses that will be incurred are, by their nature, difficult to estimate
accurately. To the extent these Transaction and integration expenses are higher
than anticipated or are incurred at different times than anticipated, EFIs
future operating results and financial condition may be materially adversely
affected.
EFIs future results will suffer if it does not
effectively manage its expanded operations following the Transaction.
Following the Transaction, the size of EFIs business will
increase significantly. Its future success depends, in part, upon its ability to
manage this expanded business, which will pose substantial challenges for
management, including challenges related to the management and monitoring of new
operations, and associated increased costs and complexity.
There can be no assurances that EFI will be successful following the
Transaction.
56
The Transaction may result in a loss of customers,
clients and strategic alliances.
As a result of the Transaction, some of the customers, clients,
potential customers or clients or strategic partners of EFI or Uranerz may
terminate their business relationship with EFI or Uranerz following the
Transaction. Potential clients or strategic partners may delay entering into, or
decide not to enter into, a business relationship with EFI or Uranerz because of
the Transaction. Further one of Uranerz existing uranium supply contracts will
require the purchasers consent to the change of control of Uranerz, and there
can be no assurance that such consent will be forthcoming. If customer or client
relationships or strategic alliances are adversely affected by the Transaction,
EFIs business and financial performance following the Transaction could
suffer.
The market price of EFI Common Shares may be affected by
factors different from those affecting the EFI Common Shares or Uranerz Shares
prior to consummation of the Transaction.
EFIs mining methods and historical business differ from that
of Uranerz. Accordingly, the results of operations of the combined company and
the market price of EFI Common Shares may be affected by factors different from
those that previously affected the independent results of operations and the
market price of the common shares of each of EFI or Uranerz. The ability to
produce and level and timing of production at EFIs existing mines and mill,
which are based on conventional hard-rock underground mining and alternate feed
material production, are different from those of Uranerz, which are based on ISR
production. These differences may lead to different production profiles in
different price scenarios from EFIs conventional and ISR production facilities,
which could lead to adverse impacts on the market price for EFI Common
Shares.
Third parties may terminate or alter existing contracts
with Uranerz and EFI.
Uranerz has a customer uranium sales contract that contains a
change of control or similar clause that allows the counterparty to terminate
or change the terms of its contract upon the closing of the Transaction as
contemplated by the Merger Agreement. EFI and Uranerz have agreed to work
together to obtain the necessary consent from such third party, but if such
third party consent cannot be obtained, or is obtained on unfavorable terms, EFI
and Uranerz may lose the benefit of such contract going forward, including
benefits that may be material to EFIs business following the Transaction. EFI
and Uranerz do not anticipate knowing whether any contracts will be terminated,
or whether any such contracts will be renegotiated, until the Transaction has
been completed and, accordingly, Uranerz and EFI cannot currently quantify the
financial impact, if any, of the loss of any benefits of such contract.
EFI is an emerging growth company and EFI and Uranerz
cannot be certain if the reduced disclosure requirements applicable to emerging
growth companies will make EFI Common Shares less attractive to investors.
EFI is an emerging growth company as defined in the JOBS Act,
whereas Uranerz is not an emerging growth company. EFI will continue to qualify
as an emerging growth company until the earliest to occur of: (a) the last day
of the fiscal year during which EFI has total annual gross revenues of
US$1,000,000,000 or more; (b) the last day of the fiscal year of EFI following
the fifth anniversary of the date of the first sale of common equity securities
of EFI pursuant to an effective registration statement under the Securities Act,
such as this Circular or the Form S-8 Registration Statement filed by EFI on
March 31, 2014; (c) the date on which EFI has, during the previous 3-year
period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on
which EFI is deemed to be a large accelerated filer.
57
For so long as EFI continues to qualify as an emerging growth
company, it will be exempt from the requirement to include an auditor
attestation report relating to internal control over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act (SOA) in its
annual reports filed under the Exchange Act, even if it does not qualify as a
smaller reporting company, as well as certain other exemptions from various
reporting requirements that are applicable to other public companies.
Any U.S. domestic issuer that is an emerging growth company is
able to avail itself of the reduced disclosure obligations regarding executive
compensation in periodic reports and proxy statements, and to not present to its
shareholders a nonbinding advisory vote on executive compensation, obtain
approval of any golden parachute payments not previously approved, or present
the relationship between executive compensation actually paid and EFIs
financial performance. In contrast, Uranerz is currently subject to all of these
requirements. As a foreign private issuer, EFI is not subject to such
requirements, and will not become subject to such requirements even if EFI
ceases to be an emerging growth company, unless EFI also ceases to be a foreign
private issuer.
Investors in Uranerz who are familiar with Uranerz reporting
regime, may find EFI Common Shares less attractive because EFI relies on these
exemptions. If some of Uranerz investors find EFI Common Shares less attractive
as a result, there may be a less active trading market for EFI Common Shares and
EFI share price may be more volatile.
If EFI is, or becomes, a "passive foreign investment
company," adverse U.S. federal income tax consequences may result for U.S.
shareholders of EFI
U.S. holders of EFI Common Shares should be aware that EFI
believes it was not classified as a passive foreign investment company
(PFIC) for its tax year ended December 31, 2014, and based on current
business plans and financial expectations, EFI expects that it will not be a
PFIC for the current tax year. EFI has not made any determination as to its PFIC
status for future tax years. PFIC classification is fundamentally factual in
nature, generally cannot be determined until the close of the tax year in
question, and is determined annually. Consequently, there can be no assurance
that EFI will not become a PFIC for any tax year during which U.S. holders own
EFI shares.
If EFI is a PFIC for any year during a U.S. holders holding
period, then such U.S. holder generally will be required to treat any gain
realized upon a disposition of EFI common shares, or any excess distribution
received on its EFI common shares, as ordinary income, and to pay an interest
charge on a portion of such gain or distribution, unless the U.S. holder makes a
timely and effective qualified electing fund election (QEF Election)
or a "mark-to-market" election with respect to its EFI common shares. A U.S.
holder who makes a QEF Election generally must report on a current basis its
share of EFI's net capital gain and ordinary earnings for any year in which EFI
is a PFIC, whether or not EFI distributes any amounts to its shareholders.
However, U.S. holders should be aware that there can be no assurance that EFI
will satisfy the record keeping requirements that apply to a QEF, or that EFI
will supply U.S. holders with information that such U.S. holders require to
report under the QEF Election rules, in the event that EFI is a PFIC and a U.S.
holder wishes to make a QEF Election. Thus, U.S. holders may not be able to make
a QEF Election with respect to their EFI common shares. A U.S. holder who makes
a mark-to-market election generally must include as ordinary income each year
the excess of the fair market value of the EFI common shares over the taxpayers
basis therein.
58
The Transaction is expected to result in an ownership
change for EFI, and may result in an ownership change for Uranerz, under Section
382 of the Code, potentially limiting the use of EFIs and Uranerz net
operating loss carryforwards and certain other tax attributes in future years.
In addition, each of EFIs and Uranerz ability to use its net operating loss
carryforwards may be further limited if taxable income does not reach sufficient
levels.
As of March 31, 2015, Uranerz had approximately $60 million of
net operating loss ("NOL") carryforwards available to reduce U.S. federal
taxable income in future years. As of March 31, 2015, EFI had approximately $132
million of NOL carryforwards available to reduce U.S. federal taxable income in
future years. Under Section 382 of the Code, if a corporation undergoes an
"ownership change," the corporation's ability to use its pre-change NOL
carryforwards and other pre-change tax attributes to offset its post-change
income and taxes may be limited. In general, an "ownership change" occurs if
there is a cumulative change in ownership by "5-percent shareholders" that
exceeds 50 percentage points over a rolling three-year period.
The Transaction is expected to result in an ownership change
under Section 382 of the Code for EFI, potentially limiting the use of EFIs NOL
carryforwards in future taxable years for U.S. federal income tax purposes.
These limitations may affect the timing of when these NOL carryforwards can be
used which, in turn, may impact the timing of when cash is used to pay the taxes
of EFI and have a negative impact on EFIs financial position and results of
operations. In addition, EFIs ability to use its NOL carryforwards will be
dependent on its ability to generate taxable income. Some portion of the NOL
carryforwards could expire before EFI generates sufficient taxable income.
The Transaction, together with other transactions, may result
in an ownership change under Section 382 of the Code for Uranerz, potentially
limiting the use of Uranerz NOL carryforwards in future taxable years for U.S.
federal income tax purposes. These limitations may affect the timing of when
these NOL carryforwards can be used which, in turn, may impact the timing of
when cash is used to pay the taxes of Uranerz and have a negative impact on
Uranerz financial position and results of operations. In addition, Uranerz
ability to use its NOL carryforwards will be dependent on its ability to
generate taxable income. Some portion of the NOL carryforwards could expire
before Uranerz generates sufficient taxable income.
Financing requirements of the combined business.
The combined entity may need additional financing in connection
with the implementation of its business and strategic plans from time to time
after closing of the Transaction. The exploration and development of mineral
properties and the ongoing operation of mines, requires a substantial amount of
capital and may depend on the combined entitys ability to obtain financing
through joint ventures, debt financing, equity financing or other means. The
combined entity may accordingly need further capital depending on wellfield
development plans, production and operational results and market conditions,
including the prices at which the combined entity sells its production, or in
order to take advantage of further opportunities or acquisitions. The combined
entitys financial condition, general market conditions, volatile uranium and
vanadium markets, volatile interest rates, a claim against the combined entity,
a significant disruption to the combined entitys business or operations or
other factors may make it difficult to secure financing necessary for the
expansion of mining activities or to take advantage of opportunities for
acquisitions. Further, continuing volatility in the credit markets may increase
costs associated with debt instruments due to increased spreads over relevant
interest rate benchmarks, or may affect the ability of the combined entity, or
third parties it seeks to do business with, to access those markets. There is no
assurance that the combined entity will be successful in obtaining required
financing as and when needed on acceptable terms, if at all. If the combined
entity raises additional funding by issuing additional equity securities or
securities convertible, exercisable or exchangeable for equity securities, such financing may substantially dilute the
interests of the shareholders of the combined entity and reduce the value of
their investment.
59
Risks Related to EFIs Business
You should read and consider the other risk factors specific to
EFIs businesses that will also affect EFI after the consummation of the
Transaction described in EFIs Annual Information Form for the year ended
December 31, 2014 which is incorporated by reference into this Circular.
Risks Related to Uranerz Business
You should read and consider the other risk factors specific to
Uranerz businesses that will also affect EFI after the consummation of the
Transaction, described in Part I, Item 1A of Uranerz Annual Report on Form 10-K
for the year ended December 31, 2014 filed with the SEC and on SEDAR on March
16, 2015, and other documents that have been filed by Uranerz with the SEC and
Canadian securities regulators and which are incorporated by reference into this
Circular.
Information About EFI
EFI is one of the largest uranium producers in the United
States, with production at its White Mesa Mill ranging from 19 to 25% of total
US Production over the last five years. Since June of 2012, EFI has operated the
White Mesa Mill in Utah, which is the only conventional uranium mill currently
operating in the United States.
The mill is capable of processing 2,000 tons per day of uranium
ore. EFI also owns uranium projects located in Arizona, Colorado, New Mexico,
Utah and Wyoming in the Western United States, including a currently producing
mine, several mines on standby, and mineral properties in various stages of
permitting and development.
EFI was incorporated on June 24, 1987 in the Province of
Alberta under the name 368408 Alberta Inc. In October 1987, the name was
changed to Trevco Oil & Gas Ltd. In May 1990 the name was changed to Trev
Corp. In August 1994 the name was changed to Orogrande Resources Inc. In
April 2001, the name was changed to Volcanic Metals Exploration Inc. On
September 2, 2005, Volcanic Metals Exploration Inc. was continued under the
Business Corporations Act (Ontario). On March 26, 2006, Volcanic Metals
Exploration Inc. acquired 100% of the outstanding shares of EFI Resources
Corporation. On May 26, 2006, Volcanic Metals Exploration Inc. changed its name
to Energy Fuels Inc.
The EFI Shares are listed on the TSX, under the trading symbol
EFR and on the NYSE MKT, under the trading symbol UUUU. The principal
executive office of EFI and its subsidiaries, through which it owns and operates
its business in the United States, is located at 225 Union Blvd., Suite 600,
Lakewood, Colorado 80228, and EFIs telephone number is (303) 974-2140. EFI
maintains an administrative office located at 2 Toronto Street, Suite 500,
Toronto, Ontario M5C 2B6. EFIs website is www.energyfuels.com. The content of
EFIs website and information accessible through the website does not form part
of this Circular.
EFR Nevada Corp.
Merger Sub is a Nevada corporation and an indirect wholly owned
subsidiary of EFI. Merger Sub was formed solely for the purpose of effecting the
proposed Transaction with Uranerz and has not carried on any activities other than in connection with the proposed
Transaction. The address and telephone number for Merger Subs principal
executive office is the same as for EFI.
60
Trading Price and Volume
The EFI Common Shares are listed and traded in Canada on the
TSX and in the United States on the NYSE MKT.
The following table sets forth the high and low sale prices and
the monthly trading volume for the EFI Common Shares since May 1, 2014 on both
(i) the TSX and (ii) the NYSE MKT.
61
|
|
High |
|
Low |
|
Volume |
Toronto Stock Exchange |
|
(Cdn$) |
|
(Cdn$) |
|
(#) |
May 2014 |
|
8.89 |
|
7.15 |
|
1,060,566 |
June 2014 |
|
8.70 |
|
7.51 |
|
788,946 |
July 2014 |
|
8.68 |
|
7.21 |
|
1,415,011 |
August 2014 |
|
8.51 |
|
7.92 |
|
429,740 |
September 2014 |
|
8.50 |
|
7.22 |
|
435,016 |
October 2014 |
|
7.50 |
|
6.23 |
|
327,675 |
November 2014 |
|
9.00 |
|
6.76 |
|
529,906 |
December 2014 |
|
8.49 |
|
6.97 |
|
333,150 |
January 2015 |
|
7.36 |
|
5.40 |
|
622,958 |
February 2015 |
|
6.68 |
|
5.66 |
|
329,548 |
March 2015 |
|
6.24 |
|
5.44 |
|
320,557 |
April 2015 |
|
6.73 |
|
5.03 |
|
576,465 |
May 1-May 20, 2015 |
|
6.19 |
|
5.54 |
|
233,190 |
|
|
High |
|
Low |
|
Volume |
NYSE MKT |
|
(US$) |
|
(US$) |
|
(#) |
May 2014 |
|
8.18 |
|
6.62 |
|
745,027 |
June 2014 |
|
8.00 |
|
6.90 |
|
712,405 |
July 2014 |
|
7.99 |
|
6.78 |
|
613,860 |
August 2014 |
|
7.80 |
|
7.25 |
|
318,484 |
September 2014 |
|
7.83 |
|
6.46 |
|
654,266 |
October 2014 |
|
6.86 |
|
5.55 |
|
573,113 |
November 2014 |
|
8.00 |
|
6.00 |
|
631,191 |
December 2014 |
|
7.48 |
|
6.00 |
|
388,895 |
January 2015 |
|
6.25 |
|
4.50 |
|
917,667 |
February 2015 |
|
5.34 |
|
4.51 |
|
416,650 |
March 2015 |
|
5.00 |
|
4.26 |
|
513,557 |
April 2015 |
|
5.60 |
|
4.00 |
|
1,127697 |
May 1 May 20, 2015 |
|
5.15 |
|
4.53 |
|
306,249 |
On May 20, 2015, the closing price of
the EFI Common Shares was Cdn$5.68 on the TSX and US$4.69 on the
NYSE MKT.
62
EFI Prior Sales
The following table sets out the prior sales of securities of
Energy since May 20, 2014:
Date Issued/Granted |
Number of
Securities |
Type of Security |
Price Per Security
|
January 28, 2015 |
133,150 |
Stock options to purchase EFI Common Shares exercisable at C$5.85 per share
|
n/a |
January 28, 2015 |
153,850 |
Restricted Stock Units issued
at C$5.85 per share(1) |
n/a |
(1) |
Subject to approval by EFI Shareholders at the
Meeting. |
EFI Documents Incorporated by Reference
The following documents, filed by EFI with applicable Canadian
securities authorities, are specifically incorporated by reference into, and
form an integral part of, this Circular:
|
the Annual Information Form of EFI for the year
ended December 31, 2014 filed on SEDAR on March 19, 2015; |
|
|
|
the annual consolidated financial statements of
EFI for the years ended December 31, 2014 and 2013 filed on SEDAR on March
19, 2015; |
|
|
|
the MD&A of EFI for the year ended December
31, 2014 filed on SEDAR on March 19, 2015; |
|
|
|
the unaudited consolidated interim financial
statements of EFI for the three months ended March 31, 2015 filed on SEDAR
on May 11, 2015; |
|
|
|
the unaudited consolidated interim MD&A of
EFI for the three months ended March 31, 2015 filed on SEDAR on May 11,
2015; and |
|
|
|
the material change report of EFI relating to
the announcement of the Transaction filed on SEDAR on January 14, 2015.
|
All material change reports (other than confidential reports),
audited annual financial statements and managements discussion and analysis and
all other documents of the type referred to in section 11.1 of Form 44-101F1
Short Form Prospectus filed by EFI with the applicable Canadian
securities authorities on SEDAR at www.sedar.com after the date of this Circular
and before the Meeting are deemed to be incorporated by reference into this
Circular.
Any statement contained in this Circular or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded, for purposes of this Circular, to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. The modifying or superseding statement need not state
that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or
supersedes. The making of a modifying or superseding statement shall not be
deemed an admission for any purposes that the modified or superseded statement,
when made, constitutes a misrepresentation, an untrue statement of a material
fact or an omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or superseded
shall not be deemed in its unmodified or superseded form to constitute part of
this Circular.
63
Information About Uranerz
Certain information in this Circular pertaining to Uranerz,
including but not limited to, information pertaining to Uranerz below and under
The Transaction, as well as any of the Uranerz documents that are incorporated
by reference herein, including any technical reports, has been furnished by
Uranerz or is derived from information provided by Uranerz. Although EFI does
not have any knowledge that would indicate that such information is untrue or
incomplete, neither EFI nor any of its directors or officers assumes any
responsibility for the accuracy or completeness of such information, or for the
failure by Uranerz to disclose events or information that may affect the
completeness or accuracy of such information. It is noted, however, that certain
assumptions used in preparing technical information below relating to Uranerz,
including certain pricing, production and cost assumptions differ from those
used when preparing the Pro Forma Financial Statements included at Schedule D.
Uranerz has covenanted to EFI that, to the best of its knowledge, the
information concerning Uranerz provided by it for inclusion in this Circular
does not contain a material misrepresentation.
Uranerz is a United States based uranium company focused on
commercial ISR uranium exploration, extraction and sales. ISR is a uranium
extraction process that uses a leaching solution to extract uranium from
underground sandstone-hosted uranium deposits, and it is the generally accepted
extraction technology used in the Powder River Basin area of Wyoming. Uranerz
controls a large strategic land position in the central Powder River Basin,
where it operates the Nichols Ranch ISR Uranium Project.
The Nichols Ranch ISR Uranium Project is currently licensed to
include the Nichols Ranch Unit and the Hank Unit. Under the licensed plan, a
central processing plant has been built at Nichols Ranch and a satellite
processing facility is contemplated to be built at the Hank Unit. The Nichols
Ranch central processing plant is fully operational and extraction has commenced
from the initial wellfields in the Nichols Unit. In March 2014, Uranerz
submitted environmental permit and license applications to incorporate the Jane
Dough Unit, which is adjacent to the Nichols Ranch Unit, into the Nichols Ranch
ISR Uranium Project. Uranerz is seeking to amend its original environmental
permit and license to revise the original plan of operations for the Nichols
Ranch ISR Uranium Project in order to bring the Jane Dough Unit into extraction
operations before the Hank Unit. Due to the close proximity, fluids produced
from the Jane Dough Unit can be delivered directly to the Nichols Ranch
processing facility by pipeline, and an additional satellite processing facility
may not be required. The Uranerz management team has specialized expertise in
the ISR uranium mining method, and a record of licensing, constructing and
operating ISR uranium projects.
Uranerz was incorporated under the laws of the State of Nevada
on May 26, 1999. On July 5, 2005, Uranerz changed its name from Carleton
Ventures Corp. to Uranerz Energy Corporation. The principal business office of
Uranerz is located at 1701 East E Street, Casper, Wyoming, 82605, and Uranerz
phone number is (307) 265-8900. Uranerz also maintains an administrative office
located at Suite 1410 - 800 West Pender Street, Vancouver, British Columbia,
Canada V6C 2V6, and Uranerz telephone number there is 604-689-1659 or
1-800-689-1659 (toll free). Uranerz website is www.uranerz.com. The content of Uranerz website and information accessible through
the website does not form part of this Circular.
64
Uranerz common stock is traded on the NYSE MKT and the Toronto
Stock Exchange under the symbol URZ and on the Frankfurt Exchange under the
symbol U9E.
Uranerz Documents Incorporated by Reference
The following documents, filed by Uranerz with the applicable
Canadian securities authorities, are specifically incorporated by reference
into, and form an integral part of, this Circular:
|
the Annual Report on Form 10-K in respect of
the year ended December 31, 2014 as filed on SEDAR on March 16, 2015;
|
|
|
|
the Quarterly Report on Form 10-Q of Uranerz in
respect of the three months ended March 31, 2015 as filed on SEDAR on May
11, 2015; |
|
|
|
the Uranerz Proxy Statement dated May 14, 2015
in respect of its Annual Meeting of Shareholders to be held June 29, 2015;
|
|
|
|
Uranerz Current Report on Form 8-K dated
January 5, 2015 and amended on January 9, 2015, as filed on SEDAR; |
|
|
|
Uranerz Current Report on Form 8-K dated
January 7, 2015 as filed on SEDAR; |
|
|
|
Uranerz Current Report on Form 8-K dated
January 8, 2015 and amended on January 9, 2015, as filed on SEDAR; |
|
|
|
Uranerz Current Report on Form 8-K dated March
16, 2015 as filed on SEDAR; and |
|
|
|
Uranerz Current Report on Form 8-K dated May 8,
2015 as filed on SEDAR. |
All material change reports (other than confidential reports),
audited annual financial statements and managements discussion and analysis and
all other documents of the type referred to in section 11.1 of Form 44-101F1
Short Form Prospectus filed by Uranerz with the applicable Canadian
securities authorities on SEDAR at www.sedar.com after the date of this Circular
and before the Meeting are deemed to be incorporated by reference into this
Circular.
Any statement contained in this Circular or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded, for purposes of this Circular, to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. The modifying or superseding statement need not state
that it has modified or superseded a prior statement or include any other
information set forth in the document that it modifies or supersedes. The making
of a modifying or superseding statement shall not be deemed an admission for any
purposes that the modified or superseded statement, when made, constitutes a
misrepresentation, an untrue statement of a material fact or an omission to
state a material fact that is required to be stated or that is necessary to make
a statement not misleading in light of the circumstances in which it was made.
Any statement so modified or superseded shall not be deemed in its unmodified or
superseded form to constitute part of this Circular.
Interest of Certain Persons in the Transaction
EFI has been informed that, except as disclosed herein, none of
the directors and executive officers of Uranerz has a material interest, direct
or indirect by way of beneficial ownership of securities or otherwise in the Transaction. The officers and directors of
Uranerz and their associates and affiliates beneficially own, directly or
indirectly, or exercise control or direction over, in the aggregate, 3,829,000
Uranerz Shares, representing approximately 3.99% of the Uranerz Shares
outstanding as of the close of business on May 20, 2015. All of the Uranerz
Shares held by the executive officers and directors of Uranerz will be treated
in the same fashion under the Merger Agreement as Uranerz Shares held by any
other Uranerz Shareholder.
65
Change of Control Provisions under Employment Agreements
The following discussion describes the different contractual
arrangements and other rights of Uranerz executive officers that could be
triggered in connection with a change in control of Uranerz and, with respect to
double trigger arrangements, in the event that a termination of the executives
employment were to occur in connection with a change of control.
Glenn Catchpole, Chief Executive Officer
Uranerz entered into a new change in control severance
agreement with Mr. Glenn Catchpole, Uranerz Chief Executive Officer, on May 1,
2014 (the Catchpole Agreement), replacing a 2007 arrangement, and into a
consulting agreement with Catchpole Enterprises, Inc., an entity which is 50%
owned by Glenn Catchpole and 50% owned by his wife Judy Catchpole, on March 1,
2005, which was amended on January 1, 2007, January 1, 2008 and October 29, 2014
(as amended, the Catchpole Enterprises Agreement). Following annual reviews by
Uranerz Compensation Committee, Catchpole Enterprises, Inc. is currently paid a
base compensation of $250,000 per year and is eligible to receive an annual
bonus upon the achievement of performance and management objectives reasonably
established by Uranerz Compensation Committee. Mr. Catchpoles target bonus is
currently set at 60% of his annual base salary, or $150,000 for 2015.
Pursuant to the Catchpole Agreement, if Mr. Catchpoles
employment is terminated without cause or he resigns for good reason (as those
terms are defined in the Catchpole Agreement) from and after the date of a
change in control during the term of the Catchpole Agreement, then Mr. Catchpole
would receive:
|
all earned but unpaid base salary; |
|
|
|
any earned but unpaid bonus from the preceding
fiscal year; |
|
|
|
a credit for any accrued vacation not taken;
|
|
|
|
an amount equal to his target bonus for that year
multiplied by a fraction, the numerator being the number of full months
worked in the fiscal year, and the denominator being twelve; |
|
|
|
a severance payment equal to twenty four times
the sum of his monthly base salary in effect in the month preceding the
change in control and 1/12 of his target bonus; |
|
|
|
continued medical and dental insurance coverage for Mr.
Catchpole and his dependents on the same basis in effect prior to the
change in control for twenty four months following the change in control
(i.e. $4,000 per annum in lieu of coverage); |
|
|
|
and any legal fees or expenses incurred as a
result of such termination of employment. |
In addition, if Mr. Catchpoles employment is terminated
following a change in control, all stock options or restricted stock owned or
promised to be payable to him that were not yet vested will continue to vest per
the original schedule for twenty four months following termination and shall be
exercisable (together with all options or restricted stock owned by him and vested at
the termination date) at the earlier of their original expiry date or twenty
four months from termination.
66
The Catchpole Agreement also provides that, regardless of
whether Mr. Catchpole continues to be employed following a change in control,
for the twenty four month period following a change in control any incentive
plan or arrangement (including any compensation plan, long-term incentive plan,
bonus or contingent bonus arrangements or credits, performance awards or similar
benefits) available to him at the time of the change in control shall continue
in effect, and any benefit or compensation plan, stock ownership plan, stock
purchase plan, bonus plan, life insurance plan, health-and-accident plan or
disability plan in which he is eligible to participate at the time of the change
in control shall continue in effect. The severance benefits described above are
contingent upon Mr. Catchpole providing Uranerz with a general release of all
claims, including agreements related to confidentiality, non-competition,
non-solicitation, non-disparagement and arbitration. The Catchpole Agreement has
an initial eight month term and automatically renews for additional one-year
terms on January 1st of each year, provided that the Catchpole Agreement will
continue in effect for a period of 24 months beyond the term provided therein if
a change in control has occurred during such term.
On April 27, 2015, management of EFI advised that it proposed
to discuss with the members of Uranerz management who would not continue as
employees or officers of EFI following completion of the Transaction an
arrangement whereby the management members would agree that the severance
payments payable by EFI as a result of the completion of the Transaction would
be paid over a deferred period. Mr. Catchpole is one of the members of Uranerz
management to whom EFI made such a proposal. EFI and Mr. Catchpole have since
agreed that half of such severance payments will be paid through the issuance of
EFI Common Shares calculated based on the five day volume weighted average
closing price of the EFI Common Shares at the Closing Date on the NYSE MKT with
the remaining amount to be paid in cash at Closing. Mr. Catchpole will agree to
a contractual restriction on resale with respect to the EFI Common Shares issued
on Closing with respect to the severance payment such that (i) no sales will be
made during the initial six months from Closing, and (ii) not more than 50% of
the shares issued may be sold during the period from six months to one year
following Closing.
In addition to the foregoing, it is anticipated that Mr.
Catchpole will serve as a Director on the EFI Board following the Transaction
and be entitled to receive directors fees as an EFI director, including
reimbursement of customary and reasonable out-of-pocket and travel expenses.
Dennis Higgs, Executive Chairman
Uranerz entered into a new change in control severance
agreement with Mr. Dennis Higgs, Uranerz Executive Chairman, on May 1, 2014
(the Higgs Agreement), replacing a 2007 arrangement, and into a consulting
agreement with Ubex Capital Inc., an entity which is wholly owned by Mr. Higgs,
on July 1, 2005, which was amended on January 1, 2007, January 1, 2008 and
October 29, 2014 (as amended, the Ubex Agreement). Following annual reviews by
Uranerz Compensation Committee, Ubex Capital, Inc. is paid a base compensation
of $250,000 per year and is eligible to receive an annual bonus upon the
achievement of performance and management objectives reasonably established by
Uranerz Compensation Committee. Mr. Higgs target bonus is currently set at 60%
of his annual base salary, or $150,000 for 2015.
Pursuant to the Higgs Agreement, if Mr. Higgs employment is
terminated without cause or he resigns for good reason (as those terms are
defined in the Higgs Agreement) from and after the date of a change in control
during the term of the Higgs Agreement, then Mr. Higgs would receive:
67
|
all earned but unpaid base salary; |
|
|
|
any earned but unpaid bonus from the preceding
fiscal year; |
|
|
|
a credit for any accrued vacation not taken;
|
|
|
|
an amount equal to his target bonus for that
year multiplied by a fraction, the numerator being the number of full
months worked in the fiscal year, and the denominator being twelve; |
|
|
|
a severance payment equal to twenty four times
the sum of his monthly base salary in effect in the month preceding the
change in control and 1/12 of his target bonus; |
|
|
|
continued medical and dental insurance coverage for Mr.
Higgs and his dependents on the same basis in effect prior to the change
in control for twenty four months following the change in control (i.e.
$4,000 per annum in lieu of coverage); and |
|
|
|
any legal fees or expenses incurred as a result
of such termination of employment. |
In addition, if Mr. Higgs employment is terminated following a
change in control, all stock options or restricted stock owned or promised to be
payable to him that were not yet vested will continue to vest per the original
schedule for twenty four months following termination and shall be exercisable
(together with all options or restricted stock owned by him and vested at the
termination date) at the earlier of their original expiry date or twenty four
months from termination.
The Higgs Agreement also provides that, regardless of whether
Mr. Higgs continues to be employed following a change in control, for the twenty
four month period following a change in control any incentive plan or
arrangement (including any compensation plan, long-term incentive plan, bonus or
contingent bonus arrangements or credits, performance awards or similar
benefits) available to him at the time of the change in control shall continue
in effect, and any benefit or compensation plan, stock ownership plan, stock
purchase plan, bonus plan, life insurance plan, health-and-accident plan or
disability plan in which he is eligible to participate at the time of the change
in control shall continue in effect. The severance benefits described above are
contingent upon Mr. Higgs providing Uranerz with a general release of all
claims, including agreements related to confidentiality, non-competition,
non-solicitation, non-disparagement and arbitration. The Higgs Agreement has an
initial eight month term and automatically renews for additional one-year terms
on January 1st of each year, provided that the Higgs Agreement will continue in
effect for a period of 24 months beyond the term provided therein if a change in
control has occurred during such term.
Mr. Higgs will serve as a Director on the EFI Board following
the Transaction. In addition, EFI is currently in negotiations with Mr. Dennis
Higgs to stay on as an employee or a consultant of EFI following the closing of
the Transaction. If an arrangement is concluded between EFI and Mr. Higgs, it is
anticipated that EFI would agree to pay to Mr. Higgs aggregate compensation that
would be not less than the amount payable to Mr. Higgs under the Higgs Agreement
and, in exchange, Mr. Higgs would forgo any payment under the Higgs Agreement to
which Mr. Higgs would be otherwise entitled as a result of the change in
control of Uranerz resulting from completion of the Transaction. In addition,
Mr. Higgs may be entitled to the payment of additional consideration and/or
benefits under any such arrangement. The terms of any employment or consulting
agreement between EFI and Mr. Higgs have not been concluded and there is no
assurance that any such agreement will be concluded. If an agreement is not
concluded, then it is anticipated that Mr. Higgs will be entitled to payment
under the Higgs Agreement as a result of the change in control of Uranerz
resulting from completion of the Transaction, as described in the discussion
above and as in the table below under Golden Parachute Compensation. If Mr.
Higgs is retained as a consultant or employee of EFI, he will not be entitled to
receive any fees for serving as a director.
68
On April 27, 2015, management of EFI advised that it proposed
to discuss with the members of Uranerz management who would not continue as
employees or officers of EFI following completion of the Transaction an
arrangement whereby the management members would agree that the severance
payments payable by EFI as a result of the completion of the Transaction would
be paid over a deferred period. Mr. Higgs is one of the members of Uranerz
management to whom EFI made such a proposal. EFI and Mr. Higgs have since agreed
that half of such severance payments will be paid through the issuance of EFI
Common Shares calculated based on the five day volume weighted average closing
price of the EFI Common Shares at the Closing Date on the NYSE MKT with the
remaining amount to be paid in cash at the Closing. Mr. Higgs will agree to a
contractual restriction on resale with respect to the EFI Common Shares issued
on Closing with respect to the severance payment such that (i) no sales will be
made during the initial six months from Closing, and (ii) not more than 50% of
the shares issued may be sold during the period from six months to one year
following Closing.
Paul Goranson, Chief Operating Officer
Uranerz entered into a change in control severance agreement
with Mr. William Paul Goranson, Uranerz President and Chief Operating Officer,
on May 1, 2014 (the Goranson Agreement) and into an employment
agreement with Mr. Goranson on November 25, 2013 (the Goranson Employment
Agreement). The Goranson Employment Agreement establishes an annual base
salary of $230,000 per year and a potential cash bonus award of 60% of Mr.
Goransons annual base salary, or $138,000 for 2015.
Pursuant to the Goranson Agreement, if Mr. Goransons
employment is terminated without cause or he resigns for good reason (as those
terms are defined in the Goranson Agreement) from and after the date of a change
in control during the term of the Goranson Agreement, then Mr. Goranson would
receive:
|
all earned but unpaid base salary; |
|
|
|
any earned but unpaid bonus from the preceding
fiscal year; |
|
|
|
a credit for any accrued vacation not taken; an
amount equal to his target bonus for that year multiplied by a fraction,
the numerator being the number of full months worked in the fiscal year,
and the denominator being twelve; |
|
|
|
a severance payment equal to twenty four times
the sum of his monthly base salary in effect in the month preceding the
change in control and 1/12 of his target bonus; |
|
|
|
continued medical and dental insurance coverage
for Mr. Goranson and his dependents on the same basis in effect prior to
the change in control for twenty four months following the change in
control; and |
|
|
|
any legal fees or expenses incurred as a result
of such termination of employment. |
In addition, if Mr. Goransons employment is terminated
following a change in control, all stock options or restricted stock owned or
promised to be payable to him that were not yet vested will continue to vest per
the original schedule for twenty four months following termination and shall be
exercisable (together with all options or restricted stock owned by him and
vested at the termination date) at the earlier of their original expiry date or
twenty four months from termination.
The Goranson Agreement also provides that, regardless of
whether Mr. Goranson continues to be employed following a change in control, for
the twenty four month period following a change in control any incentive plan or
arrangement (including any compensation plan, long-term incentive plan, bonus or
contingent bonus arrangements or credits, performance awards or similar
benefits) available to him at the time of the change in control shall continue in effect, and any
benefit or compensation plan, stock ownership plan, stock purchase plan, bonus
plan, life insurance plan, health-and-accident plan or disability plan in which
he is eligible to participate at the time of the change in control shall
continue in effect. The severance benefits described above are contingent upon
Mr. Goranson providing Uranerz with a general release of all claims, including
agreements related to confidentiality, non-competition, non-solicitation,
non-disparagement and arbitration. The Goranson Agreement has an initial eight
month term and automatically renews for additional one-year terms on January
1st of each year, provided that the Goranson Agreement will continue
in effect for a period of 24 months beyond the term provided therein if a change
in control has occurred during such term.
69
On March 9, 2015, Mr. Goranson accepted an offer of employment
from EFI and entered into a letter agreement with EFI setting out the terms of
Mr. Goransons employment with EFI following the closing of the Transaction. The
letter agreement will supersede all terms and conditions of Mr. Goransons
employment with Uranerz at closing. Following the closing of the Transaction,
Mr. Goranson will be employed by EFI as Executive Vice President, ISR Operations
and will be responsible for all aspects of all ISR operations in Wyoming. It is
anticipated that Mr. Goranson will be paid a base salary of $240,000 per annum
with a discretionary bonus as determined by the EFI Board and will be eligible
for EFIs benefits and savings plans. Upon a change of control or termination
without cause, it is anticipated that Mr. Goranson will receive a multiple of
his base salary at a rate that is yet to be determined but is currently
anticipated to be not less than 100% of annual base salary. EFI will provide Mr.
Goranson with a standard indemnification agreement given to all EFI officers and
Mr. Goranson will receive both restricted stock units and stock options in EFI
at the discretion of EFIs board of directors. The restricted stock unit
(RSU) grant for 2015 is estimated to be a pro rata amount, based
on the period of employment with EFI during 2015, representing such pro rata
amount of additional annual compensation of $84,000, or the pro-rata amount of
approximately 35% of base salary for 2015.
Benjamin Leboe, Chief Financial Officer
Uranerz entered into a new change in control severance
agreement with Mr. Benjamin Leboe, Uranerz Chief Financial Officer, on May 1,
2014 (the Leboe Agreement), replacing a 2007 arrangement, and into a
consulting agreement with Independent Management Consultants of B.C., an entity
which is wholly owned by Mr. Leboe, on May 23, 2006, which was amended on
January 1, 2008 and October 29, 2014 (as amended, the IMC Agreement).
Following annual reviews by Uranerz Compensation Committee Independent
Management Consultants of B.C. is currently paid a base compensation of $200,000
per year and is eligible to receive an annual bonus upon the achievement of
performance and management objectives reasonably established by Uranerz board
of directors or Compensation Committee. Mr. Leboes target bonus is currently
set at 60% of his annual base salary, or $120,000 for 2015.
Pursuant to the Leboe Agreement, if Mr. Leboes employment is
terminated without cause or he resigns for good reason (as those terms are
defined in the Leboe Agreement) from and after the date of a change in control
during the term of the Leboe Agreement, then Mr. Leboe would receive:
|
all earned but unpaid base salary; |
|
|
|
any earned by unpaid bonus from the preceding
fiscal year; |
|
|
|
a credit for any accrued vacation not taken;
|
|
|
|
an amount equal to his target bonus for that year
multiplied by a fraction, the numerator being the number of full months
worked in the fiscal year, and the denominator being twelve;
|
70
|
a severance payment equal to twenty four times the sum of
his monthly base salary in effect in the month preceding the change in
control and 1/12 of his target bonus; |
|
|
|
continued medical and dental insurance coverage for Mr.
Leboe and his dependents on the same basis in effect prior to the change
in control for twenty four months following the change in control (i.e.
$4,000 per annum in lieu of coverage); and |
|
|
|
any legal fees or expenses incurred as a result
of such termination of employment. |
In addition, if Mr. Leboes employment is terminated following
a change in control, all stock options or restricted stock owned or promised to
be payable to him that were not yet vested will continue to vest per the
original schedule for twenty four months following termination and shall be
exercisable (together with all options or restricted stock owned by him and
vested at the termination date) at the earlier of their original expiry date or
twenty four months from termination.
The Leboe Agreement also provides that, regardless of whether
Mr. Leboe continues to be employed following a change in control, for the twenty
four month period following a change in control any incentive plan or
arrangement (including any compensation plan, long-term incentive plan, bonus or
contingent bonus arrangements or credits, performance awards or similar
benefits) available to him at the time of the change in control shall continue
in effect, and any benefit or compensation plan, stock ownership plan, stock
purchase plan, bonus plan, life insurance plan, health-and-accident plan or
disability plan in which he is eligible to participate at the time of the change
in control shall continue in effect. The severance benefits described above are
contingent upon Mr. Leboe providing Uranerz with a general release of all
claims, including agreements related to confidentiality, non-competition,
non-solicitation, non-disparagement and arbitration. The Leboe Agreement has an
initial eight month term and automatically renews for additional one-year terms
on January 1st of each year, provided that the Leboe Agreement will continue in
effect for a period of 24 months beyond the term provided therein if a change in
control has occurred during such term.
On April 27, 2015, management of EFI advised that it proposed
to discuss with the members of Uranerz management who would not continue as
employees or officers of EFI following completion of the Transaction an
arrangement whereby the management members would agree that the severance
payments payable by EFI as a result of the completion of the Transaction would
be paid over a deferred period. Mr. Leboe is one of the members of Uranerz
management to whom EFI made such a proposal. EFI and Mr. Leboe have since agreed
that half of such severance payments will be paid through the issuance of EFI
Common Shares calculated based on the five day volume weighted average closing
price of the EFI Common Shares at the Closing Date on the NYSE MKT with the
remaining amount to be paid in cash at the Closing. Mr. Leboe will agree to a
contractual restriction on resale with respect to the EFI Common Shares issued
on Closing with respect to the severance payment such that (i) no sales will be
made during the initial six months from Closing, and (ii) not more than 50% of
the shares issued may be sold during the period from six months to one year
following Closing.
Change of Control Payments
The following table sets forth the estimated amounts of
compensation that each of Uranerz named executive officers other than Mr.
Goranson could receive in connection with the Transaction pursuant to their
respective change in control severance agreements and employment/consultant
agreements and their subsequent agreements with EFI each as described above
under Employment, Severance and Change in Control Agreements. The completion
of the Transaction will constitute a change of control under each executive
officers change in control severance agreement and they will be entitled to
receive the compensation summarized below in the event that either (i) the
executive officers employment is terminated by Uranerz without cause, or (ii) the executive
terminates their employment for good reason subsequent to the completion of the
Transaction. EFI anticipates that the employment of Mr. Catchpole and Mr. Leboe
will each be terminated by Uranerz following the completion of the Transaction,
with the result that the compensation summarized below will be payable. If the
current negotiations between EFI and Mr. Higgs, results in Mr. Higgs continuing
as an employee or consultant of Uranerz or EFI following the completion of the
Transaction, it is anticipated that the compensation summarized below will not
be paid to Mr. Higgs. In that case, any employment or consulting agreement to be
negotiated and executed by Mr. Higgs with EFI would be expected to provide a
waiver of the right to receive any of such compensation as a result of the
completion of the Transaction. With respect to stock options, all options held
by the executive officers will continue to be exercisable for a period of 24
months following the closing date of the Transaction and any unvested options
held will continue to vest on the original vesting schedule.
71
While EFI is currently in negotiations with Mr. Higgs to stay
on as an employee or a consultant for a transition period at the closing of the
Transaction, in which case the amounts below may not apply to Mr. Higgs, the
amounts in the table assume, where applicable (and except as expressly noted),
that each named executive officers employment is terminated in circumstances
that would trigger the right to receive severance benefits and accelerated
vesting in connection with a change in control of Uranerz under the agreements
described above (a qualifying termination), and that such a qualifying
termination of the executives employment occurred on May 15, 2015. The actual
amounts that would be paid upon a named executive officers termination of
employment can be determined only at the time of such executives separation
from Uranerz. As a result, the actual amounts received by a named executive
officer may differ in material respects from the amounts set forth below.
|
|
Cash |
|
|
|
Perquisites |
|
|
|
|
|
|
Severance |
|
Equity |
|
Benefits |
|
Other |
|
Total |
Name |
|
($)(1) |
|
($)(2) |
|
($)(3) |
|
($)(4) |
|
($) |
Glenn Catchpole |
|
428,000 |
|
Nil |
|
8,000 |
|
428,000 |
|
864,000 |
Dennis Higgs |
|
428,000 |
|
Nil |
|
8,000 |
|
428,000 |
|
864,000 |
Benjamin Leboe |
|
342,500 |
|
Nil |
|
8,000 |
|
342,500 |
|
693,000 |
(1) |
The amounts reported in this column represent the
potential cash severance payments that would be made to the named
executive officer assuming a qualifying termination of the executives
employment on May 15, 2015 in connection with the Transaction. We do not,
however, expect that the employment of each of the named executive
officers employment will be terminated in connection with the
Transaction, as discussed above. |
|
|
(2) |
Other than the amounts set out above, the individuals
named above will not be entitled to receive any payment on account of: (A)
stock awards for which vesting would be accelerated; (B) in-the-money
option awards for which vesting would be accelerated; and (C) payments in
cancellation of stock and option awards. The individuals named above hold
the Uranerz Options which will be converted into options to purchase EFI
Common Shares upon completion of the Transaction. |
|
|
(3) |
The amount reported in this column represents the
estimated cost to provide the health and welfare benefits described above
(including reimbursement of COBRA premiums for the applicable period) to
the executive following a qualifying termination in connection with the
Transaction. |
|
|
(4) |
Represents an amount of the cash severance payment
otherwise payable that the named executive officer has agreed to accept
payment of by the issuance of EFI Common Shares calculated based on the
five day volume weighted average closing price of the EFI Common Shares at
the Closing Date on the NYSE MKT. |
72
In addition, the completion of the Transaction would constitute
a change of control under Mr. Goransons change in control severance agreement,
which, assuming a termination on May 15, 2015, would entitle him to receive an
aggregate severance payment of US$826,000, which would include an amount of
$38,000 on account of the estimated cost to provide health and welfare benefits
described above (including reimbursement of COBRA premiums for the applicable
period). However, EFI anticipates that Mr. Goranson will continue as an employee
of Uranerz or EFI following the completion of the Transaction, with the result
that EFI anticipates that the change of control severance payment will not be
paid to Mr. Goranson. Further, EFI anticipates that the employment agreement to
be negotiated and executed by Mr. Goranson with EFI will provide a waiver to the
right to receive any of such change of control severance payment as a result of
the completion of the Transaction.
Name |
Option Awards |
Number
Uranerz Shares Underlying
Uranerz Options |
Exercise
Price of Uranerz Options ($) |
Uranerz
Option Expiry Date |
Number EFI
Common Shares of Underlying
EFI Options |
Exercise Price
of EFI Options ($) |
EFI
Option Expiry Date |
Dennis Higgs |
75,000 62,500 20,000
35,000 67,500 67,500 107,500 73,000 |
0.75 2.64 0.65 1.33
1.89 1.32 1.22 1.14 |
Jan 6, 2016 Jan 7, 2018 Jan
5, 2019 Jan 4, 2020 Dec 12, 2021 Dec 16, 2022 Jul 11, 2023
Jan 16, 2025 |
19,125 15,937 5,100 8,925
17,212 17,212 27,413 18,615 |
2.94 10.35 2.55 5.22
7.41 5.18 4.78 4.47 |
Two years from date of completion of the Transaction
|
Glenn Catchpole |
190,000 125,000 70,000
135,000 135,000 150,500 73,000 |
0.75 2.64 1.33 1.89
1.32 1.22 1.14 |
Jan 6, 2016 Jan 7, 2018 Jan
4, 2020 Dec 12, 2021 Dec 16, 2022 Jul 11, 2023 Jan 16,
2025 |
48,450 31,875 17,850
34,425 34,425 38,377 18,615 |
2.94 10.35 5.22 7.41
5.18 4.78 4.47 |
Two years from date of completion of the Transaction
|
Paul Goranson |
175,000 73,000 |
1.06 1.14 |
Dec 1, 2023 Jan 16, 2025 |
44,625 18,615 |
4.16 4.47 |
Two years from date of completion of the Transaction
|
Benjamin Leboe |
100,000 125,000 70,000
135,000 135,000 114,100 73,000 |
1.96 2.64 1.33 1.89
1.32 1.22 1.14 |
May 23, 2016 Jan 7, 2018 Jan
4, 2020 Dec 12, 2021 Dec 16, 2022 Jul 11, 2023 Jan 16,
2025 |
25,500 31,875 17,850
34,425 34,425 29,095 18,615 |
7.69 10.35 5.22 7.41
5.18 4.78 4.47 |
Two years from date of completion of the Transaction
|
73
Dividends
Uranerz has not paid cash dividends or made any distributions
in the last three completed financial years.
Consolidated Capitalization and Options to Purchase
Securities
As May 19, 2015, the following Uranerz Options are
outstanding:
|
|
Weighted Average
|
|
|
Remaining |
|
Number of Uranerz
Options |
Contractual Life
|
Exercise Price ($) |
Outstanding |
(Years) for Options Outstanding |
0.00 0.99 |
660,000 |
2.00 |
1.00 1.99 |
6,154,680 |
6.38 |
2.00 2.99 |
743,000 |
2.37 |
3.00 3.99 |
436,500 |
5.15 |
4.00 4.99 |
50,000 |
2.15 |
1.56 |
8,044,180 |
5.81 |
As at May 19, 2015, the following Uranerz Warrants were
outstanding and exercisable:
Number of |
|
|
Warrants |
Exercise Price ($) |
Expiry Date |
1,600,000 |
1.60 |
December 5, 2015 |
4,150,000 |
1.60 |
March 5, 2016 |
4,800,000 |
1.60 |
January 25, 2017 |
10,550,000 |
1.60 |
|
Prior Sales
The following table sets out the prior sale or issuance of
securities of Uranerz in the past twelve month period since May 19, 2014.
74
Date |
Number of
|
|
Price per
Security |
Issued/Granted |
Securities
|
Security
|
(US$) |
May 21, 2014 |
49,000 |
stock options granted |
1.36 |
May 27, 2014 |
30,000 |
stock options granted |
1.36 |
May 29, 2014 |
30,000 |
stock issued for services |
n.a |
July 21, 2014 |
3,500 |
stock options exercised |
1.32 |
July 21, 2014 |
4,000 |
stock options exercised |
1.13 |
July 25, 2014 |
9,600,000 |
stock issued for cash |
1.25 |
July 25, 2014 |
4,800,000 |
stock warrants issued |
1.60 |
August 27, 2014 |
4,000 |
stock options exercised |
1.13 |
September 2, 2014 |
30,000 |
stock options granted |
1.17 |
September 5, 2014 |
15,000 |
stock issued for services |
n.a |
October 6, 2014 |
50,000 |
stock options granted |
1.05 |
January 9, 2014 |
17,500 |
stock options exercised |
1.13 |
January 17, 2014 |
1,200,000 |
stock options granted |
1.14 |
March 2, 2014 |
50,000 |
stock options granted |
1.16 |
Price Range and Trading Volumes of Uranerz Shares
The following table sets forth, for the 12 most recent calendar
months, the high and low sales price per common share of Uranerz as reported on
the NYSE MKT and the TSX.
|
NYSE MKT
(U.S. Dollars) |
TSX
(Canadian Dollars) |
|
High |
Low |
Volume |
High |
Low |
Volume |
May 1-20, 2015 |
1.25 |
1.10 |
2,934,108 |
1.48 |
1.33 |
231,866 |
April 2015 |
1.35 |
1.00 |
9,121,646 |
1.63 |
1.25 |
727,183 |
March 2015 |
1.20 |
1.06 |
4,053,415 |
1.50 |
1.30 |
265,681 |
February 2015 |
1.26 |
1.00 |
4,640,202 |
1.56 |
1.26 |
670,504 |
January 2015 |
1.33 |
1.05 |
8,142,583 |
1.58 |
1.23 |
1,320,648 |
December 2014 |
1.31 |
1.05 |
4,378,216 |
1.48 |
1.21 |
370,988 |
November 2014 |
1.51 |
0.88 |
8,875,127 |
1.70 |
1.02 |
624,726 |
October 2014 |
1.10 |
0.88 |
4,912,270 |
1.21 |
0.99 |
418,656 |
September 2014 |
1.23 |
1.08 |
5,911,174 |
1.34 |
1.21 |
786,543 |
August 2014 |
1.21 |
1.05 |
7,213,147 |
1.32 |
1.16 |
409,804 |
July 2014 |
1.60 |
1.11 |
11,485,326 |
1.69 |
1.22 |
1,155,686 |
June 2014 |
1.60 |
1.38 |
4,570,399 |
1.72 |
1.50 |
283,100 |
May 2014 |
1.65 |
1.13 |
9,006,384 |
1.78 |
1.30 |
400,918 |
75
Legal Proceedings and Regulatory Actions
Since the beginning of its respective most recently completed
financial year, other than as disclosed in the Circular in the section titled
Litigation Related to the Transaction, Uranerz has not been a party to,
or was the subject of, a legal or regulatory proceeding which is currently
material to Uranerz.
Uranerz Material Mineral Properties
The following information concerning Uranerz material mineral
properties is presented in accordance with NI 43-101. See Cautionary Notes to
United States Investors Concerning Mineral Reserve and Resource Estimates
above.
The mineral properties which are currently considered to be
material to Uranerz are (i) the Nichols Ranch Property; (ii) the Arkose
Property; (iii) the West North Butte Satellite Properties; (iv) the North
Rolling Pin Property; and (v) the Reno Creek Property. Each of these properties
is located within the Powder River Basin area of Wyoming.
Nichols Ranch Property
The following information concerning the Nichols Ranch Property
is based on a technical report prepared for Uranerz titled Nichols Ranch
Uranium Project, 43-101 Technical Report, Preliminary Economic Assessment dated
February 28, 2015 and authored by Douglas L. Beahm, P.E., P.G. and Paul
Goranson, P.E. (the Nichols Ranch Technical Report). Mr. Beahm is
independent of Uranerz and Energy Fuels, but Mr. Goranson is the President and
COO of Uranerz. Accordingly, the Nichols Ranch Technical Report is not
independent within the meaning of NI 43-101. A copy of the Nichols Ranch
Technical Report is available on Uranerz website at www.uranerz.com and on the
SEDAR website under Uranerz profile at www.sedar.com. The content of these
websites and information accessible through these websites do not form part of
the accompanying proxy statement/prospectus.
Project Description and Location
The Nichols Ranch Project is comprised of three areas: the
Nichols Ranch, Jane Dough, and Hank. Mineral tenure consists of unpatented
mining lode claims and mineral leases covering approximately 5,434 acres, as
described below.
The Nichols Ranch Area is located at approximately 43° 42
North Latitude and 106° 01 West Longitude, and consists of 36 unpatented lode
mining claims, two fee mineral leases, and one Surface Use Agreement (an
SUA). The claims and fee leases encompass approximately 920 acres. All
lode mining claims and fee leases in the Nichols Ranch Area are subject to
royalties. There is an overriding royalty interest burden on the fee leases, and
the lode mining claims, which is 6% or 8% depending on the price of uranium. The
fee leases have a 6% to 8% royalty depending on the sales price of uranium.
Surface owners have a set rate for reimbursement of any land taken out of
service for mining activities.
The Jane Dough Area is located at approximately 43° 41 North
Latitude and 106° 01 West Longitude, and consists of 115 unpatented lode mining
claims, three SUAs, and 16 fee mineral leases, encompassing approximately
3,121.43 acres. Portions of the Jane Dough area were formerly held separately by
Uranerz and the Arkose Joint Venture, as described below under Arkose
Property. These holdings have been combined. Uranerz retains 100% of the
mineral rights for that portion they originally held and 81% of the mineral
rights for the Arkose Joint Venture portion of Jane Dough. Mineral resources for
Jane Dough reflect this partition of mineral ownership. In Section 21 and the
north portion of Section 28 and the east portion of Section 20 and the northeast
quarter of Section 29, unpatented lode mining claims have an overriding royalty interest burden of 6% or 8% depending on the
sale price of uranium. In the south portion of Section 32, twenty (20) of the
unpatented lode mining claims have an overriding royalty of 0.25% based on
production. In the southern part of Section 28 where North Jane is located, 14
fee mineral leases have royalties ranging from 2% to 10% depending on the sale
price of uranium. In the west half of Section 29 two mineral leases have a
royalty of 6% or 8% depending on the sale price of uranium. Surface owners have
a set rate for reimbursement of any land taken out of service for mining
activities and two of the Surface Owners could receive an extraction fee on
production with a burden of 1% or 2% depending on the sale price of uranium.
76
The Hank Area is located at approximately 43° 44 North
Latitude and 105° 55 West Longitude, and consists of 66 unpatented lode mining
claims, two fee surface and mineral leases, and one SUA comprising approximately
1,392.58 acres. Of the 66 unpatented lode mining claims, 53 of the claims have
an overriding royalty interest burden of 6% or 8% depending on the selling price
of uranium.
All of the unpatented lode mining claims included in the
Nichols Ranch Property have annual filing requirements ($155 per claim) with the
Bureau of Land Management (BLM), to be paid on or before September 1 of
each year.
The current Wyoming severance tax is four percent but after the
allowable wellhead deduction the effective severance tax rate is approximately
3% of gross sales. In addition, the ad valorum (gross products) tax varies by
county assessment but is approximately 6.5% .
Nichols Ranch is permitted for in-situ recovery (ISR)
mining and recovery of uranium with both the Nuclear Regulatory Commission
(NRC) and the State of Wyoming Department of Environmental Quality
(WDEQ). This includes the Nichols Ranch area and plant site as well as
the Hank satellite area. Amendments to these permits are need for the Jane Dough
Area and amendment applications have been submitted for Jane Dough.
There are no known environmental liabilities which are not
included in current bonds held by the jurisdictional regulatory agencies.
Financial assurance instruments are held by the State of Wyoming for drilling,
ISR mining, and uranium processing under a Memorandum of Understanding
(MOU) with the NRC. The bonds are required to insure reclamation and
restoration of the affected lands and aquifers in accordance with state
regulations and permit requirements. WDEQ regulations require an annual review
of the bonding and bonds may be adjusted annually to reflect changes in
conditions at the mine.
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
Johnson and Campbell Counties, in which the Nichols Ranch
Property are located, are generally rural. Most of the workers for the operation
are from the local area and nearby communities such as Casper, Wyoming,
approximately 80 miles southeast of the Nichols Ranch Project. The Uranerz main
office is located in Casper as are numerous industrial supply and service
companies.
The Nichols Ranch Uranium Project is located within the Wyoming
Basin physiographic province in the western portion of the Powder River Basin.
The site is within the Pumpkin Buttes, a series of small buttes rising several
hundred feet above the surrounding plains. The area is a low-lying plain,
roughly 4,650 feet in elevation. The site is accessible via 2-wheel drive on
existing county and/or private gravel and dirt roads.
In the vicinity of the Nichols Ranch property, the weather may
limit the time periods for capital construction but should not significantly
affect the operation of an ISR facility. The climate is semiarid and receives an
annual precipitation of approximately 13 inches, the majority of which falls
from February to April as snow.
The basic infrastructure (power, water, and transportation)
necessary to support an ISR mining operation has been established at Nichols
Ranch and is located within reasonable proximity of Hank. Existing infrastructure is associated with local oil, gas, and coal bed
methane (CBM) development. Non-potable water is and/or will be supplied
by wells developed at or near the sites. Water extracted as part of ISR
operations will be recycled for reinjection. Typical ISR mining operations also
require a disposal well for limited quantities of fluids that cannot be returned
to the production aquifers. Two deep disposal wells have been permitted and are
operational at the Nichols Ranch ISR processing facility.
77
Tailings storage areas, waste disposal areas, heap leach pad(s)
are not part of the required infrastructure for the Nichols Ranch property, as
ISR operations do not require these types of facilities. Waste disposal is
accomplished via deep well injection. Uranerz has two such wells permitted and
in operation at Nichols Ranch.
History
The Nichols Ranch Property is located within the Pumpkin Buttes
Mining District, which was the first commercial uranium production district in
Wyoming. Uranium was first discovered in the Pumpkin Buttes in 1951.
Intermittent production from some 55 small mines through 1967 is reported to
have produced 36,737 tons of ore containing 208,143 pounds of uranium. This
early mining focused on shallow oxidized ores exploited by small open pit mines.
Modern mining in the district has focused on deeper reduced mineralization.
Cogemas Christensen Ranch and Irigary Ranch in situ leach uranium mining areas
and processing facilities are located within the Pumpkin Buttes Mining District,
approximately 7 and 13 air miles respectively from Nichols Ranch.
In December 2005, Uranerz purchased the Nichols Ranch, Jane
Dough, and Hank claims groups as part of a six property agreement to option from
Excalibur Industries. Uranerz then expanded the properties by staking additional
claims in the immediate and surrounding areas. In January, 2008 Uranerz entered
into a joint venture on the Arkose Project and controls an 81% undivided
interest to the mineral rights controlled by the Arkose Joint Venture. Uranerz
commenced exploration on the Arkose Project in 2008. A portion of the Arkose
holdings were subsequently incorporated into the Jane Dough portion of the
Nichols Ranch Project and remain subject to the 81% ownership under the Arkose
Joint Venture Agreement.
Construction of the processing facility at Nichols Ranch began
in 2011. Plant construction and initial wellfield installation was competed in
2014 and operations were initiated in June, 2014. Production of approximately
200,000 pounds of uranium oxide has been reported for 2014 via In Situ Recovery
(ISR) mining. The Nichols Ranch facility is licensed at an annual
capacity of 2 million pounds uranium oxide and is currently operating and
producing uranium oxide. The Hank Area is included in the Nichols Ranch permit
as a satellite operation, however, no production has occurred at Hank. Permit
amendments have been submitted for the portion of the Jane Dough Area with
delineated mineral resources. Jane Dough has no past production.
Geological Setting
The Nichols Ranch Project is located in the Powder River Basin
(PRB) which is a large structural and topographic depression which is
sub-parallel to the trend of the Rocky Mountains. The PRB is an asymmetrical
syncline with its axis closely paralleling the western basin margin. The PRB
hosts a sedimentary rock sequence that has a maximum thickness of about 15,000
ft along the synclinal axis. The sediments range in age from Recent (Holocene)
to early Paleozoic (Cambrian - 500 million to 600 million years ago) and overlie
a basement complex of Precambrian-age (more than a billion years old) igneous
and metamorphic rocks.
The White River Formation is the youngest Tertiary unit that
still exists in the PRB. Locally, its only known remnants are found on top of
the Pumpkin Buttes. The Wasatch Formation is the next underlying unit and
consists of interbedded mudstones, carbonaceous shales, silty sandstones, and
relatively clean sandstones. In the vicinity of the Pumpkin Buttes, the Wasatch
Formation is reported to be 1,575 ft thick.
78
The interbedded mudstones, siltstones, and relatively clean
sandstones in the Wasatch vary in degree of lithification from uncemented to
moderately well-cemented sandstones, and from weakly compacted and cemented
mudstones to fissile shales. The Wasatch Formation hosts significant uranium
mineralization. The next underlying unit is the Fort Union Formation. In the PRB
this unit is lithologically similar to the Wasatch Formation. The total
thickness of the Fort Union in this area is approximately 3,000 ft. The Fort
Union contains significant uranium mineralization at various locations in the
basin.
The Wasatch Formation is the host formation at Nichols Ranch,
Jane Dough and Hank. However, the various sandstone units of the Fort Union
Formation host mineralization in other areas within the PRB. Wyoming uranium
deposits are typically sandstone roll front uranium deposits.
The Eocene Wasatch Formation hosts uranium mineralization at
the Nichols Ranch Project. The Wasatch Formation in this area was deposited in a
multi-channel fluvial and flood plain environment. Within the Nichols Ranch
Project area, there is a repetitive transgressive/regressive sequence of
sandstones separated by fine-grained horizons composed of siltstone, mudstone,
carbonaceous shale and poorly developed thin coal seams.
At Nichols Ranch the Eocene Wasatch Formation is exposed at the
surface with limited areas of quaternary alluvial and colluvial deposits. The
primary mineralized sand horizons (100 Sand) are in the lower part of the
Wasatch, at an approximate average depth of 550 ft. The Hank Area is
approximately six miles east-northeast of the Nichols Ranch. Eocene Wasatch
Formation is exposed at the surface with limited areas of quaternary alluvial
and colluvial deposits. The mineralized sand horizon (150 Sand) is in the lower
part of the Wasatch at an approximate average depth of 365 ft.
Mineralization
Mineralization within the Nichols Ranch Project is interpreted
to be dominantly roll front type mineralization. Roll fronts are formed along an
interface between oxidizing ground water solutions which encounter reducing
conditions within the host sandstone unit. Parameters controlling the deposition
and consequent thickness and grade of mineralization include the host rock
lithology and permeability, available reducing agents, ground water chemistry,
and time in that ground water/geochemical system responsible for leaching.
Transportation and re-deposition of uranium must be stable long enough to
concentrate the uranium to potentially economic grades and thicknesses.
Exploration
Uranium mineralization was discovered in the Pumpkin Buttes in
1951. Early mining focused on shallow oxidized areas by small open pit mines.
Primary exploration methods included geologic mapping and ground radiometric
surveys. Modern exploration and mining in the district has focused on deeper
reduced mineralization. Exploration is primarily conducted by drilling, as
described below.
Drilling
Uranerz has conducted its own exploration of the Nichols Ranch
Project and is continuing with delineation drilling on the Nichols Ranch
Project. The drill hole data demonstrates that mineralization is present and is
of sufficient quality and density to support mineral resource estimation. Drill
hole data is dominantly based on interpretation of downhole geophysical logs
typically consisting of natural gamma, resistivity, and SP (Spontaneous
Potential). Resistivity and SP were utilized for defining lithology and
correlating the logs. Geophysical logging was historically completed by
commercial geophysical logging companies. Recent and current geophysical logging
is being completed by Uranerz personnel using modern logging units owned by
Uranerz.
The drill hole database used for the Nichols Ranch Technical
Report has an effective date of January 1, 2015, and is summarized below:
79
Drill hole Summary
Area |
Historic Drill
Holes |
Recent Drill
Holes |
Total |
Nichols Ranch |
143 |
761 |
904 |
Jane Dough |
0 |
786 |
786 |
Hank |
203 |
86 |
289 |
TOTAL |
346 |
1,633 |
1,979 |
In addition there are 94 monitor wells at Nichols Ranch and
Jane Dough and 16 monitor wells at Hank.
General drill hole results are summarized in the following
table. The tabulation shows the difference between the Nichols Ranch Area, which
is being fully delineated, and the Jane Dough and Hank Areas, which are in an
advanced exploration stage.
Drill hole Results
NICHOLS RANCH |
Barren or Trace Mineralization |
> .02 e%U3O8 <0.2 GT |
0.2 0.5 GT |
> 0.5 GT |
141 |
16 |
66 |
681 |
JANE DOUGH |
Barren or Trace Mineralization |
> .02 e%U3O8 <0.2 GT |
0.2 0.5 GT |
> 0.5 GT |
433 |
160 |
87 |
106 |
HANK |
Barren or Trace Mineralization |
> .02 e%U3O8 <0.2 GT |
0.2 0.5 GT |
> 0.5 GT |
168 |
21 |
37 |
63 |
Specific drill data summaries showing, the range and averages
for thickness of mineralization and grade thickness (GT), for Nichols
Ranch, Jane Dough, and Hank are provided in the following table:
GT Summaries
JANE DOUGH |
CUTOFF |
AVERAGE GT |
AVERAGE T |
MIN GT |
MAX GT |
MIN T |
MAX T |
0.2 |
0.78 |
7.0 |
0.20 |
6.33 |
1.00 |
42.00 |
0.5 |
1.16 |
9.0 |
0.50 |
6.33 |
1.00 |
42.00 |
NICHOLS RANCH A1 |
CUTOFF |
AVERAGE GT |
AVERAGE T |
MIN GT |
MAX GT |
MIN T |
MAX T |
0.2 |
1.11 |
8.5 |
0.20 |
7.05 |
1.00 |
40.00 |
0.5 |
1.51 |
10.2 |
0.50 |
7.05 |
1.00 |
40.00 |
NICHOLS RANCH A2
SAND |
CUTOFF |
AVERAGE GT |
AVERAGE T |
MIN GT |
MAX GT |
MIN T |
MAX T |
0.2 |
1.15 |
8.4 |
0.20 |
7.01 |
1.50 |
28.00 |
0.5 |
1.61 |
10.4 |
0.50 |
7.01 |
1.50 |
28.00 |
HANK |
CUTOFF |
AVERAGE GT |
AVERAGE T |
MIN GT |
MAX GT |
MIN T |
MAX T |
0.2 |
0.72 |
7.6 |
0.20 |
3.22 |
1.00 |
27.50 |
0.5 |
1.13 |
10.3 |
0.20 |
3.22 |
2.00 |
27.50 |
80
Sampling and Analysis
The primary assay data for the Nichols Ranch Project is
downhole geophysical log. Additional data includes limited core assays and
Prompt Fission Neutron (PFN) geophysical logging. PFN logging provides
a direct measurement of uranium content in the borehole. PFN use a neutron
radiation source in the borehole which causes the uranium atoms to respond by
releasing a specific wave length which can be measured. In this way PFN is
essentially equivalent to other common uranium assay methods such as X-ray
diffraction (XRF) completed in a laboratory or field environment and is thus
considered to provide direct assay results.
Uranerz has written procedures for the collection of drill data
including lithological logging, natural gamma logging. Uranerz also has standard
procedures for the interpretation of natural gamma logging employing the half
amplitude method for the interpretation of historic analog data. For all recent
drilling, Compulog software was utilized to convert natural gamma measurement
to equivalent % U3O8(%eU3O8).
This grade data is then summed for thickness and GT for the appropriate
mineralized intervals. This procedure is the current industry standard
method.
In the opinion of the author of the Nichols Ranch Technical
Report, the data collection, assay procedures (geophysical logging), database
maintenance, and storage and security for all relevant data are adequate.
Further it is the authors opinion that the data is suitable for the purposes of
the mineral resource estimation in the Nichols Ranch Technical Report.
Mineral Resource and Mineral Reserve Estimates
Mineral resource calculations are based on chemically
equivalent uranium grades. A minimum grade cutoff of 0.02 %
U3O8 and minimum GT of 0.20 was used in the
calculations along with a bulk dry density of 16 cubic feet per ton, as
subsequently discussed. Measured and Indicated mineral resources where estimated
using the GT contour method in accordance with Canadian Institute of Mining,
Metallurgy and Petroleum (CIM) guidance. Inferred mineral resources
were estimated by projecting average width and GT along a measured REDOX trend
defined by drill holes. Appropriate average width and GT applied to each
specific mineral resource area was determined from drill hole data. Wellfield
recovery factors were not applied to the indicated and inferred mineral resource
estimates.
81
The cutoff criteria used by Uranerz at their operating ISR
facility at Nichols Ranch is a minimum grade cutoff of 0.02 %
U3O8 and minimum GT of 0.20. The author of the
Nichols Ranch Technical Report is familiar with cutoff criteria as applied for
similar operations and concurs that a minimum GT cutoff of 0.20 does meet
criteria for reasonable economic extraction via ISR given the depths and general
operating conditions at the Nichols Ranch Project.
The mineral resource estimates for the Nichols Ranch Property
as set out in the Nichols Ranch Technical Report are summarized as follows:
82
Mineral Resource Summary
Nichols Ranch Total Remaining Mineral
Resources(1) |
|
|
Tons |
%eU3O8 |
Pounds |
URZ Pounds(2) |
Measured |
|
641,000 |
0.132 |
1,694,000 |
1,694,000 |
Indicated |
|
428,000 |
0.126 |
1,079,000 |
1,079,000 |
|
M&I Total |
1,069,000 |
0.130 |
2,773,000 |
2,773,000 |
Jane Dough Mineral Resources |
|
|
Tons |
%eU3O8 |
Pounds |
URZ Pounds(2) |
Indicated |
|
1,892,000 |
0.112 |
4,237,000 |
3,567,000 |
Hank Mineral Resources |
|
|
Tons |
%eU3O8 |
Pounds |
URZ Pounds(2) |
Indicated |
|
450,000 |
0.095 |
855,000 |
855,000 |
|
|
|
|
|
|
Project Total Remaining Measured and Indicated
Mineral Resources |
|
|
Tons |
%eU3O8 |
Pounds |
URZ Pounds(2) |
Measured |
|
640,000 |
0.132 |
1,694,000 |
1,694,000 |
Indicated |
|
2,770,000 |
0.111 |
6,171,000 |
5,500,000 |
|
M&I Total |
3,410,000 |
0.115 |
7,865,000 |
7,194,000 |
Project Total Inferred Resources |
|
|
Tons |
%eU3O8 |
Pounds |
URZ Pounds(2) |
Hank |
|
423,000 |
0.095 |
803,000 |
803,000 |
Jane Dough |
|
170,000 |
0.112 |
381,000 |
309,000 |
|
Inferred Total |
593,000 |
0.100 |
1,184,000 |
1,112,000 |
(1) |
Remaining Measured Mineral Resources includes for
production to January 1, 2015. |
(2) |
Uranerz Pounds are 100% of Nichols Ranch and Hank; Jane
Dough 100% in part and 81% in part. |
Mineral resources are not mineral reserves and do not have
demonstrated economic viability in accordance with CIM standards. Inferred
mineral resources are too speculative to have the economic considerations
applied to them which would enable them to be categorized as mineral reserves.
83
No mineral reserves have been estimated for the Nichols Ranch
Property, as a preliminary feasibility study has not been completed.
Mining Operations
Uranerz is currently conducting ISR mining at Nichols Ranch.
ISR is an injected-solution mining process that reverses the natural processes
that originally deposited the uranium in the sandstones. On-site ground water is
being fortified with gaseous oxygen and introduced to the zones of uranium
mineralization through a pattern of injection wells. The solution dissolves the
uranium from the sandstone host. The uranium-bearing solution is brought back to
surface through production wells where the uranium is concentrated at a central
processing plant and dried into yellowcake for market.
The major surface facilities for ISR mining include the central
processing plant, satellite plant (as planned for the Hank Area), wellfields,
and deep disposal wells. The current and proposed wellfield and disturbance area
for Nichols Ranch Area will contain approximately 113 acres, Jane Dough will
contain approximately 101 acres, and Hank will contain approximately 155 acres.
The deep disposal wells will be designed for at least 100 gpm flow rate each and
have a maximum injection pressure less than the fracture pressure of the
formation.
The mineralized zones at the Nichols Ranch Unit, Jane Dough
Unit and the Hank Unit will be divided into individual production areas where
injection and recovery wells will be installed. As typical with existing
commercial operations, the wells will be arranged in variations of 5-spot or
7-spot patterns. In some situations, a line-drive pattern or staggered
line-drive pattern may be employed. Horizontal and vertical excursion monitor
wells will be installed at each well field as dictated by geologic and
hydro-geologic parameters, and as approved by the WDEQ and the NRC.
The Nichols Ranch Unit consists of the Nichols Ranch Unit
processing facility and two production areas, PA #1 and PA #2. PA #1 currently
has a monitor well network and is currently in production with 4 active
production header houses. Two permitted and constructed deep disposal wells are
also located on the Nichols Ranch Unit. The Jane Dough Unit is adjacent to the
south of the Nichols Ranch Unit and contains properties held 100% by Uranerz and
by the Arkose Mining Venture. It contains two production areas that are
currently in the license and permit to mine amendment process. The Hank Unit is
100% Uranerz owned and is located approximately 6 miles east of the Nichols
Ranch Unit. The Hank Unit is fully licensed and permitted by the NRC and WDEQ to
operate as a satellite to the Nichols Ranch Unit, and contains two production
areas, and it may be developed as an adjacent property through a pipeline to the
Nichols Ranch Unit.
The mine life can be described as production followed by
restoration and reclamation. Production activities which include development,
drilling, construction, and production, are planned to continue through 2023.
Restoration, reclamation, and decommissioning activities are scheduled soon
after production is completed within a production area. It is planned that these
activities would commence in 2017 and continue until 2026. Final decommissioning
is planned to occur with the completion of restoration with the final production
area.
Within a production wellfield, the basic component of mine
development and production is the production pattern. A pattern consists of one
recovery well and one or more injection wells that feed it. Injection wells can
be and often are shared by multiple recovery wells and function as distribution
points for injection flow. In a similar manner, the recovery wells act as
collection points for production solutions that are gathered at the header
houses prior to transfer by pipeline to the processing facility. The Hank Unit
will be developed in a similar manner with two production areas. However, it is
currently planned to be constructed with a pipeline connecting the Hank and the
Nichols Ranch Unit. The Hank Unit is licensed as a satellite recovery facility
that remains an option, and its design throughput of 2,500 GPM would be additive
to the throughput generated from the Nichols Ranch and Jane Dough Units. In the current life of mine plan, Hank is currently planned to
start production in 2022 and continue through 2024 with restoration continuing
until 2025.
84
The Nichols Ranch Unit processing facility and the allocation
of resources to the production areas within Nichols Ranch, Jane Dough and Hank
Units are designed to generate between 500,000 and 1,000,000 lbs
U3O8 per year of production for several years.
Production rate ramped up starting in 2014. According to the current
schedule, production will begin ramping down in 2024 for an approximate total
6.5 million lbs recovered from all three Units of the Nichols Ranch Project.
The Nichols Ranch Unit processing plant is licensed and
designed to have three major solution circuits: 1) the recovery/ extraction
circuit, 2) the elution circuit, and typically 3) a yellowcake slurry production
circuit. The Nichols Ranch Unit processing plant is currently constructed and
operated with only the first solution circuit installed. Currently, Uranerz
maintains a toll resin processing agreement with Power Resources Inc., (d/b/a
Cameco Resources), a wholly owned subsidiary of Cameco Corporation. This toll
resin processing agreement allows for processing of solutions for second and
third solution circuit at Cameco Resources Smith Ranch-Highland facility. The
toll resin processing is performed by Cameco Resources on a fixed unit cost
basis ($/lb U3O8) that is adjusted by inflation, as
measured using CPI. Uranerz retains the option to construct and operate the
second and third solution circuits at its Nichols Ranch Unit processing facility
at a later date if desired.
The basic infrastructure (power, water, and transportation)
necessary to support an ISR mining operation has been established at the Nichols
Ranch Area site. This basic infrastructure will also support Jane Dough and
Hank. Jane Dough is immediately proximate to Nichols Ranch. Hank is
approximately 6 miles northeast of Nichols Ranch and would require additional
infrastructure. Non-potable water is be supplied by wells. Water extracted as
part of ISR operations will be recycled for reinjection. Typical ISR mining
operations also require a disposal well for limited quantities of fluids that
cannot be returned to the production aquifers. Deep disposal wells are permitted
and installed for the Nichols Ranch ISR processing facility.
Tailings storage areas, waste disposal areas, heap leach pad(s)
will not be a part of the infrastructure for the Nichols Ranch property, as ISR
operations do not require these types of facilities. Solutions from the
wellfields are recirculated within the wellfield. The waste stream bleed from
the system is injected into the deep disposal wells.
If constructed, the Hank Unit Satellite facility will require
infrastructure similar to that at Nichols Ranch. The permitted option for Hank
includes construction and operation of a satellite facility which would consist
of an ion exchange circuit and lixiviant make-up circuit, bleed treatment and
disposal well. The other major option for the development of Hank would be to
convey fluids from Hank to the Nichols Ranch processing facility. This option
would have additional permitting requirements for the pipeline and capital
expenditures and operating expenditures related to the transfer of solutions
between Nichols Ranch and Hank. These costs would be offset by reduced capital
expenditures and operating expenditures related to the construction and
operation of the satellite plant and disposal well(s). Uranerz current preferred
alternative is to operate the Hank Unit as an adjacent property through
pipelines to the Nichols Ranch Unit processing facility.
Capital costs (CAPEX) and operating costs
(OPEX) are based on actual and estimated costs for Nichols Ranch.
Significant CAPEX have already been incurred during the construction and
development of the projects plant and initial wellfields. A summary of the
costs incurred through December 31, 2014 are detailed in the following table:
85
Incurred Capital Costs
Equipment |
Cost (US$) |
Plant |
19,043,000 |
Office and Lab Building |
2,862,000 |
Wellfield Development |
16,252,000 |
Deep Disposal Wells |
7,391,000 |
Infrastructure |
5,068,000 |
Trunk Line |
927,000 |
Rolling Stock |
1,944,000 |
Total Capital Costs |
53,487,000 |
Future CAPEX will include the development of wellfields in the
Nichols Ranch, Jane Dough and Hank Areas, additional trunk lines, central
processing plant completion at Nichols Ranch, pipeline network to Hank. The
following table summarizes the additional CAPEX for the projects:
Forward CAPEX
CAPEX |
Cost (US$) |
Wellfield Development |
67,596,000 |
Trunk line |
250,000 |
CPP Buildout |
5,500,000 |
Hank Trunk line |
2,400,000 |
Ancillary Costs (labour, equipment) |
14,021,000 |
Total Capital Costs |
89,767,000 |
OPEX costs are based on actual results from operating in 2014.
OPEX cost centers include mining, processing, mine administration, production
taxes, royalties, and selling expenses. Specific components of the costs centers
labor, chemicals, maintenance, and utilities to mine and process uranium. Total
expected OPEX costs have been estimated at US$135.7 million or US$20.76/pound.
Production taxes and royalties account for US$61.5 million of the total
estimated OPEX or US$9.41/pound.
A cash flow model has been developed by Uranerz based on the
CAPEX, OPEX and closure cost estimates. The sale price per pound for 2015-2020
is the weighted average of contracted sales and spot sales. The spot price is
assumed to be US$65/pound for 2016-2026. Uranerz files federal tax returns in
the United States and had a tax loss carryforward of US$56.7 million at the end
of 2014. This loss carryforward will be utilized in future years as profits
offset the prior losses. Federal income taxes have not been included in the cash
flow model due to the uncertain timing and extent of the tax.
86
Uranium recovery is assumed to be 70% of the mineral resource.
Total production over the life of the projects is estimated to be 6.5 million
pounds, of which approximately 200 thousand pounds were produced in 2014.
As the project has been constructed and is in operation, the
initial capital is a sunk cost. Additional CAPEX related to wellfield
development will be incurred throughout the operating life of the mine. Under
the base case assumptions the project would be capable of paying back all sunk
costs in five years or less.
Arkose Property
The following information concerning the Arkose Property is
based on the technical report prepared for Uranerz titled Arkose Uranium
Project, Mineral Resource and Exploration Target, 43-101 Technical Report dated
February 28, 2015 (the Arkose Technical Report). The Arkose Technical
Report is authored by Douglas L. Beahm, P.E., P.G., who is a qualified person
and independent of Uranerz and EFI for purposes of NI 43-101.
Project Description and Location
On January 15, 2008, Uranerz acquired an undivided 81% interest
in the Arkose Property, and in connection with the acquisition, formed the
Arkose Mining Venture with United Nuclear, LLC.
The total area of the Arkose Property is approximately 49,138
acres. The Arkose Property is located in various sections of Townships 41-44
North, Ranges 74-78 West, and falls between Latitudes 43° 47 and 43° 31 North,
and Longitudes 106° 10 and 105° 18 West, approximately 60 air miles north from
Casper, Wyoming.
Mineral tenure consists of unpatented mining claims, mineral
leases (fee and state), and Surface Use Agreements. Uranerz has a possessory
right to explore, develop and produce on the unpatented lode mining claims and
must pay an annual maintenance fee to the Bureau of Land Management of $155.00
per claim on or before September 1. Portions of the fee land within the joint
venture boundary are covered by 60 mining leases that require annual payments or
in the case of paid up leases payments every 5 years. The mining leases and
state leases have primary terms of 10 years and so long thereafter as the
property is in production. The three State of Wyoming leases are due to expire
in 2015 and decisions will be forthcoming as to whether or not to get an
extension of the leases or let them expire. Some of the mining leases will
expire in 2016 and it is Uranerz intention to negotiate extensions to the
primary term of these leases.
Uranerz has a Drilling Notification approved by the State of
Wyoming Department of Environmental Quality, Land Quality Division
(WDEQ/LQD) and the BLM which allows surface use for the purposes of
exploration by drilling. Although not required at this stage, mine development
would require a number of permits depending on the type and extent of
development, the most significant permits being the Permit to Mine issued by the
WDEQ/LQD and the Source Materials License from the NRC required for mineral
processing of natural uranium. Any injection or pumping operations will require
permits from the WDEQ.
There are no known environmental liabilities at the Arkose
Property, with the exception of the DN bond for exploration WDEQ/LQD Drilling
Notification DN378, in the amount of $659,165 effective July 2, 2014. This bond
is subject to annual renewal and updating.
The mining leases have a variety of production royalty payments
based on a two tier system, or a sliding scale system. One of the leases
has two-tier royalty based on the price of U3O8 at the
time of the sale, and they are 6% for a U3O8 price less
than $75 per lb.; and 8% for U3O8 price equal to or
greater than $75 per lb. Some of the leases have a sliding scale royalty that
runs from a low of 2% at a U3O8 price of $25 per lb. up to
a high of 10% for a U3O8 price of equal to or greater than
$100 per lb. Some leases have a sliding scale royalty that runs from a low of 4.0% at a
U3O8 price of $40 per lb. up to a high of 10% for a
U3O8 price of equal to or greater than $100 per lb.
Other leases have a sliding scale royalty that runs from a low of 4.5% at a
U3O8 price of $49.99 per lb. up to a high of 10% for a
U3O8 price of equal to or greater than $100 per lb.
Some of the Surface Use Agreements have a two tiered royalty based on the sales
price of the U3O8 received by Uranerz and they are 1
% for a sales price of less than $50 per lb; and 2% for a sales price of
equal to or greater than $50 per lb. A couple of the Surface Use Agreements have
a fixed royalty percentage of 3% of gross sales of
U3O8. Of the total of 2,321 mining claims, 662 claims have
an overriding royalty of 0.25% . This overriding royalty interest is based
on production of uranium on said claims. The State of Wyoming Leases carry a
royalty rate of 5% of the gross value.
87
The current Wyoming severance tax is four percent but after the
allowable wellhead deduction the effective severance tax rate is approximately
3% of gross sales. In addition, the ad valorum (gross products) tax varies by
county assessment but is approximately 6.5% .
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
The Arkose Property is located within the Wyoming Basin
physiographic province in the western portion of the Powder River Basin. Access,
climate, local resources, infrastructure and physiography are similar to those
for the Nichols Ranch Property, as described above.
History
The project is located within the Pumpkin Buttes Mining
District within the Powder River Basin which was the first commercial uranium
production center in Wyoming. Uranium was discovered in the area in 1951 and
production from small open pit mines proceeded intermittently from 1953 through
1967. Beginning in the 1970s and operating into the 1980s several large scale
open pit and underground mines with conventional uranium processing facilities
(mills) were developed and operated in the Powder River Basin. With falling
uranium prices in the 1980s the conventional operations ceased and the first
uranium production using ISR methods was developed in the Powder River Basin.
Historically, mineral rights in the project area were held by
several mining companies who explored the area by drilling. NAMMCO commenced
acquiring rights to the properties comprising the Arkose Property in 2005, and
continued to do so through 2006 and 2007. On January 15, 2008, Uranerz completed
an acquisition of an undivided 81% interest in the Arkose Property and formed
the Arkose Mining Venture with United Nuclear, LLC successor in interest to the
vendors of these properties, NAMMCO.
Geological Setting
The Arkose Property is located within the Powder River Basin.
Regional geology is the same as for the Nichols Ranch Property, as
described above.
Exploration
The Arkose Technical Report identified those portions of the
Arkose project which could be identified as exploration targets on the basis
that there is sufficient geologic evidence from limited drilling to interpret
that mineralization may extend from areas of resource production and/or defined
mineral resources and/or is present within the drill holes themselves. In these
areas favorable conditions for the occurrence of mineralization was determined
based on the presence of host sand units and evidence of REDOX interfaces within
those host sand units. No estimate of mineral resources or reserves in
accordance with CIM guidelines has been made for exploration target areas. The
Arkose Technical Report includes a quantification of the exploration target
portions of the Arkose Project, as allowed under NI 43-101. All tonnages, grade,
and contained pounds of uranium associated with the exploration targets, as
stated in the Arkose Technical Report, should not be construed to reflect a
calculated mineral resource (inferred, indicated, or measured). The potential
quantities and grades, as stated in the Arkose Technical Report, are conceptual in nature and there has been insufficient work
to date to define a NI 43-101 compliant resource. Furthermore, it is uncertain
if additional exploration will result in discovery of an economic mineral
resource on the property.
88
The Arkose Technical Report identifies nine exploration areas
within the Arkose Property, and recommends additional exploration work,
consisting of delination drilling, on these areas.
Mineralization
In the project area uranium mineralization is hosted by
sandstone units within the Tertiary Wasatch and Fort Union Formations. Uranium
deposits which have been delineated within the Arkose Project are classified
sandstone roll front uranium deposits. Mineralization is interpreted to be
dominantly roll front type mineralization which was deposited along an interface
between oxidizing ground water solutions and reducing conditions within the host
sandstone unit. This boundary between oxidizing and reducing conditions is often
referred to as the REDOX interface or front.
Roll front mineralization tends to be continuous for thousands
of feet along the REDOX front but may have limited width and continuity
perpendicular to the front. Roll fronts are often present in multiple sand
horizons and may occur as multiple or stacked fronts.
Uranium mineralization is hosted within the Arkose project area
within sand horizons of the Tertiary Wasatch and Fort Union formations. The
stratigraphic section provides the naming convention used for Arkose with the
sand horizons in the Wasatch beginning with the lowest sand designated as the
100 sand and increasing by increments of 10 upward in the section to the 150
sand. Sand horizons in the Fort Union begin with the 90 sand in the upper
portions of the formation and count downward by increments of 10 to the 50 sand.
The boundary between the Wasatch and Fort Union Formation is marked by a coal
and/or lignite horizon. The Arkose project focuses primarily on the 50 to 140
sands.
Drilling
Uranerz conducted exploration of the Arkose Project from 2008
through 2013 but not in 2014. The drillhole data demonstrates that
mineralization is present and is of sufficient quality and density to support
mineral resource estimation and to define exploration targets. Drillhole data is
dominantly based on interpretation of downhole geophysical logs typically
consisting of natural gamma, resistivity, and SP (Spontaneous Potential).
Resistivity and SP were utilized for defining lithology and correlating the
logs. Geophysical was completed by Uranerz personnel using modern logging units
owned by Uranerz. It is industry standard practice to calibrate the logging
trucks routinely at Department of Energy facilities. Data in the possession of
Uranerz includes 100% of the total original geophysical and lithologic logs.
The drillhole database used for the Arkose Technical Report has
an effective date of January 1, 2015. Uranerz provided drillhole locations for
some 2,136 drill holes completed within the project area. However, a portion of
these drill holes are now included in what is referred to as the Jane Dough area
of the Nichols Ranch Property, and were not used in the Arkose Technical Report.
No historic drill data or other data such as CBM drilling was used in the Arkose
Technical Report.
Sampling and Analysis
The primary assay data for the Arkose Property is downhole
geophysical log. Only limited coring has been completed. Uranerz has written
procedures for the collection of drill data including lithological logging,
natural gamma logging. Hard copies of all original drillhole data are maintained
by Uranerz and are secure. Uranerz has standard procedures for the
interpretation of natural gamma logging employing the half amplitude method for
the interpretation of historic analog data. For all recent drilling, Compulog
software is utilized to convert natural gamma measurement to equivalent %
U3O8 (%eU3O8). The output
data is provided both electronically and in hard copy by ½ foot intervals. This
grade data is then summed for thickness and GT for the
appropriate mineralized intervals. This procedure is the current industry
standard method.
89
In the opinion of the author of the Arkose Technical Report,
the data collection, assay procedures (geophysical logging), database
maintenance, and storage and security for all relevant data are adequate.
Further it is the authors opinion that the data is suitable for the purposes of
resource estimation as necessary for the Arkose Technical Report.
Mineral Resource and Mineral Reserve Estimates
For the resource estimate set out in the Arkose Technical
Report, drill data was available in over 2,000 drill holes. Inferred mineral
resources were estimated by projecting average width and GT along a measured
REDOX trend defined by drill holes. The effective date of the mineral resource
estimate is February 28, 2015. Radiometric equilibrium was evaluated and a
disequilibrium factor (DEF) of 1 was used. The minimum uranium grade included in
the estimate was 0.02 %eU3O8. Mineral resources
are reported at a cutoff of 0.20 GT. The following table provides a summary of
estimated mineral resources by classification following CIM guidelines. Detailed
mineral resource estimates are provided in the Arkose Technical Report.
Inferred Mineral Resources**
|
Tons |
%eU3O8 |
Pounds |
URZ Pounds* |
Inferred Total |
2,058.000 |
0.100
|
4,066,000 |
3,294,000 |
*Uranerz Pounds 81% of total.
**All
numbers are rounded.
Mineral resources are not mineral reserves and do not have
demonstrated economic viability in accordance with CIM standards. Inferred
mineral resources are too speculative geologically to have the economic
considerations applied to them which would enable them to be categorized as
mineral reserves.
Exploration and Development
The author of the Arkose Technical Report recommends that
exploration and development of the Arkose Project be continued. The areas
considered of highest priority for development would include:
|
|
The South Doughstick area as it is adjacent to
the Jane Dough area which is currently being permitted for ISR mining as
part of the Nichols Ranch facility. |
|
|
|
|
|
The Monument area as it has a significant
exploration target. |
|
|
|
|
|
The East Buck area which has both estimated
inferred mineral resources and exploration targets which are significant.
|
|
|
|
|
|
The Little Butte area which has both estimated
inferred mineral resources and exploration targets which are significant.
|
Expenditures for exploration and development of the Arkose
Property will be significant as the primary exploration method will consist of
drilling and the area to be explored is extensive. Average depths of
mineralization defined be drilling to date are in the range of 500 to 1,000
feet. It is recommended that the drilling be done in phases with each phase
evaluated as work progresses before proceeding to the next phase. Recommended
exploration drilling costs are estimated at US$3 million and delineation of two
of the target areas at US$3.3 million. The decision to act on those
recommendations, including scope and timing, has yet to be reached by Uranerz.
Factors such as available resources to focus on the work and available funding
remain a strong influence on that decision.
90
The other areas within Arkose remain prospective. Exploration
targets have been estimated for Kermit, Sand Rock, South Collins Draw, Cedar
Canyon, and Beecher Creek. Drilling at Lone Bull, Stage, and House Creek to date
is insufficient to define an exploration target but these areas remain
perspective.
West North Butte Satellite Properties
The following information concerning the West North Butte
Satellite Properties is based on the technical report prepared for Uranerz
titled Technical Report, West North Butte Satellite Properties, Campbell
County, Wyoming, U.S.A. dated December 9, 2008 (the WNB Technical
Report). The WNB Technical Report was authored by Douglass H. Graves, P.E.
and Don R. Woody, P.G., each of whom is a qualified person and independent of
Uranerz and Energy Fuels for purposes of NI 43-101.
Project Description and Location
The West North Butte Satellite Properties (the Satellite
Properties) include the West North Butte (WNB) Area, the East
North Butte (ENB) Area and the Willow Creek (WC) Area, which
are located in the Pumpkin Buttes Uranium Mining District of the Powder River
Basin in the state of Wyoming.
The WNB Area is located within Campbell County, Wyoming in
Township 44N, Range 76W, Sections 10, 11, 12, 13, 14, 15, 23, 24, 25, and 26, of
the 6th Prime Meridian. The WNB Area covers approximately 2,160 acres of land.
Uranerz controls the mineral rights of the WNB Area with unpatented lode mining
claims. Within the WNB Area, Uranerz has 108 unpatented lode mining claims and
one Surface Use Agreement.
The ENB Area is located within Campbell County, Wyoming in
Township 44N, Range 76W, Section 24 and Township 44 North, Range 75 West,
Section 19 of the 6th Prime Meridian. The ENB Area covers approximately
325.acres of land. Uranerz controls the mineral rights of the ENB Area with
unpatented lode mining claims. Within the ENB Area, Uranerz has 17 unpatented
lode mining claims and one Surface Use Agreement.
The WC Area is located within Campbell County, Wyoming in
Township 44N, Range 76W, Section 35 of the 6th Prime Meridian. The WC Area
property covers approximately 220 acres of land. Uranerz controls the mineral
rights of the WC Area with unpatented lode mining claims. Within the WC Area,
Uranerz has 11 unpatented lode mining claims and one Surface Use Agreement.
The claims were acquired by Uranerz and none of the unpatented
lode claims in the ENB Area are subject to a royalty. The lode claims in the WC
Area are subject to a royalty; for the WNB Area, 6 of the 118 unpatented lode
mining claims have a royalty interest burden of 6% to 8% depending on the price
of uranium. This royalty interest is based on produced uranium from such
unpatented lode claims. All of the unpatented lode claims have annual filing
requirements ($155 per claim) with the BLM, to be paid on or before September 1
of each year.
Uranerz only known, existing potential environmental liability
is restoration of exploration drill sites and exploration access roads.
Exploration drilling has been completed at the Satellite
Properties. Additional exploratory drilling may be conducted by Uranerz to
better define mineralization within specified areas of interest. However, no
future exploration is planned at this time. Uranerz has a Notification to Drill
permit (336DN) from WDEQ/LQD for additional drilling. Mine development will
require a number of licenses/permits with the two most significant being (a) the
Permit to Mine, issued by the WDEQ/LQD, and (b) the Source Material License,
required and issued by the U.S. Nuclear Regulatory Commission (NRC) for mineral
processing of natural uranium.
91
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
The Satellite Properties are located within the Wyoming Basin
physiographic province, in the Central portion of the Powder River Basin, within
the Pumpkin Buttes Mining District. Access, climate, local resources,
infrastructure and physiography are similar to those for the Nichols Ranch
Property, as described above.
History
The Satellite Properties were originally part of a large
exploration area encompassing Townships 33 through 50 North of Ranges 69 through
79 West, on the 6th principal meridian. In 1966, Mountain West Mines Inc. (MWM,
now Excalibur Industries) began a successful drilling exploration program in a
portion of this area. In 1967, MWM entered into an agreement with Cleveland and
Cliffs Iron Company (CCI) for further exploration and option if
suitable resources were found. CCI exercised its option in 1976 with plans to
begin underground mining operations in the vicinity of North Butte. Changing
economic conditions and the development of ISR mining technology reportedly
ended much of CCIs interest in the area.
The locators of the claims acquired rights to the properties
comprising the WNB and ENB Areas in 1987. In January 2007, Uranerz completed an
acquisition of an undivided 100% interest in the claims comprising the WNB and
ENB Areas. The locators of the claims acquired rights to the properties
comprising the WC Area in the 1960s. In December 2005, Uranerz entered into an
option agreement to acquire an undivided 100% interest in the claims comprising
the WC Area. The terms of the option agreement were satisfied in 2007 and the
transfer of the claims to Uranerz was completed.
Geological Setting
The Satellite Properties are located within the Powder River
Basin. Regional geology is the same as for the Nichols Ranch Property, as
described above.
At the Satellite Properties, the mineralized sand horizons
occur within the lower part of the Wasatch, at an approximate depth ranging from
482 to 1,012 feet (WNB), 540 to 660 feet (ENB) and 172 to 567 feet (WC). The
host sands are primarily Arkosic in composition, friable, and contain trace
carbonaceous material and organic debris. There are local sandy
mudstone/siltstone intervals with the sandstones, and the sands may thicken or
pinch-out in some locations. In the WNB and WC Area, the dip of the host
formation is approximately at one to two degrees since the claims are on the
east side of the synclinal axis.
Exploration
Between 1968 and 1985, CCI drilled approximately 380
exploratory holes with the Satellite Properties. From 1983 to 1985, Texas
Eastern Nuclear drilled approximately 12 exploratory holes in the Satellite
Properties and from approximately 1990 to 1992 Rio Algom Mining Corporation
drilled approximately 5 exploratory holes. In 2006, Uranerz completed an
acquisition of the Satellite Properties, and in 2007 and 2008, drilled
approximately 127 exploratory holes.
Mineralization
Mineral resources within the Satellite Properties occur in
sands of the Eocene age Wasatch Formation. The uranium mineralization at the
Satellite Properties is typical of the Wyoming roll-front sandstone deposits.
Mineral resources within the Satellite Properties occur primarily in the A, B, C
and F host sand units of the WNB Area, the A and B host sand units of the ENB
Area and in the A and F host sand units of the WC Area, as originally designated
by CCI in the 1970s. The sand units are typically one to four miles wide and
range in thickness from 70 to 130 feet. The depths to the mineralized zones
range from 100 to 1,400 feet below the ground surface depending on the
topography and changes in the formation elevation and stratigraphic horizon.
92
Drilling
Common practice for uranium exploration drilling is to drill
exploration holes vertically using conventional rotary drill rigs circulating
drilling mud and using approximately five-inch diameter bits. The cuttings are
typically collected from five-foot vertical intervals and laid out on the ground
in rows of 20 samples (each row represented 100 feet in boring depth) by the
driller. The site geologist typically examines and documents the cuttings in the
field to determine lithology and geochemical alteration, i.e., oxidized or
reduced geochemistry.
Upon completion of the drilling, the drill holes are logged,
from the bottom of the hole upward, with a gamma-ray, spontaneous-potential, and
resistivity tool by either a contract logging company or a company-owned logging
truck. The locations of the holes are recorded in the field by the site
geologist using a Global Positioning System (GPS) unit.
In the opinion of the authors of the WNB Technical Report, the
data collected within the Satellite Properties has been collected in a reliable
manner consistent with standard industry practices, and the authors have relied
upon such available data to prepare the mineral resource estimate.
Sampling and Analysis
Downhole geophysical logs, both historical and recent, were
used as the primary source of data for defining the Satellite Properties
mineralization. Approximately 285 exploratory drill holes were drilled in the
WNB Area, 127 in the ENB Area and 164 in the WC Area. Approximately 573 were
used for developing the mineral resource estimate. The holes were typically
spaced approximately 25 feet apart perpendicular to the trend and approximately
400 feet apart parallel to the trend.
Quality control for coring and field sampling performed by
Uranerz utilizes training, demonstration of basic geological abilities by field
personnel and management oversite. Exploratory drill hole cutting samples are
recovered in a wet or damp condition and soon after they are described by a
field geologist. Down hole electric logging is checked against the drillers
logs and the gamma detection instruments are calibrated in the Casper, Wyoming
United States Department of Energy test pits approximately every 60 days.
Records are kept on all these activities.
Historical data were assumed to have been collected in a manner
consistent with standard industry practices at the time, and the authors of the
WNB Technical Report considered the historical information accurate and reliable
for the purposes of completing a mineral resource estimate.
Security of Samples
The core samples were obtained by previous operators in
1979/1980. No sample preparation was performed by Uranerz staff and the sample
preparation and handling cannot be confirmed. The chemical test results were not
used in the mineral resource estimate, however the dry bulk density was used in
the calculation of resource quantities.
Mineral Resource and Mineral Reserve Estimates
The following table sets out the mineral resource estimate for
the Satellite Properties, as set out in the WNB Technical Report. Mineral
resources are not mineral reserves and do not have demonstrated economic
viability.
The mineral resource estimates shown below were calculated
using the GT (Grade x Thickness) contour method. The GT values of the subject
sand intervals for each hole were plotted on a drill hole map and contour lines were drawn. The areas within the GT contour
boundaries were used for calculating resource estimates utilizing the following
criteria:
93
Measured Resource: area is capped at 10,000 ft2.
Indicated Resource: area is capped at 40,000 ft2.
The Indicated resource is computed by subtracting the Measured area resource.
Inferred Resource: area is calculated using the GT contour
boundary value of 0.2, and is capped at 80,000 ft2
The mineral resources are reported in the WNB Technical Report
based on grade thickness (GT) cutoffs of 0.10, 0.20 and 0.50. The 0.20 GT cutoff
is recommended for reporting purposes and is presented in the following table.
The current estimate of mineral resources for the Satellite
Properties, by Area and host sand unit, and as prepared by the authors of the
WNB Technical Report is as follows:
Area |
Sand
|
Resource (GT Minimum 0.20) |
eU3O8
Pounds |
Tons
|
Average
Grade %
eU3O8 |
WNB |
F |
Measured and Indicated |
344,758 |
126,439 |
0.136 |
|
F |
Inferred |
329,383 |
182,858 |
0.090 |
|
C |
Measured and Indicated |
275,475 |
78,569 |
0.175 |
|
C |
Inferred |
177,323 |
81,262 |
0.109 |
|
B/LB |
Measured and Indicated |
1,246,808 |
329,475 |
0.189 |
|
B/LB |
Inferred |
1,443,284 |
449,063 |
0.161 |
|
A |
Measured and Indicated |
195,591 |
77,582 |
0.126 |
|
A |
Inferred |
189,086 |
71,787 |
0.132 |
|
|
|
|
|
|
ENB |
B |
Measured and Indicated |
293,811 |
84,865 |
0.173 |
|
B |
Inferred |
394,122 |
244,569 |
0.081 |
|
A |
Measured and Indicated |
150,707 |
54,570 |
0.138 |
|
A |
Inferred |
83,792 |
41,075 |
0.102 |
|
|
|
|
|
|
|
F |
Measured and Indicated |
90,607 |
38,505 |
0.118 |
|
F |
Inferred |
34,748 |
19,191 |
0.091 |
|
A |
Measured and Indicated |
239,258 |
136,377 |
0.088 |
94
Area |
Sand
|
Resource (GT Minimum 0.20) |
eU3O8
Pounds |
Tons
|
Average
Grade %
eU3O8 |
|
|
|
|
|
|
|
A |
Inferred |
30,190 |
27,164 |
0.056 |
|
|
|
|
|
|
All |
All |
Measured and Indicated |
2,837,015 |
926,293 |
0.153 |
|
All |
Inferred |
2,681,928 |
1,116,968 |
0.120 |
Exploration and Development
In the event that economics are favorable and the capital
becomes available, the West North Butte Satellite properties will require
additional drilling. The identified mineralization has been generally been
defined by lines of drill holes which are approximately 400 feet apart. The
holes in the lines are approximately 50 feet apart. Infill drilling on
approximately a 100 foot grid will be needed to situate production well
patterns.
If previously unrecognized mineralized trends are discovered
these will be drilled out on 400 foot spaced fences which are composed of
exploration holes spaced 50 feet apart.
North Rolling Pin Property
The following information concerning the North Rolling Pin
Property is based on the technical report prepared for Uranerz titled Technical
Report, North Rolling Pin Property, Campbell County, Wyoming, U.S.A. dated June
4, 2010 (the NRP Technical Report). The NRP Technical Report was
authored by Douglass H. Graves, P.E., who is a qualified person and
independent of Uranerz and Energy Fuels for purposes of NI 43-101.
Project Description and Location
The North Rolling Pin Property is located in the Pumpkin Buttes
region of the Powder River Basin in the state of Wyoming, approximately 62 air
miles northeast of the city of Casper. The NorthRolling Pin Property is located
within Campbell County, Wyoming in Township 43N, Range 76W, in the SE¼ of SE¼
Section 10, Section 11, NW ¼ Section 14, and NE¼, NW¼ of SE¼ Section 15, of the
6th Prime Meridian. The North Rolling Property is comprised of 54 unpatented
lode mining claims and one SUA. There are no mineral fee leases associated with
the North Rolling Pin Property and the claims and unclaimed area encompass
approximately 1,080 acres. The SUA has a term of 10 years and has set provisions
for reimbursement to the surface owner for disturbances resulting from Uranerz
operations.
The lode mining claims in the North Rolling Pin area are not
subject to royalties. All of the unpatented lode mining claims have annual
filing requirements ($155 per claim) with the BLM, to be paid on or before
September 1 of each year.
The only activities that have occurred on the North Rolling Pin
Property are exploration drilling for uranium, the development and operation of
an in-situ uranium pilot plant, exploration for oil and gas, and production of
CBM gas. The NRC terminated the source materials license for the uranium pilot
plant based on successful completion of groundwater restoration and surface
reclamation on November 5, 1982. Uranerz only known existing potential
liability is restoration of exploration drill sites and exploration access
roads.
95
Uranerz has a Notification to Drill permit (336DN) from the
WDEQ/LQD for all exploration drilling. Future mining development will require a
number of licenses/permits with the two most significant being (a) the Permit to
Mine, issued by the WDEQ/LQD and (b) the Source Material License, required and
issued by the NRC for mineral processing of natural uranium.
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
The North Rolling Pin Property is located within the Wyoming
Basin physiographic province, in the Central portion of the Powder River Basin,
within the Pumpkin Buttes Mining District. Access, climate, local resources,
infrastructure and physiography are similar to those for the Nichols Ranch
Property, as described above.
History
The North Rolling Pin Property is located within a large
exploration area encompassing Townships 33 through 50 North of Ranges 69 through
79 West, on the 6th principal meridian. In 1966, Mountain West Mines Inc.
(MWM, now Excalibur Industries) began a successful drilling exploration
program in a portion of the larger area. In 1967, MWM entered into an agreement
with CCI for further exploration and option if suitable resources were found.
CCI exercised its option in 1976 with plans to begin underground mining
operations in the vicinity of North Butte. Changing economic conditions and the
development of ISR mining technology reportedly ended much of CCIs interest in
the area.
In February 2007, Uranerz purchased the North Rolling Pin
claims group from Robert Shook as part of a larger 138 Federal mining claims
acquisition. Uranerz subsequently expanded the properties by staking additional
claims in the immediate area.
Geological Setting
The North Rolling Pin Property is located within the Powder
River Basin. Regional geology is the same as for the Nichols Ranch Property, as
described above.
The mineralized zones at the North Rolling Pin Property are
typical Powder River Basin rollfront deposits. Uranium mineralization, where
present, is found at the interface of naturally occurring chemical boundary
between reduced and oxidized sandstone facies. Due to the nature of fluvial
sandstone composition, an individual sand member may have several vertically
superimposed subsidiary roll fronts. This is caused by small permeability
differences in the sandstone or the occasional vertical contact between sand
members resulting in development of multiple roll fronts that overlie each other
(stacked) in complex patterns.
Exploration
Mining claims were first staked in the North Rolling Pin
Project area by MWM sometime before 1968. Exploration drilling was conducted in
the North Rolling Pin Project area Sections 11, 14 and 15, T43N, R76W, between
1968 and 1982 by CCI. A total of 476 exploration holes were drilled including 10
core holes. CCI was reported to be investigating the project area for open pit
mining potential but never carried those plans past the exploration phase. CCI
core data was not available for use in preparing the mineral resource estimate
contained in the NRP Technical Report.
In 2008 and 2009 Uranerz drilled 18 exploration holes in
Sections 11 and 14. This drilling was performed to evaluate the potential for
mineralization below the zones explored by CCI and for confirmation of the
previously identified mineralization.
Mineralization
At the North Rolling Pin Property, the mineralized sand horizon
(F Sand) occurs within the Wasatch at an approximate depth from surface ranging
from 51 to 403 feet and averaging 282 feet to the top of the mineralization. Generally the depth of mineralization decreases
from the northeast to the southwest due mainly to topography along which the
surface elevation decreases from approximately 5,180 feet to around 4,800 feet.
The F Sand ranges in thickness from approximately 30 feet to 60 feet and
generally increases in thickness in the southwest portion of Section 11 and
thins toward the northeast and southwest in the project area. The F Sand
primarily consists of two stacked sand sets, termed the Upper and Lower F Sands
that average 20 to 25 feet thick each and the nature of these sand sets, as
described above, is a major control on the mineralization occurring at North
Rolling Pin.
96
The host sand is primarily arkosic in composition, friable, and
contains trace carbonaceous material and organic debris. There are local sandy
mudstone/siltstone intervals with the sandstone, and the sand may thicken or
pinch-out in some locations. The North Rolling Pin Property area lies east of
the synclinal axis of the Powder River Basin, and the host Wasatch Formation
dips approximately 1 to 2 degrees to the west.
Drilling
Conventional water based mud drilling methods were used to
drill the approximately 494 boreholes (historical CCI and Uranerz) at North
Rolling Pin. The geophysical and lithologic log data from 386 of the 494 CCI and
Uranerz drill holes were used in the evaluation of the North Rolling Pin
Property. Data from several CCI drill holes (108) were missing but it can be
concluded that the majority of these drill holes were left out of the sequence
and were not drilled. Of the data from 386 CCI and Uranerz drill holes, 198 of
the holes had mineralization with a GT of 0.2 or greater. Data from the 198
drill holes were used to determine the grade, thickness, and GT for the stated
mineral resource.
Sampling and Analysis
Downhole geophysical logs and grade calculations provided by
Uranerz were used by the author of the NRP Technical Report as the primary
source of data for defining the North Rolling Pin Property mineralization. Data
was obtained from approximately 386 historic and recent drill holes, including
18 holes that were drilled by Uranerz in the North Rolling Pin area. The
exploration drill holes were spaced approximately 25 to 50 feet apart in rows
orientated perpendicular to the mineralization trend or in clusters of close
spaced drilling. Additional fences were then drilled approximately every 400 to
600 feet along the length of the trend.
Historical data were assumed to have been collected in a manner
consistent with standard industry practices at the time. Logging of each drill
hole utilized the same basic methodology that has been used for over 40 years in
the uranium industry. The historical logs were generally run with analog
equipment and more recent logging utilizes digital equipment. The historical
information is considered accurate and reliable by the author of the NRP
Technical Report for the purpose of developing the resource estimate. It is
assumed that the appropriate logging tool k factor was developed for the
historic geophysical logging equipment.
Security of Samples
Quality control for recent field sampling performed by Uranerz
utilizes training, demonstration of basic geological abilities by field
personnel and management oversight. Exploratory drill hole cutting samples are
recovered in a wet or damp condition and soon after they are described by a
field geologist. Down hole electric logging is checked against the drillers
logs and the gamma detection instruments are calibrated in the Casper, Wyoming
United States Department of Energy test pits approximately every 60 days.
Records are kept on all these activities. The data was considered accurate and
reliable by the author of the NRP Technical Report for the purpose of completing
a mineral resource estimate of the North Rolling Pin Property.
97
Core sampling was performed by, CCI, a previous operator. No
core sample preparation was performed by Uranerz staff and the sample
preparation and handling of the historic coring cannot be confirmed. The test
results from the historical CCI coring program at North Rolling Pin were not
available for review, thus were not included in the calculation of resource
quantities.
Mineral Resource and Mineral Reserve Estimates
Various economic and mining parameters enter into the final
cutoff grade and/or grade-thickness (GT) to calculate the in-ground mineral
resources during the economic evaluation stage of the North Rolling Pin
Property. Two GT cutoff grades were used to evaluate the reported resources,
both using a minimum grade cutoff of 0.03% eU3O8. The
0.20 GT was used to present an appropriate value relative to current ISR
operations and is recommended for reporting purposes. The 0.50 GT has been used
to highlight the areas of highest mineralization and value if economics dictate
the need for lower operating costs. The estimated GT, quantity, and grade for
measured, indicated, and inferred resources of the total Upper and Lower F Sand
unit for the North Rolling Pin Property is presented in the following table.
Measured Mineral Resource
GT Minimum |
eU3O8
Pounds |
Tons |
Average Grade % eU3O8 |
0.20 |
386,898 |
310,051 |
0.062 |
0.50 |
255,163 |
153,712 |
0.083
|
Indicated Mineral Resource
GT
Minimum |
eU3O8
Pounds |
Tons
|
Average Grade % eU3O8 |
0.20 |
277,623 |
271,881 |
0.052 |
0.50 |
135,161 |
97,513 |
0.070
|
Measured + Indicated Resource
GT
Minimum |
eU3O8
Pounds |
Tons
|
Average Grade % eU3O8 |
0.20 |
664,521 |
581,932 |
0.058 |
0.50 |
390,324 |
251,225 |
0.078
|
Inferred Mineral Resource
GT
Minimum |
eU3O8
Pounds |
Tons
|
Average Grade % eU3O8 |
0.20 |
32,522 |
38,874 |
0.042
|
98
Exploration and Development
In the event that economics are favorable and the capital
becomes available, the North Rolling Pin property will require additional
drilling. The identified mineralization has been generally been defined by lines
of drill holes which are approximately 400 feet apart. The holes in the lines
are approximately 50 feet apart. Infill drilling on approximately a 100 foot
grid will be needed to situate production well patterns.
If previously unrecognized mineralized trends are discovered
these will be drilled out on 400 foot spaced fences which are composed of
exploration holes spaced 50 feet apart.
Reno Creek Property
The following information concerning the Reno Creek Property is
based on the technical report prepared for Uranerz titled Technical Report,
Reno Creek Property, Campbell County, Wyoming, U.S.A. dated October 13, 2010
(the Reno Creek Technical Report). The Reno Creek Technical Report was
authored by Douglass H. Graves, P.E., who is a qualified person and
independent of Uranerz and Energy Fuels for purposes of NI 43-101.
Project Description and Location
The Reno Creek Property is located in the southeastern extent
of the Pumpkin Buttes region of the Powder River Basin in the state of Wyoming,
approximately 80 highway miles northeast of the city of Casper, 40 miles south
of Gillette and 9 miles southwest of Wright. The Reno Creek Property is located
within Campbell County, Wyoming in Township 43N, Range 73W, in the S ½ of
Section 21, SW ¼ of Section 22, E ½ of Section 28, NE ¼ of Section 29, NE ¼ of
Section 31 and SW ¼ of Section 33 of the 6th Prime Meridian. Uranerz has three
unpatented lode mining claims and three SUA and 18 fee mineral leases associated
with the Reno Creek Property. The area encompassing the claims and fee mineral
leases is approximately 1,312 acres.
Lode mining claims in the Reno Creek area are not subject to
royalties. The 18 fee mineral leases have variable royalties that are dependent
on the sale price of uranium. Surface owners have a set rate for reimbursement
in respect of any land taken out of service for mining activities. All of the
unpatented lode mining claims have annual filing requirements ($155 per claim)
with the BLM, to be paid on or before September 1 of each year.
The only activities that have occurred on the Reno Creek
Property are exploration drilling for uranium, exploration for oil and gas and
production of CBM gas. Uranerz only known existing potential environmental
liability is reclamation of exploration drill sites and exploration access
roads.
Uranerz has a Notification to Drill permit (336DN) from the
WDEQ/LQD for all exploration drilling. Future mining development will require a
number of licenses/permits with the two most significant being (a) the Permit to
Mine, issued by the WDEQ/LQD and (b) the Source Material License, required and
issued by the NRC for mineral processing of natural uranium.
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
The Reno Creek Property is located within the Wyoming Basin
physiographic province, in the central portion of the Powder River Basin, within
the Pumpkin Buttes Mining District. Access, climate, local resources,
infrastructure and physiography are similar to those for the Nichols Ranch
Property, as described above.
History
In 1968, Rocky Mountain Energy (RME, a subsidiary of
Union Pacific Corporation) began a successful drilling exploration program in
the region. In the mid 1970s RME formed a joint venture with Mono Power and Halliburton Company to develop the property for
mining. The joint venture applied for and received a research and development
test pilot license in 1978 from the NRC and DEQ. Following the successful
restoration of the test pilot, RME began application for a deep disposal well
and conducted feasibility studies for the property. Changing economic conditions
eventually resulted in RMEs sale of the property in 1992 to Energy Fuels
Nuclear (EFN). In 1993 and 1994 EFN drilled several hundred pre-mining
development holes and selected a location for the processing plant. In 1996 EFN
requested NRC to start the license application process. In 1998, EFN was
acquired by International Uranium USA Corporation (IUC). IUC evaluated the
project and decided in 1999 to withdraw the license application. Then in 2001,
IUC sold the property to Rio Algom. Rio Algom held the property until 2002.
99
In 2002, Power Resources Inc., the U.S. subsidiary of what is
now Cameco Resources Inc., acquired the Reno Creek property. Power Resources
Inc. held the state permit to mine until it was terminated in 2007 . Beginning
in 2003 Power Resources began to relinquish their federal claims and leases. In
2004, Strathmore Minerals Corporation (SMC) acquired the Federal
minerals portion of the Reno Creek property by staking claims. SMC formed an
operating company, American Uranium Corporation which was sold jointly to
Bayswater Uranium Corporation (BAYS) and Pacific Road Capital in 2010.
A subsidiary of BAYS, NCA Nuclear, is currently operator for the federal
minerals portion of the property.
The private minerals and surface portion of the Reno Creek
property was leased by Uranerz between 2006 and 2009. A total of 1,312 acres and
18 mineral owners were involved in the acquisition. The federal and private
mineral leases are interspersed throughout the Reno Creek property.
Geological Setting
The Reno Creek Property is located within the Powder River
Basin. Regional geology is the same as for the Nichols Ranch Property, as
described above.
The mineralized zones at the Reno Creek Property are typical
Powder River Basin roll-front deposits. Uranium mineralization, where present,
is found at the interface of a naturally occurring chemical boundary between
reduced and oxidized sandstone facies. Due to the nature of fluvial sandstone
composition, an individual sand member may have several vertically superimposed
subsidiary roll fronts. This is caused by small permeability differences in the
sandstone or the occasional vertical contact between sand members resulting in
development of multiple roll fronts that overlie each other (stacked) in complex
patterns.
Exploration
A total of 768 exploration development drill holes and 31
wells were completed on the Reno Creek Property between 1968 and 1994. The
geologic data available from 747 of the 768 exploration drill holes and all 31
wells include electric logs, lithology descriptions, tabulated mineralization
intercepts, and location maps. These data were used in the estimation of the
mineral resource. Data from 21 exploration drill holes located in the SW ¼ of
Section 33 were not available for the development of the resource estimate. In
addition Uranerz drilled 49 holes and one water well throughout the project area
in 2010 to confirm the validity of the historic drilling. Data from the RME, EFN
and Uranerz geophysical and lithological logs are considered reliable for the
purposes of the mineral resource estimate set out in the Reno Creek Technical
Report. The following summarizes the exploration activities that have occurred
at the Reno Creek Property:
|
|
501 exploratory drill holes completed by RME
from 1968 to 1991; |
|
|
|
|
|
267 exploratory drill holes completed by EFN
from 1993 to 1994; |
|
|
|
|
|
49 exploratory drill holes completed by Uranerz
in 2010. |
100
The results of the RME and EFN drilling programs are the
primary source of information used in the mineral resource estimate,
supplemented with data from the Uranerz exploration program. Uranerz drilling
data (geophysical and lithologic) were compared with data from nearby historic
drill holes. The recent drill hole data correlated consistently with the
historic data with respect to log characteristics, geologic characteristics and
mineralization trends within the individual horizons. Thus the recent Uranerz
drilling provided information that confirmed data from historic drilling.
Collectively, these data demonstrate that mineralization is present on the
property and the data define the spatial attributes of the mineralization.
Mineralization
At the Reno Creek Property, the mineralized sand horizon (Reno
Creek Target Sand) occurs within the Wasatch at an approximate depth from
surface ranging from 129 to 441 feet and averaging 329 feet to the top of the
mineralization. Generally the depth of mineralization is related to topography,
being greater in Section 28 where elevations are generally higher than in other
mineralized portions of the project area.
The Reno Creek Target Sand ranges in thickness from about 20
feet up to 220 feet, with an average thickness of approximately 100 feet. The
Reno Creek Target Sand generally occurs as a single sand body in the northern
and eastern portions of the property and occurs as upper and lower sand units
bifurcated by siltstones and shales that are 10 to 50 feet thick, towards the
southern and western parts of the property. Primary mineralization in the Reno
Creek Target Sand occurs within five horizons, designated from shallowest to
deepest, as the Green, Purple, Red, Orange and Blue horizons, and the
nature of these sand sets is a major control on the mineralization occurring at
Reno Creek.
Drilling
Conventional water based mud drilling methods were used to
drill the approximately 817 exploratory boreholes and an additional 31 monitor
or water wells (historical RME and EFN and recent Uranerz) at the Reno Creek
Property. All the geophysical and lithologic log data from 796 RME, EFN and
Uranerz drill holes were used in the evaluation of the Reno Creek Property. Only
data from drill holes with individual mineralization intercepts of GT 0.2 or
greater were used to determine the grade, thickness, and GT for the mineral
resource estimate presented in the Reno Creek Technical Report.
In the opinion of the author of the Reno Creek Technical Report
, the data collected within the Reno Creek Property have been collected in a
reliable manner consistent with standard industry practices, and the author has
relied upon these available data to prepare the mineral resource estimate.
Sampling and Analysis
Downhole geophysical logs and grade calculations provided by
Uranerz were used as the primary source of data for defining the Reno Creek
Property mineralization. As described above, data were obtained from
approximately 848 historic and recent exploratory drill holes and wells
including 49 holes and one water well that were drilled by Uranerz in the Reno
Creek area. The exploration drill holes were spaced approximately 25 to 100 feet
apart, generally in rows (fences) oriented perpendicular to the mineralization
trend or in clusters of close spaced grid drilling. Additional fences were then
drilled by Uranerz in pre-determined locations along the mineral trend to
validate historical drilling.
Historical data were assumed to have been collected in a manner
consistent with standard industry practices at the time. Logging of each drill
hole utilized the same basic methodology that has been used for over 40 years in
the uranium industry. The historical logs were generally run with analog
equipment and more recent logging utilizes digital equipment. The historical
information is considered accurate and reliable by the author of the Reno Creek
Technical Report for the purpose of developing the mineral resource estimate.
101
Security of Samples
Quality control for recent field sampling performed by Uranerz
utilizes training, demonstration of basic geological abilities by field
personnel and management oversight. Exploratory drill hole cutting samples are
recovered in a wet or damp condition and soon after recovery they are described
by a field geologist. Down hole electric logging is checked against the
drillers logs. The gamma detection instruments are calibrated in the Casper,
Wyoming United States Department of Energy test pits approximately every 60
days. Records are kept on all these activities. These data are considered
accurate and reliable for the purpose of completing a mineral resource estimate
for the Reno Creek Property.
Core sampling was performed at Reno Creek by previous operators
RME and EFN. RME drilled and sampled 52 core holes in the general Reno Creek
area. Core sample preparation from the RME operations was performed by RME staff
and the sample preparation and handling of the historic coring cannot be
confirmed.
Mineral Resource and Mineral Reserve Estimates
The mineral resource estimates shown below were calculated by
GT (Grade x Thickness) contour method using a minimum grade cutoff of 0.03%
eU3O8 and a minimum mineralization thickness of 1.0
feet. The GT values of the subject sand intervals for each hole were plotted on
a drill hole map and contour lines were drawn along the general mineralization
trend. The areas within the GT = 0.2 contour boundaries were used for
calculating resource estimates. Based on results of Uranerz confirmation
drilling which validated historic drilling data, measured resources were
determined within the area of influence of all historic and recent drill hole
locations. The mineral resources are reported based on GT cutoffs of 0.20 and
0.50. The 0.20 GT cutoff is recommended for reporting purposes and is presented
in the following table. The 0.5 GT cutoff has been used to highlight areas of
highest mineralization.
The estimate of mineral resources for the Reno Creek Property
set out in the Reno Creek Technical Report is as follows:
Measured
Mineral Resource |
Horizon ID |
Green |
Purple |
Red |
Orange |
Blue |
TOTAL |
GT Minimum |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
eU3O8 Pounds |
239,594 |
122,530 |
443,675 |
283,653 |
1,452,243 |
1,163,885 |
569,376 |
358,445 |
77,320 |
44,910 |
2,782,208 |
1,973,423 |
Tons |
196,338 |
80,612 |
346,621 |
170,876 |
1,171,164 |
855,798 |
499,453 |
238,963 |
67,825 |
34,023 |
2,281,451 |
1,380,272 |
Avg. Grade (%
eU3O8) |
0.061 |
0.076 |
0.064 |
0.083 |
0.062 |
0.068 |
0.057 |
0.075 |
0.057 |
0.066 |
0.061 |
0.071 |
|
102
Indicated
Mineral Resource |
Horizon ID |
Green |
Purple |
Red |
Orange |
Blue |
TOTAL |
GT Minimum |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
eU3O8 Pounds |
120,265 |
25,659 |
177,616 |
49,732 |
663,342 |
457,241 |
454,667 |
233,138 |
94,850 |
39,939 |
1,510,740 |
805,709 |
Tons |
130,723 |
21,032 |
188,954 |
32,293 |
676,880 |
408,251 |
454,667 |
191,097 |
98,802 |
38,403 |
1,550,026 |
691,076 |
Avg. Grade (%
eU3O8) |
0.046 |
0.061 |
0.047 |
0.077 |
0.049 |
0.056 |
0.050 |
0.061 |
0.048 |
0.052 |
0.049 |
0.058 |
|
Measured +
Indicated Mineral Resource |
Horizon ID |
Green |
Purple |
Red |
Orange |
Blue |
TOTAL |
GT Minimum |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
eU3O8 Pounds |
359,859 |
148,189 |
621,291 |
333,385 |
2,115,585 |
1,621,126 |
1,024,043 |
591,583 |
172,170 |
84,849 |
4,292,948 |
2,779,132 |
Tons |
327,111 |
101,644 |
535,575 |
203,169 |
1,848,044 |
1,264,049 |
954,120 |
430,060 |
166,627 |
72,426 |
3,831,477 |
2,071,348 |
Avg. Grade (%
eU3O8) |
0.055 |
0.073 |
0.058 |
0.082 |
0.057 |
0.064 |
0.054 |
0.069 |
0.052 |
0.059 |
0.056 |
0.067 |
|
Inferred
Mineral Resource |
Horizon ID |
Green |
Purple |
Red |
Orange |
Blue |
TOTAL |
GT Minimum |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
0.2 |
0.5 |
eU3O8 Pounds |
12,712 |
|
17,614 |
|
39,821 |
|
50,442 |
|
21,578 |
|
142,167 |
|
Tons |
15,889 |
|
16,031 |
|
64,228 |
|
66,371 |
|
27,664 |
|
190,183 |
|
Avg. Grade (% eU3O8)
|
0.040
|
|
0.055
|
|
0.031
|
|
0.038
|
|
0.039
|
|
0.039
|
|
|
103
Exploration and Development
The bulk of the mineralized trend in Section 29, T44N R74W has
been drilled on 100 foot spaced offset holes and is largely well enough defined
to plan production well patterns. The mineralization in sections 20, 21, and 28
is less well developed but with minimal delineation drilling could be brought
into production planning rather quickly. The mineral trend in section 31 will
require additional delineation drilling but the trends are well established and
the grades from the existing holes are significant.
Information About EFI After Giving Effect to the Transaction
General
Pursuant to the Merger Agreement, at the Effective Time, EFI
will acquire all of the issued and outstanding Uranerz Shares. This will be
accomplished by Merger Sub merging with and into Uranerz and as a result Uranerz
becoming an indirect, wholly owned subsidiary of EFI. Each issued and
outstanding Uranerz Share will be canceled and automatically converted into the
right to receive a fraction of an EFI Common Share equal to the Exchange Ratio,
provided that holders of Uranerz Shares who have properly and validly exercised
and perfected their right to dissent shall not have their Uranerz Shares so
converted. Upon completion of the Transaction, Uranerz Shares will be delisted
from the NYSE MKT and the TSX.
EFI will not be a party to the merger, and will remain
unaffected as a corporation governed by the laws of Ontario. The EFI Common
Shares will continue to trade on the TSX under the symbol EFR and on the NYSE
Mkt under the symbol uuuu.
Pro Forma Financial Information
The unaudited pro forma condensed consolidated financial
statements of EFI for the three months ended March 31, 2015 and the year ended
December 31, 2014 included in this Circular have been prepared by EFI using the
business combination rules under IFRS and are attached as Schedule D. The pro
forma condensed consolidated statement of financial position of EFI as at March
31, 2015 assumes that the Transaction took place on March 31, 2015, and combines
the EFI unaudited consolidated balance sheet at March 31, 2015 with Uranerz
unaudited consolidated balance sheet at March 31, 2015, with adjustments. The
pro forma condensed consolidated statement of comprehensive income (loss) of EFI
for the three months ended March 31, 2015 assumes that the Transaction took
place as of January 1, 2014 and combines the unaudited condensed consolidated
statement of comprehensive income (loss) of EFI for the three months ended March
31, 2015 and the unaudited consolidated statement of comprehensive income (loss)
of Uranerz for the three months ended March 31, 2015, with adjustments. The pro
forma condensed consolidated statement of comprehensive income (loss) of EFI for
the year ended December 31, 2014 assumes that the Transaction took place as of
January 1, 2014 and combines the audited consolidated statement of income (loss)
of EFI for the year ended December 31, 2014 and the audited consolidated
statement of income (loss) of Uranerz for the year ended December 31, 2014, with
adjustments. In preparing these unaudited pro forma condensed financial
statements, EFI has adjusted Uranerz financial statements to conform to IFRS
and to EFIs accounting policies. These adjustments are described in the notes
to the unaudited pro forma condensed financial statements of EFI for the three
months ended March 31, 2015 and the year ended December 31, 2014 which should be
read in conjunction with the selected unaudited pro forma condensed financial
data presented below.
The unaudited pro forma condensed financial statements assume
that, at the Effective Time, each outstanding Uranerz Share will be converted
into the right to receive 0.255 EFI Common Shares. Pro forma book value per
share is calculated by dividing total assets (including both tangible and
intangible assets) minus total liabilities of EFI as at March 31, 2015
under IFRS by the total number of EFI common shares outstanding at such date
(including issuance of EFI shares to Uranerz shareholders as of such date).
104
The selected unaudited pro forma condensed financial data is
based on estimates and assumptions that are preliminary, presented for
illustrative purposes only and is not necessarily indicative of the combined
financial position or results of operations of future periods or the results
that actually would have been realized had the entities been a single entity
during these periods. The assumptions underlying the selected unaudited pro
forma condensed financial data described in the notes to the unaudited pro forma
condensed financial statements of EFI for the three months ended March 31, 2015
and for the year ended December 31, 2014 and should be read in conjunction with
the selected unaudited pro forma condensed financial data presented below. The
following information should also be read in conjunction with (i) the audited
consolidated financial statements of EFI for the year ended December 31, 2014,
including the notes thereto, as filed on SEDAR, (ii) the unaudited interim
consolidated financial statements of EFI for the three months ended March 31,
2015, including the notes thereto, as filed on SEDAR, (iii) the audited
consolidated financial statements of Uranerz, including the notes thereto,
contained in Uranerz Annual Report on Form 10-K for the year ended December 31,
2014, and (iv) the unaudited interim consolidated financial statements of
Uranerz, including the notes thereto, contained in Uranerz Form 10-Q for the
three month period ended March 31, 2015, each of which are incorporated by
reference into this Circular.
|
|
Three months
ended |
|
|
Year ended
December |
|
|
|
March 31, 2015
|
|
|
31, 2014 |
|
|
|
(in thousands
of U.S. dollars, except per share amounts) |
|
Statement of operations
data: |
|
|
|
|
|
|
Operating Revenue |
|
11,000 |
|
|
56,260 |
|
Gross Profit |
|
2,489 |
|
|
13,296 |
|
Net loss |
|
(5,180) |
|
|
(56,723) |
|
Per common share data:
|
|
|
|
|
|
|
Basic and diluted loss per share |
|
(0.12) |
|
|
(1.26) |
|
|
|
|
|
|
|
|
Shares used in computing net loss per share
|
|
44,964,970 |
|
|
44,949,079 |
|
|
|
As at March 31,
2015 |
|
|
|
(in thousands of U.S.
dollars) |
|
Balance sheet data:
|
|
|
|
Total assets |
|
282,509 |
|
Total liabilities |
|
(60,968) |
|
Net assets |
|
221,549 |
|
Capital Stock |
|
356,547 |
|
Number of shares outstanding |
|
44,964,970 |
|
105
Authorized and Issued Share Capital
The authorized share capital of EFI will remain unchanged as a
result of the completion of the Transaction.
The table below sets out the approximate share capital of EFI
that will be outstanding before and after giving effect to the Transaction.
|
|
Percentage of |
Percentage of
|
|
Number of EFI |
Non-Diluted |
Fully-Diluted
|
|
Common
Shares |
Share
Capital |
Share
Capital |
EFI Common Shares outstanding pre-Transaction
|
19,677,552 |
43.8% |
35.3% |
|
|
|
|
EFI Common Shares to be issued to Uranerz
Shareholders under the Transaction |
24,457,766 |
54.4% |
43.9% |
|
|
|
|
EFI Common Shares to be issued as
compensation to financial advisors(1) |
584,560 |
1.3% |
1.1% |
|
|
|
|
EFI Common Shares to be issued to satisfy
severance obligations (1) |
245,092 |
0.5% |
0.5% |
|
|
|
|
Non- Diluted Total |
44,964,970 |
100% |
80.8% |
|
|
|
|
EFI Common Shares to be Reserved for
Issuance: |
|
|
|
|
|
|
|
EFI Common Shares issuable pursuant to EFI
Options |
975,872 |
- |
1.8% |
|
|
|
|
EFI Common Shares issuable pursuant to EFI
RSUs |
153,850 |
- |
0.3% |
|
|
|
|
EFI Common Shares issuable to exercise of
Uranerz Options |
2,051,266 |
- |
3.7% |
|
|
|
|
EFI Common Shares issuable pursuant to EFI
Warrants |
849,069 |
- |
1.5% |
|
|
|
|
EFI Common Shares issuable pursuant to
exercise of Uranerz Warrants |
2,690,250 |
- |
4.8% |
|
|
|
|
EFI Common Shares issuable upon conversion of outstanding
convertible debentures (based on May 15, 2015 closing price for EFI Common
Shares of Cdn$5.86) |
3,951,859 |
- |
7.1% |
|
|
|
|
Shares Reserved for Issuance:
|
10,601,707 |
- |
19.2% |
106
|
|
Percentage of |
Percentage of
|
|
Number of EFI |
Non-Diluted |
Fully-Diluted
|
|
Common Shares
|
Share Capital
|
Share Capital
|
|
|
|
|
Fully-Diluted Share Capital Post-Acquisition:
|
55,384,171 |
|
100.0% |
(1) The numbers above are based on the closing price
of EFI Common Shares on May 15, 2015 of US$4.89. The actual number of EFI Common
Shares that may be issued will be based on the five day volume weighted average
closing price at the time of Closing and therefore the actual number of shares
may be higher or lower than indicated above.
Principal Holders of Common Shares
After giving effect to the Transaction, to the best of the
knowledge of the directors and executive officers of EFI, no person will
beneficially own, directly or indirectly, or exercise control or direction over,
more than 10% of the then outstanding EFI Common Shares.
Board of Directors and Management After the Transaction
Upon completion of the Transaction, the composition of the EFI
Board will change. EFI currently has nine directors. The EFI Board has
determined that it would be in the best interests of EFI to reduce the size of
the EFI Board to eight, and accordingly eight directors will be elected at the
Meeting, with Mr. Goodman not standing for re-election. On Closing, two other
members of the EFI Board are expected to resign and two additional board members
designated by Uranerz, Dennis Higgs and Glenn Catchpole, will be appointed to
the EFI Board. In accordance with the provisions of the OBCA and the EFI Bylaws,
the directors may appoint one or more directors to fill vacancies created by the
resignation of existing directors.
In addition, Paul Goranson, current President and COO of
Uranerz is expected to become the Executive Vice President, ISR Operations of
EFI. Furthermore, EFI is currently in negotiations with Dennis Higgs to
potentially stay on as an employee or a consultant following the closing of the
Transaction.
The directors of Uranerz will resign as of the Effective Time.
Information about Messrs. Higgs, Catchpole and Goranson is set out below.
Dennis Higgs
Mr. Higgs is Executive Chairman of the Uranerz Board. Mr. Higgs
was appointed to the Uranerz Board as President and Chief Executive Officer on
May 26, 1999, and resigned as President and Chief Executive Officer on March 1,
2005. Mr. Higgs became Executive Chairman of the Uranerz Board on February 1,
2006.
Mr. Higgs has been involved in the financial and venture
capital markets in the United States, Canada and Europe for over thirty years.
He founded his first junior exploration company in 1983 and took it public
through an initial public offering in 1984. Since then, Mr. Higgs has been
involved in the founding, financing, initial public listing, and building of
several companies. Mr. Higgs was directly involved with the founding and initial
public offering of Arizona Star Resource Corp. and the listing and financing of
BioSource International Inc. Mr. Higgs holds a Bachelor of Commerce degree from
the University of British Columbia.
Glenn Catchpole
Mr. Glenn Catchpole was appointed to the Uranerz Board and
became the President and Chief Executive Officer of Uranerz on March 1, 2005.
Mr. Catchpole resigned as President of Uranerz on December 2, 2013 upon the
appointment of Mr. Goranson as President & Chief Operation Officer. Mr.
Catchpole retained his position as Chief Executive Officer. Mr. Catchpole is a
licensed engineer with a B.S. degree in Mechanical Engineering from the University of Wyoming and an
M.S. degree in Civil Engineering from Colorado State University. He has been
active in the uranium solution mining industry since 1978, holding various
positions including wellfield engineer, project manager, general manager and
managing director of several uranium solution mining operations.
107
In 1988 Mr. Catchpole joined Uranerz U.S.A. Inc. and Uranerz
Exploration and Mining and became Director of Regulatory Affairs, Environmental
Engineering and Solution Mining. Mr. Catchpoles responsibilities included the
monitoring and oversight of the environmental and regulatory aspects of two
large uranium mines in Canada and the operational aspects of one uranium
solution mine in the United States. In 1996 Mr. Catchpole was appointed General
Manager and Managing Director of the Inkai uranium solution mining project
located in the Republic of Kazakhstan (Central Asia). In 1998 Cameco Corporation
acquired Uranerz U.S.A. Inc., and Mr. Catchpole continued his post at the Inkai
Project for Cameco. Mr. Catchpole spent six years taking the Inkai project from
acquisition through feasibility study, joint venture formulation, government
licensing, environmental permitting, design, construction and the first phase
start-up.
Following his departure from Cameco in 2002, Mr. Catchpole was
an independent consulting engineer providing project management to the oil and
gas, mining, and construction industries. Mr. Catchpole is experienced in all
phases of project development including environmental permitting, budgeting,
scheduling, procurement, and construction of infrastructure and mining
facilities. He has served on numerous mineral evaluation and due diligence
teams.
Paul Goranson
Mr. Paul Goranson is President and Chief Operating Officer of
Uranerz and was appointed to the Uranerz Board on December 2, 2013. Mr. Goranson
is a licensed engineer with a B.S. degree in Natural Gas Engineering from Texas
A&M University and an M.S. in Environmental Engineering from Texas A&M
University Kingsville. Mr. Goranson has over twenty-seven years of mining,
processing and regulatory experience in the uranium extraction industry that
includes both conventional and in-situ recovery mining. Most recently Mr.
Goranson was President of Cameco Resources, a wholly-owned U.S. subsidiary of
Cameco Corporation, which is one of the world's largest uranium mining
companies. Mr. Goranson was responsible for executing the "Double U" growth
strategy for Cameco's U.S. operations, including developing production expansion
projects such as the North Butte ISR uranium recovery facility and the
refurbishment of the Highland Central Processing Plant. While President of
Cameco Resources, Mr. Goranson's responsibilities included executive leadership
for the operations at the Smith Ranch-Highland, Crow Butte and North Butte ISR
uranium recovery facilities.
Prior to Cameco Resources, Mr. Goranson was Vice President of
Mesteña Uranium LLC where he led the construction, startup and operation of the
Alta Mesa project that achieved over one million pounds of uranium extraction
per year under his stewardship. At Mesteña his responsibilities included
marketing uranium where he negotiated long term uranium supply contracts with
nuclear utilities as well as spot uranium sales. Prior to Mesteña, Mr. Goranson
was the manager for radiation safety, regulatory compliance and licensing with
Rio Algom Mining LLC, a division of BHP Billiton.
Interest of Experts
Qualified Persons
The information contained in this Circular concerning Uranerz
material mineral properties is based on the following technical reports authored
by the following qualified persons:
|
(a) |
information concerning the Nichols Ranch Property is
based on a technical report prepared for Uranerz titled Nichols Ranch
Uranium Project, 43-101 Technical Report, Preliminary Economic Assessment dated February 28, 2015 and
authored by Douglas L. Beahm, P.E., P.G. and Paul Goranson, P.E.; |
108
|
(b) |
information concerning the Arkose Property is based on
the technical report prepared for Uranerz titled Arkose Uranium Project,
Mineral Resource and Exploration Target, 43- 101 Technical Report dated
February 28, 2015 and authored by Douglas L. Beahm, P.E., P.G.; |
|
|
|
|
(c) |
information concerning the West North Butte Satellite
Properties is based on the technical report prepared for Uranerz titled
Technical Report, West North Butte Satellite Properties, Campbell County,
Wyoming, U.S.A. dated December 9, 2008 and authored by Douglass H.
Graves, P.E. and Don R. Woody, P.G.; |
|
|
|
|
(d) |
information concerning the North Rolling Pin Property is
based on the technical report prepared for Uranerz titled Technical
Report, North Rolling Pin Property, Campbell County, Wyoming, U.S.A.
dated June 4, 2010 authored by Douglass H. Graves, P.E.; and |
|
|
|
|
(e) |
information concerning the Reno Creek Property is based
on the technical report prepared for Uranerz titled Technical Report,
Reno Creek Property, Campbell County, Wyoming, U.S.A. dated October 13,
2010 authored by Douglass H. Graves, P.E. |
At the date hereof, to the knowledge of management of EFI, each
of the aforementioned qualified persons beneficially own, directly or
indirectly, less than 1% of the EFI Common Shares.
Financial Advisors
Roth and Cantor acted as financial advisors to EFI in
connection with the Transaction. The Fairness Opinion, which is attached hereto
as Schedule C, has been prepared by Roth.
Legal Counsel
Certain legal matters relating to the Transaction will be
passed upon by Borden Ladner Gervais LLP on behalf of EFI and McMillan LLP on
behalf of Uranerz.
Except as set out herein, to the knowledge of management of EFI
and Uranerz as at the date hereof, none of the experts, or designated
professionals of the experts named above have any registered or beneficial
interest, direct or indirect, in any securities or other property of EFI or
Uranerz or their respective associates or affiliates when the experts prepared
their respective reports.
Auditors
The audited financial statements of EFI as at December 31, 2014
and 2013 and for the years then ended which are incorporated by reference in
this Circular were audited by KPMG LLP. In connection with their audit of such
financial statements, KPMG LLP reported to EFIs audit committee that they are
independent of EFI within the meaning of the relevant rules and related
interpretations prescribed by the relevant professional bodies in Canada and any
applicable legislation or regulations.
The audited financial statements of Uranerz for the year ended
December 31, 2014 which are incorporated by reference in this Circular were
audited by Manning Elliott LLP, Chartered Accountants. Manning Elliott LLP is
independent of Uranerz in accordance with the rules of the Public Company
Oversight Accounting Board (PCAOB) in the United States.
109
Consent of Expert
Consent of Roth Capital Partners LLC
We refer to the written fairness opinion dated as of January 2,
2015 (the Fairness Opinion), which we prepared for the Board of
Directors of Energy Fuels Inc. (EFI) in connection with the acquisition
of Uranerz Energy Corporation.
We consent to the inclusion of the Fairness Opinion as Schedule
C, a summary of the Fairness Opinion and our firm name in the management
information circular of EFI dated May 21, 2015.
Toronto, Ontario
May 21, 2015
ROTH CAPITAL PARTNERS LLC |
|
|
By:: |
(signed) John Dalfonsi |
|
Managing Director |
110
PARTICULARS OF MATTERS TO BE ACTED UPON AT THE MEETING OTHER
THAN THE TRANSACTION
Election of Directors
The EFI Board may consist of a minimum of three and a maximum
of fifteen directors, who are elected annually. The EFI Board is currently
composed of nine directors. At its meeting on May 6, 2015, the EFI Board
considered the appropriate size of the EFI Board with a view to facilitating
effective decision-making, and has determined that the size of the EFI Board
should be reduced from nine directors, to eight directors. Accordingly, eight
directors will be elected at the Meeting. As a result of this determination and
change in the size of the EFI Board, Mr. Mark E. Goodman has decided not to
stand for re-election as a director, and will therefore not be nominated for
re-election at the Meeting.
When determining nominees for election, the EFI Board also
considers its strategic relationship with Korea Electric Power Corporation
(KEPCO). KEPCO is the primary utility in South Korea and an
international supplier of nuclear reactors worldwide. KEPCO has its head office
in Naju-si, South Korea, and currently owns approximately 8.7% of the
outstanding EFI Common Shares. Energy Fuels and KEPCO entered into a strategic
relationship agreement in 2013, which provides for a long-term collaborative
business relationship. Under this agreement, the Corporation agreed to nominate
one person designated by KEPCO for election as a director at any shareholder
meeting where directors are to be elected, so long as KEPCO holds more than 5%
of the outstanding EFI Common Shares. KEPCO has designated Mr. Joo Soo Park as
its nominee.
The Corporation has adopted an advance notice requirement in
its by-laws for nominations of directors by shareholders. Among other things,
the advance notice requirement fixes a deadline by which shareholders must
submit a notice of director nominations to the Corporation prior to any annual
or special meeting of shareholders where directors are to be elected, and sets
forth the information that a shareholder must include in the notice for it to be
valid. As of the date hereof, the Corporation has not received notice of any
director nominations in connection with the Meeting.
EFI Shareholders will vote for the election of each individual
director separately. The Corporation has adopted a majority voting policy for
the election of directors whereby any nominee (in an uncontested election) who
receives a greater number of shares withheld from voting than shares voted in
favour of his or her election is expected to tender his or her resignation to
the EFI Board, to take effect upon acceptance by the EFI Board. The EFI Board
will, within 90 days of the Meeting, determine whether to accept any such offer
to resign. See Schedule E Corporate Governance Disclosure.
The following table provides the names of and information for
the nominees for election as directors of the Corporation (the
Nominees). The persons named in the enclosed form of proxy intend to
vote for the election of each of the Nominees. Management does not
contemplate that any of the Nominees will be unable to serve as a director. All
directors so elected will hold office until the next annual meeting of
shareholders or until their successors are elected or appointed, unless his
office is vacated earlier in accordance with the by-laws of EFI or with the
provisions of the OBCA.
111
Name and Municipality of
Residence |
Office Held
|
Director
Since(1) |
Principal
Occupation, if different than Office Held |
EFI Common
Shares Beneficially Owned or Over Which
Control or Direction is Exercised(2)
|
J. Birks Bovaird(3) Ontario,
Canada |
Chair and Director |
2006 |
Consultant, providing advisory
services to natural resource companies |
5,192 |
Stephen P. Antony(4) Colorado, USA
|
President, CEO and Director |
2009 |
Same |
16,957 |
Paul A. Carroll(5) Ontario, Canada
|
Director |
2010 |
President of Carnarvon Capital
Corporation; President & CEO of World Wide Minerals Ltd. |
Nil |
Lawrence A. Goldberg Ontario, Canada(5)
|
Director |
2012 |
Chief Financial Officer of JSN
Jewellery Inc. |
Nil |
Bruce D. Hansen(3)(5) Colorado,
USA |
Director |
2007 |
CEO of General Moly Inc., a US
based mineral company |
2,600 |
Ron F. Hochstein(4)(6) British
Columbia, Canada |
Director |
2012 |
President and CEO of Lundin Gold
Inc. |
23,368 |
Joo Soo Park Seoul, Korea |
Director |
2015(7) |
General Manager, Overseas Resources Development Department, Korea Electric Power
Corporation |
Nil |
Richard J. Patricio(3)(6) Ontario,
Canada |
Director |
2012 |
CEO of Pinetree Capital Ltd. |
7,720 |
Notes:
(1) |
Directors are elected annually and hold office until a
successor is elected at a subsequent annual meeting of the Corporation,
unless a directors office is earlier vacated in accordance with the
by-laws of the Corporation. |
(2) |
The information as to EFI Common Shares beneficially
owned or over which the directors exercise control or direction not being
within the knowledge of the Corporation, has been furnished by the
respective nominees individually. |
(3) |
Member of the Compensation Committee. |
(4) |
Member of the Environment, Health and Safety
Committee. |
(5) |
Member of the Audit Committee. |
(6) |
Member of the Governance and Nominating
Committee. |
(7) |
Mr. Park was appointed a director by the EFI Board on
January 28, 2015, as the designated nominee of KEPCO, to fill the vacancy
created by the resignation of Mr. Tae Hwan Kim. |
Information about each Nominee, including present principal
occupation, business or employment and the principal occupations, businesses or
employments within the five preceding years, is set out below.
112
J. Birks Bovaird
For a majority of his career, Mr. Bovairds focus has been the
provision and implementation of corporate financial consulting and strategic
planning services. He was previously the Vice President of Corporate Finance for
one of Canadas major accounting firms. He currently is the Chair of Nuna
Minerals A/S, a public mining exploration and development company listed on the
Copenhagen Exchange (NUNA.CO). He is a director of Noble Minerals Exploration
(TSX-V:NOB) where he is Chair of the Nominating, Compensation and Governance
Committee as well as a member of the Audit Committee. He is also the Chair of
the board of directors of GTA Resources and Mining Inc. (TSX-V:GTA.V), as well
as a member of the Audit Committee. He has previously been involved with
numerous public resource companies, both as a member of management and as a
director. He is a graduate of the Canadian Director Education Program and holds
an ICD.D designation.
Stephen P. Antony
Mr. Antony is a registered professional engineer in a number of
states in which the Corporation holds properties. He is a graduate of the
Colorado School of Mines, and holds a Masters of Business Administration from
the University of Denver. Over the last 38 years, Mr. Antony has held
increasingly senior positions in both the technical and managerial sectors of
the mining business. He first entered the uranium business with Mobil Oils
Mining and Mineral group in the mid 1980s, during which time he developed the
reclamation plan for Mobils El Mesquite ISL operation in south Texas. He joined
Energy Fuels Nuclear, Inc. ("EFN") in 1986 as the company was
growing to become the largest U3O8 producer in the
US, peaking at more than five million pounds annually. Mr. Antony served as
director of Technical Services for the company where he authored many of the
feasibility studies which provided justification for the expansion of EFNs
highly successful Breccia Pipe Mine projects in the Arizona Strip. Subsequent to
his employment with EFN, Mr. Antony held a brief position with Power Resources,
Inc. ("PRI") as Vice President of Business Development. He then consulted
to Cameco Corp. on due diligence prior to their acquisition of PRI, which Cameco
undertook as part of their strategy to become a significant uranium producer in
the US. Mr. Antony was most recently Chief Operating Officer of EFI, responsible
for the daily operations of the Corporation, including all aspects of uranium
property exploration, ore production and mill processing. He was appointed
President and Chief Executive Officer of the Corporation on April 1, 2010.
Paul A. Carroll
Mr. Carroll has had a lengthy business career in the mining
industry, both as a lawyer and as a director and/or officer of many mining
companies. He has been engaged in the mineral exploration and mining industry in
Canada, the U.S., Mexico, Central and South America, Africa, China, Russia and
Kazakhstan. Mr. Carroll is President of Carnarvon Capital Corporation, a
corporate management and advisory company based in Toronto, Canada. Companies
with which he has been extensively involved include Dundee Corporation, a
full-service investment bank, Corona Corporation, where he was a member of the
Executive Committee, Zemex Corporation, Royex Gold Mining Corporation, Campbell
Resources Inc., Cobra Emerald Mines Ltd., Lacana Mining Corporation where he was
Chair, Arcon International Resources plc where he was Chair, Tahera Corporation,
World Wide Minerals Ltd. where he is President and Chief Executive Officer, Poco
Petroleums Ltd., Mascot Gold Mines Ltd., United Keno Hill Mines Ltd., Repadre
Capital Corporation (now IAMgold Corporation), Crowflight Minerals Inc., War
Eagle Mining Company Inc. and Diadem Resources Ltd. From 2004 to 2005, as one of
the committee of independent directors thereof, Mr. Carroll was a director of
Argus Corporation Limited and Hollinger Inc. (Hollinger) and in 2005 he was
Chief Executive Officer. He was a director of The Uranium Institute (now the
World Nuclear Association) in 1998. In addition to the Corporation, Mr. Carroll
is currently a director of the following companies: World Wide Minerals (TSX,
CDN, OTC); War Eagle Mining Company Inc. (TSX-V) and Mammoth Resources Corp.
(TSX-V). Mr. Carroll serves on the Audit Committee of War Eagle Mining Company
Inc., as well as of the Corporation
113
Lawrence A. Goldberg
Mr. Goldberg is a Chartered Professional Accountant (CPA, CA).
He is currently Chief Financial Officer of JSN Jewellery Inc. From May 2013 to
May 2014 he was Chief Financial Officer of Blue Goose Capital Corp., a private
organic food company. From May 2012 to May 2013 he was Chief Financial Officer
and Chief Operating Officer of Arcestra Inc., a private software company. From
August 2010 to September 2011, Mr. Goldberg was the Chief Financial Officer of
ZENN Motor Company Inc., a TSX-V listed energy storage technology company. From
February 2000 to August 2010, Mr. Goldberg was the Chief Financial Officer of
Mega Uranium Ltd., a uranium exploration company listed on the TSX, and of
Pinetree Capital Ltd., a TSX-listed investment company. From May 2004 to
December 2009, Mr. Goldberg was the CFO of Brownstone Ventures Inc. (now called
Brownstone Energy Inc.), an energy company listed on the TSX-V.
Bruce D. Hansen
Mr. Hansen is currently Chief Executive Officer and a director
of General Moly Inc., a position he has held since 2007. Prior to that, Mr.
Hansen was Senior Vice-President, Operations Services and Development with
Newmont Mining Corporation. He worked with Newmont for ten years holding
increasingly senior roles, including CFO from 1999 to 2005. Prior to joining
Newmont, Mr. Hansen spent 12 years with Santa Fe Pacific Gold, where he held
increasingly senior management roles including Senior Vice President of
Corporate Development and Vice President Finance and Development. Mr. Hansen
holds a Masters of Business Administration from the University of New Mexico and
a Bachelors of Science Degree in Mining Engineering from the Colorado School of
Mines. Mr. Hansen is also a director and serves on the Audit Committee of ASA
Gold and Precious Metals Ltd. (NYSE).
Ron F. Hochstein
Mr. Hochstein is currently President and Chief Executive
Officer of Lundin Gold Inc., a position he has held since December 2014. Mr.
Hochstein is also currently Executive Chairman of Denison Mines Corp., and
previously served as its President and Chief Executive Officer since 2009. Prior
to this Mr. Hochstein served as President and Chief Operating Officer of Denison
Mines Corp. since 2006, when International Uranium Corporation ("IUC") and
Denison Mines Inc. combined to form Denison Mines Corp. Mr. Hochstein served as
President and Chief Executive Officer of IUC from 2000 to 2006 after serving as
Vice President Corporate Development and Vice President and Chief Operating
Officer. Prior to joining IUC Mr. Hochstein was a Project Manager with Simons
Mining Group and was with Noranda Minerals as a metallurgical engineer. Mr.
Hochstein is a Professional Engineer and holds a Masters of Business
Administration from the University of British Columbia and a Bachelor of Science
in Mineral Processing from the University of Alberta. Mr. Hochstein is a
Director of Denison Mines Corp. (TSX, NYSE MKT) and Lundin Gold Inc. (TSX,
Nasdaq Stockholm). He is also a Director and serves on the Audit Committee of
Sprott Resource Corp. (TSX).
Joo Soo Park
Since 2012, Mr. Park has been Team Leader and General Manager,
Overseas Resources Development Department for KEPCO, an international electric
power company headquartered in Korea. From 2007 to 2012, Mr. Park was Senior
Manager, Korea Electric Power Research Institute for KEPCO, and from 2002 to
2007, Mr. Park was Senior Manager, Kum-ho Nuclear Power Plant Construction
Division for KEPCO. Mr. Park has been with KEPCO for nearly twenty five years,
and has been involved in many domestic and overseas projects for KEPCO. Mr. Park
has a business degree from Chungnam National University, Korea, and a Masters of Business Administration
from Helsinki School of Economics, Finland.
114
Richard J. Patricio
Since March 2015, Mr. Patricio has been the Chief Executive
Officer and President of Mega Uranium Ltd., where he previously was, since 2005,
the Executive Vice President, Corporate Affairs. In addition, since February
2015, Mr. Patricio is the Chief Executive Officer of Pinetree Capital Ltd.,
where he previously was the Vice President of Corporate and Legal Affairs since
2005. Prior to joining Pinetree, Mr. Patricio worked as in-house General Counsel
for a senior TSX listed manufacturing company. Prior to that, Mr. Patricio
practiced law at Osler Hoskin & Harcourt LLP in Toronto where he focused on
mergers and acquisitions, securities law and general corporate transactions. In
addition to his legal and corporate experience, Mr. Patricio has built a number
of mining companies with global operations. He holds senior officer and director
positions in several junior mining companies that are listed on the TSX,
TSX-Venture, AIM, ASX and New York exchanges. Mr. Patricio is a lawyer qualified
to practice in the Province of Ontario. Mr. Patricio is also a director of
NexGen Energy Ltd. (TSX-V), Plateau Uranium Ltd. (formerly Macusani Yellowcake
Inc.) (TSX-V) and Toro Energy Ltd. (ASX). He formerly served as a Director for
Caledonia Mining Corp. (TSX, AIM, NASDAQ-OTCQX), Santa Maria Petroleum Inc.
(formerly Quetzal Energy Ltd.), U3O8 Corp. (TSX, OTCQX), X-Terra Resources
Corporation, Dejour Enterprises Ltd., Titan Uranium Inc., Mooncor Oil & Gas
Corp., Vesta Capital Corp. and Macarthur Minerals Ltd. (TSX). He has also agreed
to resign as a director of Terreno Resources Corp. (TSX-V) and Mega Precious
Metals Inc. (TSX-V), pending completion of certain acquisition transactions
anticipated to be completed by the second quarter of fiscal 2015.
Cease Trade Orders and Bankruptcies
Except as set out below, to the knowledge of the Corporation,
no director of the Corporation is, or has been in the last 10 years, (a) a
director, chief executive officer or chief financial officer of a company that
(i) while that person was acting in that capacity, was the subject of a cease
trade order or similar order (including a management cease trade order) or an
order that denied the relevant company access to any exemptions under Canadian
securities legislation, for a period of more than 30 consecutive days, or (ii)
after that person ceased to act in that capacity, was the subject of a cease
trade or similar order or an order that denied the issuer access to any
exemption under Canadian securities legislation, for a period of more than 30
consecutive days, which resulted from an event that occurred while that person
acted in such capacity, or (b) a director or executive officer of a company
that, while that person was acting in that capacity, or within a year of that
person ceasing to act in that capacity, became bankrupt, made a proposal under
any legislation relating to bankruptcy or insolvency or was subject to or
instituted any proceedings, arrangement or compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold its assets; or (c)
become bankrupt, made a proposal under any legislation relating to bankruptcy or
insolvency, or become subject to or instituted any proceedings, arrangement or
compromise with creditors, or had a receiver, receiver manager or trustee
appointed to hold his assets.
Mr. Bovaird was a director of HMZ Metals Inc. (HMZ) at
the time a management cease trade order was issued on September 6, 2005
requiring the directors, officers and insiders of HMZ to cease all trading in,
or acquisition of, the securities of HMZ due to HMZs failure to file its
interim financial statements for the six month period ended June 30, 2005. The
management cease trade order issued on September 6, 2005 expired on October 20,
2005. The management cease trade order issued on April 3, 2006 expired and was
replaced with a permanent management cease trade order dated April 17, 2006,
which was allowed to expire on June 2, 2008. Mr. Bovaird was also an independent
director of Fort Chimo Minerals Inc. (Fort Chimo) at the time a
management cease trade order was issued on June 5, 2007 requiring the directors,
officers and insiders of Fort Chimo to cease all trading in, or acquisition of, the securities of Fort Chimo due to Fort Chimos failure to
file its interim financial statements for the three month period ended March 31,
2007. The management cease trade order was allowed to expire on July 9, 2007
after Fort Chimo remedied the filing default.
115
Mr. Carroll is a director and President and Chief Executive
Officer of World Wide Minerals Ltd., a Canadian public company which is subject
to an issuer cease trade order issued by the Ontario Securities Commission on
May 9, 2011 for failure to file financial statements and has not been revoked.
Mr. Hochstein was a director of Sirocco Mining Inc.
(Sirocco). Pursuant to a plan of arrangement completed on January 31,
2014, Canadian Lithium Corp. acquired Sirocco. The final step in the plan of
arrangement was the amalgamation of Canadian Lithium Corp. and Sirocco to form
RB Energy Inc (RBI). On October 13, 2014, RBI announced that, among
other things, the Board of Directors of RBI had approved a filing on October 14,
2014, for an Initial Order to commence proceedings under the Companies'
Creditors Arrangement Act (the "CCAA"). On October 15, 2014, RBI further
announced that the Quebec Superior Court had issued an Amended and Restated
Initial Order in respect of RBI and certain of its subsidiaries under the CCAA.
RBI is now under the protection of the Court. KPMG Inc. has been appointed
monitor under the Court Order. The TSX de-listed RBIs common shares effective
at the close of business on November 24, 2014 for failure to meet the continued
listing requirements of the TSX. Since that time, RBIs common shares have been
suspended from trading.
Appointment of Auditors
The auditors of EFI are KPMG LLP, Chartered Professional
Accountants, who were first appointed auditors of EFI on April 12, 2007. The
persons named in the form of proxy accompanying this Circular intend to vote for
the reappointment of KPMG LLP as the auditors of EFI for the ensuing year or
until their successors are appointed and to authorize the directors of EFI to
fix the remuneration of the auditors, unless the shareholder has specified
in the form of proxy that the EFI Common Shares represented by such proxy are to
be withheld from voting in respect thereof.
Extension of Shareholder Rights Plan
At the Meeting, EFI Shareholders will be asked to consider and,
if thought advisable, approve the extension of the Shareholder Rights Plan
Agreement dated February 2, 2009 (the Rights Plan) between the
Corporation and CST Trust Company (initially entered into with CIBC Mellon Trust
Company and later novated to CST Trust Company), as rights agent (the Rights
Agreement). A copy of the Rights Agreement is attached as Schedule F to
this Circular.
The Rights Plan had an initial term until the date of the
Corporations annual meeting of shareholders in 2012 unless further extended. On
February 10, 2012, at an annual and special meeting of shareholders, the Rights
Plan was extended for a further three years. The Rights Plan is currently in
effect but will expire at the conclusion of the Meeting, unless an amendment of
the definition of the Expiration Time of the Rights Plan is approved by
Shareholders at the Meeting. To be effective, the resolution approving the
extension of the Rights Plan must be passed by a majority of the votes cast at
the Meeting. The Rights Plan was not adopted by the EFI Board in response to, or
in anticipation of, any offer or takeover bid, and the EFI Board is not
currently aware of any pending offer or takeover bid for the Shares. The EFI
Board has determined that extension of the Rights Plan for a further period of
three years is in the best interest of the Corporation and its shareholders.
Purpose of the Rights Plan
The Rights Plan is designed to give the EFI Board and EFI
Shareholders sufficient time to properly assess an unsolicited takeover bid
without undue pressure and to give the EFI Board time to consider alternatives designed to allow the EFI Shareholders to receive
full and fair value for the EFI Common Shares. Additionally, the Rights Plan is
designed to provide EFI Shareholders with equal treatment in a takeover bid. The
desire to ensure that the Corporation is able to address unsolicited takeover
bids for its issued and outstanding EFI Common Shares during the term of the
Rights Plan stems from a concern that Canadian takeover bid rules may provide
too short a response time to companies that are subject to unsolicited takeover
bids to ensure that Shareholders are offered full and fair value for their
shares. Shareholders may also feel compelled to tender to a takeover bid even if
the shareholder is being left with illiquid or minority discounted shares in the
Corporation. This is particularly so in the case of a partial bid for less than
all of the EFI Common Shares of the Corporation where the bidder wishes to
obtain a control position but does not wish to acquire all of the EFI Common
Shares. In addition, while existing securities legislation has addressed many
concerns related to unequal treatment of shareholders, there remains the
possibility that control of a company may be acquired pursuant to private
agreements in which a small group of shareholder may dispose of shares at a
premium to the market price, which premium is not shared with the other
shareholders.
116
The Rights Plan encourages a potential acquirer who makes a
takeover bid to proceed either by way of a Permitted Bid (described below),
which generally requires a takeover bid to satisfy certain minimum standards
designed to promote fairness, or with the concurrence of the EFI Board. If a
takeover bid fails to meet these minimum standards and the Rights Plan is not
waived by the EFI Board, the Rights Plan provides that holders of EFI Common
Shares, other than the Acquiring Person (defined below), will be able to
purchase additional Common Shares at a significant discount to market, thus
exposing the Acquiring Person to substantial dilution of its holdings. Even
where a takeover bid does not meet the Permitted Bid criteria, the EFI Board is
always bound to consider any bid for the Corporation and consider whether or not
it should waive the application of the Rights Plan in respect of such bid. In
discharging such responsibility, the EFI Board is obligated to act honestly and
in good faith with a view to the best interest of the Corporation.
A number of recent decisions rendered by the Canadian
securities regulators relating to shareholder rights plans have concluded that a
board of directors faced with an unsolicited takeover bid will not be permitted
to maintain a shareholder rights plan indefinitely to prevent the successful
completion of the bid, but only for so long as the board of directors is
actively seeking alternatives to the bid and there is a reasonably possibility
that, given additional time, a value maximizing alternative will be
developed.
The Rights Plan does not preclude any shareholder from
utilizing the proxy mechanism of the OBCA, to promote a change in the management
or direction of the Corporation, and will have no effect on the rights of
holders of the EFI Common Shares to requisition a meeting of shareholders in
accordance with the provisions of applicable legislation.
The Rights Plan is not expected to interfere with the
day-to-day operations of the Corporation, nor in any way alter the financial
condition of the Corporation, impede its business plans, or alter its financial
statements. In addition, the Rights Plan is initially not dilutive. However, if
a Flip-in Event (described below) occurs and the Rights separate from the EFI
Common Shares, reported earnings per share and reported cash flow per share on a
fully-diluted or non-diluted basis may be affected. In addition, holders of
Rights not exercising their Rights after a Flip-in Event may suffer substantial
dilution.
Summary of the Rights Plan
The following is a summary of the principal terms of the Rights
Plan, which is qualified in its entirety by reference to the text of the Rights
Plan Agreement.
Effective Date
The effective date of the Rights Plan is February 3, 2009.
117
Term
If the extension of the Rights Plan is not approved by EFI
Shareholders at the Meeting, the Rights Plan will terminate at the conclusion of
the Meeting. If the extension of the Rights Plan is approved by shareholders,
the Rights Plan will terminate as of 5:00 p.m. (Toronto time) on the date of the
Corporations annual meeting of shareholders held in 2018, at which time the
Rights will expire, unless prior to that date, the Rights are terminated,
redeemed, or exchanged by the EFI Board.
Issue of Rights
To implement the Rights Plan, the EFI Board authorized the
issuance of share purchase rights (Rights) to the current shareholders of the
Corporation at the rate of one Right for each EFI Common Share outstanding as at
5:00 p.m. (Toronto time) on February 3, 2009 (the Record Time). In addition,
one Right has been and will be issued with each EFI Common Share issued after
the Record Time and prior to the earlier of the Separation Time (as defined
below) and the redemption or expiration of the Rights.
Rights Exercise Privilege
The Rights will trigger (i.e. separate from the EFI Common
Shares) (the Separation Time) and will become exercisable 10 Business Days
after a person (an Acquiring Person) becomes the beneficial owner of 20% or
more of, or commences or announces a takeover bid for, the Corporations
outstanding Common Shares, other than by an acquisition pursuant to a Permitted
Bid or a Competing Permitted Bid (each as defined below) or pursuant to certain
other transactions as described in the Rights Plan. The acquisition by an
Acquiring Person of 20% or more of the EFI Common Shares is referred to as a
Flip-in Event.
Any Rights held by an Acquiring Person will become void upon
the occurrence of a Flip-in Event. By making any takeover bid other than a
Permitted Bid or a Competing Permitted Bid prohibitively expensive for an
Acquiring Person, the Rights Plan is designed to require any person interested
in acquiring more that 20% of the Common Shares to do so by way of a Permitted
Bid or Competing Permitted Bid or to make a takeover bid which the EFI Board
considers to represent the full and fair value of the EFI Common Shares.
Prior to the rights being triggered, they will have no value
and no dilutive effect on the EFI Common Shares.
Flip-In Event
A Flip-in Event is triggered in the event that a transaction
occurs pursuant to which a person becomes an Acquiring Person. Upon the
occurrence of a Flip-in Event, each Right (except for Rights beneficially owned
by the Acquiring Person and certain other persons specified below) shall
thereafter constitute the right to purchase from the Corporation upon exercise
thereof in accordance with the terms of the Rights Plan that number of EFI
Common Shares having an aggregate Market Price (as defined in the Rights Plan)
on the date of the consummation or occurrence of such Flip-in Even equal to
twice the Exercise Price (as defined in the Rights Plan and equal to $10.00) for
an amount in cash equal to the Exercise Price. Accordingly, if one assumes a
market price of $2.00 per share, each Right allows a shareholder to purchase 10
Common Shares for $10.00, effectively allowing the exercising holders of Rights
to acquire the EFI Common Shares at a 50% discount to the then prevailing market
price and resulting in the issue of 10 EFI Common Shares for each Right, thus
creating substantial dilution.
The Rights Plan provides that, upon the occurrence of a Flip-in
Event, Rights that are beneficially owned by: (i) an Acquiring Person or any
affiliate or associate of an Acquiring Person, or any Person acting jointly or
in concert with an Acquiring Person, or any affiliate or associate of such
Acquiring Person; or (ii) a transferee or other successor in title of Rights of
an Acquiring Person (or and affiliate or associate of an Acquiring Person or of
any person acting jointly or in concert with an Acquiring Person) who becomes a transferee or successor in title concurrently with or
subsequent to the Acquiring Person becoming an Acquiring Person; shall become
null and void without any further action and any holder of such Rights
(including transferees or successors in title) shall not have any right
whatsoever to exercise such Rights under any provision of the Rights Plan.
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Acquiring Person
An Acquiring Person is a person who Beneficially Owns (as
defined in the Rights Plan) 20% or more of the EFI Common Shares. An Acquiring
Person does not, however, include the Corporation or any subsidiary of the
Corporation, or any person who becomes the Beneficial Owner of 20% or more of
the outstanding EFI Common Shares as a result of Permitted Bid, Competing
Permitted Bids and certain other exempt transactions.
Permitted Bids and Competing Permitted Bids
A Permitted Bid is a takeover bid made by takeover bid
circular in compliance with the following additional provisions:
(1) |
The Bid must be made to all holders of record of EFI
Common Shares; |
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(2) |
The bid must be open for a minimum of 60 days following
the date that the bid circular is sent to shareholders and no EFI Common
Shares may be taken up prior to completion of such 60-day
period; |
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(3) |
Take-up and payment for the EFI Common Shares may not
occur unless the bid is accepted by persons holding more than fifty
percent (50%) of the outstanding EFI Common Shares, exclusive of Common
Shares held be the person responsible for triggering the Flip-in Event or
any person who has announced a current intention to make, or who is
making, a takeover bid for the EFI Common Shares of the Corporation and
the respective affiliates and associates of such persons and persons
acting jointly or in concert with such persons; |
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(4) |
EFI Common Shares may be deposited into or withdrawn from
the bid at any time prior to the takeup date; and |
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(5) |
If the bid is accepted by the requisite percentage
specified in (3) above, the bidder must extend the bid for a period of 10
business days to allow other shareholders to tender into the bid should
they so choose and must make a public announcement to such
effect. |
A Competing Permitted Bid is a takeover bid that satisfies
all of the criteria of a Permitted Bid except that since it is made after a
Permitted Bid has been made, the minimum deposit period and the time period for
the takeup of and payment for EFI Common Shares tendered under a Competing
Permitted Bid is not 60 days, but is instead the greater of 35 days (the minimum
permitted by law) and the earliest date on which Common Shares may be taken up
under the prior Permitted Bid then in existence.
Neither a Permitted Bid nor a Competing Permitted Bid need be
approved by the EFI Board and may be taken directly to the shareholder of the
Corporation. Acquisitions of EFI Common Shares made pursuant to a Permitted Bid
or a Competing Permitted Bid do not give rise to a Flip-in Event.
Lock-up Agreements
A Lock-up Agreement is an agreement between an Offeror (as
defined in the Rights Plan) and a person (the Locked-up Person) whereby the
Locked-up Person agrees to deposit or tender Common Shares to the Offerors
takeover bid. Entering into a Lock-up Agreement will not constitute a Flin-in
Event provided that the Lock-up Agreement permits the Locked-up
Person to withdraw its EFI Common Shares from the Lock-up Agreement in order to
tender or deposit the EFI Common Shares to another takeover bid or to support
another transaction, where (i) the price per EFI Common Share offered under the
other bid or transaction is higher than the Lockup Agreement; or (ii) the number
of EFI Common Shares to be purchased under the other bid or transaction is
higher than the number of EFI Common Shares proposed to be purchased in the
offer to be made pursuant to the Lock-up Agreement and the price per EFI Common
Share offered in such alternative bid or transaction is not less than the price
contained in or proposed to be contained in the offer to be made pursuant to the
Lock-up Agreement.
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Certificates and Transferability
Prior to separation, the Rights will be evidenced by the EFI
Common Share certificates and will not be transferable separately from the
Common Shares. EFI Common Share certificates do not need to be exchanged to
entitle a shareholder to these Rights. A legend referring to the Rights Plan
will be placed on all new share certificates for EFI Common Shares issued by the
Corporation following the Effective Date. From and after separation, the Rights
will be evidenced by Rights certificates and will be transferable and traded
separately from the EFI Common Shares.
Redemption and Waiver
The EFI Board may, at any time prior to the occurrence of a
Flip-in Event, and subject to shareholder approval, elect to redeem all but not
less than all of the Rights at a redemption price of $0.0005 per Right (the
Redemption Price), which has been adjusted to take into account the
Consolidation, and which may be further appropriately adjusted in certain events
in the future. Rights will be deemed to automatically be redeemed at the
Redemption Price where a person who has made a Permitted Bid, a Competing
Permitted Bid or a takeover bid otherwise exempted by the EFI Board, takes up
and pays for the EFI Common Shares under the terms of the bid. If the EFI Board
elects or is deemed to have elected to redeem the Rights, the right to exercise
the Rights will terminate and each Right will, after redemption, be null and
void and the only right thereafter of the holders of Rights shall be to receive
the Redemption Price. Under the Rights Plan, the EFI Board has discretion to
waive application of the Rights Plan to a takeover bid made by way of a takeover
bid circular, subject to an automatic waiver with respect to all other takeover
bids made while the waived takeover bid is outstanding. The EFI Board may also
waive the application of the Rights Plan to a Flip-in Event which occurs through
inadvertence, subject to the inadvertent Acquiring Person reducing its holding
of the Common Shares within an agreed upon time. Other waivers of the Rights
Plan will require shareholder approval.
Amendment
The Rights Plan provides that prior to ratification by
shareholders, the EFI Board may in its sole discretion supplement or amend the
Rights Plan. Once the Rights Plan has been ratified by the shareholders,
however, any amendments or supplements to the terms of the Rights Plan (other
than for clerical errors or to maintain the Rights Plans validity and
effectiveness as a result of changes in applicable legislation or regulatory
requirements) will require prior shareholder approval. Changes arising from
changes in applicable legislation will require subsequent shareholder
ratification.
Shareholder Approval
At the Meeting, EFI Shareholders will be asked to extend the
Shareholder Rights Plan by a majority of the votes cast thereon.
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EFI Shareholders will be asked to consider and, if deemed
advisable, to approve, with or without amendment, the following resolution:
BE IT RESOLVED that:
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1. |
The Shareholder Rights Plan Agreement dated February 2,
2009 (the Rights Plan) between the Corporation and CST Trust Company,
Inc., as rights agent (the Rights Agreement), in the form attached as
Schedule F to the management information circular of the Corporation dated
May 21, 2015, be and is hereby extended such that the Rights Plan will
terminate as of 5:00 p.m. (Toronto time) on the date of the Corporations
annual meeting of shareholders held in 2018, at which time the Rights
issued thereunder will expire, unless prior to that date, the Rights are
terminated, redeemed, or exchanged by the EFI Board, and the definition of
Expiration Time in the Rights Agreement shall be amended accordingly;
and |
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2. |
any one director or officer of the Corporation, be, and
each of them is hereby, authorized and directed for and on behalf, and in
the name, of the Corporation, to execute or cause to be executed and to
deliver or cause to be delivered all such documents, and to do or cause to
be done all such acts and things, as in the opinion of such director or
officer may be necessary or desirable in order to give effect to this
resolution. |
The EFI Board recommends a vote FOR the resolution to extend
the Rights Plan.
Approval of 2015 Omnibus Equity Incentive Compensation Plan
On January 28, 2015, the EFI Board approved the 2015 Omnibus
Equity Incentive Compensation Plan (the Equity Incentive Plan), which
supersedes and replaces the Companys existing stock option plan (the
Existing Option Plan). The EFI Board has determined that it is in the
best interest of the Corporation to approve the Equity Incentive Plan, as it
will provide the Corporation with the ability to grant a broader range of equity
incentive awards, consistent with the practices of similar public companies.
At the Meeting, shareholders will be asked to consider and
approve the Equity Incentive Plan. The Equity Incentive Plan is also subject to
approval by the TSX.
After January 28, 2015, and up to the time of the next meeting
of shareholders of the Corporation, no further grants of stock options shall be
made pursuant to the Existing Option Plan. Upon ratification of the Equity
Incentive Plan by the shareholders of the Corporation and receipt of TSX
approval, the Existing Option Plan shall be terminated, and all stock options
previously granted pursuant to the Existing Option Plan which are then
outstanding shall be incorporated into the Equity Incentive Plan and treated as
Awards under the Equity Incentive Plan. Until such time as the shareholders of
the Corporation ratify the Equity Incentive Plan and TSX approval is received,
the Existing Option Plan shall continue in full force and effect.
Summary of Equity Incentive Plan
The following is a summary of the principal terms of the Equity
Incentive Plan, which is qualified in its entirety by reference to the text of
the Equity Incentive Plan, a copy of which is attached at Schedule G.
Employees, directors and consultants of the Corporation and its
affiliates are eligible to participate in the Equity Incentive Plan (the
Eligible Participants and, following the grant of an award (an
Award) pursuant to the Equity Incentive Plan, the
Participants). The EFI Board or a committee authorized by the EFI Board (the Committee) will be responsible for
administering the Equity Incentive Plan.
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The Equity Incentive Plan will permit the Committee to grant
Awards for non-qualified stock options (NQSOs), incentive stock options
(ISOs and together with NQSOs, Options), stock appreciation
rights (SARs) restricted stock (Restricted Stock), deferred
share units (DSUs), restricted stock units (RSUs),
performance shares (Performance Shares), performance units
(Performance Units) and stock-based awards (SBAs) to Eligible
Participants.
Common Shares Issuable Pursuant to the Equity Incentive
Plan
The number of EFI Common Shares reserved for issuance under the
Equity Incentive Plan shall not exceed 10% of the then issued and outstanding
EFI Common Shares from time to time. Subject to applicable law, the requirements
of the TSX or the NYSE and any shareholder or other approval which may be
required, the EFI Board may in its discretion amend the Plan to increase such
limit without notice to any Participants.
The number of EFI Common Shares reserved for issuance to
insiders of the Corporation pursuant to the Equity Incentive Plan together with
all other share compensation arrangements shall not exceed 10% of the
outstanding EFI Common Shares. Within any one-year period, the number of EFI
Common Shares issued to insiders pursuant to the Equity Incentive Plan and all
other share compensation arrangements of the Corporation will not exceed an
aggregate of 10% of the outstanding EFI Common Shares.
Ongoing Shareholder Approval of the Equity Incentive
Plan
Pursuant to the rules of the TSX, since the Equity Incentive
Plan provides for a maximum number of EFI Common Shares issuable thereunder
based on a percentage of the outstanding EFI Common Shares from time to time,
the Equity Incentive Plan must be renewed by approval of the shareholders of EFI
every three years.
Types of Awards
Options
The Committee may grant Options to any Eligible Participant at
any time, in such number and on such terms as will be determined by the
Committee in its discretion. ISOs may be granted only to employees of the
Corporation or a parent subsidiary corporation of the Corporation within the
meaning of Section 424 of the U.S. Internal Revenue Code of 1986 (the
Code). The exercise price for any Option granted pursuant to the Equity
Incentive Plan will be determined by the Committee and specified in the Award
Agreement, provided however, that the price will not be less than the fair
market value (the FMV) of the EFI Common Shares on the day of grant
(which cannot be less than the greater of (a) the volume weighted average
trading price of the Common Shares on the TSX or the NYSE for the five trading
days immediately prior to the grant date; or (b) the closing price of the EFI
Common Shares on the TSX or the NYSE on the trading day immediately prior to the
grant date), provided further, that the exercise price for an ISO granted to a
holder of 10% or more of the EFI Common Shares (a Significant
Stockholder) shall not be less than 110% of the FMV.
Options will vest and become exercisable at such times and on
the occurrence of such events, and be subject to such restrictions and
conditions, as the Committee in each instance approves.
Options will expire at such time as the Committee determines at
the time of grant; provided, however that no Option will be exercisable later
than the tenth anniversary date of its grant and, provided further, that no ISO
granted to a Significant Stockholder shall be exercisable after the expiration
of five years from the date of grant, except where the expiry date of any NQSO
would occur in a blackout period or within five days of the end of a blackout
period, in which case the expiry date will be automatically extended to the
tenth business day following the last day of a blackout period.
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Stock Appreciation Rights
A stock appreciation right or a SAR entitles the holder to
receive the difference between the FMV of an EFI Common Share on the date of
exercise and the grant price. The Committee may grant SARs to any Eligible
Participant at any time and on such terms as will be determined by the Committee
and may grant SARs in tandem with Options or as standalone SARs. The grant price
of a SAR will be determined by the Committee and specified in the Award
Agreement. The price will not be less than the FMV of the EFI Common Shares on
the day of grant. The grant price of an SAR granted in tandem with an Option
will be equal to the price of the related Option. SARs will vest and become
exercisable upon whatever terms and conditions the Committee, in its discretion,
imposes. Additionally, tandem SARs will only be exercisable upon the surrender
of the right to receive EFI Common Shares under the related Options. SARs will
expire at such time as the Committee determines and, except as determined
otherwise by the Committee and specified in the Award Agreement, no SAR will be
exercisable later than the tenth anniversary date of its grant.
Upon the exercise of an SAR, a Participant shall be entitled to
receive payment from the Corporation in an amount representing the difference
between the FMV of the underlying EFI Common Shares on the date of exercise over
the grant price. At the discretion of the Committee, the payment may be in cash,
EFI Common Shares or some combination thereof.
Restricted Stock and Restricted Stock Units.
Restricted Stock are awards of common shares that are subject
to forfeiture based on the passage of time, the achievement of performance
criteria, and/or upon the occurrence of other events, over a period of time, as
determined by the Committee. Restricted Stock Units are similar to Restricted
Stock, but provide a right to receive common shares or cash or a combination of
the two upon settlement. The Committee may grant Restricted Stock and/or RSUs to
any Eligible Participant at any time and on such terms as the Committee
determines. The specific terms, including the number of Restricted Stock or RSUs
awarded, the restriction period, the settlement date and any other restrictions
or conditions that the Committee determines to impose on any Restricted Stock or
RSU shall be set out in an Award Agreement.
To the extent required by law, holders of Restricted Stock
shall have voting rights during the restricted period, however, holders of RSUs
shall have no voting rights until and unless EFI Common Shares are issued on the
settlement of such RSUs.
Unless otherwise determined by the Committee or as set out in
any Award Agreement, no RSU will vest later than three years after the date of
grant.
Deferred Share Units.
DSUs are awards denominated in units that provide the holder
with a right to receive common shares or cash or a combination of the two upon
settlement. The Committee may grant DSUs to any Eligible Participant at any
time, in such number and on such terms as will be determined by the Committee in
its discretion and as will be set out in the applicable Award Agreement.
Performance Shares and Performance Share Units.
Performance Shares are awards, denominated in EFI Common
Shares, the value of which at the time it is payable is determined as a function
of the extent to which corresponding performance criteria have been achieved.
Performance Units are equivalent to Performance Shares but are denominated in
units. The Committee may grant Performance Shares and/or Performance Units to
any Eligible Participant at any time, in such number and on such terms as may be
determined by the Committee in its discretion. Each Performance Share and
Performance Unit will have an initial value equal to the FMV of an EFI Common
Share on the date of grant. The Committee will set performance criteria for a
Performance Share or Performance Unit in its discretion and the period of time
during which the performance criteria must be met. The extent to which the
performance criteria is met will determine the ultimate value and/or number of
Performance Shares or Performance Units that will be paid to the
Participant.
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The Committee may pay earned Performance Shares or Performance
Units in the form of cash or EFI Common Shares equal to the value of the
Performance Share or Performance Unit at the end of the performance period. The
Committee may determine that holders of Performance Shares or Performance Units
be credited with consideration equivalent to dividends declared by the EFI Board
and paid on outstanding EFI Common Shares.
Stock-Based Awards.
The Committee may, to the extent permitted by the TSX, grant
other types of equity-based or equity-related Awards not otherwise described by
the terms of the Equity Incentive Plan in such amounts and subject to such terms
and conditions as the Committee determines. Such SBAs may involve the transfer
of actual EFI Common Shares to Participants, or payment in cash or otherwise of
amounts based on the value of EFI Common Shares.
Assignability
Other than Restricted Stock and RSUs, Awards will be
non-transferable and non-assignable except as provided in an Award Agreement, by
will or by the law of descent and distribution. Such Awards will be exercisable
during the Participants lifetime only by the Participant. Restricted Stock and
RSUs will be non-transferable and non-assignable until the end of the applicable
period of restriction specified in the Award Agreement (and in the case of RSUs
until the date of settlement through delivery or other payment), or upon earlier
satisfaction of any other conditions, as specified by the Committee.
Cessation of Awards
Death.
If a Participant dies while an employee, officer or director
of, or consultant to, the Corporation or an Affiliate: (i) any Options held by
the Participant that are exercisable at the date of death continue to be
exercisable by the executor or administrator of the Participants estate until
the earlier of twelve months after the date of death and the date on which the
exercise period of the particular Option expires and any Options that are not
exercisable at the date of death shall immediately expire; (ii) any RSUs held
that have vested as at the date of death will be paid to the Participant's
estate, and any RSUs that have not vested as at the date of death will be
immediately cancelled; and (iii) the treatment for all other types of Awards
shall be as set out in the applicable Award Agreement.
Termination other than Death.
Upon termination of the Participants employment or term of
office or engagement with the Corporation for any reason other than death: (i)
any of the Options held by the Participant that are exercisable on the
termination date continue to be exercisable until the earlier of three months
(six months in the case of a voluntary retirement) after the termination date
and the date on which the exercise period of the Option expires, and any Options
that have not vested at the termination date shall immediately expire; (ii) any
RSUs held by a Participant that have vested at the termination date will be paid
to the Participant and any RSUs that have not at the termination date will be
immediately cancelled; and (iii) the treatment for all other types of Awards
shall be as set out in the applicable Award Agreement.
Corporate Reorganization and Change of Control
Corporate Reorganization.
In the event of any merger, arrangement, amalgamation,
consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary dividend, stock
split, reverse stock split, split up, spin-off or other distribution of stock or
property of the Corporation, combination of securities, exchange of securities,
dividend in kind, or other like change in capital structure or distribution to
stockholders of the Corporation, or any similar corporate event or transaction
(a Corporate Reorganization), the Committee will make or provide for
such adjustments or substitutions as are equitably necessary in: (i) the number
and kind of securities that may be issued under the Equity Incentive Plan, (ii)
the number and kind of securities subject to outstanding Awards, (iii) the price
applicable to outstanding Awards, (iv) the award limits, (v) the limit on
issuing Awards except as provided for in the Equity Incentive Plan, and (vi) any
other value determinations applicable to outstanding Awards or to the Equity
Incentive Plan.
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In connection with a Corporate Reorganization, the Committee
will have the discretion to permit a holder of Options to purchase, and the
holder shall be required to accept, on the exercise of such Option, in lieu of
the EFI Common Shares, securities or other property that the holder would have
been entitled to receive as a result of the Corporate Reorganization if that
holder had owned all EFI Common Shares that were subject to the Option.
Change of Control.
In the event of a Change of Control (as defined in the Equity
Incentive Plan), subject to applicable laws and rules and regulations of a
national exchange or market on which EFI Common Shares are listed or as
otherwise provided in any Award Agreement, (a) all Options and SARs shall be
accelerated to become immediately exercisable; (b) all restrictions imposed on
Restricted Stock and RSUs shall lapse and RSUs shall be immediately settled and
payable; (c) target payout opportunities attainable under all outstanding Awards
of performance-based Restricted Stock, performance-based Restricted Stock Units,
Performance Units and Performance Shares shall be deemed to have been fully
earned; (d) unless otherwise specifically provided in a written agreement
entered into between the Participant and the Corporation or an Affiliate, the
Committee shall immediately cause all other Stock-Based Awards to vest and be
paid out as determined by the Committee, and (e) the Committee will have
discretion to cancel all outstanding Awards, and the value of such Awards will
be paid in cash based on the change of control price.
Notwithstanding the above, no acceleration of vesting,
cancellation, lapsing of restrictions, payment of an Award, cash settlement or
other payment will occur with respect to an Award if the Committee determines,
in good faith, that the Award will be honoured, assumed or substituted by a
successor corporation, provided that such honoured, assumed or substituted Award
must: (a) be based on stock which is traded on the TSX and/or an established
securities market in the United States; (b) provide such Participant with rights
and entitlements substantially equivalent to or better than the rights, terms
and conditions applicable under such Award; (c) recognize, for the purpose of
vesting provisions, the time that the Award has been held prior to the Change of
Control; (d) have substantially equivalent economic value to such Award; and (e)
have terms and conditions which provide that in the event a Participants
employment with the Corporation, and Affiliate or a successor Corporation is
involuntarily terminated or constructively terminated at any time within twelve
months of the Change of Control, any conditions on a Participants rights under,
or any restrictions on transfer or exercisability applicable to such alternative
Award shall be waived or shall lapse, as the case may be.
Amending the Equity Incentive Plan
Except as set out below, and as otherwise provided by law or
stock exchange rules, the Equity Incentive Plan may be amended, altered
modified, suspended or terminated by the Committee at any time, without notice
or approval from shareholders, including but not limited to for the purposes of:
(a) |
making any acceleration of or other amendments to the
general vesting provisions of any Award; |
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(b) |
waiving any termination of, extending the expiry date of,
or making any other amendments to the general term of any Award or
exercise period thereunder provided that no Award held by
an insider may be extended beyond its original expiry date; |
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(c) |
making any amendments to add covenants or obligations of
the Corporation for the protection of Participants; |
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(d) |
making any amendments not inconsistent with the Plan as
may be necessary or desirable with respect to matters or questions which,
in the good faith opinion of the EFI Board, it may be expedient to make,
including amendments that are desirable as a result of changes in law or
as a housekeeping matter; or |
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(e) |
making such changes or corrections which are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or manifest
error. |
Amendments requiring the prior approval of the Corporations
shareholders are: (i) a reduction in the price of a previously granted Option or
SAR benefitting an insider; (ii) an increase in the total number of Common
Shares available under the Equity Incentive Plan or the total number of EFI
Common Shares available for ISOs; (iii) an increase to the limit on the number
of Common Shares issued or issuable to insiders; (iv) an extension of the expiry
date of an Option or SAR other than in relation to a blackout period; and (v)
any amendment to the amendment provisions of the Equity Incentive Plan.
Awards Granted under the Equity Incentive Plan Prior to
the Date hereof
Since the Equity Incentive Plan was adopted by the EFI Board on
January 28, 2015, a total of 153, 850 RSUs have been awarded to Participants,
all of which were awarded on January 28, 2015, as follows: 82,450 RSUs were
awarded to the CEO and three other executive officers of the Corporation, a
total of 13,250 RSUs were granted to two officers of the Corporations
subsidiaries, a total of 23,350 RSUs were granted to four senior managers of the
Corporations subsidiaries, and a total of 34,800 RSUs were granted to eight
non-executive directors of the Corporation. Such Awards will vest as to 50% on
January 28, 2016, as to a further 25% on January 28, 2017, and as to the
remaining 25% on January 28, 2018. These Awards cannot be exercised until such
time that shareholders of the Corporation have approved and ratified the Equity
Incentive Plan and the grants. Should shareholders fail to approve the Equity
Incentive Plan, these Awards will be cancelled forthwith.
Shareholder Approval and Ratification of Equity Incentive
Plan
At the Meeting, EFI Shareholders will be asked to approve the
Equity Incentive Plan adopted by the EFI Board on January 28, 2015. EFI
Shareholders will be asked to consider and, if deemed advisable, to approve,
with or without amendment, the following resolution which ratification shall
require the affirmative vote of a majority of votes cast on the matter,
excluding any votes attached to shares beneficially owned by persons entitled to
participate in the Equity Incentive Plan:
BE IT RESOLVED that:
1. |
The 2015 Omnibus Equity Incentive Compensation Plan (the
Equity Incentive Plan) in the form attached as Schedule G to the
management information circular of the Corporation dated May 21, 2015 (the
Circular) pursuant to which EFI Common Shares representing up to 10% of
the then issued and outstanding EFI Common Shares from time to time may be
issued, is hereby ratified and approved, subject to any changes that may
be required to comply with the rules of the TSX or the NYSE; |
|
|
2. |
The 153,850 Restricted Stock Units granted under the
Equity Incentive Plan on January 28, 2015, as described under the
subheading Awards Granted Under the Equity Incentive Plan Prior to the
Date hereof in the Circular, are hereby ratified, approved and
authorized; and |
126
3. |
any one director or officer of the Corporation, be, and
each of them is hereby, authorized and directed for and on behalf and in
the name of the Corporation, to execute or cause to be executed and to
deliver or cause to be delivered all such documents, and to do or cause to
be done all such acts and things, as in the opinion of such director or
officer may be necessary or desirable in order to give effect to this
resolution. |
The EFI Board recommends a vote FOR the resolution to
ratify, approve and confirm the Equity Incentive Plan as well as the RSUs
awarded thereunder on January 28, 2015.
Executive Compensation
Compensation Governance
Until May 21, 2014, EFI's compensation committee (the
Compensation Committee), was made up of four directors, being J. Birks
Bovaird, W. Robert Dengler, Bruce D. Hansen, and Richard J. Patricio, each of
whom is independent. On May 21, 2014, Mr. Dengler decided not to stand for
re-election to the EFI Board, and thereafter the Compensation Committee was made
up of the three remaining directors on the committee, being J. Birks Bovaird,
Bruce D. Hansen, and Richard J. Patricio, each of whom is independent. Each of
Messrs. Bovaird, Hansen and Patricio has direct educational and work experience
that is relevant to his responsibilities in executive compensation. The
Compensation Committee has been delegated the task of reviewing and recommending
to the EFI Board, the Corporations compensation policies, and reviewing such
policies on a periodic basis to ensure they remain current, competitive and
consistent with the Corporations overall goals.
The Compensation Committee also has the authority and
responsibility to review and approve corporate goals and objectives relevant to
the compensation of the Chief Executive Officer (CEO), evaluating the
CEOs performance in light of those corporate goals and objectives, and making
recommendations to the EFI Board with respect to the CEOs compensation level
(including salary incentive compensation plans and equity-based plans) based on
this evaluation, as well as making recommendations to the EFI Board with respect
to any employment, severance or change of control agreements for the CEO. The
ultimate decision relating to the CEOs compensation rests with the EFI Board,
taking into consideration the Compensation Committees recommendations,
corporate and individual performance, and industry standards.
The Compensation Committee has also been delegated the task of
reviewing and approving for executive officers, other than the CEO, all
compensation (including salary, incentive compensation plans and equity-based
plans) and any employment, severance or change of control agreements, although
the ultimate decision relating to any stock option or other equity grants rests
with the EFI Board. The experience of Board and committee members who are also
involved as management of, or board members or advisors to, other companies also
factors into decisions concerning compensation.
In September 2013, the Corporation engaged the Harlon Group, a
compensation consulting company, to conduct a compensation study for employees,
the executive team and the EFI Board. The Harlon Group produced reports for each
of these three groups during the fall of 2013 and was then asked, in January
2014, to provide data on stock option practices in the industry for the
executive team and the EFI Board. These reports were considered by the
Compensation Committee in making its determinations and recommendations to the
EFI Board for executive compensation in 2014. The compensation survey data
utilized in the Harlon Groups review was from: (a) the Harlon Group proprietary
salary survey data base containing over 6,000 titles of executive jobs in all
industries for all sized organizations in the continental US, Canada, UK,
Western Europe, Australia and New Zealand, including the Coopers Mining Salary
Survey 2011; and (b) a benchmark analysis of the following publicly held
companies, considered to be a peer group for the Corporation, utilizing 2012
data from their respective 2013 proxy statements:
127
|
Uranium Energy Corp. (NYSE MKT: UEC) a
US-based uranium mining and exploration company |
|
Powertech Uranium Corp. (TSX: PWE) a
uranium company with advanced properties in South Dakota and Colorado
|
|
UR- Energy Inc. (NYSE MKT: URG) a
junior uranium mining company |
|
General Moly Inc. (NYSE MKT: GMO) a
US-based mineral company engaged in the exploration, development and
mining of molybdenum |
|
Uranerz Energy Corporation (NYSE MKT:
URZ) - a US mining company focused on near term commercial in-situ
recovery uranium production |
|
Uranium Resources Inc. - (NASDAQ MKT:
URRE) - exploring, developing and mining uranium |
|
Denison Mines Corp. - (NYSE MKT: DNN) -
engaging in the exploration, development, mining, and milling of uranium
in Canada, Zambia, and Mongolia |
|
Hallador Energy Inc. (NASDAQ MKT:
HNRG) - primary focus in coal and oil and gas production |
|
Peninsula Energy Ltd. (ASX MKT: PEN) -
an emerging uranium company with assets in Wyoming, USA and Karoo, South
Africa |
|
Aura Energy Ltd. (ASX MKT: AEE) -
Australian based uranium company that has advanced projects with large
resources in Europe, Africa and Australia. |
In December 2014 and January 2015, the Corporation again
engaged the Harlon Group to conduct a compensation study for employees, the
executive team and the EFI Board, and to provide data on equity incentive
practices in the industry for the executive team and the EFI Board. These
reports were considered by the Compensation Committee in making its
determinations and recommendations to the EFI Board for executive compensation
in 2015, and resulted in the EFI Board adopting the Equity Incentive Plan,
discussed above, to replace the Existing Option Plan.
The following table sets forth the fees paid to consultants and
advisors related to determining compensation for Named Executive Officers
(NEOs) and directors for each of the two most recently completed
financial years.
Year |
Executive Compensation-Related
Fees(1) |
All Other Fees(2)
|
Financial Year Ended December 31, 2014 |
US$11,940 |
Nil |
15-Month Period Ended December 31, 2013 |
US$17,176 |
Nil |
Notes:
(1) The aggregate fees billed by each consultant or advisor, or
any of its affiliates, for services related to determining compensation for any
of the Corporations directors or executive officers.
(2) The aggregate fees
billed for all other services provided by each consultant or advisor, or any of
its affiliates, that are not reported under Executive Compensation Related
Fees.
128
Compensation Discussion and Analysis
Objectives of the Compensation Program
The objectives of the Corporations compensation programs are
to attract and retain the best possible executives and to motivate the
executives to achieve goals consistent with the Corporations business strategy.
The compensation program is designed to reward executives for achieving these
goals.
Elements of Compensation
The compensation practices are flexible, entrepreneurial and
geared to meeting the requirements of the individual and hence securing the best
possible talent to manage the Corporation. During fiscal 2014, the three key
elements used to compensate the NEOs of the Corporation were: (i) base salary;
(ii) bonuses; and (iii) long-term incentives in the form of stock options. The
Corporation had six NEOs during fiscal 2014: Stephen P. Antony; Graham G.
Moylan; Daniel G. Zang; Harold R. Roberts; David C. Frydenlund and Gary R.
Steele.
Determination of Compensation
Base Salaries
Base salary is a fixed component of pay that compensates
executives for fulfilling their roles and responsibilities and aids in
attracting and retaining qualified executives.
Base compensation for the CEO is generally fixed by the EFI
Board at its regularly scheduled meeting in January of each year for that year,
based on recommendations from the Compensation Committee. In making its
recommendations to the EFI Board, the Compensation Committee evaluates the CEOs
performance in light of the corporate goals and objectives set by the
Compensation Committee for the CEO for the previous year, as well as levels of
compensation provided by industry competitors. Increases or decreases in base
salary on a year-over-year basis are dependent on the Compensation Committees
recommendation to the EFI Board and the EFI Boards assessment of the
performance of the Corporation overall, the Corporations projects and the CEOs
individual contribution.
Base compensation for the NEOs, other than the CEO, is
generally fixed by the Compensation Committee at its regularly scheduled meeting
in January of each year for that year, based on recommendations from the CEO. In
making his recommendations to the Compensation Committee, the CEO evaluates the
NEOs performance in light of the corporate goals and objectives set by the CEO
for the NEOs for the previous year, as well as levels of compensation provided
by industry competitors. Increases or decreases in base salary on a
year-over-year basis are dependent on the Compensation Committees assessment of
the performance of the Corporation overall, the Corporations projects and the
particular individuals contributions.
Bonuses
Along with the establishment of competitive base salaries and
long-term incentives, one of the objectives of the executive compensation
strategy is to encourage and recognize strong levels of performance by linking
achievement by the Corporation of such specific objectives and the overall
performance of the NEO, and in particular the contribution of the NEO, to the
objective of maximizing value for the Corporations shareholders.
The bonus for the CEO for each financial year is approved by
the EFI Board, based on the overall financial performance of the Corporation,
the achievement of objective measures and individual performance of the CEO as
described under Performance Goals, and levels of bonuses provided by
benchmark companies. The bonus for the CEO is determined in the
sole discretion of the EFI Board, based on recommendations from the Compensation
Committee.
129
The bonus for the NEOs, other than the CEO, for each financial
year are approved by the Compensation Committee, based on the overall financial
performance of the Corporation, the achievement of objective measures and
individual performance of the NEO as described under Performance Goals,
and levels of bonuses provided by benchmark companies. Bonuses for the NEOs
other than the CEO are determined in the sole discretion of the Compensation
Committee, based on recommendations from the CEO, and the overall bonus pool
approved by the EFI Board in the budget for the year.
The bonus in respect of each financial year of the Corporation
may be paid in one or more instalments, as determined by the EFI Board, or the
Compensation Committee, as the case may be.
Long-Term Incentives - Stock Options
In 2014, the Corporation relied on the grant of stock options
(EFI Options) to align managements interests with shareholder value.
Grant ranges were established independently each time grants of EFI Options were
made, to provide competitive long-term incentive value, with significant
recognition of the contribution and potential of the individual. The EFI Options
generally have a five year term and, under the Existing Option Plan, an exercise
price not less than the fair market value of a common share on the date of
grant. For more information on the Existing Option Plan see Securities
Authorized for Issuance under Equity Compensation Plans below.
All grants of EFI Options are approved by the EFI Board, based
on recommendations from the Compensation Committee. When recommending to the EFI
Board the number of EFI Options to be granted to an NEO, the Compensation
Committee takes into account recommendations from the CEO. The Compensation
Committee also considers the number and terms of EFI Options previously granted
to the NEO, and considers option compensation granted by benchmark companies to
executives with similar responsibilities, comparing such grants on the basis of
the percentage they represent of base salary rather than the absolute number of
such options. EFI Options granted to NEOs may be made subject to specific
vesting requirements which may include vesting over a particular period.
Under the Equity Incentive Plan, which was approved by the EFI
Board on January 28, 2015, and is subject to ratification by shareholders at the
Meeting as discussed above, the EFI Board may, in its discretion, commencing in
2015, grant from time to time, Options, Stock Appreciation Rights (SARs),
Restricted Stock and Restricted Stock Units, Deferred Share Units, Performance
Shares and Performance Units, and Stock-Based Units to employees, directors,
officers and consultants of the Corporation and its affiliates.
Performance Goals
Performance goals apply in determining base salary increases,
bonus awards, and the equity incentive awards for each NEO. These goals are
subjective and, therefore, subject to discretion by the Compensation Committee
and the EFI Board. The Corporation believes shareholder value is primarily
driven by results, both in terms of financial strength and operating measures
such as production, production capability, and mineral reserve and resource
growth, as well as protection of public health, safety and the environment and
good corporate governance. As such, individual and Corporation performance goals
are used when determining individual compensation and are based on these and
other measures through the setting of short and long-term performance
objectives. These objectives include, for example: implementing the
Corporations strategic goals and objectives; managing the Corporations
business and budget; meeting safety and environmental protection goals;
increasing mineral reserves and resources; maintaining the ability to increase
production commensurate with increases in commodity prices; satisfying
contractual uranium supply obligations; continuing to meet permitting objectives
required to progress projects and achieve targeted milestones; identifying and
engaging strategic financial partners; maintaining strong internal controls;
executing public and private market capital raising initiatives; ensuring
continued compliance with corporate governance requirements; entering into
uranium supply contracts as required; and continuing to develop the
Corporations marketing plan to expand awareness of the Corporations production
profile and capabilities, domestically and internationally. Many of these
objectives are directly tied to the Corporations annual budget and long-term
business plan, which are approved by the EFI Board. Each executives performance
is also evaluated against expectations for fulfilling the executives individual
responsibilities and goals within his or her particular employment functions and
areas of expertise, which also reflects on the executives contribution to the
Corporations success in meeting its objectives.
130
The Compensation Committee considers the implications of risks
associated with compensation policies and practices by working closely with the
CEO. The CEO is tasked with ensuring that: (i) fair and competitive practices
are followed regarding employee compensation at all levels of the Corporation;
(ii) the compensation practices do not encourage an NEO or individual at a
principal business unit or division to take inappropriate or excessive risk or
that are reasonably likely to have a material adverse effect on EFI; and (iii)
compensation policies and practices include regulatory, environmental compliance
and sustainability as part of the performance metrics used in determining
compensation. The CEOs recommendations on these matters are taken into
consideration by the Compensation Committee when reviewing and recommending to
the EFI Board the Corporations compensation policies.
EFI has in place a policy that restricts NEOs and directors
from purchasing financial instruments, such as prepaid variable forward
contracts, equity swaps, collars, or units of exchange funds, which are designed
to hedge or offset a decrease in market value of equity securities granted as
compensation or held, directly or indirectly, by the NEO or director.
Performance Graph
The following graph compares the total cumulative shareholder
return for C$100 invested in EFI Common Shares on October 1, 2009 with the total
return of the S&P/TSX Composite GIC (Diversified Metals and Mining) Index
for the five most recently completed financial years (assuming reinvestment of
dividends) and reflects the Consolidation which occurred on November 5, 2013.
EFI Common Shares are listed for trading on the TSX under the symbol EFR and
on the NYSE MKT under the symbol UUUU.
131
|
October 1,
2009 |
September 30,
2010 |
September 30,
2011 |
September 30,
2012 |
December 31,
2013(1) |
December 31,
2014 |
Energy Fuels Inc.(2)
|
$17.50 |
$18.00 |
$12.50 |
$10.00 |
$8.00 |
$7.14 |
Value of C$100 Investment |
$100.00 |
$102.86 |
$71.43 |
$57.14 |
$45.71 |
$40.80 |
S&P/TSX Composite GIC
(Diversified Metals & Mining) |
$7,649.65 |
$10,117.50 |
$7,485.06 |
$7,945.13 |
$7,360.75 |
$6,076.31 |
Value of C$100 Investment |
$100.00 |
$132.26 |
$97.85 |
$103.86 |
$96.22 |
$79.43
|
Note:
(1) |
Reflects the 15-month period resulting from the change in
the Corporations year-end from September 30 to December 31. |
(2) |
Reflects the Consolidation of common shares of the
Corporation. |
EFIs compensation to executive officers has generally
increased during the five most recently completed financial years. The total
cumulative shareholder return for an investment in EFI Common Shares has
decreased over the same period, commencing in 2011, due in part to the Fukushima
natural disaster which occurred in March 2011 and the resulting decrease in
uranium prices since that time. Executive compensation has increased during that
period, in part due to the competition among organizations operating in the
natural resources sector to attract and retain the best possible executives.
Equity Incentive Awards
The Existing Option Plan has been used to provide EFI Options,
and if ratified by the shareholders at the Meeting, the Equity Incentive Plan
will, at the discretion of the EFI Board, be used to provide Options, Stock
Appreciation Rights, Restricted Stock and Restricted Stock Units, Deferred Share
Units, Performance Shares and Performance Units, and Stock-Based
Units,which have and will be granted in consideration of the level of
responsibility of the executive as well as his or her impact or contribution to
the longer-term operating performance of EFI. In determining the equity
incentive awards to be granted to the executive officers, the EFI Board takes
into account the number or value of such awards, if any, previously granted to
each executive officer, and the exercise price or value of any outstanding
options or other equity incentive awards to ensure that such grants are in
accordance with the policies of the TSX, and closely align the interests of the
executive officers with the interests of shareholders.
132
All equity incentive awards are approved by the EFI Board, on
the recommendation of the Compensation Committee.
Summary Compensation Table
In November 2013, the Corporation changed its financial year
end from September 30 to December 31, which resulted in the Corporations
financial year ended December 31, 2013 being a 15-month financial period. With
the exception of Mr. Moylan whose compensation was paid in Canadian dollars, the
compensation of the NEOs is paid and reported in United States dollars.
Name and
Principal Position |
Year(1) |
Salary
(US$) |
Share-Based
Awards (US$) |
Option- Based Awards
(US$)(2) |
Non-Equity Incentive Plan Compensation ($) |
Pension Value (US$) |
All
Other Compensation (US$)(3) |
Total
Compensation (US$) |
Annual
Incentive Plans |
Long-Term
Incentive Plans |
Stephen P. Antony President & CEO |
2014 2013 2012 |
360,000 454,209 253,205 |
Nil Nil Nil |
212,616 94,462 362,168 |
75,000 75,000 125,000 |
Nil Nil Nil |
Nil Nil Nil |
10,400 21,817 7,596 |
658,016 646,489 747,969
|
Graham G. Moylan(4)(5)(6) CFO |
2014 2013 2012 |
36,204 293,485 21,179 |
Nil Nil Nil |
Nil 87,552 176,921 |
62,593 25,158 Nil |
Nil Nil Nil |
Nil Nil Nil |
8,357 20,442 Nil |
107,154 426,637 198,100
|
Daniel G. Zang(7) |
2014 2013 2012 |
196,250 Nil Nil |
Nil Nil Nil |
106,308 Nil Nil |
20,500 Nil Nil |
Nil Nil Nil |
Nil Nil Nil |
8,670 Nil Nil |
331,728 Nil Nil |
Harold R. Roberts(8) Executive VP
& COO |
2014 2013 2012 |
235,000 303,542 229,092 |
Nil Nil Nil |
106,308 59,664 74,211 |
7,500 32,500 37,100 |
Nil Nil Nil |
Nil Nil Nil |
6,567 7,246 4,421 |
355,375 402,952 344,824
|
David C. Frydenlund(8) Sr. VP,
General Counsel and Corporate Secretary |
2014 2013 2012 |
230,000 297,084 225,245 |
Nil Nil Nil |
106,308 47,731 43,606 |
25,000 22,500 38,100 |
Nil Nil Nil |
Nil Nil Nil |
Nil Nil Nil |
361,308 367,315 306,951
|
Gary R. Steele(9) Sr. VP Marketing
and Sales |
2014 2013 2012 |
118,500 239,082 139,307 |
Nil Nil Nil |
53,154 23,866 155,986 |
7,500 10,000 25,000 |
Nil Nil Nil |
Nil Nil Nil |
27,800 7,581 4,179 |
206,955 280,529 324,472
|
Notes:
(1) |
The year 2013 represents the 15-month financial period
ended December 31, 2013, which period resulted from the change of year-end
from September 30 to December 31. The years 2014 and 2012 represent the
12-month financial years ended on December 31, 2014 and September 30,
2012, respectively. |
(2) |
The fair value of each option award granted at the time
of the grant was calculated using the Black-Scholes option-pricing model.
For the assumptions made in calculating the fair value of these options,
see Note 18 Share-Based Payments to EFIs financial statements for
financial year ended December 31, 2014. Option fair values were calculated
in Canadian dollars and converted into US dollars using an average annual
exchange rate of: (i) Cdn$1 to US$0.9054 for the financial period ended
December 31, 2014; (ii) Cdn$1 to US$0.9782 for the financial period ended
December 31, 2013; and (iii) Cdn$1 to US$1.0074 for the fiscal year ended
September 30, 2012. |
(3) |
These amounts represent retirement savings benefits
contributed by the Corporation. |
133
(4) |
As Mr. Moylan is a resident of Canada, his compensation
was paid in Canadian dollars. The amounts relating to his compensation
have been converted into US dollars using an average annual exchange rate
of (i) C$1 to US$0.9054 for the financial period ended December 31, 2014;
(ii) C$1 to US$0.9782 for the financial period ended December 31, 2013;
and (iii) C$1 to US$1.0074 for the fiscal year ended September 30,
2012. |
(5) |
Mr. Moylan was appointed as CFO in September 2012. His
salary indicated above for 2012 represents salary for the month of
September 2012. |
(6) |
Mr. Moylan resigned as CFO of the Corporation effective
February 15, 2014. |
(7) |
Mr. Zang was appointed as CFO of the Corporation
effective February 15, 2014. |
(8) |
Messrs. Roberts and Frydenlund were employed by the
Corporations subsidiary both before and subsequent to the acquisition of
the subsidiary from Denison Mines Corp. on June 29, 2012. Compensation for
the entire year of 2012, which was paid by the subsidiary, is included
even though the subsidiary was not acquired by the Corporation until June
29, 2012. |
(9) |
Mr. Steele resigned as Sr. VP Marketing and Sales of the
Corporation effective September 30, 2014. Consulting fees paid to Mr.
Steele after his retirement totaled $12,384, which are not included in the
table. |
Incentive Plan Awards
The table below shows the number of EFI Options outstanding for
each NEO and their value as at December 31, 2014 based on the last trade of EFI
Common Shares on the TSX prior to the close of business on December 31, 2014 of
C$7.14.
Outstanding Share-Based Awards and Option-Based
Awards
Name |
Option-Based Awards |
Share-Based Awards |
Number
of Securities Underlying Unexercised
Options(1) |
Option
Exercise Price
(C$)(1)(2) |
Option
Expiration Date |
Value
of Unexercised In-the - Money Options
(C$) |
Number
of Shares or Units of Shares that Have
Not Vested (#) |
Market
or Payout Value of Share-Based Awards
that Have Not Vested (C$) |
Stephen P. Antony |
6,000 6,000
19,200 20,000 16,000 40,000 |
10.00 25.50
15.50 11.50 8.75 9.05 |
7/13/2015
4/13/2016 3/7/2017 8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil
Nil Nil Nil |
Nil Nil Nil
Nil Nil Nil |
Nil Nil Nil
Nil Nil Nil |
Graham G. Moylan(3) |
Nil |
-- |
-- |
Nil |
Nil |
Nil |
Daniel G. Zang(4) |
6,000 6,000
20,000 |
8.00 8.75
9.05 |
5/10/2018
7/16/2018 1/23/2019 |
Nil Nil Nil
|
Nil Nil Nil
|
Nil Nil Nil
|
Harold R. Roberts |
12,000 10,000
20,000 |
11.50 8.75
9.05 |
8/13/2017
7/16/2018 1/23/2019 |
Nil Nil Nil
|
Nil Nil Nil
|
Nil Nil Nil
|
David C. Frydenlund |
7,000 8,000
20,000 |
11.50 8.75
9.05 |
8/13/2017
7/16/2018 1/13/2019 |
Nil Nil Nil
|
Nil Nil Nil
|
Nil Nil Nil
|
Gary R. Steele(5) |
2,000 2,400
6,000 12,000 4,000 10,000 |
10.00 25.50
15.50 11.50 8.75 9.05 |
7/13/2015
4/13/2016 3/7/2017 8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil
Nil Nil Nil |
Nil Nil Nil
Nil Nil Nil |
Nil Nil Nil
Nil Nil Nil |
Notes:
(1) The number of EFI Options and the exercise price of EFI
Options have been adjusted to take into account the Consolidation.
(2) EFI
Options were granted and are reported in Canadian dollars.
(3) Mr. Moylan
resigned as Chief Financial Officer on February 15, 2014.
(4) Mr. Zang was
appointed as Chief Financial Officer on February 15, 2014.
(5) Mr. Steele
resigned as Sr. VP Marketing and Sales of the Corporation effective September
30, 2014. Mr. Steele has performed services as a consultant to the Corporation
since that date.
134
Incentive Plan Awards Value Vested or Earned
Name |
Option-Based Awards Value Vested During the
Year ($) |
Share-Based
Awards Value Vested During the
Year(1) ($) |
Non-Equity
Incentive Plan Compensation Value Earned During
the Year ($) |
Stephen P. Antony |
Nil |
Nil |
75,000 |
Graham G. Moylan(1) |
Nil |
Nil |
62,593 |
Daniel G. Zang(2) |
Nil |
Nil |
20,500 |
Harold R. Roberts |
Nil |
Nil |
7,500 |
David C. Frydenlund |
Nil |
Nil |
25,000 |
Gary R. Steele(3) |
Nil |
Nil |
7,500 |
Notes:
|
(1) |
Mr. Moylan resigned as CFO of the Corporation effective
February 15, 2014. |
|
(2) |
Mr. Zang was appointed as CFO of the Corporation
effective February 15, 2014. |
|
(3) |
Mr. Steele resigned as Sr. VP Marketing and Sales of the
Corporation effective September 30, 2014. |
Pension Plan Benefits and Deferred Compensation Plans
EFI does not provide defined pension plan benefits or any other
pension plans that provide for payments or benefits at, following or in
connection with retirement to its directors or officers.
EFI does not have any deferred compensation plans relating to
its NEOs.
Termination and Change of Control Benefits
The events that trigger payment to an NEO on account of a
change of control are negotiated and documented in each employment contract or
letter of understanding. These benefits attempt to balance the protection of the
employee upon a change of control with the preservation of the executive base in
the event such a change of control occurs. As noted below, there are certain
circumstances that trigger payment, vesting of stock options, or the provision
of other benefits to an NEO upon termination and change of control.
EFI has employment agreements or letters of understanding with
each of the NEOs.
Stephen P. Antony
In the event of the termination of Mr. Antonys employment
without cause or upon a change of control of EFI, Mr. Antony will be entitled to
receive all outstanding base salary and vacation accrued to the date of
termination and a lump sum payment equal to two and one-half times his base
salary, plus two and one-half times the amount of his highest annual performance
bonus paid for any fiscal year beginning October 1, 2007. In the event of death
or disability, Mr. Antony is entitled to receive all outstanding base salary and
vacation accrued, plus payment of his annual base salary, either in a lump sum
payment in the event of death or, in the event of a disability, over a period of
twelve months thereafter. The effective term of Mr. Antonys employment
agreement is October 1, 2012 through September 30, 2015.
135
The estimated additional payment to Mr. Antony in the case of
termination without cause, or upon a change of control, assuming that the
triggering event took place on December 31, 2014 is US$1,552,000.
Daniel G. Zang
In the event of a change of control, Mr. Zang may elect to
terminate his employment with EFI unilaterally within thirty days of the
occurrence of the change of control. In such case, EFI would be required to pay
Mr. Zang all outstanding base salary and vacation pay accrued to the effective
date of termination and provide a lump sum payment equal to one times his annual
base salary plus one times the amount of the highest annual performance bonus
paid to him. The estimated additional payment to Mr. Zang in the case of
termination upon a change of control, assuming that the triggering event took
place on December 31, 2014, was $277,500.
Harold R. Roberts
In the event Mr. Roberts employment is terminated by EFI, he
will be entitled to severance pay in an amount equal to his annual base salary
at the time of termination plus the greater of (a) one times any bonus received
between July 1, 2012 and the time of termination, or (b) 15% of his current
annual base salary at the time of termination. The estimated additional payment
to Mr. Roberts in the case of a termination, assuming that the triggering event
took place on December 31, 2014 is $279,100.
Further, in the event that within six months after a change of
control, Mr. Roberts is terminated by EFI or its successor, or elects to resign
for Good Reason (defined to include a material reduction or diminution in the
level of responsibility, a reduction in the compensation level of more than 15%
or a proposed, forced relocation to another geographic region), EFI will pay Mr.
Roberts all outstanding base salary and vacation pay accrued to the effective
date of termination and will provide a lump sum payment equal to one and
one-half times his annual base salary plus one and one-half times the amount of
the highest annual performance bonus paid to him. The estimated additional
payment to Mr. Roberts in the case of termination upon a change of control,
assuming that the triggering event took place on December 31, 2014, is
US$433,650.
David C. Frydenlund
In the event Mr. Frydenlunds employment is terminated by EFI,
he will be entitled to severance pay in an amount equal to three months of his
base salary at the time of termination. The estimated additional payment to Mr.
Frydenlund in the case of a termination, assuming that the termination took
place on December 31, 2014, is US$60,000. In addition, the Corporation will
reimburse all direct costs of relocating Mr. Frydenlund and his family to
Canada, provided such relocation occurs within 14 months from the date of
termination. Such reimbursement will not apply to the extent the costs
contemplated are paid by another employer.
Further, in the event that within six months after a change of
control, Mr. Frydenlund is terminated by EFI or its successor, or elects to
resign for Good Reason (defined to include a material reduction or diminution in
the level of responsibility, a reduction in the compensation level of more than
15% or a proposed, forced relocation to another geographic region), EFI will pay
Mr. Frydenlund all outstanding base salary and vacation pay accrued to the
effective date of termination and will provide a lump sum payment equal to one
times his annual base salary plus one times the amount of the highest annual
performance bonus paid to him since 2010. The estimated additional payment to
Mr. Frydenlund in the case of termination upon a change of control, assuming
that the triggering event took place on December 31, 2014, is US$299,600.
136
Director Compensation
Director Compensation Table
EFIs policy with respect to directors compensation was
developed by the EFI Board, on recommendation of the Compensation Committee. The
following table sets forth the compensation awarded, paid to or earned by the
directors of EFI during the most recently completed financial year. Directors of
EFI who are also officers or employees of EFI are not compensated for service on
the EFI Board; therefore no fees are payable to Stephen P. Antony for his
service as a director of EFI.
Name |
Fees
Earned ($)(1) |
Share-
Based Awards ($) |
Option-
Based Awards ($)(2) |
Non-Equity Incentive Plan
Compensation ($) |
Pension Value ($) |
All
Other Compensation ($) |
Total
($) |
J. Birks Bovaird |
45,156 |
Nil |
53,154 |
Nil |
Nil |
Nil |
98,310 |
Paul A. Carroll |
27,841 |
Nil |
53,154 |
Nil |
Nil |
Nil |
80,995 |
Eun Ho Cheong(3) |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
W. Robert Dengler(4) |
11,148 |
Nil |
53,154 |
Nil |
Nil |
Nil |
64,302 |
Lawrence A. Goldberg |
38,366 |
Nil |
53,154 |
Nil |
Nil |
Nil |
91,520 |
Mark E. Goodman |
21,729 |
Nil |
53,154 |
Nil |
Nil |
Nil |
74,883 |
Bruce D. Hansen |
28,859 |
Nil |
53,154 |
Nil |
Nil |
Nil |
82,013 |
Ron F. Hochstein |
31,918 |
Nil |
53,154 |
Nil |
Nil |
Nil |
85,072 |
Stephen N. Khan(5) |
5,452 |
Nil |
53,154 |
Nil |
Nil |
Nil |
58,606 |
Tae Hwan Kim(6) |
20,541 |
Nil |
53,154 |
Nil |
Nil |
Nil |
73,695 |
Richard Patricio |
31,238 |
Nil |
53,154 |
Nil |
Nil |
Nil |
84,392 |
Notes:
(1) |
Except for Mr. Hansen (a US director), directors
compensation was paid in Canadian dollars. The amounts relating to such
directors compensation have been converted into US dollars using an
average annual exchange rate of C$1 to US$0.9054 for the financial period
ended December 31, 2014. |
(2) |
The fair value of each option award granted at the time
of the grant was calculated using the Black-Scholes option-pricing model.
For the assumptions made in calculating the fair value of options, see
Note 18 Share-Based Payments to EFIs financial statements for the
12-month period ended December 31, 2014. Option fair values were
calculated in Canadian dollars and converted into US dollars using an
average annual exchange rate of C$1 to US$0.9054 for the financial period
ended December 31, 2014. |
(3) |
Mr. Cheong resigned as a director effective January 13,
2014. |
(4) |
Mr. Dengler did not stand for re-election and was no
longer a director of the Corporation as of May 21, 2014. |
(5) |
Mr. Khan resigned as a director, effective March 31,
2014. |
(6) |
Mr. Kim was appointed as a director by the EFI Board
effective January 23, 2014. |
Retainer and Meeting Fees
EFIs director compensation program is designed to enable EFI
to attract and retain highly qualified individuals to serve as directors. In
fiscal 2014, directors compensation, which is paid only to non-employee
directors, consisted of:
|
annual retainer for board member of C$15,000;
|
|
|
|
annual retainer for committee (other than Audit
Committee) Chairs of C$18,750; |
137
|
annual retainer for audit committee Chair of
C$30,000; |
|
|
|
annual retainer for Chair of the EFI Board of
C$37,500; |
|
|
|
meeting fee of C$1,125 per meeting for any and
all Board and committee meetings if attended in person or telephonically;
and |
|
|
|
reimbursement of related travel and
out-of-pocket expenses. |
Effective January 1, 2015, the directors compensation, which
is paid only to non-employee directors, consists of:
|
annual retainer for each board member of
C$45,000; |
|
|
|
annual retainer for committee chairs (other
than audit committee chairman) of C$50,000; |
|
|
|
annual retainer for audit committee chairman of
C$55,000; |
|
|
|
annual retainer for chairman of the board of
C$60,000; |
|
|
|
reimbursement of related travel and
out-of-pocket expenses; and |
|
|
|
no additional fees for attendance at Board or
committee meetings. |
Incentive Plan Awards
The table below shows the number of stock options outstanding
for each director and their value as at December 31, 2014 based on the last
trade of the EFI Common Shares on the TSX prior to the close of business on
December 31, 2014 of C$7.14.
Outstanding Share-Based Awards and Option-Based Awards as
at December 31, 2014
Name |
Option-Based Awards |
Share-Based Awards |
Number
of Securities Underlying Unexercised
Options(1) |
Option
Exercise Price
(C$)(1)(2) |
Option
Expiration Date |
Value
of Unexercised In-the-Money Options
($) |
Number
of Shares or Units of Shares that Have
Not Vested ($) |
Market
or Payout Value of Share-Based Awards
that Have Not Vested ($) |
J. Birks Bovaird (Chair) |
3,000 2,000 7,200
20,000 10,000 10,000 |
15.00 25.50 15.50 11.50
8.75 9.05 |
8/5/2015 4/1/2016 3/7/2017
8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Paul A. Carroll |
3,000 4,000 7,200
20,000 10,000 10,000 |
15.00 25.50 15.50 11.50
8.75 9.05 |
8/5/2015 4/13/2016 3/7/2017
8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Eun Ho Cheong(3) |
Nil |
NA |
NA |
Nil |
Nil |
Nil |
W. Robert Dengler(4) |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Lawrence A. Goldberg |
7,200 20,000 10,000
10,000 |
15.50 11.50 8.75 9.05
|
3/7/2017 8/27/2017
7/16/2018 1/23/2019 |
Nil Nil Nil Nil |
Nil Nil Nil Nil |
Nil Nil Nil Nil |
138
Name |
Option-Based Awards |
Share-Based Awards |
Number
of Securities Underlying Unexercised
Options(1) |
Option
Exercise Price
(C$)(1)(2) |
Option
Expiration Date |
Value
of Unexercised In-the-Money Options
($) |
Number
of Shares or Units of Shares that Have
Not Vested ($) |
Market
or Payout Value of Share-Based Awards
that Have Not Vested ($) |
Mark E. Goodman |
3,000 2,000 7,200
20,000 10,000 10,000 |
15.00 25.50 15.50 11.50
8.75 9.05 |
8/5/2015 4/13/2016 3/7/2017
8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Bruce D. Hansen |
3,000 2,000 7,200
20,000 10,000 10,000 |
15.00 25.50 15.50 11.50
8.75 9.05 |
8/5/2015 4/13/2016 3/7/2017
8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Ron F. Hochstein |
20,000 10,000 10,000 |
11.50 8.75 9.05 |
8/27/2017 7/16/2018
1/23/2019 |
Nil Nil Nil |
Nil Nil Nil |
Nil Nil Nil |
Steven N. Khan(5) |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Tae Hwan Kim(6) |
10,000 |
9.05 |
1/23/2019 |
Nil |
Nil |
Nil |
Richard Patricio |
7,200 2,720 3,400
20,000 10,000 10,000 |
15.50 19.50 43.00 11.50
8.75 9.05 |
3/7/2017 3/7/2015 3/7/2016
8/27/2017 7/16/2018 1/23/2019 |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Nil Nil Nil Nil Nil
Nil |
Notes:
(1) |
The number of options and the exercise price of the
options has been adjusted to take into account the
Consolidation. |
(2) |
The options were granted and are reported in Canadian
dollars. |
(3) |
Mr. Cheong resigned as a director effective January 13,
2014. |
(4) |
Mr. Dengler did not stand for re-election and was no
longer a director as of May, 21, 2014. |
(5) |
Mr. Khan resigned as a director effective March 31,
2014. |
(6) |
Mr. Kim was appointed as a director by the EFI Board
effective January 23, 2014. |
Incentive Plan Awards Value Vested or Earned During the
12-Month Period Ended December 31, 2014
Name |
Option-Based Awards Value Vested During the
Year ($) |
Share-Based
Awards Value Vested During the
Year(1) ($) |
Non-Equity
Incentive Plan Compensation Value Earned During
the Year(1) ($) |
J. Birks Bovaird |
Nil |
Nil |
Nil |
Paul A. Carroll |
Nil |
Nil |
Nil |
Eun Ho Cheong |
Nil |
Nil |
Nil |
W. Robert Dengler |
Nil |
Nil |
Nil |
Lawrence A. Goldberg |
Nil |
Nil |
Nil |
Mark E. Goodman |
Nil |
Nil |
Nil |
Bruce D. Hansen |
Nil |
Nil |
Nil |
Ron F. Hochstein |
Nil |
Nil |
Nil |
139
Name |
Option-Based Awards Value Vested During the
Year ($) |
Share-Based
Awards Value Vested During the
Year(1) ($) |
Non-Equity
Incentive Plan Compensation Value Earned During
the Year(1) ($) |
Steven N. Khan |
Nil |
Nil |
Nil |
Richard Patricio |
Nil |
Nil |
Nil |
Share Ownership Requirement
At its meeting held on January 23, 2014, the EFI Board adopted
a share ownership requirement for Board members. It provides that all
non-employee directors must own a requisite number of EFI Common Shares by the
later of five years from the commencement of their directorship or the date on
which the EFI Common Share ownership requirement was adopted. Under this
requirement, non-employee directors are required to own EFI Common Shares with a
value equal to twice the value of their annual director retainers. EFI Common
Shares are valued at the higher of the price they were acquired or the year-end
closing price of the Corporations shares on the TSX for the previous year.
Further, until such time as a non-employee director reaches his or her share
ownership requirement, the non-employee director is required to hold 50% of all
EFI Common Shares received upon exercise of stock options (net of any EFI Common
Shares utilized to pay for the exercise price of the option and tax
withholding), and shall not otherwise sell or transfer any EFI Common Shares.
This requirement does not apply to a nominee of a shareholder of the Corporation
pursuant to a contractual right of the shareholder to nominate one or more
directors to the EFI Board. As a result, these requirements do not apply to Mr.
Park, as the nominee of KEPCO, which has a contractual right to designate a
nominee for election as a director. Although not required to demonstrate
compliance with this policy until the later of five years from the commencement
of their directorships or January 23, 2014, a majority of the directors of the
Corporation are currently in compliance with this policy.
Securities Authorized For Issuance under Equity Compensation
Plans
The following table provides information as of December 31,
2014, concerning options outstanding pursuant to the Existing Option Plan, which
has been approved by shareholders:
Plan Category |
Number of
Common Shares to be issued upon exercise of
outstanding options(1) |
Weighted-average exercise price of
outstanding options (C$)(1) |
Number of
Common Shares remaining available for future
issuance under the Existing Option Plan |
Existing Option Plan |
902,620 |
$11.59 |
1,065,135(2)
|
Strathmore Replacement Options
|
2,793 |
32.35 |
Nil |
Total |
905,413 |
11.66 |
1,065,135
|
Notes:
(1) |
The number of EFI Common Shares and the exercise price
have been adjusted to take into account the Consolidation. |
(2) |
If the Equity Incentive Plan is approved by shareholders
at the Meeting, EFI will not issue any Options under the Existing Option
Plan. |
Existing Option Plan
The Existing Option Plan, which replaced a prior option plan,
was approved by the EFI Board on January 25, 2013 and ratified by shareholders
on March 6, 2013. The EFI Board adopted the Equity Incentive Plan on January 28,
2015. The Equity Incentive Plan is subject to TSX approval and approval of the
shareholders at the Meeting. See Approval of 2015 Omnibus Equity Incentive
Compensation Plan, above. If the Equity Incentive Plan is approved by
shareholders at the Meeting, the EFI Board will not issue any further Options under the Existing Option Plan. There
are currently 974,980 outstanding Options that were issued under the Existing
Option Plan.
140
Shares Issuable Under Existing Option Plan. The Existing
Option Plan provides that the maximum number of EFI Common Shares issuable
thereunder shall not exceed the number which represents 10% of the issued and
outstanding EFI Common Shares. The Existing Option Plan limits the number of EFI
Common Shares that may be issued at any time to insiders of EFI, together with
all security-based compensation arrangements of the EFI, to an amount that may
not exceed 10% of the issued and outstanding EFI Common Shares as of the date of
the grant, and the number of EFI Common Shares which may be issued to such
insiders within any one year period to an amount that may not exceed 10% of the
issued and outstanding EFI Common Shares.
Administration. The Existing Option Plan is administered
by the EFI Board, or a committee of the EFI Board. The EFI Board or a committee
of the EFI Board is authorized to determine the participants to whom grants of
options to purchase EFI Common Shares may be made and, consistent with the
provisions of the Existing Option Plan, the terms and conditions of such grants.
Specific Terms of Stock Options. The key features of the
options available for grant under the Existing Option Plan are as follows:
|
options may be granted to employees, directors, officers
and consultants of EFI and its affiliates, as well as any other person
engaged to provide services to EFI or an affiliate other than services
provided in relation to a distribution of securities of EFI or an
affiliate; |
|
|
|
all options outstanding under the plan have a maximum
term of 10 years from the date of grant, provided that if an option would
expire during or immediately after a black out period during which EFI has
imposed trading restrictions on its insiders then the expiry of such
options shall be extended for 10 business days following the expiry of the
blackout period; |
|
|
|
the vesting schedule for any option shall be determined
by the EFI Board or the committee acting in its sole discretion, and shall
be stated in the option agreement to be entered into between each optionee
and EFI; and |
|
|
|
the exercise price of all options issued under the plan
shall be determined by the committee or the EFI Board, but in any event
may not be less than the volume weighted average trading price of the EFI
Common Shares on the TSX for the five trading days immediately preceding
the date of grant. |
Amendments. The EFI Board has the discretion to
terminate, suspend, or make amendments to the Existing Option Plan, or amend
awards granted under it, without notice or shareholder approval, for the
following purposes:
|
amendments to the general vesting provisions of each
option or to the general term of each option, provided that no option held
by an insider may be extended beyond its original expiry date and no
option may be exercised after the tenth anniversary of the date of grant;
|
|
|
|
amendments to the provisions of the plan
relating to the treatment of options upon a termination of employment;
|
|
|
|
amendments to add covenants of EFI for the
protection of participants; |
|
|
|
amendments not inconsistent with the plan as may be
necessary or desirable with respect to matters or questions which, in the
good faith opinion of the EFI Board, it may be expedient to make,
including amendments that are desirable as a result of changes in law or
as a housekeeping matter; or |
141
|
making such changes or corrections which are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or manifest error.
|
The Existing Option Plan provides that the approval of the TSX
and shareholders of EFI will be required for the following amendments:
|
amendments which would increase the number of EFI Common
Shares issuable under the plan, or which would increase the number of EFI
Common Shares issuable to insiders; |
|
|
|
amendments which would extend the period of
time during which any option held by insiders granted under the plan may
be exercised; |
|
|
|
amendments which would reduce the exercise
price of any options held by insiders; |
|
|
|
amendments which would add any form of
financial assistance to an eligible participant; and |
|
|
|
amendments which would entitle the EFI Board to
amend any of the foregoing provisions without shareholder approval.
|
Adjustments. In the event of certain events affecting
the capitalization of EFI, including a stock dividend, or certain other
corporate transactions, the EFI Board may adjust the number of shares that may
be acquired on the exercise of any outstanding options, and the exercise price
of any outstanding options.
Assignability. Options may not be assigned or
transferred, with the exception of an assignment made to an executor or
administrator of a deceased participants estate.
Cessation. Unless the EFI Board or a committee of the
EFI Board decides otherwise, the right to exercise options granted under the
Existing Option Plan terminates on the earlier of the expiry date and (i) the
date that is 12 months after the optionees death; and (ii) 90 days after the
optionees resignation or termination for any reason other than death. Any
options held by the optionee that are not yet vested as at such date immediately
expire and are cancelled and forfeited to EFI on that date. The EFI Board or the
Committee may, however, in its discretion, at any time prior to or following the
foregoing events, permit the exercise of any or all options held by an optionee
or permit the acceleration of vesting of any or all options.
Change in Control. In the event of a change in
control, as defined in the Existing Option Plan, unless otherwise determined by
the committee of the EFI Board or the EFI Board, any options outstanding
immediately prior to the occurrence of a change in control event shall
immediately vest and become fully exercisable. The committee and the EFI Board
also have the discretion to modify the terms of the options in the event of a
change in control to cash settle any outstanding options or to convert or
exchange any outstanding options into or for other rights or securities.
Strathmore Replacement Options
The Corporation issued 292,971 stock options of the Corporation
(adjusted for the Consolidation) to the holders of options granted pursuant to
the Strathmore Option Plan in connection with the acquisition of Strathmore on
August 31, 2013. As of the date hereof, there are 882 stock options outstanding
under the Strathmore Option Plan. These options are exercisable for EFI Common
Shares. No further stock options will be granted pursuant to the Strathmore
Option Plan. The options have varying expiry dates with the last options
expiring in October 2022.
AUDIT COMMITTEE DISCLOSURE
The Corporation is required to have an audit committee (the
Audit Committee). The following directors, all of whom are independent
directors, are currently members of EFIs Audit Committee: Paul A. Carroll, Lawrence A. Goldberg, Bruce D. Hansen. Prior to May
21, 2014, Ron F. Hochstein was also a member of the Audit Committee. Lawrence A.
Goldberg is the Chair of the Audit Committee.
Additional information regarding
the Corporations Audit Committee, its members and charter, as well as
information concerning auditor compensation, is set out in the Corporations
Annual Information Form which may be found on SEDAR at www.sedar.com.
142
CORPORATE GOVERNANCE DISCLOSURE
In accordance with National Instrument 58-101, information on
the Corporations corporate governance practices is set out in Schedule E to
this Circular.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No person proposed or who has been a director or executive
officer of the Corporation at any time since the beginning of its last completed
financial year, or any associate of any such director or executive officer has
any material interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the Meeting, except
as disclosed in this Circular.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Except as disclosed herein, no insider of the Corporation or
proposed nominee for election as director or any of their associates or
affiliates had any material interest in any transactions involving the
Corporation since the commencement of the Corporations most recently completed
financial year or in any proposed transaction which has materially affected or
would affect the Corporation.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
During the most recently completed financial year, other than
routine indebtedness as defined under Canadian securities laws, no director or
executive officer of the Corporation, no proposed nominee for election as a
director of the Corporation and no associate of any such director, executive
officer or proposed nominee: (a) is, or at any time since the beginning of the
most recently completed financial year has been, indebted to the Corporation or
any of its subsidiaries, and (b) has any indebtedness to another entity that is,
or at any time since the beginning of the most recently completed financial year
has been, the subject of a guarantee, support agreement, letter of credit or
other similar arrangement or understanding provided by the Corporation or any of
its subsidiaries.
Additional information relating to EFI may be found on SEDAR at
www.sedar.com. Financial information is provided in the Corporations
comparative financial statements and MDA for the 12-month period ended December
31, 2014 which are available on SEDAR or can be received upon written request to
the Corporation at 225 Union Blvd., Suite 600, Lakewood, Colorado, USA 80228.
143
The board of directors of the Corporation has approved the
contents and the sending of this Circular.
DATED at Lakewood, Colorado, USA this 21st
day of May, 2015.
BY ORDER OF THE BOARD |
|
(Signed) Stephen P. Antony |
Stephen P. Antony, President and Chief |
Executive Officer |
144
SCHEDULE A TRANSACTION
RESOLUTION RESOLUTION OF THE SHAREHOLDERS OF ENERGY FUELS
INC.
(the Corporation)
WHEREAS the Corporation has entered into an agreement
and plan of merger dated January 4, 2015, as amended on May 8, 2015 (the
Merger Agreement) with EFR Nevada Corp. and Uranerz Energy Corporation
(Uranerz) to complete a transaction (the Transaction) whereby
(i) the Corporation would indirectly acquire all of the issued and outstanding
shares of common stock of Uranerz (each a Uranerz Share) in exchange
for common shares of the Corporation (EFI Common Shares) on the basis
of 0.255 EFI Common Shares for each whole Uranerz Share (the Exchange
Ratio), (ii) each outstanding option to acquire Uranerz Shares (each a
Uranerz Option) will automatically be converted into an option to
acquire an EFI Common Share, provided that the number of shares subject to each
such option and the exercise price thereof will be adjusted by the Exchange
Ratio, so as to preserve the economic value of such option; and (iii) each
outstanding Uranerz warrant (a Uranerz Warrant) will entitle its holder
to acquire, in lieu of one Uranerz Share on exercise thereof, 0.255 EFI Common
Shares with the exercise price to be adjusted based on the Exchange Ratio, all
on the terms and conditions set out in the Merger Agreement, as more fully
described in the management information circular of the Corporation dated May
21, 2015 (the Circular);
AND WHEREAS the Corporation may, at its option, issue
EFI Common Shares to each of (i) Cantor Fitzgerald Canada Corporation
(Cantor) in satisfaction of the advisory fee payable to Cantor for
acting as financial advisor to EFI in connection with the Transaction and (ii)
Haywood Securities Inc. (Haywood) in satisfaction of the advisory fee
payable to it for acting as financial advisor to Uranerz in connection with the
Transaction;
AND WHEREAS the Corporation has agreed to satisfy half
of certain severance obligations to management of Uranerz who are not employed
as officers or employees of the Corporation after the closing of the Transaction
through the issuance of EFI Common Shares based on the five day volume weighted
average trading price of the EFI Common Shares at the closing of the Transaction
(such EFI Common Shares, the Severance Shares);
AND WHEREAS the Corporation in accordance with Section
611(c) of the Toronto Stock Exchange Company Manual, wishes to obtain the
requisite shareholder approval for the issuance of the EFI Common Shares to
Uranerz shareholders, and the EFI Common Shares made issuable on exercise of
Uranerz Options and Uranerz Warrants after the closing of the Transaction, all
as contemplated in the Merger Agreement, as well as the potential issuance of
EFI Common Shares to each of Cantor and Haywood and certain members of Uranerz
management as described above;
NOW THEREFORE BE IT RESOLVED THAT:
1. |
The issuance of the EFI Common Shares comprising the
consideration for the acquisition of Uranerz Shares pursuant to the terms
of the Merger Agreement as described in the Circular is hereby
approved. |
|
|
2. |
The assumption of the Uranerz Options and the Uranerz
Warrants and the issuance of the EFI Common Shares upon the due exercise
of the Uranerz Options and Uranerz Warrants, all pursuant to the terms of
the Merger Agreement as described in the Circular is hereby
approved. |
3. |
The issuance of the EFI Common Shares to Cantor and
Haywood in satisfaction of their respective advisory fees as described in
the Circular is hereby approved. |
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4. |
The issuance of the Severance Shares as described in the
Circular is hereby approved. |
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5. |
The Merger Agreement and all of the transactions
contemplated therein, including but not limited to the issuance of the EFI
Common Shares to be issued and made issuable thereunder, as described in
the Circular, and the actions of the directors of the Corporation in
approving the Merger Agreement and the actions of the officers of the
Corporation in executing and delivering the Merger Agreement and any
amendments thereto are hereby ratified, confirmed and approved. |
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6. |
Any director or officer of the Corporation is hereby
authorized and directed to execute or cause to be executed, whether under
corporate seal of the Corporation or otherwise, and to deliver or cause to
be delivered all such documents, and to do or cause to be done all such
acts and things, as in the opinion of such director or officer may be
necessary or desirable in connection with the foregoing. |
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7. |
The board of directors of the Corporation be and it is
authorized to delay or abandon all or any part of this resolution at any
time prior to giving effect thereto. |
SCHEDULE B - MERGER AGREEMENT
AGREEMENT AND PLAN OF MERGER
By and Among
ENERGY FUELS INC.
EFR NEVADA CORP.
and
URANERZ ENERGY CORPORATION
Dated as of January 4, 2015
TABLE OF CONTENTS
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Page |
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ARTICLE I THE MERGER |
1 |
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1.1 |
The Merger |
1 |
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1.2 |
Effective Time of the Merger
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1 |
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1.3 |
Governance of Parent |
2 |
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ARTICLE II THE SURVIVING ENTITY
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2 |
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2.1 |
Articles of Incorporation and
Bylaws |
2 |
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2.2 |
Officers and Directors |
2 |
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ARTICLE III CONVERSION OF SHARES
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2 |
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3.1 |
Conversion of Capital Stock |
2 |
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3.2 |
Surrender and Payment |
3 |
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3.3 |
Stock Options and Warrants |
5 |
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3.4 |
Dissenting Shareholders. |
7 |
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3.5 |
Closing |
7 |
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ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF TARGET |
8 |
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4.1 |
Organization and Qualification
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8 |
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4.2 |
Capitalization |
8 |
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4.3 |
Authority; Validity of
Agreement |
10 |
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4.4 |
No Violation; Consents and
Approvals |
10 |
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4.5 |
Target Reports |
11 |
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4.6 |
Financial Statements |
12 |
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4.7 |
Absence of Undisclosed
Liabilities |
12 |
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4.8 |
Off-Balance Sheet Arrangements
. |
13 |
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4.9 |
Absence of Certain Changes |
13 |
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4.10 |
Taxes |
14 |
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4.11 |
Litigation |
16 |
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4.12 |
Employee Benefit Plans; ERISA
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16 |
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4.13 |
Environmental Liability |
18 |
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4.14 |
Compliance with Applicable Laws
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20 |
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4.15 |
Insurance |
20 |
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4.16 |
Properties; Mining Claims |
20 |
B-i
TABLE OF CONTENTS
(continued)
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Page |
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4.17 |
Material Contracts |
23 |
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4.18 |
Required Shareholder Vote |
23 |
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4.19 |
Form F-4 and Proxy
Statement/Prospectus |
23 |
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4.20 |
Intellectual Property |
23 |
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4.21 |
Affiliate Transactions |
24 |
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4.22 |
Brokers |
24 |
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4.23 |
FIRPTA |
24 |
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4.24 |
Fairness Opinion; Board
Approval |
24 |
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4.25 |
Controls and Procedures |
25 |
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4.26 |
Takeover Matters |
25 |
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4.27 |
Related Party Transactions |
25 |
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4.28 |
Compliance with the U.S. Foreign Corrupt Practices Act
and Other Applicable Anti-Corruption Laws. |
26 |
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4.29 |
Powers of Attorney |
26 |
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4.30 |
Books and Records |
26 |
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ARTICLE V REPRESENTATIONS AND
WARRANTIES OF PARENT PARTIES |
27 |
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5.1 |
Organization and Qualification
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27 |
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5.2 |
Capitalization. |
28 |
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5.3 |
Authority; Validity of
Agreement |
29 |
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5.4 |
No Violation; Consents and
Approvals |
29 |
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5.5 |
Parent Reports |
30 |
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5.6 |
Financial Statements |
31 |
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5.7 |
Absence of Undisclosed
Liabilities |
32 |
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5.8 |
Off-Balance Sheet Arrangements
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32 |
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5.9 |
Absence of Certain Changes |
32 |
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5.10 |
Taxes |
34 |
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5.11 |
Litigation |
35 |
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5.12 |
Employee Benefit Plans; ERISA
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36 |
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5.13 |
Environmental Liability |
38 |
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5.14 |
Compliance with Applicable Laws
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39 |
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5.15 |
Insurance |
40 |
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5.16 |
Properties; Mining Claims |
40 |
B-ii
TABLE OF CONTENTS
(continued)
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Page |
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5.17 |
Material Contracts |
42 |
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5.18 |
Required Shareholder Vote |
43 |
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5.19 |
Operations of Merger Sub |
43 |
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5.20 |
Form F-4 and Proxy
Statement/Prospectus |
43 |
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5.21 |
Fairness Opinion; Board
Approval |
43 |
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5.22 |
Controls and Procedures |
43 |
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5.23 |
Parent Common Shares |
44 |
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5.24 |
Substituted Options and Assumed
Warrants |
44 |
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5.25 |
Intellectual Property |
44 |
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5.26 |
Affiliate Transactions |
45 |
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5.27 |
Brokers |
45 |
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5.28 |
Takeover Matters |
45 |
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5.29 |
Related Party Transactions |
45 |
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5.30 |
Compliance with the U.S. Foreign Corrupt Practices Act
and Other Applicable Anti-Corruption Laws. |
46 |
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5.31 |
Books and Records |
46 |
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ARTICLE VI CONDUCT OF BUSINESS
PENDING THE MERGER |
46 |
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6.1 |
Conduct of Business by Target
Pending the Merger |
46 |
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6.2 |
Conduct of Business by Parent
Pending the Merger |
50 |
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ARTICLE VII ADDITIONAL AGREEMENTS
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53 |
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7.1 |
Access to Information;
Confidentiality |
53 |
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7.2 |
Non-Solicitation and
Acquisition Proposals |
54 |
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7.3 |
Cooperation |
57 |
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7.4 |
Publicity |
58 |
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7.5 |
Filings |
58 |
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7.6 |
Employee Matters |
58 |
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7.7 |
Preparation of the Form F-4 and
Proxy Statement/Prospectus |
59 |
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7.8 |
Target Shareholders Meeting
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61 |
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7.9 |
Stock Exchange Listing |
61 |
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7.10 |
Notice of Certain Events |
61 |
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7.11 |
Section 16 |
62 |
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7.12 |
Takeover Statutes |
62 |
B-iii
TABLE OF CONTENTS
(continued)
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Page |
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7.13 |
Parent Shareholders Meeting
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62 |
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7.14 |
Consents of Accountants |
62 |
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7.15 |
Commercially Reasonable Efforts
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63 |
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7.16 |
Shareholder Rights Plan.
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63 |
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7.17 |
Obligation to Indemnify and
Maintain Insurance |
63 |
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7.18 |
NI 43-101 Technical Reports |
64 |
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ARTICLE VIII CONDITIONS TO
CONSUMMATION OF THE MERGER |
64 |
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8.1 |
Conditions to the Obligation of
Each Party |
64 |
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8.2 |
Conditions to the Obligations
of the Parent Parties |
65 |
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8.3 |
Conditions to the Obligations
of Target |
66 |
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ARTICLE IX SURVIVAL |
67 |
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9.1 |
Survival of Representations and
Warranties |
67 |
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9.2 |
Survival of Covenants and
Agreements |
67 |
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ARTICLE X TERMINATION, AMENDMENT
AND WAIVER |
67 |
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10.1 |
Term and Termination |
67 |
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10.2 |
Effect of Termination |
68 |
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ARTICLE XI MISCELLANEOUS |
69 |
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11.1 |
Expenses |
69 |
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11.2 |
Notices |
71 |
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11.3 |
Severability |
72 |
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11.4 |
Assignment |
72 |
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11.5 |
Interpretation |
72 |
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11.6 |
Knowledge |
72 |
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11.7 |
Counterparts |
73 |
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11.8 |
Entire Agreement |
73 |
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11.9 |
Governing Law |
73 |
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11.10 |
Submission to Jurisdiction |
73 |
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11.11 |
Waiver of Jury Trial |
73 |
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11.12 |
Attorneys Fees |
73 |
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11.13 |
No Third Party Beneficiaries
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74 |
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11.14 |
Disclosure Letters |
74 |
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11.15 |
Amendments and Supplements |
74 |
B-iv
TABLE OF CONTENTS
(continued)
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Page |
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11.16 |
Extensions, Waivers, Etc |
74 |
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ARTICLE XII DEFINITIONS |
74 |
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12.1 |
Defined Terms |
74 |
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12.2 |
Additional Defined Terms |
81 |
B-v
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger
(this Agreement) dated January 4, 2015 (the Agreement
Date), by and among Energy Fuels Inc., a corporation organized under the
laws of the province of Ontario, Canada (Parent), EFR Nevada Corp., a
corporation organized under the laws of the state of Nevada and an indirect
wholly owned subsidiary of Parent (Merger Sub, and, together with
Parent, the Parent Parties) and Uranerz Energy Corporation, a
corporation organized under the laws of the state of Nevada (Target).
WHEREAS, the board of directors
of Parent deems it advisable and in the best interests of Parent and its
shareholders, that Merger Sub merge with and into Target (the Merger)
upon the terms and subject to the conditions set forth herein, and Parents
board of directors has approved this Agreement and the Merger, subject to
approval by the shareholders of Parent;
WHEREAS, the board of directors of Target deems it advisable
and in the best interests of Target and its shareholders that Target enter into
and complete the Merger, and Targets board of directors has approved this
Agreement and the Merger, subject to approval by the shareholders of Target;
WHEREAS, as an inducement to Parent and Merger Sub to enter
into this Agreement, concurrently with the execution and delivery of this
Agreement, with the approval of Targets board of directors, Parent has entered
into voting agreements with each of the officers and directors of Target set
forth on Exhibit A-1 attached hereto, pursuant to which such parties
have, among other things, agreed to support the Merger upon the terms and
conditions set forth therein (collectively, the Target Voting
Agreements); and
WHEREAS, as an inducement to Target to enter into this
Agreement, concurrently with the execution and delivery of this Agreement, with
the approval of Parents board of directors, Target has entered into voting
agreements with each of the officers and directors of Parent set forth on
Exhibit A-2 attached hereto, pursuant to which such parties have, among
other things, agreed to support the Merger upon the terms and conditions set
forth therein (collectively, the Parent Voting Agreements, and together
with the Target Voting Agreements, the Voting Agreements).
NOW, THEREFORE, in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger
Upon the terms and subject to
the conditions hereof, at the Effective Time, Merger Sub shall merge with and
into Target and the separate existence of Merger Sub shall thereupon cease and
Target shall be the surviving entity in the Merger (sometimes referred to herein
as the Surviving Entity) as an indirect wholly owned subsidiary of
Parent. The Merger shall have the effects set forth in Section 92A.250 of Nevada
Revised Statutes (NRS) (Chapter 92A of the Nevada Revised Statutes
being referred to herein as the Merger Act), including the Surviving
Entitys succession to and assumption of all rights and obligations of Merger
Sub and Target.
B-1
1.2 Effective Time of the Merger
The Merger shall become
effective (the Effective Time) upon the later of (i) the date and time
of filing of properly executed Articles of Merger relating to the Merger with
the Secretary of State of Nevada in accordance with the Merger Act (the
Articles of Merger) and (ii) at such later time as the parties shall
agree and set forth in such Articles of Merger. The Articles of Merger shall be
filed as soon as practicable on or prior to the Closing Date.
1.3 Governance of Parent
The Parent shall, in accordance
with all applicable corporate, NYSE MKT LLC (NYSE MKT) and TSX
laws, rules and regulations, take all actions necessary to cause the appointment
of three (3) existing members of the board of directors of Target to the board
of directors of Parent such that the board of directors of Parent is constituted
as provided in Section 7.13 of this Agreement as of the Effective Time.
ARTICLE II
THE SURVIVING ENTITY
2.1 Articles of Incorporation and Bylaws
The articles of incorporation
and bylaws of Merger Sub in effect immediately prior to the Effective Time shall
be the articles of incorporation and bylaws of the Surviving Entity at and after
the Effective Time until thereafter amended in accordance with the terms thereof
and Chapter 78 of the NRS (the Corporations Act), provided that the
articles of incorporation and bylaws of the Surviving Entity will contain
provisions with respect to exculpation, indemnification and the advancement of
expenses that are at least as favorable, to the officers and directors of the
Target, as those contained in the articles of incorporation and bylaws of
Target, as amended and as in effect on the date hereof.
2.2 Officers and Directors
At and after the Effective
Time, the officers and directors of Merger Sub shall be the officers and
directors of the Surviving Entity until their respective successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Entitys articles of
incorporation, bylaws and the Corporations Act.
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of Capital Stock
At the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
capital stock described below:
(a) All Target Common Shares that are held in Targets treasury
or that are then owned by Parent shall be canceled and cease to exist and no
cash, Parent capital stock or other consideration shall be delivered in exchange
therefor.
(b) Subject to Section 3.2(i) and
Section 3.4, all issued and outstanding Target Common Shares (other than Target
Common Shares cancelled pursuant to Section 3.1(a)) shall be automatically
converted into and represent the right to receive Parent Common Shares, on the
basis of 0.255 of a Parent Common Share for each one (1.0) Target Common Share
(the Exchange Ratio). All such Target Common Shares, when so converted, shall
be retired, shall cease to be outstanding and shall automatically be cancelled,
and the holder of (i) a certificate in the case of Target Physical Shares, or
(ii) a statement of ownership in the case of Target Book-Entry Shares, that,
immediately prior to the Effective Time, represented such Target Common Shares,
shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender or transfer of such Target Common Shares in
accordance with Section 3.2, the number of Parent Common Shares issuable
therefor in accordance with the Exchange Ratio, without interest, and any
amounts payable pursuant to Section 3.2(d) . Notwithstanding the foregoing, if
between the Agreement Date and the Effective Time, the Parent Common Shares or
Target Common Shares are changed into a different number of shares or a
different class because of any stock dividend or distribution, subdivision,
reorganization, reclassification, recapitalization, split, combination or
exchange of shares, the Parent Common Shares to be issued pursuant to this
Section 3.1(b) shall be appropriately adjusted to reflect such event.
B-2
(c) The shares of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time, shall be converted into
shares of common stock of the Surviving Entity, such that the converted shares
of common stock will represent all of the issued and outstanding shares of
common stock of the Surviving Entity and will be held by an indirect wholly
owned subsidiary of Parent.
(d) The Parent Common Shares
issued upon the surrender or transfer of Target Common Shares in accordance with
the terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Target Common Shares formerly represented by any
physical certificate or statement of ownership in book-entry form, and from and
after the Effective Time there shall be no further registration of transfers
effected on the stock transfer books of the Surviving Entity of Target Common
Shares which were outstanding immediately prior to the Effective Time.
3.2 Surrender and Payment
(a) Exchange Agent and
Exchange Fund. Parent shall authorize one or more transfer agent(s) to act
as exchange agent hereunder (the Exchange Agent) with respect to the Merger.
At and prior to the Effective Time, Parent shall deposit, or cause to be
deposited, with the Exchange Agent, as depositary for the Parent Common Shares,
or any successor depositary thereto, a number of Parent Common Shares equal to
the aggregate number of Parent Common Shares to be issued in exchange for the
Target Common Shares pursuant to the Exchange Ratio (the Exchange Fund). The
Exchange Agent shall deliver the applicable Parent Common Shares in exchange for
the Target Common Shares pursuant to Section 3.1 out of the Exchange Fund.
Except as contemplated by Section 3.2(d), the Exchange Fund shall not be used
for any other purpose.
(b) Exchange Procedures.
As soon as practicable after the Effective Time, Parent shall cause the Exchange
Agent to send to each holder of record of Target Common Shares a letter of
transmittal (which shall specify that delivery will be effected, and risk of
loss and title to Target Physical Shares shall pass, only upon receipt of the
Target Physical Shares by the Exchange Agent and shall be in a form and have
such other provisions as Parent and Target may reasonably specify), and such
other documents as may reasonably be requested by the Exchange Agent (which may
include the receipt of an agents message by the Exchange Agent in connection
with Target Book-Entry Shares), for use in the exchange contemplated by Section
3.1 and instructions for use in effecting the surrender or transfer of Target
Common Shares for cancellation in accordance with this Agreement (together, the
Exchange Instructions). Upon surrender or transfer of Target Common Shares for
cancellation to the Exchange Agent together with such letter of transmittal,
properly completed and duly executed, and such other documents as may be
required pursuant to the Exchange Instructions, the holder of such Target Common
Shares shall be entitled to receive in exchange therefor Parent Common Shares
(which shall be in uncertificated book-entry form unless a physical certificate
is requested or as otherwise agreed to by the Parent and Target) representing,
in the aggregate, the whole number of Parent Common Shares that such holder has
the right to receive pursuant to Section 3.1 and Section 3.2(i), plus any amount
payable pursuant to Section 3.2(d) .
B-3
(c) Transferred Target Common Shares. If any portion of
the Parent Common Shares are to be issued to a Person other than the registered
holder of Target Common Shares represented by the stock certificate(s) or
statement of ownership surrendered or transferred in exchange therefor, no such
issuance shall be made unless (i) the stock certificate(s) or statement of
ownership so surrendered or transferred have been properly endorsed and contain
any required Medallion Signature Guarantees and otherwise are in proper form for
transfer, and (ii) the Person requesting such issuance has paid to the Exchange
Agent any transfer or other Taxes required as a result of such issuance to a
Person other than the registered holder or has established to the Exchange
Agents satisfaction that such Tax has been paid or is not applicable.
(d) Dividends and
Distributions. No dividends or other distributions declared or made with
respect to Parent Common Shares with a record date after the Effective Time
shall be paid to the holder of any un-surrendered or un-transferred Target
Common Shares with respect to the Parent Common Shares that such holder would be
entitled to receive until surrender or transfer of such Target Common Shares in
accordance with Sections 3.1 or 3.2(f) . Following surrender or transfer of any
Target Common Shares, there shall be paid to such holder of Parent Common Shares
issuable in exchange therefor, without interest, (i) as soon as practicable
after the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such Parent Common Shares, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such Parent Common Shares. For purposes of dividends or
other distributions in respect of Parent Common Shares, all Parent Common Shares
to be issued pursuant to the Merger shall be entitled to dividends pursuant to
the immediately preceding sentence as if such Parent Common Shares were issued
and outstanding as of the Effective Time.
(e) Termination of Exchange
Fund. Any portion of the Exchange Fund that remains unclaimed by the holders
of Target Common Shares one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged such holders
Target Common Shares in accordance with this Section 3.2 prior to that time
shall thereafter look only to the Parent to exchange such Target Common Shares
pursuant to Section 3.1 or 3.2(i) or to pay amounts to which such holder is
entitled pursuant to Section 3.2(d) . Neither Parent nor the Surviving Entity
shall be liable to any holder of Target Common Shares for any such Parent Common
Shares (or dividends or distributions with respect thereto) from the Exchange
Fund delivered to a public official pursuant to any abandoned property, escheat
or similar Law.
B-4
(f) Subject to applicable
abandoned or unclaimed property laws, any certificates formerly representing
Target Common Shares that are not deposited with all other documents as provided
in Section 3.2(b) on or before the fifth anniversary of the Effective Time shall
cease to represent any right or claim of any kind or nature and the right of the
former shareholder of such Target Common Shares to receive certificates
representing Parent Common Shares and the Target Common Shares otherwise
issuable to such former Target shareholder shall be deemed to be surrendered to
Parent together with all dividends or distributions thereon held for such
shareholder.
(g) Lost Certificates. If
any Target Physical Shares shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Target Physical
Shares to be lost, stolen or destroyed and, if required by Parent or the
Exchange Agent, the posting by such Person of a bond, in such reasonable amount
as Parent or the Exchange Agent may direct, as indemnity against any claim that
may be made against it with respect to such Target Physical Shares, the Exchange
Agent shall pay in exchange for such lost, stolen or destroyed Target Physical
Shares the Parent Common Shares payable in respect of the Target Physical Shares
formerly represented by such lost, stolen or destroyed stock certificate,
without interest.
(h) Withholding. Each of
Parent, the Surviving Entity and the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Target Common Shares such amounts as Parent, the Surviving
Entity or the Exchange Agent determine are required to be deducted and withheld
under the Code or any provision of state, local, or foreign Tax Law with respect
to the making of such payment, such withholding of Parent Common Shares issued
to any holder of Target Common Shares shall be an amount determined by Parent to
be reasonably necessary to satisfy the Parents withholding obligation. To the
extent that amounts are so withheld by Parent, the Surviving Entity or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Target Common Shares in respect
of which such deduction and withholding was made by Parent, the Surviving Entity
or the Exchange Agent, as the case may be. Parent and Target shall cooperate
with and assist each other with efforts to reduce or eliminate such withholding
Taxes. Parent will sell a sufficient number of Parent Common Shares to satisfy
the withholding obligation and the balance of any Parent Common Shares and any
cash proceeds remaining after satisfaction of the withholding obligation shall
be remitted to the holder.
(i) No Fractional Shares.
No certificates or scrip or fractional Parent Common Shares or book-entry credit
representing such fractional share interests shall be issued upon the surrender
of Target Common Shares. Each holder of Target Common Shares exchanged pursuant
to this Article III (after taking into account all Target Common Shares
delivered or transferred by such holder) who would otherwise have been entitled
to receive a number of Parent Common Shares which is not a whole number shall
receive the number of Parent Common Shares rounded to the nearest whole number
(and, if the fraction is 0.5, the number of Parent Common Shares shall be
rounded up to the next whole number). The parties acknowledge that rounding of
fractional Parent Common Shares was not separately bargained for consideration
but merely represents a mechanical rounding off for purposes of simplifying the
corporate and accounting problems that would otherwise be caused by the issuance
of fractional Parent Common Shares.
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3.3 Stock Options and Warrants
(a) At the Effective Time, Parent and Target shall take all
such action as may be necessary to cause each outstanding and unexpired and
unexercised option to purchase Target Common Shares (a Target Stock Option)
granted under Targets 2005 Nonqualified Stock Option Plan, as amended
(collectively, the Target Stock Option Plan) to be automatically converted at
the Effective Time into options (the Substituted Options) to purchase a number
of Parent Common Shares (rounded down to the nearest whole number of Parent
Common Shares) equal to the product of (x) the aggregate number of Target Common
Shares purchasable pursuant to such Target Stock Option immediately prior to the
Effective Time multiplied by (y) the Exchange Ratio at a price per Parent Common
Share equal to the exercise price per Target Common Share specified in the
Target Stock Option divided by the Exchange Ratio (such price rounded up to the
nearest whole cent). Such Substituted Option shall otherwise be subject to the
same terms and conditions, including vesting and expiry date, as the Target
Stock Option in respect of which it is issued. Parent will assume all
obligations under the Target Stock Option Plan as at the Effective Time and from
and after the Effective Time, and the Parent will comply with all of the terms
and conditions of the Substituted Options, including the obligation to issue the
Parent Common Shares contemplated thereby upon the exercise thereof. For
purposes of vesting conditions, the date of grant of the Substituted Option
shall be deemed to be the date on which the corresponding Target Stock Option
was granted. Prior to the Effective Time, Target shall make all necessary
amendments under the Target Stock Option Plan to provide that no further awards
shall be made thereunder following the Closing. At and after the Effective Time,
(i) all references in the Target Stock Option Plan and related stock option
agreements to Target shall be deemed to refer to Parent and (ii) Parent shall
assume all of Targets obligations with respect to the Target Stock Options as
so amended. Substitution of the Target Stock Options for the Substituted Options
will occur in compliance with Code Section 409A so that the substitution avoids
being treated as the grant of new stock options.
(b) Target Stock Options held by
independent directors of Target (as defined by applicable Law), who are not
officers or directors of Parent on Closing, shall expire on the earlier of (i)
the current expiry date of such Target Stock Options (exclusive of the operation
of the early termination provisions of such Target Stock Options) or (ii) six
months after the Closing Date.
(c) In respect of each
Substituted Option, and the Parent Common Shares underlying such Substituted
Option, Parent shall, as soon as practicable after the Effective Time and in no
event later than 30 days from the Closing Date, file a Form S-8 or other
appropriate registration statement and use reasonable efforts to keep such
registration statement current for as long as any Substituted Options remain
outstanding.
(d) At the Effective Time, and in
accordance with the terms of each warrant to purchase Target Common Shares
issued by Target that are issued and outstanding immediately prior to the
Effective Time (collectively, the Target Warrants), Target Warrants shall
become exercisable into Parent stock in accordance with their terms. Parent
acknowledges and shall assume the obligations under the Target Warrants and
under each warrant indenture governing the Target Warrants (the Target Warrant
Indentures) to issue Parent Common Shares upon exercise of such Target Warrants
and, if required by the Target Warrant Indentures, shall issue a warrant
certificate to each holder of Target Warrants confirming such assumption.
Consistent with the terms of the Target Warrants and Target Warrant Indentures,
any such warrant certificate shall provide that such warrant shall be
exercisable for a number of Parent Common Shares equal to the product of (x) the
aggregate number of Target Common Shares issuable in respect of such Target
Warrants immediately prior to the Effective Time multiplied by (y) the Exchange
Ratio (the Assumed Warrants) and that the exercise price of the Assumed
Warrants will equal (i) the exercise price of the Target Warrants in effect
immediately prior to the Effective Time, divided by (ii) the Exchange Ratio.
Each Assumed Warrant shall, consistent with the terms of the Target Warrants and
Target Warrant Indentures, contain appropriate provision such that the
provisions of each Target Warrant (including the exercise period and the
exercise price and provision for adjustment of the exercise price) shall
thereafter be maintained in each such Assumed Warrant as nearly equivalent as
may be practicable in relation to such Target Warrant. From and after the
Effective Time, Parent shall comply with all of the terms and conditions set
forth in each such Assumed Warrant, including the obligation to issue the Parent
Common Shares contemplated thereby upon exercise thereof.
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3.4 Dissenting Shareholders.
(a) Notwithstanding anything in
this Agreement to the contrary, in the event that the applicable requirements of
Section 92A.120 of the Merger Act have been satisfied, Target Common Shares
which were outstanding on the date for the determination of shareholders
entitled to vote on the Merger and which were voted against the Merger and the
holders of which have demanded that the Target purchase such shares at their
fair value in accordance with Sections 92A.300 through 92A.500 of the Merger Act
and have not otherwise failed to perfect or shall not have effectively withdrawn
or lost their rights to require such shares to be purchased for cash under the
Merger Act (collectively, Dissenting Shares), shall not be converted into or
represent the right to receive any Parent Common Shares pursuant to Section
3.1(b), but, instead, the holders thereof shall be entitled to have their shares
purchased for cash at the fair value of such Dissenting Shares as agreed upon or
determined in accordance with the provisions of Sections 92A.460 through 92A.500
of the Merger Act.
(b) If any shareholder who holds
Dissenting Shares as of the Effective Time effectively withdraws or loses
(through passage of time, failure to demand or perfect, or otherwise) the right
to demand and perfect dissenters rights under the Merger Act, then, as of the
later of the Effective Time and the occurrence of such event, such holders
shares that were Dissenting Shares shall automatically be converted into and
represent only the right to receive the Parent Common Shares pursuant to and
subject to Section 3.1(b) without interest thereon upon surrender of the
Certificates representing such holders Target Common Shares.
(c) The Target shall give Parent
(i) prompt written notice of any written demands for purchase of any Target
Common Shares pursuant to the exercise of dissenters rights, withdrawals of
such demands, and any other instruments or notices served pursuant to the Merger
Act on the Target and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for purchase of any Target Common Shares
pursuant to the exercise of dissenters rights under the Merger Act. The Target
shall not, except with the prior written consent of Parent, voluntarily make or
agree to make any payment with respect to any demands for purchase of any shares
of Target Common Shares pursuant to the exercise of dissenters rights under the
Merger Act, or settle or offer to settle any such demands.
3.5 Closing
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The closing (the
Closing) of the transactions contemplated by this Agreement (the
Transactions) will take place at 10:00 a.m. Eastern Standard Time on
the second Business Day after the satisfaction or (to the extent permitted by
applicable Law) waiver of the conditions set forth in Article VIII, other
than any such conditions which by their nature cannot be satisfied until the
Closing Date, or such other time agreed by the parties, at the offices of Borden
Ladner Gervais LLP in Toronto, unless another time, date or place is agreed to
in writing by the parties hereto (the date upon which the Closing occurs being
referred to herein as the Closing Date).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TARGET
Except as set forth in the
disclosure letter delivered by Target to Parent contemporaneously with the
execution hereof (the Target Disclosure Letter), Target represents and
warrants to the Parent Parties, unless another date is specifically referenced
in a particular representation or warranty, as of the Agreement Date and as of
the Closing Date, that the representations and warranties contained in this
Article IV are true and correct on and as of such dates. For purposes of this
Agreement, a document shall be deemed to have been made available by the
Target to Parent if it is publicly available through the Electronic Data
Gathering, Analysis, and Retrieval system (EDGAR) or the System for
Electronic Document Analysis and Retrieval (SEDAR).
4.1 Organization and Qualification
.
(a) Target is a corporation
validly existing and in good standing under the laws of the State of Nevada, and
has all requisite corporate or other power and authority to own, lease, use and
operate its properties and to carry on its business as it is now being
conducted.
(b) Target is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification or licensing is required, except for
such failures to be so qualified or licensed as would not, individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect with
respect to Target or the Surviving Entity. Section 4.1(b) of the Target
Disclosure Letter sets forth a true and correct list of all of the jurisdictions
in which Target is qualified or licensed to do business as a foreign
corporation.
(c) Target has no Subsidiaries.
Target does not own any equity interest in any Person other than as set forth in
Section 4.1(c) of the Target Disclosure Letter.
(d) Target has previously
delivered to Parent a true and complete copy of its articles of incorporation
and bylaws, in each case as amended through the Agreement Date. Target is not in
violation of its articles of incorporation, bylaws or similar governing
documents.
(e) Pursuant to express
provisions in the Targets articles of incorporation, the provisions of Nevadas
Combinations with Interested Stockholders Act (NRS 78.411 to 78.444) and
Nevadas Acquisition of Controlling Interest Act (NRS 78.378 to 78.3793) do not
apply to the Target and the Transactions contemplated in this Agreement.
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4.2 Capitalization
(a) The authorized capital stock of Target consists solely of
750,000,000 Target Common Shares and 10,000,000 shares of preferred stock (the
Target Preferred Shares). As of the Agreement Date, (i) 95,895,306 Target
Common Shares are issued and outstanding, (ii) 7,311,680 Target Common Shares
are reserved for issuance upon the exercise of outstanding Target Stock Options
under the Target Stock Option Plan, (iii) 10,550,000 Target Common Shares are
reserved for issuance upon the exercise of outstanding Target Warrants under the
Warrant Indentures, (iv) no Target Preferred Shares have been issued, (v) no
Target Common Shares are held by Target in treasury, and (vi) a number of rights
equivalent to the number of Target Common Shares issued and outstanding have
been issued and are outstanding pursuant to a Shareholder Rights Plan adopted by
Target effective as of August 25, 2010 and reconfirmed on July 10, 2013 (the
Target Rights Plan). All of the outstanding Target Common Shares are duly
authorized, validly issued, fully paid and non-assessable, and were not issued
in violation of any purchase option, call option, right of first refusal,
preemptive right or other similar right. Other than as set forth in Section
4.2(a) of the Target Disclosure Letter, Target has not agreed to register any
securities under the Securities Act or any state securities laws.
(b) Except as set forth in
Section 4.2(a) of this Agreement or in Section 4.2(b) of the Target Disclosure
Letter, there are no authorized or outstanding (i) options, warrants, preemptive
rights, subscriptions, calls or other rights, convertible securities,
agreements, stock appreciation rights, phantom equity or other claims or
commitments of any character (including rights plans or poison pills) that
may obligate Target to issue, transfer or sell any shares of capital stock or
other equity interest in Target , or securities convertible into or exchangeable
for such shares or equity interests, (ii) contractual obligations of Target to
repurchase, redeem or otherwise acquire any capital stock or other equity
interest of Target or any securities or agreements listed in clause (i) of this
sentence, or (iii) voting trusts or similar agreements to which Target is a
party with respect to the voting of the capital stock or other equity interests
of Target.
(c) There are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) with the shareholders or other equity holders of Target, whether
together or as a separate class, on any matters on which such holders may
vote.
(d) Section 4.2(d) of the Target
Disclosure Letter sets forth the following information with respect to each
Target Stock Option outstanding as of the Agreement Date: (i) the name of the
holder, (ii) the number of Target Common Shares issuable upon exercise thereof,
(iii) the exercise price, (iv) the issue date, (v) the termination date, (vi)
the stock option plan under which such option was issued and (vii) whether such
option contains any put, redemption, cashless exercise or similar feature.
(e) At the Effective Time, after
giving effect to the provisions of Section 3.3, there will not be any
outstanding subscriptions, options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible or exchangeable securities,
agreements, claims or commitments of any character by which Target will be bound
providing for the purchase or issuance of any shares of capital stock or other
equity interest of Target (or, following the Closing, the Surviving Entity) or
securities convertible into or exchangeable for such shares or any other such
securities or agreements.
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(f) Except for the Target Stock
Options and the Target Stock Option Plan there are no contracts to which Target
is a party obligating Target to accelerate vesting of any equity compensation
awards as a result of the Transactions contemplated by this Agreement.
4.3 Authority; Validity of Agreement
Target has full corporate power
and authority to execute and deliver this Agreement and any Ancillary Agreements
to which it is or will be a party and, subject to obtaining the Target
Shareholder Approvals, to consummate the Transactions. The execution, delivery
and performance of this Agreement and the Ancillary Agreements to which Target
is or will be a party and the consummation of the Transactions have been duly
and validly authorized by Targets board of directors, and no other corporate
proceedings on the part of Target are necessary to authorize this Agreement and
the Ancillary Agreements to which Target is or will be a party or to consummate
the Transactions, other than the Target Shareholder Approvals and the filing of
the Articles of Merger with the Secretary of State of the State of Nevada. This
Agreement has been, and the Ancillary Agreements to which Target is or will be a
party are, or upon execution will be, duly and validly executed and delivered by
Target and, assuming the due authorization, execution and delivery hereof and
thereof by the other parties hereto and thereto, constitutes, or upon execution
will constitute, valid and binding obligations of Target enforceable against
Target in accordance with their respective terms, except as such enforceability
may be subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and other Laws relating to or affecting the rights of creditors and
of general principles of equity (the Enforceability Exception).
4.4 No Violation; Consents and Approvals
(a) The execution and delivery of
this Agreement and any Ancillary Agreement to which Target is or will be a
party, the consummation of the Transactions and the performance by Target of its
obligations hereunder and thereunder will not (i) subject to receipt of the
Target Shareholder Approvals, conflict with any provision of the articles of
incorporation or bylaws of Target, (ii) subject to completion of the deliveries
required under the Wyoming Bond Financing Agreement identified in Section 4.4
(b) below, result in any violation of, or the breach of, or constitute a default
(with notice or lapse of time or both) under, or give rise to any right of
termination, cancellation or acceleration or guaranteed payments or a loss of
any benefit under, or the acceleration of performance, vesting or an increase in
compensation or benefit required by, or the creation of any Lien upon any equity
interests in or assets of Target under, any of the terms, conditions or
provisions of any note, lease, mortgage, license, plan, agreement or other
instrument or obligation to which Target is a party or by which Target or any of
its properties or assets may be bound or (iii) violate the provisions of any Law
applicable to Target, except, in the case of clauses (ii) and (iii), for such
violations, breaches, defaults, or rights of termination, cancellation or
acceleration that, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect with respect to Target or the Surviving
Entity, materially impair the ability of Target to perform its obligations under
this Agreement or any Ancillary Agreement or be reasonably likely to prevent or
materially delay the consummation of any of the Transactions.
(b) No material filing or
registration with, declaration or notification to, or order, authorization,
consent or approval of, any Governmental Authority or any other Person is
required in connection with the execution and delivery of this Agreement or any
Ancillary Agreement to which Target is or will be a party and the consummation
of the Transactions by Target and the performance by Target of its obligations
hereunder or thereunder, except for (i) the filing with the Securities and
Exchange Commission (the SEC) of the Form F-4, the Proxy Statement/Prospectus
in definitive form and the filing and declaration of effectiveness of the Form
F-4, (ii) the filing with the SEC of such reports under the Exchange Act as may
be required in connection with this Agreement and the other transactions
contemplated by this Agreement, (iii) filings required under the rules and
policies of the NYSE MKT and TSX, (iv) the delivery of an assumption agreement
and legal opinion under the Wyoming Bond Financing Agreement, in form and
substance as required under the Wyoming Bond Financing Agreement, (v) the
receipt of the Target Shareholder Approvals, (vi) such filings, authorizations
or approvals as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the HSR Act), (vii) the filing of the Articles of Merger in the office of the
Nevada Secretary of State, (viii) any consents, authorizations, approvals,
filings or exemptions in connection with applicable stock exchange rules, (ix)
approval of the Wyoming Department of Environmental Quality to application for
Permit to Mine Transfer, (x) the approval of the United States Nuclear
Regulatory Commission to the change of control of any source material or
byproduct material licenses held by Target; and (xi) such consents, approvals,
orders, authorizations, notifications, registrations, declarations and filings
(A) as are customarily made or obtained in connection with the transfer of
interests in or change of control of ownership of mining properties and (B) the
failure of which to be obtained or made, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect with respect to
Target or the Surviving Entity, materially impair the ability of Target to
perform its obligations under this Agreement or any Ancillary Agreement or be
reasonably likely to prevent or materially delay the consummation of any of the
Transactions.
B-10
4.5 Target Reports
(a) Copies of Targets registration statements, reports,
schedules, proxies or information statements and other documents (including
exhibits and amendments thereto) filed with or furnished to the SEC since
January 1, 2012 (collectively, the Target SEC Reports) are available online
with the SEC and through the EDGAR system. Target has timely filed with or
furnished to the SEC each of the Target SEC Reports required to be filed or
submitted by it with the SEC or mailed to its shareholders pursuant to the
Securities Act, the Exchange Act or rules promulgated thereunder. As of their
respective dates (or, if any Target SEC Reports were amended, as of the date
such amendment was filed with the SEC), each Target SEC Report, including any
financial statements or schedules included therein and as amended, if amended,
(i) complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the applicable
rules promulgated thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. No event since the date of the last
Target SEC Report has occurred that would require Target to file a Current
Report on Form 8-K other than the execution of this Agreement.
(b) Copies of Targets
prospectuses, financial statements, management discussion & analysis, annual
reports, management proxy circulars and other public disclosure documents
(including exhibits and amendments thereto, and documents incorporated by
reference therein) filed with or furnished to the securities regulatory
authorities in the Provinces of Canada in which Target is a reporting issuer
or equivalent since January 1, 2012 (collectively, the Target SEDAR Reports)
are available online through SEDAR. Target has timely filed each of the Target
SEDAR Reports required to be filed or submitted by it or mailed to its
shareholders pursuant to the applicable securities legislation (including any
rules and regulation promulgated thereunder) of each of the Provinces of Canada
in which Target is a reporting issuer or equivalent. As of their respective
dates (or, if any Target SEDAR Reports were amended, as of the date such
amendment was filed on SEDAR), each Target SEDAR Report, including any financial
statements or schedules included therein, (i) complied in all material respects
with all applicable requirements of such applicable securities legislation, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
B-11
(c) The Chief Executive Officer and Chief Financial Officer of
Target have made all certifications (without qualification or exception to the
matters certified) required by, and would be able to make such certifications
(without qualification or exception to the matters certified) if required to do
so as of such dates pursuant to the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act) and any related rules and regulations promulgated by the
SEC, and the statements contained in any such certifications are complete and
correct.
(d) Except as set forth in
Section 4.5(d) of the Target Disclosure Letter, neither Target nor any of its
officers has received any notice from any Governmental Authority questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of the certifications in Section 4.5(c) .
(e) Except as set forth in the
Target SEC Reports, Target is otherwise in compliance in all material respects
with all applicable provisions of the Sarbanes-Oxley Act and the applicable
rules of NYSE MKT and the TSX.
(f) To the Knowledge of the
Target, each director and executive officer of the Target has filed with the SEC
on a timely basis all statements required by Section 16(a) of the Exchange Act
and the rules and regulations thereunder.
4.6 Financial Statements
Each of the audited
consolidated financial statements and unaudited consolidated interim financial
statements of Target (including any related notes and schedules) included or
incorporated by reference in the Target SEC Reports, as such financial
statements may have been amended or restated, as applicable, has been or will be
prepared from, and is or will be in accordance with, the books and records of
Target, complies or will comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as in effect at the time of filing, has been or will be
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (GAAP) (except as may be
indicated in the notes thereto and subject, in the case of interim financial
statements, to normal and recurring year-end adjustments that, individually or
in the aggregate, would not be reasonably likely to have a Material Adverse
Effect with respect to Target) and fairly presents or will fairly present the
consolidated financial position of Target as of the date thereof and the
consolidated results of operations, cash flows and changes in financial position
of Target for the periods presented therein.
4.7 Absence of Undisclosed Liabilities
B-12
Except as and to the extent (i)
set forth on the consolidated balance sheet of Target as at December 31, 2013,
including the notes thereto (the 2013 Target Balance Sheet), (ii) set
forth on the unaudited balance sheet of Target as at September 30, 2014,
including the notes thereto (the September 30, 2014 Target Balance
Sheet) (each of the 2013 Target Balance Sheet and the September 30, 2014
Target Balance Sheet as filed on EDGAR), or (iii) specifically and individually
described in Section 4.7 of the Target Disclosure Letter, Target does not have
any Liability required to be reflected or reserved against in a consolidated
balance sheet of Target prepared in accordance with GAAP as applied in preparing
the 2013 Target Balance Sheet or the September 2014 Target Balance Sheet, as
applicable, except for Liabilities that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect with respect
to Target.
4.8 Off-Balance Sheet Arrangements.
Target is not a party to, and
does not have any commitment to become a party to, any "off balance sheet
arrangements", as defined in Item 303(a) of Regulation S-K under the Exchange
Act.
4.9 Absence of Certain Changes
Except as (i) disclosed in the
Target SEC Reports filed and publicly available prior to the Agreement Date,
including the September 30, 2014 Target Balance Sheet, (ii) contemplated by this
Agreement, or (iii) set forth in Section 4.9 of the Target Disclosure Letter, as
of the date of this Agreement, except for Sections 4.9(a), 4.9(b) and 4.9(o)
which shall be true as of the date of this Agreement and as of the Closing
Date, Target has conducted its business only in the ordinary course of
business consistent with past practice since December 31, 2013 and since
December 31, 2013:
(a) there has not been any change or development that,
individually or in the aggregate, has had or would be reasonably likely to have
had a Material Adverse Effect with respect to Target;
(b) there has not been any
material damage, destruction or other casualty loss with respect to any material
asset or property owned, leased or otherwise used by Target, whether or not
covered by insurance;
(c) there has not been any amendment or change in the
Targets organizational documents;
(d) there has not been any incurrence,
creation or assumption of (i) any Lien on any of its assets or properties (other
than Permitted Liens) or (ii) any Liability as a guarantor or surety with
respect to the obligations of any Person other than in the ordinary course of
business consistent with past practice;
(e) there has not been any increase or
agreement to increase the wages, salaries or compensation payable to any
officer, employee or director from the amount thereof in effect as of September
30, 2014, other than increases in wages, salaries and other cash compensation
and new employment agreements in the ordinary course of business consistent with
past practice;
(f) there has not been a grant of, or change in, any severance or
termination pay, other than with respect to new employment agreements entered
into in the ordinary course of business consistent with past practice;
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(g) the Target has not entered
into or made any loans to any of its officers, directors or employees or made
any change in its borrowing or lending arrangements for or on behalf of any of
such Persons;
(h) the Target has not adopted or amended, or accelerated the
payment or vesting of benefits under, any Target Benefit Plan;
(i) the Target
has not declared, set aside or paid any dividend or other distribution (whether
in cash, stock or property) with respect to any of Targets capital stock;
(j) the Target has not effected or authorized any split, combination or
reclassification of any of Targets capital stock or any issuance thereof or
issued any other securities in respect of, in lieu of or in substitution for
shares of Targets capital stock, except for issuances of Target Common Shares
upon the exercise of Target Stock Options or Target Warrants, in each case, in
accordance with their terms at the time of exercise,
(k) there has not been any
material change, and the Target does not have Knowledge of any reason that would
require any material change, in any accounting methods (or underlying
assumptions), principles or practices of Target or any revaluation of any of its
assets;
(l) the Target has not made or changed any material Tax election, or
settled or compromised any material income Tax liability, or materially amended
any Tax Return;
(m) the Target has not acquired any material assets, or sold,
leased, exchanged, transferred, licensed, farmed-out or otherwise disposed of
any material assets, in each case other than in the ordinary course of business
consistent with past practice;
(n) the Target has not discharged or satisfied
any Indebtedness or paid any obligation or Liability, other than current
Liabilities incurred and paid in the ordinary course of business and consistent
with past practice;
(o) there has not been the commencement of any action, suit,
arbitration, mediation, proceeding, claim or investigation, or receipt notice
of, or a threat of any action, suit, arbitration, mediation, proceeding, claim
or investigation against the Target relating to any of its business, properties
or assets; and
(p) the Target has not made any agreement or commitment
(contingent or otherwise) to do any of the foregoing.
4.10 Taxes
Except as set forth in Section 4.10 of the Target Disclosure
Letter:
(a) Target has timely filed or
will file all Tax Returns required by applicable Law to be filed by it prior to
or as of the Closing Date. As of the Closing Date, the foregoing Tax Returns
were true and correct and prepared in compliance with applicable Law in all
material respects. The unpaid Taxes of Target did not, as of the most recent
fiscal month end, exceed the reserve for Tax Liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the 2013 Target Balance Sheet (rather than
in any notes thereto) and do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and practice
of Target in filing its Tax Returns, and such reserve fully accounts for all Tax
accrued or accruing for all periods up to the date of such 2013 Target Balance
Sheet. Target is not currently the beneficiary of any extension of time within
which to file any Tax Return. Target has made available or will make available
prior to the Closing Date true and complete copies of its Tax Returns to Parent
for all periods beginning on or after January 1, 2010.
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(b) Target has paid all Taxes due with respect to any period
ending prior to or as of the Closing Date except where failure to pay any such
Taxes will not have a Material Adverse Effect with respect to Target. Target has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, director, officer,
agent, independent contractor, creditor, shareholder, or other third party,
except where failure to pay or withhold any such Taxes will not have a Material
Adverse Effect with respect to Target.
(c) No Audit by a Tax Authority
is pending or, to the Knowledge of Target, threatened, with respect to any Tax
Returns filed by, or Taxes due from, Target. No issue has been raised by any Tax
Authority in any Audit of Target that, if raised with respect to any other
period not so audited, reasonably could be expected to result in a material
proposed deficiency for any period not so audited. No material deficiency or
adjustment for any Taxes has been proposed, asserted, assessed or, to the
Knowledge of Target, threatened, against Target. No claim has ever been made by
a Tax Authority in a jurisdiction where Target does not file Tax Returns that
Target is or may be subject to taxation by that jurisdiction. There are no Liens
for Taxes upon the assets of Target, except Liens imposed by operation of law
for current Taxes not yet delinquent.
(d) Target has not given any
waiver of statutes of limitations relating to Taxes or executed a power of
attorney with respect to Tax matters that, in either case, will be outstanding
as of the Closing Date.
(e) There are no Tax sharing, Tax
indemnity or similar agreements to which Target is a party or bound by or
pursuant to which Target has any obligation or liability for Taxes.
(f) Target has never been a
member of an affiliated group of corporations within the meaning of Section 1504
of the Code or a group of corporations filing combined or unitary returns.
(g) Target has not agreed to make
nor is it required to make any adjustment under Section 481(a) of the Code by
reason of change in accounting method or otherwise.
(h) Target has no liability for
Taxes of any Person (other than Target) under Treasury Regulation Section 1.1502
-6 (or any similar provision of state, local or foreign Law), as a transferee or
successor, by contract or otherwise.
(i) Target has not distributed
stock of another Person, or has had its stock distributed by another Person in a
transaction that was purported or intended to be governed in whole or in part by
Code Sections 355 or 361 within the two-year period preceding the date of this
Agreement.
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(j) Target will not be required
to include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any (i) change in method of accounting for a taxable period
ending on or prior to the Closing Date, (ii) closing agreement as described in
Code Section 7121 (or any corresponding or similar provision of state, local, or
foreign income Tax law) executed on or prior to the Closing Date or (iii) an
installment sale or open transaction disposition made on or prior to the Closing
Date.
(k) Target has not participated,
within the meaning of Treasury Regulation Section 1.6011 -4(c) (or any
predecessor of such Treasury Regulation), in (i) any listed transaction within
the meaning of Code Section 6011 and the Treasury Regulation thereunder (or any
corresponding or similar provision of state, local, or foreign income Tax Law)
or (ii) any transaction required to be registered with the Internal Revenue
Service under Code Section 6111 as in effect on or prior to December 31, 2013
and the Treasury Regulation thereunder (or any corresponding or similar
provision of state, local, or foreign income Tax Law).
(l) Target is not a party to any
agreement, contract, arrangement or plan that has resulted or could result,
separately or in the aggregate, in the payment of (i) any excess parachute
payment within the meaning of Code §280G (or any corresponding provision of
state, local or foreign Tax Law) and (ii) any amount that will not be fully
deductible as a result of Code §162(m) (or any corresponding provision of state,
local or foreign Tax Law).
4.11 Litigation
Except as specifically
disclosed in Section 4.11 of the Target Disclosure Letter, there is no suit,
claim, action, proceeding or investigation pending or, to Targets Knowledge,
threatened against or directly affecting Target or any of the directors or
officers of Target in their capacity as such, nor is there any reasonable basis
therefor, that, individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect with respect to Target if determined adversely to
Target or any such director or officer. Neither Target nor any officer, director
or employee of Target, has been permanently or temporarily enjoined by any
order, judgment or decree of any court or any other Governmental Authority that
names such Person from engaging in or continuing any conduct or practice in
connection with the business, assets or properties of Target nor, to the
Knowledge of Target, is Target or any officer, director or employee of Target
under investigation by any Governmental Authority. There has not been, and to
the Targets Knowledge, there is not pending or contemplated, any investigation
by the SEC involving the Target or any current or former director or officer of
the Target.
4.12 Employee Benefit Plans; ERISA
(a) Section 4.12(a) of the Target
Disclosure Letter contains a true and complete list of each plan, fund,
contract, program, agreement and arrangement (whether written or not) for the
benefit of present or former employees or directors, including those intended to
provide pension, profit sharing, retirement, supplemental retirement, deferred
compensation, equity incentive, or bonus or other incentive benefits (whether or
not tax qualified and whether or not defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended (ERISA)); disability,
medical, dental, or other health insurance benefits, life insurance or other
death benefit benefits (whether or not defined in Section 3(1) of ERISA); salary
continuation, unemployment, supplemental unemployment, severance, termination
pay, change-in-control, vacation or holiday benefits (whether or not defined in
Section 3(3) of ERISA) (i) to which Target is a party or by which it is bound,
or (ii) with respect to which Target has made any payments or contributions or
may otherwise have any liability, whether direct or indirect, (including any
such plan or other arrangement formerly maintained by Target), (iii) that Target
has committed to implement, establish, adopt or contribute to in the future,
(iv) for which Target is or may be financially liable as a result of Targets
affiliation with any company or any companys shareholders which together with
Target would be deemed a single employer within the meaning of Section 414(b),
(c) or (m) of the Code or Section 4001(b)(1) of ERISA (a Target ERISA
Affiliate) (whether or not such affiliation exists at the date of this
Agreement and notwithstanding that the plan is maintained by the Target for the
benefit of its employees or former employees), (v) for or with respect to which
Target is or may become liable under any common law successor doctrine, express
successor liability provision of Law, labor or employment Law or agreement with
a predecessor employer (Target Benefit Plan). Target Benefit Plan does not
include any arrangement that has been terminated and completely wound up prior
to the date of this Agreement and for which Target has no present or potential
Liability.
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(b) With respect to each Target Benefit Plan, (i) such
plan has been administered in compliance with its terms and applicable Law in
all material respects, (ii) each Target Benefit Plan that is intended to be
qualified within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service or is
maintained under a prototype or volume submitter plan and with respect to which
the Target and the Target ERISA Affiliates are entitled to rely upon a favorable
opinion or advisory letter issued by the Internal Revenue Service, (iii) to the
Knowledge of the Target, there is no circumstance that will result in the
revocation of any favorable determination letter, opinion letter or advisory
letter issued by the Internal Revenue Service, (iv) neither Target nor any
Target ERISA Affiliate has engaged in, and Target and each Target ERISA
Affiliate do not have any Knowledge of any Person that has engaged in, any
transaction or acted or failed to act in any manner that would subject Target or
any Target ERISA Affiliate to any liability for a breach of fiduciary duty under
ERISA, (v) no disputes are pending or, to the Knowledge of Target or any Target
ERISA Affiliate, threatened, other than ordinary claims for benefits, nor is
there any basis for such a proceeding, (vi) neither Target nor any Target ERISA
Affiliate has engaged in, and neither Target nor any Target ERISA Affiliate has
any Knowledge of any Person that has engaged in, any transaction prohibited by
Section 406 of ERISA or Section 4975 of the Code, except for those for which an
exemption applies, (vii) all contributions due have been made on a timely basis,
(viii) all required reports, notices and descriptions related to the Target
Benefit Plan (including, but not limited to, those required by Target Benefit
Plan provisions, ERISA and the Code) have been distributed to participants or
filed with the appropriate Governmental Authority, (ix) all contributions made
or that will be made under any Target Benefit Plan meet the requirements for
deductibility under the Code, (x) Target is not liable (either directly or as a
result of indemnification) for any excise Taxes, penalties, damages or equitable
relief as a result of any violation under ERISA or any other applicable Law,
(xi) no leased employees (as defined in Section 414(n) of the Code) or
independent contractors are eligible for, or participate in, any Target Benefit
Plan and (xii) no audit or examination by a Governmental Authority is currently
pending (nor has notice been received regarding a potential audit or
examination) and there are no pending submissions to a Governmental Authority.
(c) With respect to all Target
Benefit Plans, to the extent that the following documents exist, Target has
furnished Parent with true and complete copies of: (i) the most recent
determination letter, if any, received by the Target or any Target ERISA
Affiliate from the IRS, (ii) all pending applications for rulings,
determinations, opinions, no action letters and the like filed with any
governmental agency (including the Department of Labor and the Internal Revenue
Service), (iii) the Annual Report/Return (Form Series 5500) with financial
statements, if any, and attachments for the most recent plan year, (iv) Target
Benefit Plan documents, summary plan descriptions, trust agreements, insurance
contracts, individual agreements, service agreements and all related contracts
and documents (including any material employee summaries and material employee
communications), and (v) all Internal Revenue Service or Department of Labor
audit closing letters, audit finding letters, revenue agent findings and similar
documents.
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(d) Any Target Benefit Plan, individual employment, severance
or other compensatory agreement or arrangement with respect to which the Target
or any Target ERISA Affiliate has any current or future obligation that is a
nonqualified deferred compensation plan (as defined in Section 409A(d)(1) of
the Code), complies in form and operation with the requirements under Code
Section 409A and the Treasury Regulations issued thereunder (without regard to
the effective date of such regulations) so as not to result in the imposition of
additional Tax or interest to a service provider.
(e) No Target Benefit Plan is a
multiple employer plan (as defined in Section 413(c) of the Code), a
multiemployer plan (as defined in Section 3(37) of ERISA), a defined benefit
pension plan (as defined in Section 3(35) of ERISA) subject to Title IV of
ERISA, a plan subject to the minimum funding standards under Section 302 of
ERISA or Section 412 of the Code, a plan that is intended to be qualified under
Section 401(a), a welfare plan that is self-funded, a plan that owns employer
stock or a plan that is funded, in whole or in part, through a voluntary
employees beneficiary association exempt from Tax under Section 501(c)(9) of
the Code.
(f) No present or former
employees or directors of Target are covered by any employee agreements or plans
that provide or will provide severance pay, post-termination health or life
insurance benefits (except as required pursuant to Section 4980(B) of the Code)
or any similar benefits.
(g) No condition, agreement or
Target Benefit Plan provision limits the right of Parent or Merger Sub to amend,
cut back or terminate any Target Benefit Plan (except to the extent such
limitation arises under ERISA). Each Target Benefit Plan may be unilaterally
amended or terminated in its entirety without liability except as to (i)
benefits accrued thereunder prior to such amendment or termination or (ii) costs
necessary to satisfy any notice periods described in such Target Benefit Plan or
funding vehicle.
(h) The execution, delivery, and
performance by Target of this Agreement or any Ancillary Agreement to which
Target is or will be a party and the consummation of the Transactions will not
constitute an event under any Target Benefit Plan that will (i) cause any Target
Benefit Plan to increase benefits payable to any participant or beneficiary,
(ii) entitle any current or former employee or director of Target to severance
pay, unemployment compensation or any other payment, benefit or award, or (iii)
modify or result in any payment (whether as severance pay or otherwise),
acceleration, vesting, or increases in benefits, awards or compensation with
respect to any employee of the Target.
4.13 Environmental Liability
Except as set forth in Section
4.13 of the Target Disclosure Letter or the Target SEC Reports filed and
publicly available prior to the Agreement Date, including the September 30, 2014
Target Balance Sheet:
B-18
(a) The business of Target has
been and is operated in compliance in all material respects with all applicable
Environmental Laws.
(b) Target has not caused or
allowed the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any Hazardous
Substances, except in compliance in all material respects with all Environmental
Laws and in a manner that does not give rise to any Liability under any
Environmental Laws, and, to Targets Knowledge, no generation, treatment,
manufacture, processing, distribution, use, storage, discharge, release,
disposal, transport or handling of any Hazardous Substances has otherwise
occurred at any property or facility currently or formerly owned, leased or
operated by Target, including the Target Real Property, except in compliance in
all material respects with all Environmental Laws and in a manner that does not
give rise to any Liability under any Environmental Laws.
(c) Target has not received any
written notice from any Governmental Authority or third party or, to the
Knowledge of Target, any other communication alleging or concerning any material
violation by Target of, or responsibility or liability of Target under, any
Environmental Law. There are no pending, or to the Knowledge of Target,
threatened, claims, suits, actions, proceedings or investigations with respect
to the businesses or operations of Target alleging or concerning any material
violation of, or responsibility or liability under, any Environmental Law, nor
does Target have any Knowledge of any fact or condition that could give rise to
such a claim, suit, action, proceeding or investigation.
(d) Target has obtained and is in
compliance in all material respects with all approvals, permits, licenses,
registrations and similar authorizations from all Governmental Authorities under
all Environmental Laws required for the operation and ownership of the Target
Real Property, Target Improvements and the businesses of Target as currently
conducted, and there are no pending or, to the Knowledge of Target, threatened,
actions, proceedings or investigations alleging violations of or seeking to
modify, revoke or deny renewal of any of such approvals, permits, licenses,
registrations and authorizations. Target does not have Knowledge of any fact or
condition that is reasonably likely to give rise to any action, proceeding or
investigation regarding the violation of or seeking to modify, revoke or deny
renewal of any such approvals, permits, licenses, registrations and
authorizations.
(e) Without in any way limiting
the generality of the foregoing, to Targets Knowledge, (i) all offsite
locations where Target has transported, released, discharged, stored, disposed
or arranged for the disposal of Hazardous Substances are and have been licensed
and operating in all material respects with Environmental Laws and (ii) no
polychlorinated biphenyls (PCBs), PCB-containing items, asbestos-containing
materials, or radioactive materials are now or have been used or stored at any
property owned, leased or operated by Target, except in compliance in all
material respects with Environmental Laws and in a manner that does not give
rise to any Liability under any Environmental Laws.
(f) No claims have been asserted
or, to Targets Knowledge, threatened to be asserted against Target for any
personal injury (including wrongful death) or property damage (real or personal)
arising out of alleged exposure or otherwise related to Hazardous Substances
used, handled, generated, transported or disposed of by Target.
(g) No Lien has been attached or
filed or is, to the Knowledge of Target, threatened against Target in favor of
any Person for (i) any liability under or violation of any applicable Environmental Law, (ii) any Release of Hazardous Substances or
(iii) any imposition of Liability.
B-19
(h) No property currently or
formerly owned or operated by Target, including the Target Real Property, is
listed on a List, and Target has not received any notice that any such property
is being considered for listing on a List.
(i) All environmental audits,
site assessments, risk assessments, and other environmental reports and studies,
including summaries of any material test results or analytic data, conducted by,
at the expense of, or on behalf of Target or that are otherwise in the
possession of Target have been provided to Parent.
4.14 Compliance with Applicable Laws
Target holds all approvals,
licenses, permits, registrations, exemptions and similar authorizations from
Governmental Authorities and other Persons necessary for the lawful conduct of
its business as now conducted (the Target Permits). Section 4.14 of the
Target Disclosure Letter lists each of the Target Permits. Except as set forth
in the Target SEC Reports or in Section 4.14 of the Target Disclosure Letter,
Target has been and is in compliance with the terms of the Target Permits and
all applicable Laws in all material respects, and Target has not received any
notice from any Person that the business of Target has been or is being
conducted in violation of any applicable Law or the terms of any Target Permit
in any material respect. Target has not received any notice that any Target
Permit will be terminated or modified or cannot be renewed in the ordinary
course of business, and Target has no Knowledge of any reasonable basis for any
such termination, modification or non-renewal.
4.15 Insurance
Section 4.15 of the Target
Disclosure Letter sets forth a complete and accurate list of each insurance
policy under which Target has been an insured, a named insured or otherwise the
principal beneficiary of coverage at any time during the past three years.
Target has made available or will make available prior to the Closing Date to
Parent a true and complete copy of each such policy that are in effect as of the
date of this Agreement. With respect to each such policy, neither Target, nor,
to Targets Knowledge, any other party to the policy is in material breach or
default thereunder (including with respect to the payment of premiums or the
giving of notices), and Target does not know of any occurrence or any event
which (with notice or the lapse of time or both) would constitute such a breach
or default or permit termination, modification or acceleration under the policy.
Target has not received any notice that any of its policies cannot be renewed in
the ordinary course of business, and has no Knowledge of any reasonable basis
for any such non-renewal. All appropriate insurers under such insurance policies
have been notified of all potentially insurable losses and pending litigation
and legal matters, and no such insurer has informed Target of any denial of
coverage or reservation of rights thereto. Section 4.15 of the Target Disclosure
Letter describes any self-insurance arrangements affecting Target.
4.16 Properties; Mining Claims .
(a) Section 4.16 of the Target
Disclosure Letter sets out all of the real property owned, held, leased or
controlled, whether legally or beneficially for the benefit of Target, including
(i) all material fee surface and mineral property (Target Fee Property), (ii)
all unpatented mining claims (Target Mining Claims), and (iii) all real
property leases, mining leases, surface use agreements, rights-of-way,
easements, or other contracts with respect to real property (Target Property
Contracts). The Target Fee Property, Target Mining Claims and Target Property
Contracts will be collectively referred to hereinafter as the Target Real
Property. (b) Except as provided in Section 4.16 of the Target Disclosure
Letter or the Target SEC Reports, Target owns good and marketable title to an
undivided one hundred percent (100%) record and beneficial interest in and to
the Target Real Property, in each case free and clear of any Liens, other than
Permitted Liens. Target has not leased, subleased, optioned, mortgaged, or
entered into other contract or agreement transferring any interest in the Target
Real Property, Target Property Contracts, Water Rights, Target Improvements, or
Target Listed Personal Property to any Person, and there are no actions, suits,
administrative or other proceedings pending, or, to Targets Knowledge,
threatened against any of the Target Real Property. All ad valorem property and
other Taxes assessed against the Target Real Property have been timely and
properly paid.
B-20
(c) Except as set forth in Section 4.16(c) of the Target
Disclosure Letter or the Target SEC Reports, (i) all annual labor and assessment
work, rental fees or maintenance fees, license, royalty, and tax fees, and
filings with any Governmental Authority required to hold the Target Mining
Claims and the Target Property Contracts have been properly and timely
performed, paid or filed, in all material respects and all affidavits of annual
labor and assessment work and other filings required to maintain the Target
Mining Claims in good standing have been properly and timely recorded and filed
with the appropriate Governmental Authorities; (ii) the Target Mining Claims and
Target Property Contracts are free and clear of any claims or Liens except for
Permitted Liens, and there are no material conflicting claims by a third party
with respect to the lands covered by the Target Mining Claims or Target Property
Contracts; and (iii) there are no royalties or similar types of obligations
payable or required to be paid to any Person having an interest in the Target
Mining Claims or Target Property Contracts.
(d) All Target Property Contracts
are in good standing, valid and effective in accordance with their respective
terms, Target has performed all of its material obligations thereunder, and
there is not, under any of such Target Property Contracts any existing default
or event of default (or event which with notice or lapse or time, or both would
constitute a default; or would constitute a basis of force majeure or other
claim of excusable delay or non-performance) of Target or the other party to the
Property Contract. To Targets Knowledge, the party granting Target rights to
the properties covered by those Target Property Contracts owns good and
marketable title to those properties, free and clear of all Liens, other than
Permitted Liens.
(e) Section 4.16(e) of the Target
Disclosure Letter sets out water rights owned, held, leased or controlled,
whether legally or beneficially for the benefit of Target, including all surface
and underground water and water rights, including but not limited to
certificates, licenses, and permits, together with all applications for water
rights or applications or permits for the use, transfer or change of water
rights, ditch and ditch rights, well and well rights, reservoir and reservoir
rights, stock or interests in irrigation or ditch companies appurtenant to the
Target Real Property and all other rights to water for use at or in connection
with the Target Real Property or the mining of minerals from the Target Real
Property (Water Rights). Except as set forth in Section 4.16(e) of the Target
Disclosure Letter, (i) Target owns good and marketable title to an undivided one
hundred percent (100%) record and beneficial interest in and to the Water
Rights, free and clear of all Liens, except for Permitted Liens, and (ii) the
Water Rights are sufficient to conduct the operations and activities of the
Target as they are currently being conducted.
B-21
(f) Section 4.16(f) of the Target Disclosure Letter sets out
improvements (Target Improvements) to the Target Real Property and personal
property (Target Listed Personal Property) owned, held, leased or controlled,
whether legally or beneficially for the benefit of Target. Except as set forth
in Section 4.16(f) of the Target Disclosure Letter, (i) Target owns good and
marketable title to an undivided one hundred percent (100%) interest in and to
all Target Improvements and Target Listed Personal Property, free and clear of
all Liens, except for Permitted Liens, and (ii) all Target Improvements and
Target Listed Personal Property are in good condition and repair, ordinary wear
excepted, and are suitable for the purposes for which they are currently used by
Target.
(g) Except as set forth in
Section 4.16(g) of the Target Disclosure Letter, Target owns or leases all of
the assets, tangible and intangible, of any nature whatsoever, necessary to
operate its business and their business as currently conducted.
(h) Except as disclosed in
Section 4.16(h) of the Target Disclosure Letter, Target has now and, immediately
following the consummation of the transactions contemplated by this Agreement,
will have the right to occupy and use each of its Real Properties and Target
Improvements in the same manner currently occupied and used by Target to conduct
its business as presently conducted.
(i) Target is not obligated under
any forward sale or advanced sale contract with respect to minerals produced or
producible from the Target Real Property under which sales proceeds are paid by
the purchaser in advance of delivery.
(j) Target has made available to
Parent Parties all information, data, geological and geophysical test results,
maps and surveys in the possession of Target that might reasonably be expected
to be material to a prospective purchaser of the Target or that have been
requested by Parent relating to Target and its properties and business, and
Target has not withheld from Parent Parties any such information, data, test
results, maps or surveys. Target represents and warrants that all such
information, data, test results, maps and surveys were prepared or procured by
Target in the ordinary course of business.
(k) Each of the technical reports
prepared by or on behalf of Target and filed by Target on SEDAR (the Target
43-101 Technical Reports) was prepared in good faith and in the ordinary course
of business and in accordance with the requirements of NI 43-101. To Targets
Knowledge, the estimates of mineral reserves and resources reflected in the
Target 43-101 Technical Reports were estimated in good faith using methods and
based on assumptions considered reasonable at the time of estimation on the
basis of drill and test data generated and compiled in accordance with prudent
mining and engineering practice. The mine plans of Target listed in Section 4.16
of the Target Disclosure Letter, including the financial forecasts and budgets
include therein and the studies related thereto (i) have been prepared by
management of Target in good faith and in the ordinary course of business, and
(ii) are based on assumptions, including assumptions relating to mining
operations, capital and operating costs and production rates, that are
considered by management to be reasonable, as at the date the mine plans were
prepared, for the purpose of planning the future mining operations of Target,
provided that Parent acknowledges that Target provides no assurance as to the
future uranium prices used in such mine plans, other than where the uranium
prices reflect contractual prices for uranium to be delivered under existing
supply agreements.
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4.17 Material Contracts
Set forth in Section 4.17 of
the Target Disclosure Letter is a complete and accurate list of each Material
Contract (which list sets forth the parties to each such agreement and the date
on which such agreement was entered into) to which Target is a party or by which
Target or any of its assets are bound. Target has provided or will make
available to Parent prior to the Closing Date true and complete copies of all
Material Contracts unless otherwise available in Target SEC Reports. Except as
set forth in Section 4.17 of the Target Disclosure Letter, each Material
Contract is valid and binding and in full force and effect and Target has
performed all obligations required to be performed by them under each Material
Contract in all material respects. To Targets Knowledge, there does not exist,
nor has Target received written notice of, any material breach of or violation
or default under, any of the terms, conditions or provisions of any Material
Contract and Target has not received written notice of the desire of the other
party or parties to any such contract to exercise any rights such party has to
cancel, terminate or repudiate such contract or exercise remedies thereunder
that would be reasonably likely to have a Material Adverse Effect with respect
to Target. Subject to the Enforceability Exception, each Material Contract is
enforceable by Target in accordance with its terms.
4.18 Required Shareholder Vote
The affirmative vote of (i) the
holders of a majority of the outstanding Target Common Shares entitled to vote
at the Target Meeting at a duly convened and held shareholder meeting at which a
quorum is present (the Target Shareholders Approval) and (ii) a
majority of the Target Common Shares cast at the Target Meeting exclusive of all
Target Common Shares owned, directly or indirectly, by the Parent Parties or the
officers or directors of Target (the Unaffiliated Shareholders
Approval, collectively, the Target Shareholder Approvals) are the
only votes required of the holders of any class or series of Targets capital
stock that shall be necessary to adopt this Agreement and to consummate the
Transactions.
4.19 Form F-4 and Proxy Statement/Prospectus
None of the information to be
supplied by Target specifically for inclusion in (a) the registration statement
on Form F-4 to be filed by Parent with the SEC in connection with the issuance
of Parent Common Shares in the Merger or (b) the proxy statement on Schedule 14A
relating to the Target Meeting to be filed by Target, which will also constitute
the prospectus in respect of Parent Common Shares registered by means of the
Form F-4 to be filed by Parent (the Proxy Statement/Prospectus), to be
filed by Target and Parent with the SEC, in each case, and any amendments or
supplements thereto, will, in the case of the Proxy Statement/Prospectus, at the
time the Proxy Statement/Prospectus or any amendment or supplement thereto is
first mailed to the Target shareholders and at the time of the Target Meeting,
and, in the case of the Form F-4, when it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be made therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except that no representation or warranty is made by
Target with respect to statements made or incorporated by reference in the Form
F-4 or the Proxy Statement/Prospectus based on information supplied by Parent,
Merger Sub or any of their Representatives for inclusion or incorporation by
reference therein.
B-23
4.20 Intellectual Property
Except as set forth in Section
4.20 of the Target Disclosure Letter, the Target owns, licenses or otherwise
possesses title to or the right to use all patents, trademarks, service marks,
trade names, registered copyrights and applications therefor owned by or
registered in the name of Target, together with all other material intellectual
property assets, including computer software, owned or licensed by Target, and,
in either case, used by the Target in connection with the operation and conduct
of its business (collectively, the Target Intellectual Property). The
Target Intellectual Property set forth in Section 4.20 of the Target Disclosure
Letter constitutes all material intellectual property used by the Target in
connection with the conduct and operation of its business. Except as set forth
in Section 4.20 of the Target Disclosure Letter, Parent will have the right to
use the Target Intellectual Property following the Closing. To the Knowledge of
Target, it is not infringing any valid patent right, trademark, service mark,
trade name, copyright or other intellectual property right of any third party in
connection with its use of the Target Intellectual Property that would be
reasonably likely to have a Material Adverse Effect with respect to Target.
4.21 Affiliate Transactions
Target has not entered into any
agreements, contracts, commitments or transactions (other than Target Benefit
Plans), whether or not entered into in the ordinary course of business, to or by
which Target, on the one hand, and any of its officers, directors or affiliates
(or any affiliates of such officers or directors), on the other hand, are or
have been a party or are otherwise bound or affected and that (a) are currently
pending or proposed, in effect or have been in effect at any time since January
1, 2012 or (b) involve continuing Liabilities and obligations to or of
Target.
4.22 Brokers
No broker, finder or investment
banker (other than Haywood Securities Inc. (Haywood) and Euro Pacific
Canada Inc. (Euro Pacific) the fees and expenses of which will be paid
by Target at Closing) is entitled to any brokerage, finders fee or other fee or
commission payable by Target in connection with the Transactions based upon
arrangements made by and on behalf of Target. Target has heretofore furnished to
Parent a true and complete copy of all agreements between Target and Haywood and
Euro Pacific pursuant to which such firms would be entitled to any payment
relating to the Transactions.
4.23 FIRPTA
The Target Common Shares shall
be regularly traded on an established securities exchange within the meaning
of Treasury Regulation Section 1.897 -9T(d). Other than as disclosed in Section
4.23 of the Target Disclosure Letter, no Target shareholder who is a foreign
person (as defined in Section 1445(f)(3)) holds or has held more than 5% of
Target Common Shares at any time during the 5-year period ending on Closing
Date.
4.24 Fairness Opinion; Board Approval
(a) Targets board of directors
has received a written opinion dated January 2, 2015 from Euro Pacific to the
effect that, as of the date of such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of the Target Common Shares (other than
Parent and its affiliates). A true and complete copy of such opinion has been
provided to Parent.
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(b) Targets board of directors,
at a meeting duly called and held, unanimously (i) determined that this
Agreement and the Transactions are advisable and are fair to, and in the best
interests of, the shareholders of Target, (ii) approved this Agreement and the
Transactions and (iii) recommended approval and adoption of this Agreement and
the Merger and the Transactions by the shareholders of Target.
4.25 Controls and Procedures
Except as set forth in the
Target SEC Reports and Target SEDAR Reports, Target has established and
maintains disclosure controls and procedures that are reasonably designed to
ensure that all material information (both financial and non-financial) required
to be disclosed by Target in the reports that it is required to file under
applicable Laws (including applicable securities Laws) is recorded, processed,
summarized and reported within the time periods specified in the applicable Laws
and that all such information is accumulated and communicated to Targets
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the chief executive officer and
chief financial officer of Target required under applicable Laws (including
applicable securities Laws) with respect to such reports. Except as set forth in
Section 4.25 of the Target Disclosure Letter, in the Target SEC Reports or
Target SEDAR Reports, neither Target nor its independent auditors have
identified any significant deficiencies or material weaknesses in Targets
internal controls as contemplated under applicable Laws (including applicable
securities Laws and Section 404 of the Sarbanes-Oxley Act). Target has made or
will make available to Parent prior to the Closing Date true and complete copies
of any disclosures made by management to Targets auditors and audit committee
regarding such significant deficiencies or material weaknesses. Target has no
Knowledge of any material complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of Target or its internal accounting controls,
including any material complaint, allegation, assertion or claim that Target has
engaged in questionable accounting or auditing practices. No attorney
representing Target, whether or not employed by Target, has reported evidence of
a violation of securities laws, breach of fiduciary duty or similar violation by
Target or any of its officers, directors, employees or agents to the board of
directors of Target or any committee thereof or to any director or officer of
Target. Target has not granted any waivers with respect to its policies
regarding ethical conduct.
4.26 Takeover Matters
Target does not have any
applicable anti-takeover provision in its articles of incorporation or bylaws.
Target and Targets board of directors have each taken all actions necessary to
be taken such that the Target Rights Plan is not, or at the Effective Time will
not be, applicable to Target, Parent, Merger Sub, the Target Common Shares, the
Voting Agreements, this Agreement or the Transactions.
4.27 Related Party Transactions
Except as set forth in the
Target SEC Reports and Target SEDAR Reports, the Target has not, and, to the
knowledge of the Target, has not been deemed to have for purposes of any
applicable Law, engaged in or been party to any transaction with any of its
officers, directors, employees or direct or indirect shareholders or, to the
knowledge of the Target, any member of their immediate families (i) acquired or
have the use of property for proceeds greater than the fair market value
thereof, (ii) received services or have the use of property for consideration
other than the fair market value thereof, or (iii) received interest or any
other amount other than at a fair market value rate from any person with whom it
does not deal at arms length within the meaning of applicable taxation acts.
Except as set forth in the Target SEC Reports and Target SEDAR Reports, the
Target has not, and, to the knowledge of the Target, has not been deemed to have
for purposes of any applicable Law, engaged in or been party to any transaction
with any of its officers, directors, employees or direct or indirect
shareholders or, to the knowledge of the Target, any member of their immediate
families (i) disposed of the property for proceeds less than the fair market
value thereof, (ii) performed services for consideration other than the fair
market value thereof or (iii) paid interest or any other amount other than at a
fair market value rate to any person with whom it does not deal at arms length
within the meaning of applicable acts. Except as set forth in the Target SEC
Reports and Target SEDAR Reports and to the knowledge of the Target, none of the
officers, directors and employees of the Target, no shareholder of the Target
and no immediate family member of an officer, director, employee or such
beneficial owner, has a direct ownership interest of more than five percent (5%)
of the equity ownership of any firm or corporation that competes with, or does
business with, or has any contractual arrangement with, the Target. Since the
date of 2013Target Balance Sheet, no event has occurred that would be required
to be reported as a certain relationship of related transaction pursuant to
Item 404 of Regulation S-K of the SEC.
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4.28 Compliance with the U.S. Foreign Corrupt Practices Act
and Other Applicable Anti-Corruption Laws.
(a) Target has complied with the
U.S. Foreign Corrupt Practices Act of 1977 and other applicable anti-corruption
laws.
(b) Neither Target nor any
director, officer, agent, employee or representative of Target at the direction
of or on behalf of Target corruptly or otherwise illegally offered or gave
anything of value to: (i) any official, employee or representative of a
Governmental Authority, any political party or official thereof, or any
candidate for political office; or (ii) any other Person, in any such case while
knowing, or having reason to know, that all or a portion of such money or thing
of value may be offered, given or promised, directly or indirectly, to any
official, employee or representative of a Governmental Authority, any political
party or official thereof, or candidate for political office for the purpose of
the following: (x) influencing any action or decision of such Person, in his or
her official capacity, including a decision to fail to perform his or her
official function; (y) inducing such Person to use his or her influence with any
Governmental Authority to affect or influence any act or decision of such
Governmental Authority to assist in obtaining or retaining business or to secure
an improper business advantage; or (z) where such payment would constitute a
bribe, kickback or illegal or improper payment to assist Target in obtaining or
retaining business for, or with, or directing business to, any Person or in
securing any improper advantage.
(c) There have been no false or
fictitious entries made in the books or records of Target relating to any
illegal payment or secret or unrecorded fund and Target has not established or
maintained a secret or unrecorded fund.
4.29 Powers of Attorney
Except as disclosed in Section
4.29 of the Target Disclosure Letter, there are no powers of attorney executed
on behalf of the Target.
4.30 Books and Records
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To the Knowledge of the Target,
the minute books and other similar records of the Target for the most recent
three full fiscal years and any interim period contain a true and complete
record, in all material respects, of all actions taken at all meetings and by
all written consents in lieu of meetings of the stockholders, the boards of
directors (and other similar governing bodies) and committees of the boards of
directors (and other similar governing bodies) of the Target.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT PARTIES
Except as set forth in the
disclosure letter delivered by Parent to Target contemporaneously with the
execution hereof (the Parent Disclosure Letter), each of Parent and
Merger Sub represent and warrant to Target, unless another date is specifically
referenced in a particular representation or warranty, as of the Agreement Date
and as of the Closing Date, that the representations and warranties contained in
this Article V are true and correct on and as of such dates. For purposes of
this Agreement, a document shall be deemed to have been made available by
Parent to Target if it is publicly available through EDGAR or SEDAR:
5.1 Organization and Qualification
.
(a) Parent and each of its
Subsidiaries are corporations or other entities, are validly existing and in
good standing under the laws of the jurisdiction of their respective
incorporation or organization, and have all requisite corporate or other power
and authority to own, lease, use and operate their properties and to carry on
their respective business as it is now being conducted.
(b) Parent and each of its
Subsidiaries are duly qualified or licensed to do business as foreign
corporations and are in good standing in each jurisdiction in which such
qualification or licensing is required, except for such failures to be so
qualified or licensed as would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect with respect to Parent or
Merger Sub. Section 5.1(b) of the Parent Disclosure Letter sets forth a true and
correct list of all of the jurisdictions in which Parent and each of its
Subsidiaries are qualified or licensed to do business as foreign corporations.
(c) Section 5.1(c) of the Parent
Disclosure Letter sets forth a true and correct list of all of the Subsidiaries
of Parent and their respective jurisdictions of incorporation or organization.
None of Parent or its Subsidiaries owns any equity interest in any Person other
than as set forth in Section 5.1(c) of the Parent Disclosure Letter.
(d) Parent has previously
delivered to Target a true and complete copy of its articles of incorporation
and bylaws, in each case as amended through the Agreement Date, and has made
available the articles of incorporation, bylaws or other organizational
documents of each of the Parent Material Subsidiaries, in each case as amended
through the Agreement Date. Neither Parent nor any of the Parent Material
Subsidiaries is in violation of its articles or certificate of incorporation, as
applicable or other similar governing documents.
(e) Parent is the sole
shareholder, and owns all of the issued and outstanding stock, of Energy Fuels
Holdings Corp., a company incorporated under the laws of the State of Delaware,
and Energy Fuels Holdings Corp., is the sole shareholder, and owns all of the
issued and outstanding stock, of Merger Sub.
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5.2 Capitalization.
(a) Parent is authorized
to issue an unlimited number of Parent Common Shares, as well as an unlimited
number of preferred shares issuable in series, and an unlimited number of series
A preferred shares (the preferred shares collectively, the Parent Preferred
Shares). As of the Agreement Date, there are: (i) 19,677,552 Parent Common
Shares issued and outstanding (not including 20,920 treasury shares held by a
subsidiary of the Parent); (ii) 905,413 options to acquire Parent Common Shares
outstanding (Parent Options), 902,620 of which have been issued and are
governed by the stock option plan of the Parent dated March 2014 (the Parent
Stock Option Plan) and 2,793 issued in connection with the acquisition of
Strathmore Mineral Corp.; (iii) nil Parent Preferred Shares issued or
outstanding; (iv) 1,079,069 Parent Common Shares reserved for issuance upon the
exercise of currently outstanding warrants (the Parent Warrants); (v)
1,466,665 Parent Common Shares reserved for issuance upon the conversion of
currently outstanding convertible debentures (Parent Debentures) and (vi) a
number of rights equivalent to the number of Parent Common Shares issued and
outstanding have been issued and are outstanding pursuant to a Shareholder
Rights Plan adopted by Parent effective as of March 19, 2009 and reconfirmed on
February 10, 2012 (Parent Rights Plan). All outstanding Parent Common Shares
have been duly authorized and are validly issued and outstanding as fully paid
and non-assessable shares and were not issued in violation of any purchase
option, call option, right of first refusal, preemptive right or other similar
right. Other than as set forth in Section 5.2(a) of the Parent Disclosure
Letter, neither Parent nor any of its Subsidiaries has agreed to register any
securities under the Securities Act or any state securities laws.
(b) Except as set forth in
Section 5.2(a) of this Agreement or in Section 5.2(b) of the Parent Disclosure
Letter, there are no authorized or outstanding (i) options, warrants, preemptive
rights, subscriptions, calls or other rights, convertible securities,
agreements, stock appreciation rights, phantom equity or other claims or
commitments of any character (including rights plans or poison pills) that
may obligate Parent or any of its Subsidiaries to issue, transfer or sell any
shares of capital stock or other equity interest in Parent or any of its
Subsidiaries, or securities convertible into or exchangeable for such shares or
equity interests, (ii) contractual obligations of Parent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock or
other equity interest of Parent or any of its Subsidiaries or any securities or
agreements listed in clause (i) of this sentence, or (iii) voting trusts or
similar agreements to which Parent or any of its Subsidiaries is a party with
respect to the voting of the capital stock or other equity interests of Parent
or any of its Subsidiaries.
(c) Parent is, directly or
indirectly, the record and beneficial owner of all of the outstanding equity
interests of each Subsidiary of Parent, and holds such shares or interests free
and clear of all Liens other than statutory Liens for Taxes not yet due and
payable.
(d) Except as disclosed in the
Parent SEC Reports and/or the Parent SEDAR Reports, there are no outstanding
bonds, debentures, notes or other evidences of indebtedness of Parent having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) with the shareholders or other equity holders of Parent or any of
its Subsidiaries, whether together or as a separate class, on any matters on
which such holders may vote.
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(e) Section 5.2(e) of the Parent
Disclosure Letter sets forth the following information with respect to the
Parent Stock Options outstanding as of the Agreement Date: (i) the number of
Parent Common Shares issuable upon exercise thereof, (ii) the exercise price and
(iii) the termination date. The completion of the Merger and the transactions
contemplated by this Agreement will not result in the acceleration of the
vesting of any of the Parent Options and the board of directors of Parent will
not undertake any action that would result in a change of control being deemed
to have occurred under the Parent Stock Option Plan.
5.3 Authority; Validity of Agreement
Each of the Parent Parties has
full corporate power and authority to execute and deliver this Agreement and any
Ancillary Agreements to which it is or will be a party and, subject to obtaining
the Parent Shareholders Approval, to consummate the Transactions. The
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which each of the Parent Parties is or will be a party and the
consummation of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Parent Parties are necessary to authorize this Agreement and any Ancillary
Agreements to which it is or will be a party or to consummate the Transactions,
other than the Parent Shareholders Approval. This Agreement has been, and the
Ancillary Agreements to which each of the Parent Parties is or will be a party
are, or upon execution will be, duly and validly executed and delivered by the
Parent Parties, as applicable, and, assuming the due authorization, execution
and delivery hereof and thereof by the other parties hereto and thereto,
constitutes, or upon execution will constitute, valid and binding obligations of
the Parent Parties, as the case may be, enforceable against the Parent Parties,
as the case may be, in accordance with their respective terms, subject to the
Enforceability Exception.
5.4 No Violation; Consents and Approvals
.
(a) The execution and delivery of
this Agreement and any Ancillary Agreement to which Parent or Merger Sub is or
will be a party, the consummation of the Transactions and the performance by
each of Parent or Merger Sub of its obligations hereunder and thereunder will
not (i) conflict with any provision of the articles or certificate of
incorporation, as applicable, of Parent or Merger Sub, (ii) Except as set forth
in Section 5.4(a) of the Parent Disclosure Letter, result in any violation of,
or the breach of, or constitute a default (with notice or lapse of time or both)
under, or give rise to any right of termination, cancellation or acceleration or
guaranteed payments or a loss of any benefit under, or the acceleration of
performance, vesting or an increase in compensation or benefit required by, or
the creation of any Lien upon any equity interests in or assets of Parent or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, lease, mortgage, license, plan, agreement or other instrument or
obligation to which Target or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective properties or
assets may be bound, including the trust indenture relating to the outstanding
Parent Debentures, or (iii) violate the provisions of any Law applicable to
Parent or any of its Subsidiaries, except, in the case of clauses (ii) and
(iii), for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration that, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect with respect to Parent or
Merger Sub, materially impair the ability of Parent or Merger Sub to perform its
obligations under this Agreement or any Ancillary Agreement or be reasonably
likely to prevent or materially delay the consummation of any of the
Transactions.
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(b) No material filing or
registration with, declaration or notification to, or order, authorization,
consent or approval of, any Governmental Authority or any other Person is
required in connection with the execution and delivery of this Agreement or any
Ancillary Agreement to which either of the Parent Parties is or will be a party
and the consummation of the Transactions by Parent or Merger Sub and the
performance by either Parent or Merger Sub of its obligations hereunder or
thereunder, except for (i) the filing with the SEC of the Form F-4, the Proxy
Statement/Prospectus in definitive form and the filing and declaration of
effectiveness of the Form F-4, (ii) the receipt of the Parent Shareholders
Approval, (iii) the filing with the Canadian Securities Regulatory Authorities
on SEDAR and the furnishing of such filings to the SEC on EDGAR as may be
required in connection with this Agreement and the other transactions
contemplated by this Agreement, including the information circular in connection
with the Parent Meeting, (iv) any consents, authorizations, approvals, filings
or exemptions in connection with rules and policies of the NYSE MKT and TSX, (v)
such filings, authorizations or approvals as may be required under the HSR Act,
(vi) the filing of the Articles of Merger, (vii) the approval of the
State of Utah Division of Radiation Control with respect to any change of
control of the White Mesa Mill Radioactive Material License and Groundwater
Discharge Permit and Air Approval Order and (viii) such consents, approvals,
orders, authorizations, notifications, registrations, declarations and filings
(A) as are customarily made or obtained in connection with the transfer of
interests in or change of control of ownership of mining and milling properties
and (B) the failure of which to be obtained or made, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect with
respect to Parent or Merger Sub, materially impair the ability of Parent or
Merger Sub to perform its obligations under this Agreement or any Ancillary
Agreement or be reasonably likely to prevent or materially delay the
consummation of any of the Transactions.
(c) The execution and delivery of
this Agreement and any Ancillary Agreement to which Parent or Merger Sub is or
will be a party, the consummation of the Transactions and the performance by
each of Parent or Merger Sub of its obligations hereunder and thereunder will
not trigger any severance, termination or other payment or any right to claim
such a payment other than any employment agreement as set forth in Section
5.12(f) of the Parent Disclosure Letter to which Parent or any of its
subsidiaries are party to with any director, officer or employee of Parent of
any subsidiary of Parent.
5.5 Parent Reports
(a) Parent has timely filed with
or furnished to the SEC, and has heretofore made available to Target true and
complete copies of, each form, registration statement, report, schedule, proxy
or information statement and other document (including exhibits and amendments
thereto), required to be filed, furnished or submitted by it with the SEC or
mailed to its shareholders pursuant to the Securities Act, the Exchange Act or
rules promulgated thereunder since January 1, 2012 (collectively, the Parent
SEC Reports). As of their respective dates (or, if any Parent SEC Reports were
amended, as of the date such amendment was filed with the SEC), each Parent SEC
Report, including any financial statements or schedules included therein and as
amended, if amended, (a) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
the applicable rules promulgated thereunder and (b) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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No event since the date of the last Parent SEC Report has
occurred that would require Parent to file a Current Report on Form 6-K other
than the execution of this Agreement.
(b) Copies of Parents
prospectuses, financial statements, management discussion & analysis, annual
information forms, management information circulars, material change reports and
other public disclosure documents (including exhibits and amendments thereto,
and documents incorporated by reference therein) filed with or furnished to the
securities regulatory authorities in the Provinces of Canada in which Parent is
a reporting issuer or equivalent (Canadian Securities Regulatory
Authorities) since January 1, 2012 (collectively, the Parent SEDAR Reports)
are available online through SEDAR. Parent has timely filed each of the Parent
SEDAR Reports required to be filed or submitted by it or mailed to its
shareholders pursuant to the applicable securities legislation (including any
rules and regulation promulgated thereunder) of each of the Provinces of Canada
in which Parent is a reporting issuer or equivalent. As of their respective
dates (or, if any Parent SEDAR Reports were amended, as of the date such
amendment was filed on SEDAR), each Parent SEDAR Report, including any financial
statements or schedules included therein, (i) complied in all material respects
with all applicable requirements of such applicable securities legislation and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (c) The Chief Executive Officer and Chief Financial Officer of
Parent have made all certifications (without qualification or exception to the
matters certified) required by, and would be able to make such certifications
(without qualification or exception to the matters certified) if required to do
so as of such dates pursuant to the applicable securities legislation (including
any rules and regulation promulgated thereunder) of each of the Provinces of
Canada in which Parent is a reporting issuer or equivalent, the Sarbanes-Oxley
Act and any related rules and regulations promulgated by the SEC, and the
statements contained in any such certifications are complete and correct.
(d) Except as disclosed in either
the Parent SEC Reports or the Parent SEDAR Reports, neither Parent nor any of
its officers has received any notice from any Governmental Authority questioning
or challenging the accuracy, completeness, form or manner of filing or
submission of such certifications.
(e) To the Knowledge of Parent,
each director and executive officer of Parent has filed all required insider
reports under Canadian securities laws.
(f) Except as set forth in either
the Parent SEC Reports or Parent SEDAR Reports, Parent is otherwise in
compliance in all material respects with all applicable provisions of the
Sarbanes-Oxley Act and the applicable rules of the TSX and NYSE MKT.
5.6 Financial Statements
Each of the audited
consolidated financial statements and unaudited consolidated interim financial
statements of Parent (including any related notes and schedules) included or
incorporated by reference in the Parent SEDAR Reports has been or will be
prepared from, and is or will be in accordance with, the books and records of
Parent and its consolidated Subsidiaries, complies or will comply in all
material respects with applicable accounting requirements and with the published
rules and regulations of applicable Canadian securities law with respect thereto
as in effect at the time of filing, has
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5.7 Absence of Undisclosed Liabilities
Except as and to the extent (i)
set forth on the consolidated balance sheet of Parent and its Subsidiaries as at
December 31, 2013, including the notes thereto (the 2013 Parent Balance
Sheet), (ii) set forth on the unaudited consolidated balance sheet of
Parent and its Subsidiaries as at September 30, 2014, including the notes
thereto (the September 30, 2014 Parent Balance Sheet) (each of the 2013
Parent Balance Sheet and the September 30, 2014 Parent Balance Sheet as filed on
SEDAR), or (iii) specifically and individually described in Section 5.7 of the
Parent Disclosure Letter, neither Parent nor any of its Subsidiaries has any
Liability required to be reflected or reserved against in a consolidated balance
sheet of Parent prepared in accordance with IFRS as applied in preparing the
2013 Parent Balance Sheet or the September 2014 Parent Balance Sheet, as
applicable, except for Liabilities that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect with respect
to Parent.
5.8 Off-Balance Sheet Arrangements
Neither the Parent nor any of
its Subsidiaries is a party to, or has any commitment to become a party to, any
"off balance sheet arrangements", as defined in Item 303(a) of Regulation S-K
under the Exchange Act.
5.9 Absence of Certain Changes
Except as (i) disclosed in
either the Parent SEC Reports or Parent SEDAR Reports filed and publicly
available prior to the Agreement Date, including the September 30, 2014 Parent
Balance Sheet; (ii) contemplated by this Agreement, or (iii) set forth in
Section 5.9 of the Parent Disclosure Letter, as of the date of this Agreement,
except for Sections 5.9(a), 5.9(b) and 5.9(o) which shall be true as of the date
of this Agreement and as of the Closing Date, Parent and its Subsidiaries have
conducted their respective businesses only in the ordinary course of business
consistent with past practice since December 31, 2013 and since December 31,
2013:
(a) there has not been any change or development that, individually or in
the aggregate, has had or would be reasonably likely to have had a Material
Adverse Effect with respect to Parent;
(b) there has not been any material
damage, destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by Parent or its Subsidiaries, whether
or not covered by insurance;
(c) there has not been any amendment or change in
the Parents organizational documents;
B-32
(d) there has not been any
incurrence, creation or assumption of (i) any Lien on any of its assets or
properties (other than Permitted Liens) or (ii) any Liability as a guarantor or
surety with respect to the obligations of any Person other than a Subsidiary of
the Parent other than in the ordinary course of business consistent with past
practice;
(e) there has not been any increase or agreement to increase the
wages, salaries or compensation payable to any officer, employee or director
from the amount thereof in effect as of September 30, 2014, other than increases
in wages, salaries and other cash compensation in the ordinary course of
business consistent with past practice;
(f) there has not been a grant of, or
change in, any severance or termination pay, other than with respect to new
employment agreements entered into in the ordinary course of business consistent
with past practice;
(g) the Parent has not entered into or made any loans to any
of its officers, directors or employees or made any change in its borrowing or
lending arrangements for or on behalf of any of such Persons;
(h) the Parent has
not adopted or amended, or accelerated the payment or vesting of benefits under,
any Parent Benefit Plan;
(i) the Parent has not declared, set aside or paid any
dividend or other distribution (whether in cash, stock or property) with respect
to any of Parents capital stock;
(j) the Parent has not effected or authorized
any split, combination or reclassification of any of Parents capital stock or
any issuance thereof or issued any other securities in respect of, in lieu of or
in substitution for shares of Parents capital stock, except for issuances of
Parent Common Shares upon the exercise of Parent Options or Parent Warrants, in
each case, in accordance with their terms at the time of exercise,
(k) there has
not been any material change, and the Parent does not have Knowledge of any
reason that would require any material change, in any accounting methods (or
underlying assumptions), principles or practices of Parent or its Subsidiaries
or any revaluation of any of its assets;
(l) the Parent has not made or changed
any material Tax election, or settled or compromised any material income Tax
liability, or materially amended any Tax Return;
(m) the Parent has not acquired
any material assets, or sold, leased, exchanged, transferred, licensed,
farmed-out or otherwise disposed of any material assets, in each case other than
in the ordinary course of business consistent with past practice;
(n) the Parent
has not discharged or satisfied any Indebtedness or paid any obligation or
Liability, other than current Liabilities incurred and paid in the ordinary
course of business and consistent with past practice;
(o) there has not been the
commencement of any action, suit, arbitration, mediation, proceeding, claim or
investigation, or receipt notice of, or a threat of any action, suit,
arbitration, mediation, proceeding, claim or investigation against the Parent
and its Subsidiaries relating to any of its business, properties or assets; and
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(p) the Parent has not made any
agreement or commitment (contingent or otherwise) to do any of the foregoing.
5.10 Taxes
Except as set forth in Section 5.10 of the Parent Disclosure
Letter:
(a) Parent and each of its
Subsidiaries have timely filed or will file all Tax Returns required by
applicable Law to be filed by any of them prior to or as of the Closing Date. As
of the Closing Date, the foregoing Tax Returns were true and correct and
prepared in compliance with applicable law in all material respects. The unpaid
Taxes of Parent or its Subsidiaries did not, as of the most recent fiscal month
end, exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the 2013 Parent Balance Sheet (rather than in any notes
thereto) and do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Parent and its Subsidiaries in filing their Tax Returns, and such reserve fully
accounts for all Tax accrued or accruing for all periods up to the date of such
2013 Parent Balance Sheet. Neither Parent, nor any of its Subsidiaries currently
is the beneficiary of any extension of time within which to file any Tax Return.
Parent has made available or will make available prior to the Closing Date true
and complete copies of its Tax Returns to Parent for all periods beginning on or
after January 1, 2010.
(b) Parent and each of its
Subsidiaries have paid all Taxes due with respect to any period ending prior to
or as of the Closing Date except where failure to pay any such Taxes will not
have a Material Adverse Effect with respect to Parent. Parent and each of its
Subsidiaries have withheld and paid all Taxes required to have been withheld and
paid in connection with any amounts paid or owing to any employee, director,
officer, agent, independent contractor, creditor, shareholder, or other third
party, except where failure to pay or withhold any such Taxes will not have a
Material Adverse Effect with respect to Parent.
(c) No Audit by a Tax Authority
is pending or, to the Knowledge of Parent, threatened, with respect to any Tax
Returns filed by, or Taxes due from, Parent or any of its Subsidiaries. No issue
has been raised by any Tax Authority in any Audit of Parent or any of its
Subsidiaries that, if raised with respect to any other period not so audited,
reasonably could be expected to result in a material proposed deficiency for any
period not so audited. No material deficiency or adjustment for any Taxes has
been proposed, asserted, assessed or, to the Knowledge of Parent, threatened,
against Parent or any of its Subsidiaries. No claim has ever been made in
writing by a Tax Authority in a jurisdiction where Parent or any of its
Subsidiaries does not file Tax Returns that Parent or any of its Subsidiaries is
or may be subject to taxation by that jurisdiction. There are no Liens for Taxes
upon the assets of Parent or any of its Subsidiaries, except Liens imposed by
operation of law for current Taxes not yet delinquent.
(d) Neither Parent nor any of its
Subsidiaries has given any waiver of statutes of limitations relating to Taxes
or executed a power of attorney with respect to Tax matters that, in either
case, will be outstanding as of the Closing Date.
(e) There are no Tax sharing, Tax
indemnity or similar agreements to which Parent or any of its Subsidiaries is a
party or bound by or pursuant to which Parent or any of its Subsidiaries has any
obligation or liability for Taxes except for agreements among Parent and its
Subsidiaries.
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(f) Except for the group of which
Parent is currently the parent corporation, Parent has never been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
or a group of corporations filing combined or unitary returns.
(g) Parent has not agreed to make
nor is it required to make any adjustment under Section 481(a) of the Code by
reason of change in accounting method or otherwise.
(h) None of Parent or any of its
Subsidiaries has any liability for Taxes of any Person (other than Parent and
its Subsidiaries) under Treasury Regulation Section 1.1502 -6 (or any similar
provision of state, local or foreign Law), as a transferee or successor, by
contract or otherwise.
(i) Neither Parent nor any of its
Subsidiaries has distributed stock of another Person, or has had its stock
distributed by another Person in a transaction that was purported or intended to
be governed in whole or in part by Code Sections 355 or 361 within the two-year
period preceding the date of this Agreement.
(j) None of Parent or its
Subsidiaries will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (i) change in method
of accounting for a taxable period ending on or prior to the Closing Date, (ii)
closing agreement as described in Code Section 7121 (or any corresponding or
similar provision of state, local, or foreign income Tax law) executed on or
prior to the Closing Date or (iii) an installment sale or open transaction
disposition made on or prior to the Closing Date.
(k) Neither Parent nor any of its
Subsidiaries has participated, within the meaning of Treasury Regulation Section
1.6011 -4(c) (or any predecessor of such Treasury Regulation), in (i) any
listed transaction within the meaning of Code Section 6011 and the Treasury
Regulation thereunder (or any corresponding or similar provision of state,
local, or foreign income Tax Law) or (ii) any transaction required to be
registered with the Internal Revenue Service under Code Section 6111 as in
effect on or prior to December 31, 2013 and the Treasury Regulation thereunder
(or any corresponding or similar provision of state, local, or foreign income
Tax Law).
(l) Neither Parent nor any of its
Subsidiaries is a party to any agreement, contract, arrangement or plan that has
resulted or could result, separately or in the aggregate, in the payment of (i)
any excess parachute payment within the meaning of Code §280G (or any
corresponding provision of state, local or foreign Tax Law) and (ii) any amount
that will not be fully deductible as a result of Code §162(m) (or any
corresponding provision of state, local or foreign Tax Law).
5.11 Litigation
Except as specifically
disclosed in either the Parent SEC Reports or Parent SEDAR Reports filed and
publicly available prior to the Agreement Date or Section 5.11 of the Parent
Disclosure Letter, there is no suit, claim, action, proceeding or investigation
pending or, to Parents Knowledge, threatened against or directly affecting
Parent, any Subsidiary of Parent or any of the directors or officers of Parent
or any of its Subsidiaries in their capacity as such, nor is there any
reasonable basis therefor, that, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect with respect to Parent if
determined adversely to Parent, a Subsidiary of Parent or any such director or
officer.
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Neither Parent nor any of its Subsidiaries, nor any officer,
director or employee of Parent or any of its Subsidiaries, has been permanently
or temporarily enjoined by any order, judgment or decree of any court or any
other Governmental Authority that names such Person from engaging in or
continuing any conduct or practice in connection with the business, assets or
properties of Parent or such Subsidiary nor, to the Knowledge of Parent, is
Parent, any Subsidiary of Parent or any officer, director or employee of Parent
or any of its Subsidiaries under investigation by any Governmental Authority.
There has not been, and to the Parents Knowledge, there is not pending or
contemplated, any investigation by the SEC involving the Parent or any current
or former director or officer of the Parent.
5.12 Employee Benefit Plans; ERISA
(a) Section 5.12(a) of the Parent
Disclosure Letter contains a true and complete list of each plan, fund,
contract, program, agreement and arrangement (whether written or not) for the
benefit of present or former employees or directors, including those intended to
provide pension, profit sharing, retirement, supplemental retirement, deferred
compensation, equity incentive, or bonus or other incentive benefits (whether or
not tax qualified and whether or not defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended (ERISA)); disability,
medical, dental, or other health insurance benefits, life insurance or other
death benefit benefits (whether or not defined in Section 3(1) of ERISA); salary
continuation, unemployment, supplemental unemployment, severance, termination
pay, change-in-control, vacation or holiday benefits (whether or not defined in
Section 3(3) of ERISA) (i) to which Parent or any of its Subsidiaries is a party
or by which it is bound, or (ii) with respect to which Parent or any of its
Subsidiaries has made any payments or contributions or may otherwise have any
liability, whether direct or indirect, (including any such plan or other
arrangement formerly maintained by Parent or any of its Subsidiaries), (iii)
that Parent or any of its Subsidiaries has committed to implement, establish,
adopt or contribute to in the future, (iv) for which Parent or any of its
Subsidiaries is or may be financially liable as a result of Parents affiliation
with any company or any companys shareholders which together with Parent or any
of its Subsidiaries would be deemed a single employer within the meaning of
Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA (a Parent
ERISA Affiliate) (whether or not such affiliation exists at the date of this
Agreement and notwithstanding that the plan is maintained by the Parent or any
of its Subsidiaries for the benefit of its employees or former employees), (v)
for or with respect to which Parent or any of its Subsidiaries is or may become
liable under any common law successor doctrine, express successor liability
provision of Law, labor or employment Law or agreement with a predecessor
employer (Parent Benefit Plan). Parent Benefit Plan does not include any
arrangement that has been terminated and completely wound up prior to the date
of this Agreement and for which neither Parent nor any of its affiliates has any
present or potential Liability.
(b) With respect to each Parent
Benefit Plan, (i) such plan has been administered in compliance with its terms
and applicable Law in all material respects, (ii) each Parent Benefit Plan that
is intended to be qualified within the meaning of Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service
or is maintained under a prototype or volume submitter plan and with respect to
which the Parent and the Parent ERISA Affiliates are entitled to rely upon a
favorable opinion or advisory letter issued by the Internal Revenue Service,
(iii) to the Knowledge of the Parent, there is no circumstance that will result
in the revocation of any favorable determination letter, opinion letter or
advisory letter issued by the Internal Revenue Service, (iv) neither Parent nor
any Parent ERISA Affiliate has engaged in, and Parent and each Parent ERISA
Affiliate do not have any Knowledge of any Person that has engaged in, any
transaction or acted or failed to act in any manner that would subject Parent or
any Parent ERISA Affiliate to any liability for a breach of fiduciary duty under
ERISA, (v) no disputes are pending or, to the Knowledge of Parent or any Parent
ERISA Affiliate, threatened, other than ordinary claims for benefits, nor is
there any basis for such a proceeding, (vi) neither Parent nor any Parent ERISA
Affiliate has engaged in, and neither Parent nor any Parent ERISA Affiliate has
any Knowledge of any Person that has engaged in, any transaction prohibited by
Section 406 of ERISA or Section 4975 of the Code, except for those which an
exemption applies (vii) all contributions due have been made on a timely basis,
(viii) all required reports, notices and descriptions related to the Parent
Benefit Plan (including, but not limited to, those required by Parent Benefit
Plan provisions, ERISA and the Code) have been distributed to participants or
filed with the appropriate Governmental Authority, (ix) all contributions made
or that will be made under any Parent Benefit Plan meet the requirements for
deductibility under the Code, (x) Parent is not liable (either directly or as a
result of indemnification) for any excise Taxes, penalties, damages or equitable
relief as a result of any violation under ERISA or any other applicable Law,
(xi) no leased employees (as defined in Section 414(n) of the Code) or
independent contractors are eligible for, or participate in, any Parent Benefit
Plan and (xii) no audit or examination by a Governmental Authority is currently
pending (nor has notice been received regarding a potential audit or
examination) and there are no pending submissions to a Governmental Authority.
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(c) With respect to all Parent Benefit Plans, to the
extent that the following documents exist, Parent has furnished Target with true
and complete copies of: (i) the most recent determination letter, if any,
received by the Parent or any Parent ERISA Affiliate from the IRS, (ii) all
pending applications for rulings, determinations, opinions, no action letters
and the like filed with any governmental agency (including the Department of
Labor and the Internal Revenue Service), (iii) the Annual Report/Return (Form
Series 5500) with financial statements, if any, and attachments for the most
recent plan year, (iv) Parent Benefit Plan documents, summary plan descriptions,
trust agreements, insurance contracts, individual agreements, service agreements
and all related contracts and documents (including any material employee
summaries and material employee communications), and (v) all Internal Revenue
Service or Department of Labor audit closing letters, audit finding letters,
revenue agent findings and similar documents.
(d) Any Parent Benefit Plan,
individual employment, severance or other compensatory agreement or arrangement
with respect to which the Parent or any Parent ERISA Affiliate has any current
or future obligation that is a nonqualified deferred compensation plan (as
defined in Section 409A(d)(1) of the Code), complies in form and operation with
the requirements under Code Section 409A and the Treasury Regulations issued
thereunder (without regard to the effective date of such regulations) so as not
to result in the imposition of additional Tax or interest to a service
provider.
(e) No Parent Benefit Plan is a
multiple employer plan (as defined in Section 413(c) of the Code), a
multiemployer plan (as defined in Section 3(37) of ERISA), a defined benefit
pension plan (as defined in Section 3(35) of ERISA) subject to Title IV of
ERISA, a plan subject to the minimum funding standards under Section 302 of
ERISA or Section 412 of the Code, a plan that is intended to be qualified under
Section 401(a), a welfare plan that is self-funded, a plan that owns employer
stock or a plan that is funded, in whole or in part, through a voluntary
employees beneficiary association exempt from Tax under Section 501(c)(9) of
the Code.
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(f) No present or former
employees or directors of Parent or any of its Subsidiaries are covered by any
employee agreements or plans that provide or will provide severance pay,
post-termination health or life insurance benefits (except as required pursuant
to Section 4980(B) of the Code) or any similar benefits.
(g) No condition, agreement or
Parent Benefit Plan provision limits the right of Parent or Merger Sub to amend,
cut back or terminate any Parent Benefit Plan (except to the extent such
limitation arises under ERISA). Each Parent Benefit Plan may be unilaterally
amended or terminated in its entirety without liability except as to (i)
benefits accrued thereunder prior to such amendment or termination or (ii) costs
necessary to satisfy any notice periods described in such Parent Benefit Plan or
funding vehicle.
(h) The execution, delivery, and
performance by Parent of this Agreement or any Ancillary Agreement to which
Parent is or will be a party and the consummation of the Transactions will not
constitute an event under any Parent Benefit Plan that will (i) cause any Parent
Benefit Plan to increase benefits payable to any participant or beneficiary,
(ii) entitle any current or former employee or director of Parent or any of its
Subsidiaries to severance pay, unemployment compensation or any other payment,
benefit or award, or (iii) modify or result in any payment (whether as severance
pay or otherwise), acceleration, vesting, or increases in benefits, awards or
compensation with respect to any employee of the Parent or Subsidiary of Parent,
except as set forth in Section 5.12(f) of the Parent Disclosure Letter.
5.13 Environmental Liability
Except as set forth in Section 5.13 of the Parent Disclosure
Letter or either the Parent SEC
Reports or Parent SEDAR Reports filed and publicly available
prior to the Agreement Date, including the September 30, 2014 Parent Balance
Sheet: (a) The businesses of Parent and its Subsidiaries have been and are
operated in compliance in all material respects with all applicable
Environmental Laws.
(b) Neither Parent nor any of its
Subsidiaries has caused or allowed the generation, treatment, manufacture,
processing, distribution, use, storage, discharge, release, disposal, transport
or handling of any Hazardous Substances, except in compliance in all material
respects with all Environmental Laws and in a manner that does not give rise to
any Liability under any Environmental Laws, and, to Parents Knowledge, no
generation, treatment, manufacture, processing, distribution, use, storage,
discharge, release, disposal, transport or handling of any Hazardous Substances
has otherwise occurred at any property or facility currently or formerly owned,
leased or operated by Parent or any of its Subsidiaries, including the Parent
Real Property, except in compliance in all material respects with all
Environmental Laws and in a manner that does not give rise to any Liability
under any Environmental Laws.
(c) Neither Parent nor any of its
Subsidiaries has received any written notice from any Governmental Authority or
third party or, to the Knowledge of Parent, any other communication alleging or
concerning any material violation by Parent or any of its Subsidiaries of, or
responsibility or liability of Parent or any of its Subsidiaries under, any
Environmental Law. There are no pending, or to the Knowledge of Parent,
threatened, claims, suits, actions, proceedings or investigations with respect
to the businesses or operations of Parent or any of its Subsidiaries alleging or
concerning any material violation of, or responsibility or liability under, any
Environmental Law, nor does Parent have any Knowledge of any fact or condition
that could give rise to such a claim, suit, action, proceeding or investigation.
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(d) Parent and its Subsidiaries have obtained and are in
compliance in all material respects with all approvals, permits, licenses,
registrations and similar authorizations from all Governmental Authorities under
all Environmental Laws required for the operation and ownership of the Parent
Real Property, Parent Improvements and the businesses of Parent and its
Subsidiaries as currently conducted, and there are no pending or, to the
Knowledge of Parent, threatened, actions, proceedings or investigations alleging
violations of or seeking to modify, revoke or deny renewal of any of such
approvals, permits, licenses, registrations and authorizations. Parent does not
have Knowledge of any fact or condition that is reasonably likely to give rise
to any action, proceeding or investigation regarding the violation of or seeking
to modify, revoke or deny renewal of any such approvals, permits, licenses,
registrations and authorizations.
(e) Without in any way limiting
the generality of the foregoing, to Parents Knowledge, (i) all offsite
locations where Parent or any of its Subsidiaries has transported, released,
discharged, stored, disposed or arranged for the disposal of Hazardous
Substances are and have been licensed and operating in all material respects
with Environmental Laws and (ii) no PCBs, PCB-containing items,
asbestos-containing materials, or radioactive materials are now or have been
used or stored at any property owned, leased or operated by Parent or any of its
Subsidiaries, except in compliance in all material respects with Environmental
Laws and in a manner that does not give rise to any Liability under any
Environmental Laws.
(f) No claims have been asserted
or, to Parents Knowledge, threatened to be asserted against Parent or its
Subsidiaries for any personal injury (including wrongful death) or property
damage (real or personal) arising out of alleged exposure or otherwise related
to Hazardous Substances used, handled, generated, transported or disposed of by
Parent or its Subsidiaries.
(g) No Lien has been attached or
filed or is, to the Knowledge of Parent, threatened against Parent or its
Subsidiaries in favor of any Person for (i) any liability under or violation of
any applicable Environmental Law, (ii) any Release of Hazardous Substances or
(iii) any imposition of Liability.
(h) No property currently or
formerly owned or operated by Parent or its Subsidiaries, including the Parent
Real Property, is listed on a List, and neither the Parent nor its Subsidiaries
have received any notice that any such property is being considered for listing
on a List.
(i) All environmental audits,
site assessments, risk assessments, and other environmental reports and studies,
including summaries of any material test results or analytic data, conducted by,
at the expense of, or on behalf of Parent or its Subsidiaries or that are
otherwise in the possession of Parent or its Subsidiaries have been provided to
Target.
5.14 Compliance with Applicable Laws
Parent and each of its
Subsidiaries hold all approvals, licenses, permits, registrations, exemptions
and similar authorizations from Governmental Authorities and other Persons
necessary for the lawful conduct of their respective businesses as now conducted
(the Parent Permits). Except as set forth in either the Parent SEC
Reports or Parent SEDAR Reports, or in Section 5.14 of the Parent Disclosure
Letter, Parent and each of its Subsidiaries have been and are in compliance with
the terms of the Parent Permits and all applicable Laws in all material
respects, and neither Parent nor any of its Subsidiaries has received any notice
from any Person that the business of Parent or any of its Subsidiaries has been
or is being conducted in violation of any applicable Law or the terms of any
Parent Permit in any material respect. Neither Parent nor any Subsidiary has
received any notice that any Parent Permit will be terminated or modified or
cannot be renewed in the ordinary course of business, and Parent has no
Knowledge of any reasonable basis for any such termination, modification or
non-renewal.
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5.15 Insurance
Section 5.15 of the Parent
Disclosure Letter sets forth a complete and accurate list of each insurance
policy under which Parent or its Subsidiaries has been an insured, a named
insured or otherwise the principal beneficiary of coverage at any time during
the past three years. Parent has made available or will make available prior to
the Closing Date to Parent a true and complete copy of each such policy. With
respect to each such policy, none of Parent, its Subsidiaries or, to Parents
Knowledge, any other party to the policy is in material breach or default
thereunder (including with respect to the payment of premiums or the giving of
notices), and Parent does not know of any occurrence or any event which (with
notice or the lapse of time or both) would constitute such a breach or default
or permit termination, modification or acceleration under the policy. Neither
Parent nor any Subsidiary has received any notice that any of its policies
cannot be renewed in the ordinary course of business, and has no Knowledge of
any reasonable basis for any such non-renewal. All appropriate insurers under
such insurance policies have been notified of all potentially insurable losses
and pending litigation and legal matters, and no such insurer has informed
either the Parent or any of its Subsidiaries of any denial of coverage or
reservation of rights thereto. Section 5.15 of the Parent Disclosure Letter
describes any self-insurance arrangements affecting Parent or its Subsidiaries.
5.16 Properties; Mining Claims
(a) Section 5.16 of the Parent
Disclosure Letter sets out all of the real property owned, held, leased or
controlled, whether legally or beneficially for the benefit of Parent or the
Parent Material Subsidiaries, as applicable, including all material (i) fee
surface and mineral property (Parent Fee Property), (ii) unpatented mining
claims (Parent Mining Claims), and (iii) real property leases, mining leases,
surface use agreements, rights-of-way, easements, or other contracts with
respect to real property (Parent Property Contracts). The Parent Fee Property,
Parent Mining Claims and Parent Property Contracts will be collectively referred
to hereinafter as the Parent Real Property. (b) Except as provided in Section
5.16 of the Parent Disclosure Letter or either the Parent SEC Reports or Parent
SEDAR Reports, Parent or its Subsidiaries own good and marketable title to an
undivided one hundred percent (100%) record and beneficial interest in and to
the Parent Real Property, in each case free and clear of any Liens, other than
Permitted Liens. Neither Parent nor its Subsidiaries have leased, subleased,
optioned, mortgaged, or entered into other contract or agreement transferring
any interest in the Parent Real Property, Property Contracts, Parent Water
Rights, Parent Improvements, or Parent Listed Personal Property to any Person,
and there are no actions, suits, administrative or other proceedings pending,
or, to Parents Knowledge, threatened against any of the Parent Real Property.
All ad valorem
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(c) Except as set forth in Section 5.16 of the Parent
Disclosure Letter, (i) all annual labor and assessment work, rental fees or
maintenance fees, license, royalty, and tax fees, and filings with any
Governmental Authority required to hold the Mining Claims and the Property
Contracts have been properly and timely performed, paid or filed, in all
material respects, and all affidavits of annual labor and assessment work and
other filings required to maintain the Mining Claims in good standing have been
properly and timely recorded and filed with the appropriate Governmental
Authorities; (ii) the Mining Claims and Property Contracts are free and clear of
any claims or Liens except for Permitted Liens, and there are no material
conflicting claims by a third party with respect to the lands covered by the
Mining Claims or Property Contracts; and (iii) there are no royalties or similar
types of obligations payable or required to be paid to any Person having an
interest in the Mining Claims or Property Contracts.
(d) All Property Contracts are in
good standing, valid and effective in accordance with their respective terms,
Parent and its Subsidiaries have performed all of their respective material
obligations thereunder, and there is not, under any of such Property Contracts
any existing default or event of default (or event which with notice or lapse or
time, or both would constitute a default; or would constitute a basis of force
majeure or other claim of excusable delay or non-performance) of Parent or its
Subsidiaries or the other party to the Property Contract. To Parents Knowledge,
the party granting Parent or its Subsidiaries rights to the properties covered
by those Property Contracts owns good and marketable title to those properties,
free and clear of all Liens, other than Permitted Liens.
(e) Section 5.16(e) of the Parent
Disclosure Letter sets out water rights owned, held, leased or controlled,
whether legally or beneficially for the benefit of Parent or its Subsidiaries,
as applicable, including all surface and underground water and water rights,
including but not limited to certificates, licenses, and permits, together with
all applications for water rights or applications or permits for the use,
transfer or change of water rights, ditch and ditch rights, well and well
rights, reservoir and reservoir rights, stock or interests in irrigation or
ditch companies appurtenant to the Parent Real Property and all other rights to
water for use at or in connection with the Parent Real Property or the mining of
minerals from the Parent Real Property (Parent Water Rights). Except as set
forth in Section 5.16(e) of the Parent Disclosure Letter, (i) Parent or its
Subsidiaries own good and marketable title to an undivided one hundred percent
(100%) record and beneficial interest in and to the Parent Water Rights, free
and clear of all Liens, except for Permitted Liens, and (ii) the Parent Water
Rights are sufficient to conduct the operations and activities of the Parent and
its Subsidiaries as they are currently being conducted and are contemplated to
be conducted.
(f) Except as set forth in
Section 5.16(f) of the Parent Disclosure Letter, (i) Parent owns good and
marketable title to an undivided one hundred percent (100%) interest in and to
all improvements (Parent Improvements) to the Parent Real Property and
personal property (Parent Listed Personal Property) free and clear of all
Liens except for Permitted Liens, and (ii) all Parent Improvements and Parent
Listed Personal Property are suitable for the purposes for which they are
currently used by Parent.
(g) Except as set forth in
Section 5.16(g) of the Parent Disclosure Letter, Parent or its Subsidiaries owns
or leases all of the assets, tangible and intangible, of any nature whatsoever,
necessary to operate its business and their business as currently conducted.
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(h) Except as disclosed in
Section 5.16(h) of the Parent Disclosure Letter, Parent or its Subsidiaries have
now and, immediately following the consummation of the transactions contemplated
by this Agreement, will have the right to occupy and use each of their Material
Real Properties and Parent Improvements in the same manner currently occupied
and used by Parent or its Subsidiaries to conduct their business as presently
conducted.
(i) Parent or its Subsidiaries is
not obligated under any forward sale or advanced sale contract with respect to
minerals produced or producible from the Parent Real Property under which sales
proceeds are paid by the purchaser in advance of delivery.
(j) Parent has made available to
Target all information, data, geological and geophysical test results, maps and
surveys in the possession of Parent or its Subsidiaries that might reasonably be
expected to be material to a prospective purchaser of the Parent or that have
been requested by Target relating to Parent or its Subsidiaries and their
properties and business, and Parent and its Subsidiaries have not withheld from
Parent Parties any such information, data, test results, maps or surveys. Parent
represents and warrants that all such information, data, test results, maps and
surveys were prepared or procured by Parent or its Subsidiaries in the ordinary
course of business.
(k) Each of the technical reports
prepared by or on behalf of Parent and filed by Parent on SEDAR (the Parent
43-101 Technical Reports) was prepared in good faith and in the ordinary course
of business and in accordance with the requirements of NI 43-101. To Parents
Knowledge, the estimates of mineral reserves and resources reflected in the
Target 43-101 Technical Reports were estimated in good faith using methods and
based on assumptions considered reasonable at the time of estimation on the
basis of drill and test data generated and compiled in accordance with prudent
mining and engineering practice. The mine plans of Parent listed in Section 5.16
of the Parent Disclosure Letter, including the financial forecasts and budgets
included therein and the studies related thereto (i) have been prepared by
management of Parent in good faith and in the ordinary course of business, and
(ii) are based on assumptions, including assumptions relating to mining
operations, capital and operating costs and production rates, that are
considered by management to be reasonable, as at the date the mine plans were
prepared, for the purpose of planning the future mining operations of Parent,
provided that Target acknowledges that Parent provides no assurance as to the
future uranium prices used in such mine plans, other than where the uranium
prices reflect contractual prices for uranium to be delivered under existing
supply agreements.
5.17 Material Contracts
Parent has provided or will
make available to Target prior to the Closing Date true and complete copies of
all Material Contracts unless otherwise available in either Parent SEC Reports
or Parent SEDAR Reports, and has referenced each of such Material Contracts in
Section 5.17 of the Parent Disclosure Letter. Except as set forth in Section
5.17 of the Parent Disclosure Letter, each Material Contract is valid and
binding and in full force and effect and Parent and each of its Subsidiaries
have performed all obligations required to be performed by them under each
Material Contract in all material respects. To Parents Knowledge, there does
not exist, nor has Parent or any of its Subsidiaries received written notice of,
any material breach of or violation or default under, any of the terms,
conditions or provisions of any Material Contract and neither Parent nor any of
its Subsidiaries has received written notice of the desire of the other party or
parties to any such contract to exercise any rights such party has to cancel,
terminate or repudiate such contract or exercise remedies thereunder that would
be reasonably property and other Taxes assessed against the Parent Real Property
have been timely and properly paid.
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5.18 Required Shareholder Vote
The affirmative vote of the
holders, as of the record date, of a majority of the Parent Common Shares voted
in person or represented by proxy and entitled to vote thereon at a duly
convened and held shareholder meeting at which a quorum is present (the
Parent Shareholders Approval) is the only vote required of the holders
of any class or series of Parents common shares that shall be necessary to
adopt this Agreement and to consummate the Transactions.
5.19 Operations of Merger Sub
Merger Sub is an indirect
wholly owned subsidiary of Parent, and was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.
5.20 Form F-4 and Proxy Statement/Prospectus
None of the information to be
supplied by Parent or Merger Sub expressly for inclusion in (a) the Form F-4 or
(b) the Proxy Statement/Prospectus, in each case, and any amendments or
supplements thereto, will, at the respective times such documents are filed,
and, in the case of the Proxy Statement/Prospectus, at the time the Proxy
Statement/Prospectus or any amendment or supplement thereto is first mailed to
the Target shareholders, at the time of the Target Meeting and at the Effective
Time, and, in the case of the Form F-4, when it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be made therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
5.21 Fairness Opinion; Board Approval
(a) Parents board of directors
has received a written opinion dated January 2, 2015 from Roth Capital Partners,
LLC (Roth) to the effect that, as of the date of such opinion, the Exchange
Ratio is fair, from a financial point of view, to the holders of the Parent
Common Shares. A true and complete copy of such opinion has been provided to
Target.
(b) Parents board of directors,
at a meeting duly called and held, unanimously (i) determined that this
Agreement and the Transactions are advisable and are fair to, and in the best
interests of, the shareholders of Parent, (ii) approved this Agreement and the
Transactions and (iii) recommended approval and adoption of this Agreement and
the Merger and the Transactions by the shareholders of Parent.
5.22 Controls and Procedures
Except as set forth in either
the Parent SEC Reports or Parent SEDAR Reports, Parent has established and
maintains disclosure controls and procedures that are reasonably designed to
ensure that all material information (both financial and non-financial) required
to be disclosed by Parent in the reports that it is required to file under
applicable Laws (including applicable securities Laws) is recorded, processed,
summarized and reported within the time periods specified in the applicable Laws
and that all such information is accumulated and communicated to Parents
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the chief executive officer and
chief financial officer of Parent required under applicable Laws (including
applicable securities Laws) with respect to such reports. Except as set forth in
Section 5.22 of the Parent Disclosure Letter, or either the Parent SEC Reports
or Parent SEDAR Reports, neither Parent nor its independent auditors have
identified any significant deficiencies or material weaknesses in Parents
or any of its Subsidiaries internal controls as contemplated under applicable
Laws (including applicable securities Laws and Section 404 of the Sarbanes-Oxley
Act). Parent has made or will make available to Target prior to the Closing Date
true and complete copies of any disclosures made by management to Parents
auditors and audit committee regarding such significant deficiencies or material
weaknesses. Parent has no Knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of Parent or any of its
Subsidiaries or their respective internal accounting controls, including any
material complaint, allegation, assertion or claim that Parent or any of its
Subsidiaries has engaged in questionable accounting or auditing practices. No
attorney representing Parent or any of its Subsidiaries, whether or not employed
by Parent or any of its Subsidiaries, has reported evidence of a violation of
securities laws, breach of fiduciary duty or similar violation by Parent or any
of its officers, directors, employees or agents to the board of directors of
Parent or any committee thereof or to any director or officer of Parent. Parent
has not granted any waivers with respect to its policies regarding ethical
conduct.
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5.23 Parent Common Shares
The Parent Common Shares
issuable upon conversion of the Target Common Shares upon the completion of the
Merger will, when issued and delivered in accordance with this Agreement, be
duly authorized, validly issued, fully paid and nonassessable.
5.24 Substituted Options and Assumed Warrants
The Substituted Options and
Assumed Warrants will, when issued and delivered in accordance with this
Agreement, be duly authorized, validly issued and binding obligations of Parent,
enforceable against Parent in accordance with their terms, and any Parent Common
Shares issued upon exercise thereof in accordance with the terms of the relevant
option plan, option agreement or warrant indenture will, when issued, be duly
authorized, validly issued, fully paid and nonassessable.
5.25 Intellectual Property
Except as set forth in Section
5.25 of the Parent Disclosure Letter, the Parent owns, licenses or otherwise
possesses title to or the right to use all patents, trademarks, service marks,
trade names, registered copyrights and applications therefor owned by or
registered in the name of Parent, together with all other material intellectual
property assets, including computer software, owned or licensed by Parent, and,
in either case, used by the Parent in connection with the operation and conduct
of its business (collectively, the Parent Intellectual Property). The
Parent Intellectual Property set forth in Section 5.25 of the Parent Disclosure
Letter constitutes all material intellectual property used by the Parent in
connection with the conduct and operation of its business. Except as set forth
in Section 5.25 of the Parent Disclosure Letter, Parent will have the right to
use the Parent Intellectual Property following the Closing. To the Knowledge of
Parent, it is not infringing any valid patent right, trademark, service mark,
trade name, copyright or other intellectual property right of any third party in
connection with its use of the Parent Intellectual Property that would be
reasonably likely to have a Material Adverse Effect with respect to Parent.
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5.26 Affiliate Transactions
In addition to those identified
in either the Parent SEC Reports or Parent SEDAR Reports, Section 5.26 of the
Parent Disclosure Letter contains a complete and accurate list of all
agreements, contracts, commitments or transactions (other than Parent Benefit
Plans), whether or not entered into in the ordinary course of business, to or by
which Parent or any of its Subsidiaries, on the one hand, and any of their
officers, directors or affiliates (or any affiliates of such officers or
directors), on the other hand, are or have been a party or are otherwise bound
or affected and that (a) are currently pending or proposed, in effect or have
been in effect at any time since September 30, 2014 or (b) involve continuing
Liabilities and obligations to or of Parent or any of its Subsidiaries.
5.27 Brokers
No broker, finder or investment
banker (other than Cantor Fitzgerald (Cantor) and Roth), the fees and
expenses of which will be paid by Parent at Closing) is entitled to any
brokerage, finders fee or other fee or commission payable by Parent or any of
its Subsidiaries in connection with the Transactions based upon arrangements
made by and on behalf of Parent or any of its Subsidiaries. Parent has
heretofore furnished to Target a true and complete copy of all agreements
between (i) Parent and Cantor and (ii) Parent and Roth, pursuant to which such
firm would be entitled to any payment relating to the Transactions.
5.28 Takeover Matters
The Parent does not have any
applicable anti-takeover provision in its articles of incorporation or bylaws.
Parent and Parents board of directors have each taken all actions necessary to
be taken such that the Parent Rights Plan is not, or at the Effective Time will
not be, applicable to Target, Merger Sub, the Voting Agreements, this Agreement
or the Transactions.
5.29 Related Party Transactions
Except as set forth in the
Parent SEDAR Reports, the Parent has not, and, to the knowledge of the Parent,
has not been deemed to have for purposes of any applicable Law, engaged in or
been party to any transaction with any of its officers, directors, employees or
direct or indirect shareholders or, to the knowledge of the Parent, any member
of their immediate families (i) acquired or have the use of property for
proceeds greater than the fair market value thereof, (ii) received services or
have the use of property for consideration other than the fair market value
thereof, or (iii) received interest or any other amount other than at a fair
market value rate from any person with whom it does not deal at arms length
within the meaning of applicable taxation acts. Except as set forth in the
Parent SEDAR Reports, the Parent has not, and, to the knowledge of the Parent,
has not been deemed to have for purposes of any applicable Law, engaged in or
been party to any transaction with any of its officers, directors, employees or
direct or indirect shareholders or, to the knowledge of the Parent, any member
of their immediate families (i) disposed of the property for proceeds less than
the fair market value thereof, (ii) performed services for consideration other
than the fair market value thereof or (iii) paid interest or any other amount
other than at a fair market value rate to any person with whom it does not deal
at arms length within the meaning of applicable acts. Except as set forth in
the Parent SEDAR Reports and to the knowledge of the Parent, none of the
officers, directors and employees of the Parent, no shareholder of the Parent
and no immediate family member of an officer, director, employee or such
beneficial owner, has a direct ownership interest of more than ten percent (10%)
of the equity ownership of any firm or corporation that competes with, or does
business with, or has any contractual arrangement with, the Parent. Since the
date of 2013 Parent Balance Sheet, no event has occurred that would be required
to be reported as a certain relationship of related transaction pursuant to
Item 404 of Regulation S-K of the SEC.
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5.30 Compliance with the U.S. Foreign Corrupt Practices Act
and Other Applicable Anti-Corruption Laws.
(a) Parent and its Subsidiaries
have complied with the U.S. Foreign Corrupt Practices Act of 1977 and other
applicable anti-corruption laws.
(b) Neither Parent nor any of its
Subsidiaries nor any director, officer, agent, employee or representative of
Parent or any of its Subsidiaries at the direction of or on behalf of Parent or
any of its Subsidiaries corruptly or otherwise illegally offered or gave
anything of value to: (i) any official, employee or representative of a
Governmental Authority, any political party or official thereof, or any
candidate for political office; or (ii) any other Person, in any such case while
knowing, or having reason to know, that all or a portion of such money or thing
of value may be offered, given or promised, directly or indirectly, to any
official, employee or representative of a Governmental Authority, any political
party or official thereof, or candidate for political office for the purpose of
the following: (x) influencing any action or decision of such Person, in his or
her official capacity, including a decision to fail to perform his or her
official function; (y) inducing such Person to use his or her influence with any
Governmental Authority to affect or influence any act or decision of such
Governmental Authority to assist in obtaining or retaining business or to secure
an improper business advantage; or (z) where such payment would constitute a
bribe, kickback or illegal or improper payment to assist Parent or any of its
Subsidiaries in obtaining or retaining business for, or with, or directing
business to, any Person or in securing any improper advantage.
(c) There have been no false or
fictitious entries made in the books or records of Parent or any of its
Subsidiaries relating to any illegal payment or secret or unrecorded fund and
neither Parent nor any of its Subsidiaries has established or maintained a
secret or unrecorded fund.
5.31 Books and Records
To the Knowledge of the Parent
and its Subsidiaries, the minute books and other similar records of the Parent
and its Subsidiaries for the most recent three full fiscal years and any interim
period contain a true and complete record, in all material respects, of all
actions taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors (and other similar governing bodies)
and committees of the boards of directors (and other similar governing bodies)
of the Parent and its Subsidiaries.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of
Business by Target Pending the Merger
From the Agreement Date until
the earlier of the Effective Time and the date, if any, on which this Agreement
is terminated pursuant to Article X, except as set forth in Section 6.1
of the Target Disclosure Letter, as otherwise specifically contemplated by this
Agreement, or as required by applicable Law, by a Governmental Authority of
competent jurisdiction or by the rules or requirements of the TSX, date of 2013
Parent Balance Sheet, no event has occurred that would be required to be
reported as a certain relationship of related transaction pursuant to Item 404
of Regulation S-K of the SEC.
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(a) amend or propose to amend its articles of incorporation or
bylaws or other organizational documents;
(b) (i) declare, set aside or pay any dividend or other
distribution with respect to any shares of its capital stock, (ii) repurchase,
redeem or otherwise acquire any outstanding shares of its capital stock or other
securities, (iii) split, combine or reclassify any shares of its capital stock
or (iv) issue any other securities in respect of, in lieu of or in substitution
for shares of Targets capital stock, except for issuances of Target Common
Shares upon the exercise of Target Stock Options or Target Warrants, in each
case, in accordance with their terms at the time of exercise;
(c) issue, sell, pledge, dispose of or encumber any securities
(whether through the issuance or granting of options, warrants, rights or
otherwise, other than upon the exercise of Target Stock Options outstanding on
the Agreement Date and disclosed in the Target Disclosure Letter), or enter into
any amendment of any term of any outstanding security;
(d) (i) incur or assume any Indebtedness except Indebtedness
incurred in the ordinary course of business and consistent with past practice
and in no event exceeding $1,500,000 in the aggregate or as otherwise set out in
the document titled 5-Year URZ Operating Summary provided by Target to Parent
(the Target Budget), (ii) modify the terms of any Indebtedness, (iii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person, except in
the ordinary course of business and consistent with past practice and in no
event exceeding $200,000 in the aggregate or as otherwise set out in the Target
Budget, (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than short-term investments of cash in
the ordinary course of business);
(e) subject any assets to, incur, create or assume, any Lien
other than a Permitted Lien or any Liability as a guarantor or surety with
respect to the obligations of any Person other than in the ordinary course of
business consistent with past practice;
(f) (i) increase the compensation payable or to become payable
or the benefits provided to its directors, officers or employees, except for
increases in the ordinary course of business in salaries or wages of employees
of Target who are not directors or officers of Target, (ii) adopt, amend (other
than amendments that reduce the amounts payable by Target, or amendments
required by Law or otherwise to comply with ERISA, the Code or other applicable
Law) or assume an obligation to contribute to, any employee benefit plan or
arrangement of any type or collective bargaining agreement or enter into any
employment, severance or similar contract with any Person or amend any such
existing contracts to increase or accelerate the payment or provision of any
amounts payable or benefits provided thereunder, (iii) engage in any transaction
in connection with which Target could be subject (directly or indirectly) to
either a civil penalty assessed pursuant to subsections (c), (i) or (l) of
Section 502 of ERISA or a Tax imposed pursuant to Chapter 43 of Subtitle D of
the Code, (iv) terminate any of the Target Benefit Plans, or take any other
action with respect to a Target Benefit Plan that could result in Liability to
any Person, (v) take any action that could adversely affect a Target Benefit
Plans compliance with the applicable requirements of ERISA, (vi) fail to make
full payment when due of all amounts which, under the provisions of any Target
Benefit Plans, any agreement relating thereto or applicable Law, such party is
required to pay as contributions thereto, (vii) fail to file, on a timely basis,
all reports and forms required by federal regulations with respect to any Target
Benefit Plans or (viii) adopt or amend, or accelerate the payment or vesting of
benefits under, any Target Benefit Plan;
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(g) acquire, by merging or consolidating with, or by purchasing
an equity interest in or the assets of, or in any other manner, any business or
Person, exceeding $1,000,000;
(h) sell, lease, license or otherwise surrender, relinquish or
dispose of any assets with an aggregate fair market value exceeding $1,000,000;
(i) transfer, sell, pledge, encumber or dispose of any capital
stock or other equity interest in any Subsidiary, other than in connection with
6.1(h);
(j) incur or commit to any capital expenditures, or become
bound or obligated to participate in any operation, or consent to participate in
any operation, other than in the ordinary course of business, as contemplated in
current mine plans or as otherwise previously disclosed to Parent;
(k) make any change to any material Tax method of accounting,
make or change any material Tax election, authorize any indemnities for Taxes,
extend any period for assessment of any Tax, file any request for ruling or
determination, amend any material Tax Return (including by way of a claim for
refund) or settle or compromise any material Tax liability, except where such
action would not have a material effect on the Tax position of Target;
(l) (i) except as set forth in clause (ii), pay, discharge or
satisfy any material account payable or other material Liability beyond or in
advance of its due date or the date when such account payable or Liability would
have been paid in the ordinary course of business and consistent with past
practice or (ii) compromise, settle, grant any waiver or release relating to any
action, suit or proceeding, other than settlements or compromises where the
amount paid or to be paid does not exceed $1,000,000 in the aggregate for all
claims;
(m) make any change in any method of accounting or accounting
practice or procedure except for any such change required by GAAP;
(n) enter into any agreement, understanding or commitment that
materially restrains, limits or impedes its ability, or would materially limit
the ability of the Surviving Entity or any affiliate of the Surviving Entity
after the Effective Time, to compete in or conduct any line of business or
compete with any Person or in any geographic area or during any period of time,
provided that nothing contained herein shall restrict Target from entering into
confidentiality agreements and property acquisition agreements which contain
area of interest restrictions typical in the mining industry in connection
with transactions permitted under Section 6.1(g);
(o) enter into any joint venture, partnership or other similar
arrangement or materially amend or modify the terms of (or waive any material
rights under) any existing joint venture, partnership or other similar
arrangement;
B-48
(p) enter into any agreement or
transaction that would be required to be disclosed in the Target Disclosure
Letter pursuant to Section 4.21 regarding affiliate transactions if such
agreement or transaction had been entered into prior to the Agreement Date;
(q) grant, or change, any severance or termination pay, other
than with respect to employment agreements entered into with new employees in
the ordinary course of business consistent with past practice;
(r) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
its Affiliates, including any transactions, agreements, arrangements or
understandings with any Affiliate or other Person covered under Item 404 of
Regulation S-K under the Securities Act, that would be required to be disclosed
under Item 404;
(s) effectuate a plant closing or mass layoff, as those
terms are defined in the Worker Adjustment and Retraining Notification Act of
1988 (the WARN Act), affecting in whole or in part any site of employment,
facility, operating unit or employee of Target;
(t) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(u) (i) enter into, amend, modify, or terminate, or make any
commitment in respect of, any contract or agreement that is material to the
business, properties, assets, financial condition or results of operations of
Target, including, without limitation, any Material Contract, except in the
ordinary course of business consistent with past practice, or (ii) enter into
any contract or agreement that limits or otherwise restrains Target from
competing in or conducting any line of business or engaging in business in any
significant geographic area;
(v) cause or allow any material insurance policies (or
substantial equivalents thereof) to lapse or terminate;
(w) pay, discharge, settle or satisfy any lawsuit or threat of
any lawsuit or proceeding or other investigation against Target or relating to
its business, properties or assets, other than (i) in the ordinary course of
business for amounts not in excess of $500,000 in any case, and not to exceed
$1,000,000 in the aggregate, (ii) pursuant to existing contractual obligations,
or (iii) workers compensation claims in the ordinary course of business;
(x) except as may be required by applicable Law, settle any
material audit with respect to Taxes or file any amended Tax return that would
materially alter the Tax obligation of Target or its Subsidiaries;
(y) take any action that would result in the breach of any
representation and warranty of Target hereunder (except for representations and
warranties made as of a specific date) such that Parent would have the right to
terminate this Agreement;
(z) enter into or make any loans to any of its officers,
directors or employees or make any change in its borrowing or lending
arrangements for or on behalf of any of such Persons; or
(aa) agree to commit to any of the foregoing.
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6.2 Conduct of Business by Parent Pending the Merger
From the Agreement Date until
the earlier of the Effective Time and the date, if any, on which this Agreement
is terminated pursuant to Article X, except as set forth in Section 6.2
of the Parent Disclosure Letter, as otherwise specifically contemplated by this
Agreement, or as required by applicable Law, by a Governmental Authority of
competent jurisdiction or by the rules or requirements of the TSX, Parent agrees
that it shall conduct its business and the business of its Subsidiaries in all
material respects in the ordinary course consistent with past practice, shall
use its commercially reasonable efforts to preserve intact its business
organizations and goodwill, including, keeping available the services of its
officers, employees and consultants and maintaining reasonably satisfactory
relationships with vendors, customers and others having business relationships
with it, subject to the terms of this Agreement, and, by way of amplification
and not limitation, shall not, and shall cause its Subsidiaries not to (without
the prior written consent of Target, which consent shall not be unreasonably
withheld):
(a) amend or propose to amend its articles of incorporation or
bylaws or other organizational documents;
(b) (i) declare, set aside or pay any dividend or other
distribution with respect to any shares of its capital stock, (ii) repurchase,
redeem or otherwise acquire any outstanding shares of its capital stock or other
securities or (iii) split, combine or reclassify any shares of its capital
stock;
(c) issue, sell, pledge, dispose of or encumber any securities
(whether through the issuance or granting of options, warrants, rights or
otherwise, other than in the ordinary course of business, upon the exercise of
Parent Stock Options outstanding on the Agreement Date and disclosed in the
Parent Disclosure Letter), or enter into any amendment of any term of any
outstanding security, or as otherwise set out in Section 6.2 of the Parent
Disclosure Letter;
(d) (i) incur or assume any Indebtedness except Indebtedness
incurred in the ordinary course of business and consistent with past practice
and in no event exceeding $1,500,000 in the aggregate or as otherwise set out in
the document titled Energy Fuels Proposed Business Plan and Budget 2015 Through
2017, dated December 10, 2014, provided by Parent to Target (the Parent
Budget), (ii) modify the terms of any Indebtedness, (iii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person (other than a
wholly owned Subsidiary of Parent), except in the ordinary course of business
and consistent with past practice and in no event exceeding $200,000 in the
aggregate or as otherwise set out in the Parent Budget, (iv) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than to wholly owned Subsidiaries of Parent, or by such Subsidiaries to Parent
and other than short-term investments of cash in the ordinary course of
business);
(e) subject any assets to, incur, create or assume, any Lien
other than a Permitted Lien or any Liability as a guarantor or surety with
respect to the obligations of any Person other than in the ordinary course of
business consistent with past practice;
(f) (i) engage in any transaction in connection with which
Parent or any of its Subsidiaries could be subject (directly or indirectly) to
either a civil penalty assessed pursuant to subsections (c), (i) or (l) of
Section 502 of ERISA or a Tax imposed pursuant to Chapter 43 of Subtitle D of
the Code, (ii) terminate any of the Parent Benefit Plan that could result in
Liability to any Person, (iii) take any action that could adversely affect a
Parent Benefit Plans compliance with the applicable requirements of ERISA, (iv)
fail to make full payment when due of all amounts which, under the provisions of
any Parent Benefit Plans, any agreement relating thereto or applicable Law, such
party is required to pay as contributions thereto, or (v) fail to file, on a
timely basis, all reports and forms required by federal regulations with respect
to any Parent Benefit Plans or (vii) adopt or amend, or accelerate the payment
or vesting of benefits under, any Target Benefit Plan;
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(g) acquire, by merging or consolidating with, or by purchasing
an equity interest in or the assets of, or in any other manner, any business or
Person, exceeding $1,000,000;
(h) sell, lease, license or otherwise surrender, relinquish or
dispose of any assets with an aggregate fair market value exceeding
$1,000,000;
(i) transfer, sell, pledge, encumber or dispose of any capital
stock or other equity interest in any Subsidiary other than in connection with
Section 6.2(h); (j) incur or commit to any capital expenditures, or become bound
or obligated to participate in any operation, or consent to participate in any
operation, other than in the ordinary course or as contemplated in current mine
plans or as otherwise previously disclosed to Target;
(k) make any change to any material Tax method of accounting,
make or change any material Tax election, authorize any indemnities for Taxes,
extend any period for assessment of any Tax, file any request for ruling or
determination, amend any material Tax Return (including by way of a claim for
refund) or settle or compromise any material Tax liability, except where such
action would not have a material effect on the Tax position of Parent and its
Subsidiaries taken as a whole;
(l) (i) except as set forth in clause (ii), pay, discharge or
satisfy any material account payable or other material Liability beyond or in
advance of its due date or the date when such account payable or Liability would
have been paid in the ordinary course of business and consistent with past
practice or (ii) compromise, settle, grant any waiver or release relating to any
action, suit or proceeding, other than settlements or compromises where the
amount paid or to be paid does not exceed $1,000,000 in the aggregate for all
claims;
(m) enter into any agreement, understanding or commitment that
materially restrains, limits or impedes its ability, or would materially limit
the ability of the Surviving Entity or any affiliate of the Surviving Entity
after the Effective Time, to compete in or conduct any line of business or
compete with any Person or in any geographic area or during any period of time,
provided that nothing contained herein shall restrict Parent from entering into
confidentiality agreements and property acquisition agreements which contain
area of interest restrictions typical in the mining industry in connection
with transactions permitted under Section 6.2(g);
(n) enter into any joint venture, partnership or other similar
arrangement or materially amend or modify the terms of (or waive any material
rights under) any existing joint venture, partnership or other similar
arrangement in circumstances where the sum of (i) the assets of Parent involved,
and (ii) the amount of the obligations and liabilities assumed or agreed to by
Parent, is in excess of $5,000,000;
(o) make any change in any method of accounting or accounting
practice or procedure except for any such change required by IFRS;
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(p) enter into any agreement or
transaction that would be required to be disclosed in the Parent Disclosure
Letter pursuant to Section 5.26 regarding affiliate transactions if such
agreement or transaction had been entered into prior to the Agreement Date;
(q) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
its Affiliates, including any transactions, agreements, arrangements or
understandings with any Affiliate or other Person covered under Item 404 of
Regulation S-K under the Securities Act, that would be required to be disclosed
under Item 404;
(r) effectuate a plant closing or mass layoff, as those
terms are defined in the WARN Act, affecting in whole or in part any site of
employment, facility, operating unit or employee of Parent;
(s) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(t) (i) enter into, amend, modify, or terminate, or make any
commitment in respect of, any contract or agreement that is material to the
business, properties, assets, financial condition or results of operations of
Parent, including, without limitation, any Material Contract, except in the
ordinary course of business consistent with past practice and provided that, for
the purposes of this subparagraph (i), a commitment will not be considered
material unless the amount of the obligations or liabilities assumed or agreed
to by Parent under such commitment are in excess of $5,000,000, or (ii) enter
into any contract or agreement that limits or otherwise restrains Parent from
competing in or conducting any line of business or engaging in business in any
significant geographic area;
(u) cause or allow any material insurance policies (or
substantial equivalents thereof) to lapse or terminate;
(v) pay, discharge, settle or satisfy any lawsuit or threat of
any lawsuit or proceeding or other investigation against Parent or relating to
its business, properties or assets, other than (i) in the ordinary course of
business for amounts not in excess of $500,000 in any case, and not to exceed
$1,000,000 in the aggregate, (ii) pursuant to existing contractual obligations,
or (iii) workers compensation claims in the ordinary course of business;
(w) except as may be required by applicable Law, settle any
material audit with respect to Taxes or file any amended Tax return that would
materially alter the Tax obligation of Parent or its Subsidiaries;
(x) take any action that would result in the breach of any
representation and warranty of Parent hereunder (except for representations and
warranties made as of a specific date) such that Target would have the right to
terminate this Agreement; or
(y) agree to commit to any of the foregoing.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Information; Confidentiality
.
(a) Subject to Section 7.1(b),
from the Agreement Date until the earlier of the Effective Time and the date, if
any, on which this Agreement is terminated pursuant to Article X, Target shall
(i) provide to Parent (and Parents officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives) reasonable access
during normal business hours upon prior notice to the officers, employees,
agents, properties, offices and other facilities of Target to the facilities,
offices, properties, technology, processes, books, business and financial
records, officers, employees, business plans, budget and projections, customers,
suppliers and other information of the Target, and the work papers of its
independent accountants, and otherwise provide such assistance as may be
reasonably requested by such party in order that the other party has a
reasonable opportunity to make such investigation and evaluation as it
reasonably desires to make of the business and affairs of the Target; and (ii)
furnish promptly to Parent such information concerning the business, properties,
contracts, assets, Liabilities, personnel and other aspects of Target as
reasonably requested. Subject to Section 7.1(b), from the Agreement Date until
the earlier of the Effective Time and the date, if any, on which this Agreement
is terminated pursuant to Article X, Parent shall (i) provide to Target (and
Targets officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives) reasonable access during normal
business hours upon prior notice to the officers, employees, agents, properties,
offices and other facilities of Parent and its Subsidiaries to the facilities,
offices, properties, technology, processes, books, business and financial
records, officers, employees, business plans, budget and projections, customers,
suppliers and other information of the Parent and its Subsidiaries, and the work
papers of its independent accountants, and otherwise provide such assistance as
may be reasonably requested by such party in order that the other party has a
reasonable opportunity to make such investigation and evaluation as it
reasonably desires to make of the business and affairs of the Parent and its
Subsidiaries; and (ii) furnish promptly to Target such information concerning
the business, properties, contracts, assets, Liabilities, personnel and other
aspects of Parent and its Subsidiaries as reasonably requested. Each of Parent
and Target shall use its reasonable efforts to give prompt notice to the other
party of any event or circumstance of which it becomes aware that results in any
representation or warranty made by such party contained in this Agreement being
untrue or inaccurate in any material respect or Target, Parent or Merger Sub, as
the case may be, being unable to comply with or satisfy any of its covenants or
agreements hereunder; provided, however, that the receipt of any
information or the delivery of any notice pursuant hereto shall not limit or
otherwise affect either partys rights or obligations under this Agreement.
(b) Each of Target and Parent
(and each of Targets and Parents officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives, respectively)
shall hold in confidence all nonpublic information so received in accordance
with the terms of the Confidentiality Agreement. If this Agreement is
terminated, the Confidentiality Agreement shall continue in full force and
effect and shall apply to any information delivered by either party to the other
in connection with this Agreement.
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7.2 Non-Solicitation and Acquisition Proposals
.
(a) Except as otherwise provided
for in this Agreement each of Parent and Target agrees that neither it nor any
of its Subsidiaries shall, and Parent and Target shall, and shall cause its
Subsidiaries to, cause their respective officers, directors, investment bankers,
attorneys, accountants, financial advisors, agents and other representatives
(collectively, Representatives) not to:
(i) solicit, assist, initiate, knowingly encourage or
facilitate (including by way of discussion (other than to state they are not
permitted to have discussions), negotiation, furnishing information, permitting
any visit to any facilities or properties of Target or Parent or their
respective Subsidiaries, or entering into any form of written or oral agreement,
arrangement or understanding) any inquiries, proposal or offers regarding, or
that may reasonably be expected to lead to, any Acquisition Proposal;
(ii) engage or participate in any discussions (other than to
state they are not permitted to have discussions) or negotiations regarding, or
provide any information with respect to or otherwise cooperate in any way with
any person (other than Target, Parent, and their Representatives) regarding any
Acquisition Proposal or Potential Acquisition Proposal (as defined below);
(iii) withdraw, modify or qualify, or propose publicly to
withdraw, modify or qualify, in any manner adverse to the other party, the
approval or recommendation of the Transactions by such partys board of
directors or any of its committees except where a Material Adverse Effect in
respect of the other party has occurred and such partys board of directors has
determined that, as a consequence of such Material Adverse Effect, it would be
inconsistent with the fiduciary duties of the directors of such party to
continue to recommend the Transactions; (iv) approve or recommend, or remain
neutral with respect to, or propose publicly to approve or recommend, any
Acquisition Proposal;
(v) accept or enter into, or publicly propose to accept or
enter into, any letter of intent, agreement in principle, agreement, arrangement
or undertaking related to any Acquisition Proposal (other than an Acceptable
Confidentiality Agreement entered into in accordance with Section 7.2(e)); or
(vi) release any person from or waive or otherwise forebear in
the enforcement of any confidentiality or standstill agreement or any other
agreement with such person that would facilitate the making or implementation of
any Acquisition Proposal.
(b) Target and Parent shall
immediately cease and cause to be terminated any existing solicitation,
discussion, negotiation, encouragement or activity with any Person (other than
Parent, Target, or any of their Representatives) by Target, Parent, or any of
their Representatives with respect to any Acquisition Proposal or any Potential
Acquisition Proposal. Target and Parent shall immediately cease to provide any
Person (other than Parent, Target, or any of their Representatives) with access
to information concerning Target or Parent in respect of any Acquisition
Proposal or any Potential Acquisition Proposal, and request the return or
destruction of all confidential information provided to any Person (other than
Parent, Target, or any of their Representatives) that has entered into a
confidentiality agreement with Target or Parent relating to any Acquisition
Proposal or Potential Acquisition Proposal to the extent provided for in such
confidentiality agreement and shall use all commercially reasonable efforts to
ensure that such requests are honored.
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(c) Target and Parent shall ensure that their Representatives
are aware of the prohibitions in this Section 7.2 and shall be responsible for
any breach of this Section 7.2 by their Representatives.
(d) Parent and Target shall
promptly (and in any event within 24 hours) notify the other party, at first
orally and then in writing, of any proposal, inquiry, offer or request received
by Target, Parent, or their Representatives: (i) relating to an Acquisition
Proposal or potential Acquisition Proposal or inquiry that could reasonably lead
or be expected to lead to an Acquisition Proposal (a Potential Acquisition
Proposal); (ii) for discussions or negotiations in respect of an Acquisition
Proposal or Potential Acquisition Proposal; or (iii) for non-public information
relating to Target or Parent, or any of their respective Subsidiaries, access to
properties, books and records or a list of the holders of Target's shares,
Parents shares or the shareholders of any of their respective Subsidiaries.
Such notice shall include the identity of the person making such proposal,
inquiry, offer or request, a description of the terms and conditions thereof and
Target or Parent shall provide a copy of any Acquisition Proposal and all
written communications with such person and such details of the proposal,
inquiry, offer or request that Parent or Target may reasonably request. Target
shall keep Parent, and Parent shall keep Target promptly and fully informed of
the status, including any change to the material terms, of such proposal,
inquiry, offer or request and shall respond promptly to all inquiries by the
other party with respect thereto.
(e) Notwithstanding Section
7.2(a), following the receipt by Target or Parent of a bona fide written
Acquisition Proposal made after the date of this Agreement that did not result
from any breach of Section 7.2(a), Target, Parent, or their Representatives may:
(i) contact the Person making such Acquisition Proposal and its
Representatives solely for the purpose of clarifying the terms and conditions of
such Acquisition Proposal and the likelihood of its consummation so as to
determine whether such Acquisition Proposal is, or is reasonably likely to lead
to, a Superior Proposal; and
(ii) if the board of directors of Target or Parent, as
applicable, determines, after consultation with its outside legal and financial
advisors, that such Acquisition Proposal is, or is reasonably likely to lead to,
a Superior Proposal:
(A) furnish information with respect to Target or Parent and
its Subsidiaries, as applicable, to the Person making such Acquisition Proposal
and its Representatives only if such Person has entered into a confidentiality
agreement that contains provisions that are not less favorable to Target (or
Parent) than those contained in the Confidentiality Agreement, (an
Acceptable Confidentiality Agreement), provided that Target or Parent,
as applicable, sends a copy of such confidentiality agreement to Parent or
Target, as applicable, promptly following its execution and Parent or Target, as
applicable, is promptly provided with a list of, and access to (to the extent
not previously provided to Parent or Target, as applicable) the information
provided to such Person; and
B-55
(B) engage in discussions and negotiations with the Person
making such Acquisition Proposal and its Representatives provided that all such
information access and discussions shall cease during the Match Period (as
defined below).
(f) Notwithstanding Section
7.2(a), Target or Parent may (i)enter into an agreement (other than an
Acceptable Confidentiality Agreement entered into in accordance with Section
7.2(e)) with respect to an Acquisition Proposal that is a Superior Proposal
and/or (ii) withdraw, modify or qualify its approval or recommendation of the
Transactions and recommend or approve an Acquisition Proposal that is a Superior
Proposal (an Adverse Recommendation Change), provided:
(i) Target or Parent shall have complied with its obligations
under this Section 7.2;
(ii) the board of directors of Target or the board of directors
of Parent, as applicable, has determined, after consultation with its outside
legal and financial advisors, that such Acquisition Proposal is a Superior
Proposal;
(iii) Target or Parent has delivered written notice to the
other party of the determination of the board of directors of Target or the
board of directors or Parent, as applicable, that the Acquisition Proposal is a
Superior Proposal and of the intention of the board of directors of Target or
the board of directors of Parent, as applicable, to approve or recommend such
Superior Proposal and/or of Target or Parent, as applicable, to enter into an
agreement with respect to such Superior Proposal, together with a copy of such
agreement executed by the Person making such Superior Proposal that is capable
of acceptance by Target or Parent, as applicable, and a summary of the valuation
analysis attributed by the board of directors of Target or the board of
directors of Parent, as applicable, in good faith to any non-cash consideration
included in such Acquisition Proposal after consultation with its financial
advisors, and together with a summary analysis articulating why the Acquisition
Proposal is determined by the board of directors of Target or the board of
directors of Parent to be a Superior Proposal (the "Superior Proposal
Notice");
(iv) at least five Business Days have elapsed since the date
the Superior Proposal Notice was received by Parent or Target, which five
Business Day period is referred to as the "Match Period";
(v) if Parent (or Target) has offered to amend the terms of the
Transaction and this Agreement during the Match Period pursuant to Section
7.2(g) below, such Acquisition Proposal continues to be a Superior Proposal
compared to the amendment to the terms of the Transaction offered by Parent (or
Target) at the termination of the Match Period; and
(vi) Target or Parent, as applicable, terminates this Agreement
in compliance with the terms of this Section 7.2 and Target or Parent, as
applicable, has previously paid or, concurrently with termination, pays in cash
a break fee of US$5 million to the other party.
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(g) During the Match Period,
Parent or Target shall have the opportunity, but not the obligation, to offer to
amend the terms of the Transaction and this Agreement and Target and Parent
shall cooperate with the other party with respect thereto, including negotiating
in good faith with the other party to enable the other party to make such
adjustments to the provisions of the Transaction and this Agreement as the other
party deems appropriate and as would enable the other party to proceed with the
Transaction on such adjusted provisions. The board of directors of Target or the
board of directors of Parent shall review any such offer by the other party to
amend the terms of the Transaction and this Agreement in order to determine, in
good faith in the exercise of its fiduciary duties, whether the other partys
offer to amend the Transaction and this Agreement, upon its acceptance, would
result in the Acquisition Proposal ceasing to be a Superior Proposal compared to
the amendment to the terms of the Transaction and this Agreement offered by the
other party. If the board of directors of Target or board of directors of
Parent, as applicable, determines that the Acquisition Proposal would cease to
be a Superior Proposal, Target and Parent shall enter into an amendment to this
Agreement reflecting the offer by the other party to amend the terms of the
Transaction and this Agreement.
(h) The board of directors of
Target or the board of directors of Parent, as applicable, shall reaffirm its
recommendation of the Transaction by news release promptly after: (i) any
Acquisition Proposal (which is determined not to be a Superior Proposal) is
publicly announced or made, (ii) the board of directors of Target (or the board
of directors of Parent) determines that a proposed amendment to the terms of the
Transaction and this Agreement would result in the Acquisition Proposal not
being a Superior Proposal and the other party has so amended the terms of the
Transaction; or (iii) the written request of Parent (or Target) given on or
within five Business Days ending the Business Day before a meeting of Target or
Parent shareholders called to consider approving the Transaction. Parent, Target
and their legal advisors shall be given a reasonable opportunity to review and
comment on the form and content of any such news release and Target or Parent
shall incorporate all reasonable comments made by the other party and its legal
advisors.
(i) Each successive material
modification of any Acquisition Proposal shall constitute a new Acquisition
Proposal for purposes of this Section 7.2.
(j) Nothing contained in this
Section 7.2 shall prohibit Target or the Targets board of directors or Parent
or Parents board of directors from (i) disclosing to the shareholders of Target
or Parent, as applicable, a position contemplated by Rule 14e-2(a) or Rule 14d-9
promulgated under the Exchange Act if the Targets board of directors or
Parents board of directors, as applicable, determines in good faith, after
consultation with outside counsel, that the failure to make such disclosure
would be inconsistent with its fiduciary duties; provided that making such
disclosure shall not in any way limit or modify the effect, if any, that any
such action has under this Section 7.2 (for the avoidance of doubt, it being
agreed that the issuance by Target or Targets board of directors or Parent or
Parents board of directors, as applicable, of a stop, look and listen
statement pending disclosure of its position, as contemplated by Rules 14d-9(f)
promulgated under the Exchange Act, shall not constitute an Adverse
Recommendation Change).
7.3 Cooperation
Subject to compliance with
applicable Law, from the Agreement Date until the Effective Time, each of Parent
and Target shall confer on a regular and frequent basis with one or more
representatives of the other to report on their respective material operational
matters and the general status of ongoing operations and each party shall
promptly provide the other party or its counsel with copies of all filings made
by such party with any Governmental Authority in connection with this Agreement
and the Transactions.
B-57
7.4 Publicity
Neither Target, Parent nor any
of their respective affiliates or representatives shall issue or cause the
publication of any press release or other announcement with respect to the
Transactions other than a joint press release of Target and Parent announcing
the execution of this Agreement or without the prior consultation of the other
party, except as may be required by applicable Law, and each party shall use its
reasonable efforts to provide copies of such release or other announcement to
the other party hereto, and give due consideration to such comments as each such
other party may have, prior to such release or other announcement. For the
avoidance of doubt, the provisions of this Section 7.4 do not apply to (i) any
announcement, document or publication in connection with an Acquisition
Proposal, Superior Proposal or Adverse Recommendation Change or (ii) any
disclosure by Target or Parent of any information concerning this Agreement or
the Transactions in connection with any dispute between the parties regarding
this Agreement, the Merger or the Transactions.
7.5 Filings
Each party shall make all
filings such party is required to make in connection herewith or desirable to
achieve the purposes contemplated hereby, including all required or advisable
filings under or relating to the HSR Act, or the rules and regulations
promulgated by the United States Nuclear Regulatory Commission, shall respond as
promptly as practicable to all inquiries or requests for information received
from a Governmental Authority in relation to such filings or notices for
additional information or documentation and shall cooperate as needed with
respect to any such filings by any other party. Each party shall use its
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all other things necessary, proper or appropriate to
resolve the objections, if any, as may be asserted by the agencies or any other
authority with respect to the transactions contemplated by this Agreement under
any antitrust or competition laws or regulations; provided that no party shall
be required to take any action under this Section 7.5 that would, or would be
reasonably likely to, materially frustrate the financial or other business
benefits reasonably expected to be derived by such party from the transactions
contemplated by this Agreement. Notwithstanding the foregoing, neither Parent
nor Target shall be required to accept, as a condition to obtaining any required
approval or resolving any objection of any Governmental Authority, any
requirement to divest or hold separate or in trust (or the imposition of any
other material condition or restriction with respect to) any of the respective
businesses or assets of Parent, Merger Sub, Target or any of their respective
Subsidiaries.
7.6 Employee Matters
(a) On and after the Closing,
until at least the 90th day after the Closing, Parent shall cause the Surviving
Entity to provide each employee of Target or any of its affiliates who is
retained by the Surviving Entity or any of their affiliates following the
Closing (each, a Continuing Employee) with (i) salary that is not less than
the Continuing Employees salary immediately prior to the Closing, and (ii) the
benefit plans, programs and arrangements that are currently provided to the
Parents employees under Parents benefit plans, programs and arrangements. Each
Continuing Employee shall be given credit under such plan for the last
continuous period of service with Target and its affiliates prior to the Closing
for purposes of determining eligibility to participate, vesting in benefits and
vacation and severance benefits, but for no other purpose (including, without
limiting the generality of the foregoing, the accrual of benefits);
B-58
(b) Parent agrees that, upon the Closing, each Continuing
Employee shall be immediately eligible to participate in Parents group health
plan (as defined in Section 5000(b)(1) of the Code) (and Parent shall cause to
be waived any eligibility waiting periods, any evidence of insurability
requirements and the application of any pre- existing condition limitations
under such plan), and such Continuing Employee shall be credited towards the
deductibles, coinsurance and maximum out-of-pocket provisions, imposed under
such group health plan, for the calendar year during which the Closing Date
occurs, with any applicable expenses already incurred during the portion of the
year preceding the Closing Date under the applicable group health plans of the
Company; provided, however, such obligation of Parent is contingent on Target
furnishing sufficient information in sufficiently usable form to enable Parent
to reasonably administer its plan. As of the Closing Date, Parent shall or shall
cause the Surviving Entity or relevant affiliate to, credit to the Continuing
Employees the amount of vacation time that such employees had accrued under any
of Targets vacation policies as of the Closing Date;
(c) Parent shall, or shall cause the Surviving Entity or
relevant affiliate to, assume and honor in accordance with their terms all
change in control and termination agreements (including any change in control
provisions therein) set forth in Section 4.17 of the Target Disclosure Letter
applicable to employees of the Target arising from completion of the
Transactions in the same manner and to the same extent that Target would be
required to perform and honor such agreements if the transactions contemplated
by this Agreement had not been consummated. Provided, however, that to the
extent that Parent or the Surviving Entity or any other affiliate of Parent
offers employment to any employee of the Target following completion of the
Merger, such employment shall be on terms concerning future changes of control
and termination agreed to between the employee and Parent or its affiliate that
are consistent with the terms currently in effect for the employees of the
Parent and its affiliates.
7.7 Preparation of the Form F-4 and Proxy
Statement/Prospectus
(a) As soon as practicable
following the date of this Agreement, Parent and Target shall each promptly
prepare and file with the SEC a preliminary version of the Proxy
Statement/Prospectus and the Parent will prepare and file with the SEC the Form
F-4, in which the Proxy Statement/Prospectus will be included as a prospectus.
(b) Each of Parent and Target
will use its commercially reasonable efforts to respond to any comments of the
SEC in connection therewith and to furnish all information required to prepare
the definitive Proxy Statement/Prospectus and the final Form F-4.
(c) Each of Parent and Target
shall use its commercially reasonable best efforts to have the Form F-4 declared
effective under the Securities Act as promptly as practicable after such
filing.
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(d) Parent shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or filing a general consent to service of process in any
jurisdiction) required to be taken under any applicable state securities laws in
connection with the issuance of the Parent Common Shares in the Merger and
Target shall furnish all information concerning Target and the holders of shares
of Target capital stock as may be reasonably requested in connection with any
such action.
(e) Promptly after the
effectiveness of the Form F-4, Target shall cause the Proxy Statement/Prospectus
to be published, sent or given to Targets shareholders, and if necessary, after
the definitive Proxy Statement/Prospectus has been published, sent or given,
promptly circulate amended, supplemented or supplemental proxy materials and, if
required in connection therewith, re-solicit proxies.
(f) Each party shall cooperate
and provide the other party with a reasonable opportunity to review and comment
on any amendment or supplement to the Form F-4 or the Proxy Statement or any
filing with the SEC incorporated by reference in the Form F-4 or the Proxy
Statement, in each case prior to filing such with the SEC, except where
doing so would cause the filing to not be filed timely, without regard to any
extension pursuant to Rule 12b-25 of the Exchange Act; provided,
however, that each party shall be deemed to have consented to the
inclusion in the Form F-4, the Proxy Statement or any filing with the SEC
incorporated by reference in the Form F-4 or the Proxy Statement of any
information, language or content specifically agreed to by such party or its
counsel on or prior to the date hereof for inclusion therein.
(g) Parent will advise the Target
promptly after it receives notice of (i) the time when the Form F-4 has become
effective or any supplement or amendment has been filed, (ii) the issuance or
threat of any stop order, (iii) the suspension of the qualification of the
Parent Common Share issuable in connection with this Agreement for offering or
sale in any jurisdiction, or (iv) any request by the SEC for amendment of the
Proxy Statement/Prospectus or the Form F-4 or comments thereon and responses
thereto or requests by the SEC for additional information (and shall deliver a
copy of such comments and requests to the Target).
(h) Target will advise Parent,
and Parent will advise Target, promptly after it receives notice of the issuance
by the SEC, any Canadian Securities Regulatory Authority, as applicable, any
other securities regulatory authority, the TSX, NYSE MKT or by any other
competent authority of any order to cease or suspend trading of any securities
of Target or Parent, as applicable, or of the institution or threat of
institution of any proceedings for that purpose.
(i) If at any time prior to the
Effective Time any information relating to Target or Parent, or any of their
respective affiliates, officers or directors, should be discovered by Target or
Parent which should be set forth in an amendment or supplement to either of the
Form F-4 or the Proxy Statement/Prospectus, so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement, including, where appropriate, a filing pursuant to
Rules 165 and 425 of the Securities Act, describing such information shall
promptly be filed with the SEC and, to the extent required by law, disseminated
to the shareholders of Target or Parent.
B-60
7.8 Target Shareholders Meeting
Target shall, as promptly as
reasonably practicable after receiving notice from Parent that the Form F-4 has
been declared effective under the Securities Act, (i) take all action necessary
in accordance with applicable Law and the articles of incorporation and bylaws
of Target duly to give notice of, convene and hold a meeting of its shareholders
to be held as promptly as practicable to consider the approval of this Agreement
and the Merger (the Target Meeting); (ii) engage a proxy solicitation
agent, which is approved by the Parent (such approval not to be unreasonably
withheld), to advise on and assist with the solicitation of proxies in
connection with the Target Shareholder Approvals; (iii) use commercially
reasonable efforts to solicit from its shareholders proxies in favor of the
Target Shareholder Approvals and (iv) will take all other action reasonably
necessary or advisable to secure the vote of its shareholders required by the
rules of the NYSE MKT, the TSX or applicable Law to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, Target may
adjourn or postpone the Target Meeting to the extent necessary to ensure that
any necessary supplement or amendment to the Proxy Statement/Prospectus is
provided to its shareholders in advance of a vote on the approval of this
Agreement and the Merger, or, if as of the time for which the Target Meeting is
originally scheduled, there are insufficient Target Common Shares, as the case
may be, represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of such meeting. Target shall use commercially
reasonable efforts such that the Target Meeting is called, noticed, convened,
held and conducted, and that all proxies solicited in connection with the Target
Meeting are solicited in compliance with applicable Law, the rules of the NYSE
MKT, the TSX and the articles of incorporation and bylaws of Target.
Notwithstanding anything contained herein to the contrary, Target shall not be
required to hold the Target Meeting if this Agreement is terminated or if there
is an Adverse Recommendation Change by Target before the Target Meeting is held.
7.9 Stock Exchange Listing
Parent shall use its reasonable
best efforts to cause the Parent Common Shares to be issued in the Merger and
upon exercise of the Substituted Options and the Assumed Warrants to be approved
for listing on each of the NYSE MKT and the TSX at or prior to the Effective
Time, subject to official notice of issuance.
7.10 Notice of Certain Events
Target shall give prompt notice
to Parent of any fact, event or circumstance as to which Target obtains
Knowledge that would be reasonably likely to result in a failure of a condition
set forth in Section 8.2(a) or (b). Parent shall give prompt
notice to Target of any fact, event or circumstance as to which Parent obtains
Knowledge that would be reasonably likely to result in a failure of a condition
set forth in Section 8.3(a) or (b). Prior to the Closing, Target
may deliver to Parent a supplement or update to the Target Disclosure Letter
that reflects any event, condition or circumstance occurring or arising after
the Agreement Date that is not otherwise prohibited pursuant to this Agreement
and which, in the aggregate taking into account all supplemental disclosures
(the Target Supplemental Disclosures) provided pursuant to this Section
7.10, have not had and would not reasonably be expected to have a Material
Adverse Effect on Target, in which case, prior to the Closing, the specified
representations and warranties made by Target will be deemed modified to reflect
such event as of the date that such event occurs or arises for purposes of
determining whether the conditions set forth in Section 8.2 have been satisfied.
Prior to the Closing, Parent may deliver to Target a supplement or update to the
Parent Disclosure Letter that reflects any event, condition or circumstance
occurring or arising after the Agreement Date that is not otherwise prohibited
pursuant to this Agreement and which, in the aggregate taking into account all
supplemental disclosures (the Parent Supplemental Disclosures) provided
arrangements. Each Continuing Employee shall be given credit under such plan for
the last continuous period of service with Target and its affiliates prior to
the Closing for purposes of determining eligibility to participate, vesting in
benefits and vacation and severance benefits, but for no other purpose
(including, without limiting the generality of the foregoing, the accrual of
benefits);
B-61
7.11 Section 16
Prior to the Effective Time,
the Target shall take all such steps as may be required to cause to be exempt
under Rule 16b-3 promulgated under the Exchange Act any dispositions of Target
Common Shares (including derivative securities with respect to such shares) that
are treated as dispositions under such rule and result from the transactions
contemplated by this Agreement by each director or officer of the Target who is
subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to the Target.
7.12 Takeover Statutes
Target and Parent shall (i)
take all action necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to this Agreement, the Merger or
any of the transactions contemplated hereby and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to this Agreement or
any of the transactions contemplated hereby, take all action necessary to ensure
that such transactions may be consummated as promptly as practicable on the
terms required by, or provided for, in this Agreement and otherwise to minimize
the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
7.13 Parent Shareholders Meeting
Parent shall, as promptly as
reasonably practicable after the Form F-4 has been declared effective under the
Securities Act, (i) take all steps reasonably necessary to call, give notice of,
convene and hold a special (or annual and special) meeting of its shareholders
(the Parent Meeting) for the purpose of securing the Parent
Shareholders Approval, (ii) distribute to its shareholders a management
information circular in accordance with applicable Law (the Parent
MIC), which Parent MIC shall contain the recommendation of the Parent board
of directors that its shareholders approve this Agreement, (iii) use its
commercially reasonable efforts to solicit from its shareholders proxies in
favor of the approval of this Agreement and to secure the Parent Shareholders
Approval and (iv) cooperate and consult with Target with respect to each of the
foregoing matters. Notwithstanding any Adverse Recommendation Change by the
Target board of directors or the commencement, public proposal, public
disclosure or communication to Parent by Target of any Acquisition Proposal with
respect to Target or any of its Subsidiaries, or any other fact or circumstance
(except for termination of this Agreement pursuant to Article X), this Agreement
shall be submitted to the shareholders of Parent at the Parent Meeting for the
purpose of adopting this Agreement, with such disclosures as shall be required
by applicable Law. As of the Effective Time, and subject to applicable Law,
Parent shall appoint Dennis Higgs, Glenn Catchpole and Paul Saxton, each of
which are existing members of the board of directors of Target, to the board of
directors of Parent which shall be comprised of at least nine (9) members.
7.14 Consents of Accountants
Target and Parent will each use
commercially reasonable efforts to cause to be delivered to each other consents
from their respective independent auditors, dated as of the date on which the
Form F-4 is filed with the SEC, as amended or supplemented, or becomes effective
or a date not more than two days prior to such date, in form reasonably
satisfactory to the recipient and customary in scope and substance for consents
delivered by independent public accountants in connection with registration
statements on Form F-4 under the Securities Act.
B-62
7.15 Commercially Reasonable Efforts
Upon the terms and subject to
the conditions set forth in this Agreement but subject to Section 7.2, each of
the parties agrees to use commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including commercially reasonable efforts to accomplish the
following: (i) the taking of all acts necessary to cause the conditions to the
Closing to be satisfied (but in no event shall a party be required to waive any
such condition) as promptly as practicable; (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, clearances and approvals from
Governmental Authorities and the making of all necessary registrations and
filings, and the taking of all steps as may be necessary to obtain an approval,
clearance or waiver from, or to avoid an action or proceeding by, any
Governmental Authority, including under the HSR Act, or any foreign competition
laws, in each case to the extent determined to be applicable to the Merger and
the parties hereto, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) taking all steps as may be necessary to obtain
all such waiting period expirations or terminations, consents, clearances,
waivers, licenses, registrations, permits, authorizations, orders and
approvals.
7.16 Shareholder Rights Plan.
Target will take steps to cause
the Target Shareholder Rights Plan to terminate as of the Effective Time and
each Target Right issued under the Target Shareholder Rights Plan will terminate
and be of no further force or effect effective as of the Effective Time without
any payment to any holder of such Target Rights.
7.17 Obligation to Indemnify and Maintain Insurance
Prior to the Effective Time,
Target shall purchase customary tail policies of directors and officers
liability insurance providing protection no less favourable in the aggregate to
the protection provided by the policies maintained by Target that are in effect
immediately prior to the Effective Time and providing protection in respect of
claims arising from facts or events which occurred on or prior to the Effective
Time and Parent will, or will cause Surviving Entity and its subsidiaries to,
maintain such tail policies in effect without any reduction in scope or coverage
for six (6) years from the Effective Time. If a tail policy is not available,
then Parent agrees that for the period of two years following the Effective
Time, Parent shall cause Surviving Entity or any successor to Surviving Entity
(including any successor resulting from any winding-up or liquidation or
dissolution of any of them) to maintain Targets current directors and
officers insurance policies or substantially equivalent policies subject in
either case to terms and conditions no less advantageous to the directors and
officers of Target than those contained in the policies in effect on the date of
this Agreement, for all present and former directors and officers of Target,
covering claims made prior to or within such two year period, provided the
Parent shall not be required to spend annual premiums in excess of 300% of the
premiums paid by Target. Parent and Surviving Entity will assume and perform the
obligations of Target under each indemnification agreement entered into between
Target and the Indemnified Parties that is in effect immediately prior to the
Effective Time and will delivery on Closing the written agreement of Parent and
Surviving Corporation to assume and perform such obligations. Parent shall cause
the Surviving Entity to prior to such date, in form reasonably satisfactory to
the recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form F-4 under the Securities Act.
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7.18 NI 43-101 Technical Reports.
(a) Target shall take all steps
necessary to ensure that, as of the date (in this subsection the Filing
Date) which Target files on SEDAR pursuant to NI 71-102 a Form 10-K in
respect of its financial year ended December 31, 2014, it has filed a technical
report in respect of each mineral property which is material to Target as of the
Filing Date which complies with the requirements of NI 43-101 and which is
current as of the Filing Date. Subject to Parents prior approval of all
independent qualified persons selected by Target in connection with the
preparation of such technical report, Parent shall pay fifty percent of the cost
for the preparation of any such technical report.
(b) Parent shall take all steps
necessary to ensure that as of the date on which Parent files on SEDAR an annual
information form in respect of its financial year ended December 31, 2014,
Parent has filed a technical report in respect of each mineral property which is
material to Parent as of such Filing Date which complies with the requirements
of NI 43-101 and which is current as of the Filing Date.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to the Obligation of Each Party
The respective obligations of
each party to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions: (a) The Target Shareholder
Approvals:
(i) The Target Shareholders Approval shall have been obtained.
(ii) The Unaffiliated Shareholders Approval shall have been
obtained.
(b) No action, suit or proceeding
instituted by any Governmental Authority of competent jurisdiction shall be
pending and no statute, rule, order, decree or regulation and no injunction,
order, decree or judgment of any court or Governmental Authority of competent
jurisdiction may be in effect, in each case, that would prohibit, restrain,
enjoin or restrict the consummation of the Transactions; provided,
however, that, subject to Section 7.5, the party seeking to terminate this
Agreement pursuant to this Section 8.1(b) must have used its reasonable best
efforts to cause this condition to be satisfied.
(c) The Form F-4 shall have
become effective in accordance with the provisions of the Securities Act and no
stop order suspending the effectiveness of the Form F-4 shall be in effect and
no proceeding for such purpose shall be pending before or threatened by the SEC.
(d) The Parent Common Shares to
be issued in the Merger and upon exercise of the Substituted Options and the
Assumed Warrants shall have been approved (or conditionally approved, as
applicable) for listing on the NYSE MKT and the TSX, subject to official notice
of issuance or customary conditions.
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(e) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(f) All filings with, and all
consents, approvals and authorizations of, any Governmental Authority required
to be made or obtained by the Parent Parties, the Target or any of their
subsidiaries to consummate the Merger, including, without limitation, any
required filings and or approvals of the United States Nuclear Regulatory
Commission and the State of Utah Division of Radiation Control, shall have been
made or obtained, other than those that if not made or obtained would not,
individually or in the aggregate, have a Material Adverse Effect on the Target,
Parent or Surviving Entity (in each case, determined, for purposes of this
clause, after giving effect to the Merger).
(g) There shall not be any suit,
action, investigation, inquiry or other proceeding instituted, pending or
threatened by any governmental or other regulatory or administrative agency or
commission that seeks to enjoin, prevent, materially delay or otherwise impose
material limitations on the consummation of the transactions contemplated by
this Agreement.
(h) The Parent Shareholders Approval shall have been obtained.
(i) CFIUS Approval shall have been obtained.
8.2 Conditions to the Obligations of the Parent Parties
The obligation of the Parent
Parties to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) The representations and warranties of Target that are not
subject to materiality or Material Adverse Effect set forth in this Agreement
shall be true and correct as of the Agreement Date and as of the Closing Date,
as if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure of such
representations and warranties that are not subject to materiality or Material
Adverse Effect to be so true and correct individually or in the aggregate has
not had, and would not be reasonably likely to have or result in, a Material
Adverse Effect with respect to Target, and the representations and warranties of
Target that are subject to materiality or Material Adverse Effect set forth in
this Agreement shall be true and correct as of the Agreement Date and as of the
Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date). Parent shall have
received a certificate signed on behalf of Target by its Chief Executive Officer
and Chief Financial Officer to the foregoing effect.
(b) Target shall have performed
or complied in all material respects with each of its obligations under this
Agreement and any Ancillary Agreement to which it is a party required to be
performed or complied with by it at or prior to the Effective Time pursuant to
the terms of such Agreement. Parent shall have received a certificate signed on
behalf of Target by its Chief Executive Officer and Chief Financial Officer to
the foregoing effect.
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(c) From the Agreement Date
through the Effective Time, there shall not have occurred any Material Adverse
Effect with respect to Target or any event, change or circumstance that would
reasonably be likely to result in a Material Adverse Effect with respect to
Target.
(d) Parent shall have received an
opinion, dated the Closing Date, of counsel to Target, in form and substance
reasonably satisfactory to Parent, based upon facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts at the Effective Time, to the effect that the Target Common Shares shall
be regularly traded on an established securities exchange within the meaning of
Treasury Regulation Section 1.897 -9T(d) as of the Closing Date. In rendering
such opinion, counsel may require and rely upon factual representations
contained in certificates of the officers of the Parent Parties and Target.
(e) Parent shall have received
evidence reasonably satisfactory to it that the aggregate amount of all unpaid
costs and expenses incurred by Target or its Subsidiaries in connection with
this Agreement and the Transactions is not in excess of $1,500,000 (excluding
commissions and fees paid to Haywood or Euro Pacific)(it being understood and
agreed that any costs and expenses that Target shall pay from its available cash
at Closing shall be considered paid from such available cash for purposes of
this Section 8.2(f)) .
(f) Taxes required to be withheld
by Parent or Merger Sub under Section 1445 of the Code shall not exceed
$2,000,000.
(g) Each consent, waiver and
approval set forth in Section 4.4 of this Agreement must have been obtained, and
Target must have provided Parent with copies thereof.
(h) The number of
Dissenting Shares held by stockholders of Target who have exercised dissent
rights granted in accordance with Section 3.4 of this Agreement will comprise
less than 5% of the issued and outstanding Target Common Shares.
8.3 Conditions to the Obligations of Target
The obligation of Target to
effect the Merger is subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) The representations and warranties of Parent and Merger Sub
set forth in this Agreement shall be true and correct (without giving effect to
any limitation as to materiality or Material Adverse Effect set forth
therein) as of the Agreement Date and as of the Closing Date, as if made at and
as of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to materiality or Material Adverse Effect set forth therein)
individually or in the aggregate has not had, and would not be reasonably likely
to have or result in, a Material Adverse Effect with respect to Parent;
provided, however, that the representations and warranties of Parent set
forth in Sections 5.1 and 5.2 shall be true and correct at such times in all
material respects without giving effect to any limitation as to materiality or
Material Adverse Effect set forth therein. Target shall have received a
certificate signed on behalf of Parent by an authorized officer to the foregoing
effect.
(b) Each of Parent and Merger Sub
shall have performed or complied in all material respects with each of its
obligations under this Agreement and any Ancillary Agreement to which approved,
as applicable) for listing on the NYSE MKT and the TSX, subject to official
notice of issuance or customary conditions.
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(c) From the Agreement Date through the Effective Time, there
shall not have occurred any Material Adverse Effect with respect to Parent or
any event, change or circumstance that would reasonably be likely to result in a
Material Adverse Effect with respect to Parent.
(d) The Target Board Nominees
will have been appointed to the board of directors of Parent to be effective
immediately after the Effective Time, and the board of directors of Parent will
be constituted as provided in Section 7.13 of this Agreement.
(e) Each consent, waiver and
approval set forth in Section 5.4 of this Agreement must have been obtained, and
Parent must have provided target with copies thereof.
ARTICLE IX
SURVIVAL
9.1 Survival of Representations and Warranties
The representations and
warranties of the parties contained in this Agreement shall not survive the
Effective Time.
9.2 Survival of Covenants and Agreements
The covenants and agreements of
the parties to be performed after the Effective Time contained in this Agreement
shall survive the Effective Time.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Term and Termination
This Agreement shall be
effective from the date hereof until the earlier of (i) the Effective Time, and
(ii) the termination of this Agreement in accordance with its terms. This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after its approval by the shareholders of Target or Parent:
(a) by the
mutual written agreement of Parent and Target;
(b) by either Parent or Target,
if the Effective Time has not occurred on or before July 31, 2015 (the
Termination Date); provided, however, that the right to terminate this
Agreement pursuant to this Section 10.1(b) shall not be available to a party
whose failure to fulfill any obligation under this Agreement or breach of any of
its representations and warranties under this Agreement has been the cause of,
or resulted in, the failure of the Merger to have been consummated on or before
such date;
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(c) by either Target or Parent,
if after the date hereof, there shall be enacted or made any applicable Law that
makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree of a court or other Governmental Authority
of competent jurisdiction restrains, enjoins or prohibits the consummation of
the Merger, and such judgment, injunction, order or decree becomes final and
non-appealable; provided, however, that, subject to Section 7.5, the
right to terminate pursuant to this Section 10.1(c) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in such action;
(d) by Target, if there has been a breach by Parent or Merger
Sub of any representation, warranty, covenant or agreement set forth in this
Agreement which breach (i) would give rise to the failure of a condition set
forth in Section 8.3(a) or 8.3(b) and (ii) if susceptible to cure, has not been
cured in all material respects prior to the earlier to occur of (x) 20 Business
Days following delivery by Target and receipt by Parent of written notice of
such breach or (y) the Termination Date;
(e) by Parent, if there has been a breach by Target of any
representation, warranty, covenant or agreement set forth in this Agreement
which breach (i) would give rise to the failure of a condition set forth in
Section 8.2(a) or 8.2(b) and (ii) if susceptible to cure, has not been cured in
all material respects prior to the earlier to occur of (x) 20 Business Days
following delivery by Parent and receipt by Target of written notice of such
breach and (y) the Termination Date;
(f) by either Target or Parent, if the Target Shareholder
Approvals are not obtained because of the failure to obtain such approval upon a
vote at the Target Meeting;
(g) by either Target or Parent, if the Parent Shareholders
Approval is not obtained because of the failure to obtain such approval upon a
vote at the Parent Meeting;
(h) (i) by Parent or Target, if the other respective party
shall have breached or failed to perform in any material respect any of its
covenants or other agreements contained in Section 7.2, (ii) by Parent if Target
shall have failed to hold or otherwise be in material breach of its obligations
to hold the Target Meeting in accordance with its obligations under Section 7.8,
(iii) by Target if Parent shall have failed to hold or otherwise be in material
breach of its obligations to hold the Parent Meeting in accordance with its
obligations under Section 7.13, or (iv) by Parent or Target, if the board of
directors of the other party or any committee thereof shall have made an Adverse
Recommendation Change;
(i) by Target or Parent, if Target or Parent, as applicable,
will have delivered to Target or Parent, as applicable, the Superior Proposal
Notice of such partys intent to enter into a merger, acquisition or other
agreement (including an agreement in principle) to effect a Superior Proposal
received by such party in accordance with the provisions of Section 7.2(f)
including the payment by Target to Parent or Parent to Target, as applicable,
the termination fee specified in Section 11.1(b) or Section 11.1(c), as
applicable. It is understood and agreed that, prior to any termination pursuant
to this Section 10.1(i) taking effect, any amendment to the price or any other
material term of a Superior Proposal (such amended Superior Proposal, a
Modified Superior Proposal) shall require a new Superior Proposal Notice and a
new five Business Day Match Period with respect to such Modified Superior
Proposal.
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10.2 Effect of Termination
In the event of the termination
of this Agreement as provided in Section 10.1, written notice thereof
shall forthwith be given by the terminating party to the other party specifying
the provision of this Agreement pursuant to which such termination is made, and
except with respect to the last sentence of each of Section 7.1(a) and
Section 7.1(b), this Section 10.2 and Article XI (and any
related definitions contained in any such Sections or Article), this Agreement
shall forthwith become null and void after such termination and there shall be
no liability on the part of Parent, Merger Sub or Target; provided,
however, that nothing herein shall relieve any party from any liability with
respect to any willful, knowing or fraudulent breach of any representation,
warranty, covenant or other obligation under this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses
(a) Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the Transactions shall be paid by the party incurring such costs or
expenses, except as provided in this Section 11.1.
(b) Target shall pay Parent a
termination fee in the amount of $5,000,000 (the Target Termination Fee), in
any of the following circumstances:
(i) Parent terminates this Agreement pursuant to Section
10.1(h) (breach by Target of Sections 7.2 or 7.8 or in the event of an Adverse
Recommendation Change by the board of directors of Target), except in the event
of an Adverse Recommendation Change by the board of directors of Target
resulting from the occurrence of a Material Adverse Effect in respect of Parent
as contemplated in Section 7.2(a)(iii); or
(ii) Target terminates this Agreement pursuant to Section
10.1(i) (Superior Proposal); or
(iii) (A) Parent terminates this Agreement pursuant to Section
10.1(b) (failure to complete by Termination Date), or (B) either Parent or
Target terminates this Agreement pursuant to Section 10.1(f) (failure to obtain
the Target Shareholders Approval), and, after the date hereof and prior to such
termination, an Acquisition Proposal with respect to Target is publicly proposed
by any Person (other than Parent or any of its affiliates) or any Person
publicly announces its intention (whether or not conditional) to make an
Acquisition Proposal with respect to Target or such intention has otherwise
become known to Targets shareholders generally; provided,
however, that Target shall not be required to pay the Termination Fee to
Parent pursuant to this Section 11.1(b)(iii) prior to entering
into a definitive agreement and consummating a transaction constituting an
Acquisition Proposal, and shall in no event be required to pay such Termination
Fee if such consummation occurs more than twelve months after the termination of
this Agreement;
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For the purposes of the
foregoing, the term Acquisition Proposal shall have the meaning specified in
Section 12.1(b), except that references to 20% or more in the definition of
Acquisition Proposal shall be deemed to be references to 50% or more.
(c) Parent shall pay Target a termination fee in the amount of
$5,000,000 (the Parent Termination Fee), in any of the following
circumstances:
(i) Target terminates this Agreement pursuant to Section
10.1(h) (breach by Parent of Sections 7.2 or 7.13, as applicable, or in the
event of an Adverse Recommendation Change by the board of directors of Parent),
except in the event of an Adverse Recommendation Change by the board of
directors of Parent resulting from the occurrence of a Material Adverse Effect
in respect of Target as contemplated in Section 7.2(a)(iii); or
(ii) Parent terminates this Agreement pursuant to Section
10.1(i) (Superior Proposal); or
(iii) (A) Target terminates this Agreement pursuant to Section
10.1(b) (failure to complete by Termination Date), or (B) either Parent or
Target terminates this Agreement pursuant to Section 10.1(g) (failure to obtain
the Parent Shareholders Approval), and, after the date hereof and prior to such
termination, an Acquisition Proposal with respect to Parent is publicly proposed
by any Person (other than Target or any of its affiliates) or any Person
publicly announces its intention (whether or not conditional) to make an
Acquisition Proposal with respect to Parent or such intention has otherwise
become known to Parents shareholders generally; provided, however, that Parent
shall not be required to pay the Termination Fee to Target pursuant to this
Section 11.1(c)(iii) prior to entering into a definitive agreement and
consummating a transaction constituting an Acquisition Proposal, and shall in no
event be required to pay such Termination Fee if such consummation occurs more
than twelve months after the termination of this Agreement.
For the purposes of the
foregoing, the term Acquisition Proposal shall have the meaning specified in
Section 12.1(b), except that references to 20% or more in the definition of
Acquisition Proposal shall be deemed to be references to 50% or more.
(d) Except as otherwise set forth above, any payment required
pursuant to this Section 11.1 shall be made within one Business Day after
termination of this Agreement by wire transfer of immediately available funds to
an account designated by Parent.
(e) Each of Target and Parent acknowledges that the agreements
contained in this Section 11.1 are an integral part of the Transactions and
that, without these agreements, neither Parent nor Target would enter into this
Agreement. Each of Target and Parent acknowledges that the payments of the
amounts set out in this Section 11.1 are a genuine pre-estimate of the damages,
which the party entitled to such damages will suffer or incur as a result of the
event giving rise to such payment and the resultant termination of this
Agreement and accordingly are not penalties. If Target or Parent fails promptly
to pay any amount due pursuant to this Section 11.1, and, in order to obtain
such payment, Parent or Target commences a suit that results in a judgment
against Target or Parent for such payment, Target or Parent, as applicable,
shall pay to Parent or Target, as applicable, its costs and expenses (including
attorneys fees and expenses) in connection with such suit, together with
interest on the amount of the payment at a rate of 10% per annum. For greater
certainty, each of Target and Parent agrees that, upon any termination of this
Agreement under circumstances where Target or Parent is entitled to a
Termination Fee and such Termination Fee is paid in full, Target or Parent, as
the case may be, shall be precluded from any other remedy against the other
party at Law or in equity or otherwise (including, without limitation, an order
for specific performance), and shall not seek to obtain any recovery, judgment,
or damages of any kind, including consequential, indirect, or punitive damages,
against the other party or any of its Subsidiaries or any of their respective
directors, officers, employees, partners, managers, members, shareholders or
affiliates or their respective representatives in connection with this Agreement
or the transactions contemplated hereby, provided, however, that payment by a
party of a Termination Fee shall not be in lieu of any damages or any other
payment or remedy available (including, without limitation, an order for
specific performance) in the event of any wilful or intentional breach by such
party of any of its obligations under this Agreement.
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11.2 Notices
All notices or communications
hereunder shall be in writing (including facsimile or similar writing) addressed
as follows:
To Parent or Merger Sub:
Energy Fuels Inc.
225 Union Blvd.
Suite 600
Lakewood, Colorado 80228
Attention: Stephen P. Antony,
Chief Executive Officer
Facsimile: (303) 974-2141
With a copy (which shall not constitute
notice) to:
Dorsey & Whitney LLP
TD Canada
Trust Tower, Brookfield Place
161 Bay Street
Suite 4310
Toronto,
Ontario M5J 2S1
Attention: Richard B. Raymer
Facsimile: (416) 367-7371
And (which shall not constitute notice)
to:
Borden Ladner Gervais LLP
Scotia
Plaza
40 King Street West, 44th Floor
Toronto, Ontario M5H
3Y4
Attention: Mark Wheeler
Facsimile: (416) 361-7376
To Target:
Uranerz Energy Corporation
1701
East E Street
PO Box 50850
Casper, WY 82605
Attention: Glenn
Catchpole, Chief Executive Officer
Facsimile: (307) 265-8904
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With a copy (which shall not constitute
notice) to:
McMillan LLP
Royal Centre
1055
W. Georgia Street, Suite 1500
PO Box 11117
Vancouver, BC V6E 4N7
Attention: Michael Taylor
Facsimile: (604) 685-7084
Any such notice or communication
shall be deemed given (a) when made, if made by hand delivery, and upon
confirmation of receipt, if made by facsimile, (b) one Business Day after being
deposited with a next-day courier, postage prepaid or (c) three Business Days
after being sent certified or registered mail, return receipt requested, postage
prepaid, in each case addressed as above (or to such other address as such party
may designate in writing from time to time).
11.3 Severability
If any provision of this
Agreement shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining provisions
hereof, which shall remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the Transactions may be consummated as
originally contemplated to the fullest extent possible.
11.4 Assignment
This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors, and assigns; provided, however, that,
except for Merger Sub, the rights of which may be assigned to another wholly
owned Subsidiary of Parent, neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation and any assignment in
violation hereof shall be null and void.
11.5 Interpretation
The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All references to dollars or $
shall mean United States dollars. Whenever the words include, includes or
including are used in this Agreement, they shall be deemed to be followed by
the words without limitation. This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
drafting party.
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11.6 Knowledge
References to Knowledge of
Target shall mean the actual knowledge of the executive officers or general
counsel of Target. References to Knowledge of Parent shall mean the actual
knowledge of the executive officers or general counsel of Parent.
11.7 Counterparts
This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
Agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to each party.
11.8 Entire Agreement
This Agreement, together with
all documents contemplated herein or required hereby and the Confidentiality
Agreement, represent the entire agreement of the parties with respect to the
subject matter hereof and shall supersede any and all previous contracts,
arrangements or understandings between the parties with respect to the subject
matter hereof.
11.9 Governing Law
This Agreement shall be
construed, interpreted, and governed in accordance with the laws of the state
of Nevada, without reference to rules relating to conflicts of law.
11.10 Submission to Jurisdiction
Each party to this Agreement
submits to the exclusive jurisdiction of any state or federal court sitting in
the State of Nevada in any dispute or action arising out of or relating to this
Agreement and agrees that all claims in respect of such dispute or action may be
heard and determined in any such court. Each party also agrees not to bring any
dispute or action arising out of or relating to this Agreement in any other
court. Each party agrees that a final judgment in any dispute or action so
brought will be conclusive and may be enforced by dispute or action on the
judgment or in any other manner provided at law (common, statutory or other) or
in equity. Each party waives any defense of inconvenient forum to the
maintenance of any dispute or action so brought and waives any bond, surety, or
other security that might be required of any other party with respect thereto.
11.11 Waiver of Jury Trial
Each of Target and Parent
acknowledges and agrees that any controversy which may arise under this
Agreement is likely to involve complicated and difficult issues and, therefore,
each such party irrevocably and unconditionally waives any right it may have to
a trial by jury in respect of any legal action arising out of or relating to
this Agreement or the Transactions contemplated by this Agreement. Each of the
Target and Parent certifies and acknowledges that (i) no representative of any
other party to this Agreement has represented, expressly or otherwise, that such
other party would not seek to enforce the foregoing waiver in the event of a
legal action, (ii) such party has considered the implications of this waiver,
(iii) such party makes this waiver voluntarily, and (iv) such party has been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications of this Section 11.10.
11.12 Attorneys Fees
If any action at law or equity,
including an action for declaratory relief, is brought to enforce or interpret
any provision of this Agreement, the prevailing party shall be entitled to
recover reasonable 1701 East E Street attorneys fees and expenses from the
other party, which fees and expenses shall be in addition to any other relief
which may be awarded.
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11.13 No Third Party Beneficiaries
No Person other than the
parties is an intended beneficiary of this Agreement or any portion hereof.
11.14 Disclosure Letters
The disclosures made on any
disclosure letter, including the Target Disclosure Letter, with respect to any
representation or warranty, shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is reasonably apparent from the face of the disclosure letter. The
inclusion of any matter on any disclosure letter will not be deemed an admission
by any party that such listed matter is material or that such listed matter has
or would have a Material Adverse Effect with respect to Parent or Target, as
applicable, or would otherwise be material to any party.
11.15 Amendments and Supplements
At any time before or after
approval of the matters presented in connection with the Merger by the
shareholders of Target and prior to the Effective Time, this Agreement may be
amended or supplemented in writing by Parent and Target with respect to any of
the terms contained in this Agreement, except as otherwise provided by Law; provided, however, that following approval of this Agreement by
the shareholders of Target, there shall be no amendment or change to the
provisions hereof unless permitted by the Merger Act without further approval by
the shareholders of Target.
11.16 Extensions, Waivers, Etc
At any time prior to the Effective
Time, either party may extend the time for the performance of any of the
obligations or acts of the other party;
(a)
waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant
hereto; or
(b)
subject to the proviso of Section 11.14, waive compliance with
any of the agreements or conditions of the other party contained herein.
Notwithstanding the foregoing, no
failure or delay by Parent or Target in exercising any right hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE XII
DEFINITIONS
12.1 Defined Terms
The following terms shall have the following meanings for the
purposes of this Agreement:
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(a) Ancillary Agreement means each Voting
Agreement and any other agreement, document or instrument to be entered into by
any party hereto in connection with the Merger, any other Transaction or this
Agreement.
(b) Acquisition Proposal means,
with respect to Target or the Parent, any proposal or offer, or public
announcement of an intention to make a proposal or offer, to such party or its
security holders from any Person or group of Persons "acting jointly or in
concert" (within the meaning of Multilateral Instrument 62-104 Take-Over Bids
and Issuer Bids) which constitutes, or may be reasonably expected to lead to (in
either case whether in one transaction or a series of transactions):
(i) any take-over bid, issuer bid, amalgamation, plan of
arrangement, business combination, merger, tender offer, exchange offer,
consolidation, recapitalization or reorganization resulting in any Person or
group of Persons owning 20% or more of the issued and outstanding equity or
voting interests of Target or the Parent;
(ii) any sale of assets (or any lease, long-term supply
arrangement, licence or other arrangement having the same economic effect as a
sale) of Target or the Parent representing 20% or more of the consolidated
assets (based on the fair market value thereof), revenues or earnings of Target
or the Parent and for clarity includes (but not limited to) the sale of (1) with
respect to the Target, any one of the Nichols Ranch project (and/or processing
plant), the Hank project, the Jane Dough project and (2) with respect to the
Parent, any one of the White Mesa Mill and any surrounding mineral properties
described in Parents latest filed annual report on Form 40-F (other than
properties described as being non-material in such annual report on Form 40-F),
the Roca Honda Project, Gas Hills project or the Sheep Mountain project; and
(iii) any sale or issuance of shares or other equity interests
(or securities convertible into or exercisable for such shares or interests) in
Target or the Parent representing 20% or more of the issued and outstanding
equity or voting interests of Target or the Parent; and
(iv) any arrangement whereby effective operating control of
Target or Parent is granted to another party or Person.
(c) Audit means any audit,
assessment of Taxes, other examination by any Tax Authority, proceeding or
appeal of such proceeding relating to Taxes.
(d) Business Day means a day,
other than a Saturday or Sunday, on which the principal commercial banks located
in Toronto, Ontario or Las Vegas, Nevads are open for the conduct of business.
(e) CFIUS means the Committee on Foreign Investment in the
United States.
(f) CFIUS Approval means (i)
the Target and Parent shall have received a written notification issued by CFIUS
that it has determined that (A) it lacks jurisdiction over the transaction; (B)
it has concluded its review under Section 721 and has determined that there are
no unresolved national security concerns with respect to the transaction; or (C)
if CFIUS undertakes investigation of the transaction, Parent and Target shall
have received notification that the U.S. government has concluded all action
under Section 721 and has determined that there are no unresolved national
security concerns with respect to the transaction and no Material Mitigation
Measure has been imposed on either Target or Parents by CFIUS as a condition to
proceeding with the transaction.
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(g) Code means Internal Revenue Code of 1986, as
amended, and the Treasury Regulations promulgated thereunder.
(h) Confidentiality Agreement
means the confidentiality agreement between Energy Fuels Inc. and Uranerz Energy
Corporation dated June 30, 2014, as amended on December 4, 2014.
(i) Environmental Laws means
all applicable federal, state and local laws and regulations, as amended,
relating to pollution or protection of human health or the environment
(including ambient air, surface water, groundwater, land surface, or subsurface
strata) and which are administered, interpreted, or enforced by the United
States Environmental Protection Agency, other federal agencies, and state and
local agencies with jurisdiction over and including common law in respect of,
pollution or protection of the environment, including without limitation the
Clean Air Act, the Federal Water Pollution Control Act (also known as the Clean
Water Act), the Oil Pollution Act of 1990, the Rivers and Harbors Act of 1899,
the Safe Drinking Water Act, the Emergency Planning and Community Right-to-Know
Act, the Superfund Amendments and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous and Solid Waste Amendments Act of
1984, the Toxic Substances Control Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the National Environmental Policy
Act, the Mine Safety and Health Act, Atomic Energy Act, Federal Land Policy and
Management Act, 1897 Organic Act, and National Historic Preservation Act, each
as amended, and other federal and applicable state, local and foreign laws and
regulations relating to emissions, discharges, releases, or threatened releases
of any Hazardous Substances, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of any Hazardous Substances.
(j) Exchange Act means the
United States Securities Exchange Act of 1934, as amended.
(k) Form F-4 means the
registration statement on Form F-4 to be filed by Parent with the SEC in order
to register (i) the Parent Common Shares issuable upon completion of the Merger,
and (ii) the Parent Common Shares issuable upon exercise of the Assumed
Warrants.
(l) Governmental Authority
means (i) any governmental department, commission, board, bureau, agency, court
or other instrumentality, whether foreign or domestic, of any country, nation,
republic, federation or similar entity or any state, county, parish or
municipality, jurisdiction, (ii) any political subdivision or authority of any
of the above, (iii) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the foregoing, and (iv) any self-regulatory organization or stock exchange,
including the TSX and NYSE MKT.
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(m) Hazardous Substances means
any chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum, petroleum products or any substance regulated under any
Environmental Law.
(n) Hedging Agreement means,
with respect to any Person, any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, commodity price protection agreement,
foreign exchange protection agreement, and any other agreement or arrangement
designed to protect such Person against fluctuations in interest rates,
commodity prices or foreign exchange rates, as any such agreement is amended,
supplemented or modified from time to time.
(o) Indebtedness means, with
respect to any Person, (a) all indebtedness of such party or any of its
Subsidiaries for the repayment of borrowed money, whether or not represented by
bonds, debentures, notes or similar instruments, (b) all other indebtedness and
obligations of such party or any of its Subsidiaries evidenced by bonds,
debentures, notes or similar instruments, under loan agreements, security
agreements, mortgages, deeds of trust, Hedging Agreements or letter of credit
reimbursement agreements, (c) other commitments or obligations by which such
party or any of its Subsidiaries assures against loss (including contingent
reimbursement obligations with respect to letters of credit, bankers
acceptances or similar instruments), (d) commitments (contingent or otherwise)
of such party or any of its Subsidiaries to pay deferred purchase amounts for
property or services, including all notes, earn-out payments, purchase price
adjustment payments and non-competition payments and (e) guarantees or similar
contingent liabilities of such party or any of its Subsidiaries (including so
called take-or-pay or keep-well agreements) with respect to any indebtedness,
obligation, claim or Liability of any other Person.
(p) Law means any applicable
laws, including international, national, provincial, state, municipal and local
laws, treaties, statutes, ordinances, judgments, decrees, injunctions, writs,
certificates and orders, by-laws, rules, regulations, ordinances, or other
requirements of any Governmental Authority having the force of law or any
listing rule of any applicable stock exchange.
(q) Liabilities means, with
respect to any Person, any liability or obligation of such Person of any kind,
character or description, whether known or unknown, absolute or contingent,
accrued or unaccrued, disputed or undisputed, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise, and whether or not
the same is required to be accrued on the financial statements of such Person.
(r) Liens means liens, pledges,
voting agreements, voting trusts, proxy agreements, security interests,
mortgages, and other possessory interests, conditional sale or other title
retention agreements, assessments, easements, rights of way, covenants,
restrictions, rights of first refusal by any third parties, encroachments, and
other burdens, options or encumbrances of any kind.
(s) List means the United
States Environmental Protection Agencys National Priorities List (NPL) of
Hazardous Substance Sites or CERCLA Information System (CERCLIS) or any similar
list maintained by any state regulatory agency with respect to sites from which
there has been a release of Hazardous Substances.
B-77
(t) Material Adverse Effect
means any effect that is, or could reasonably be expected to be, material and
adverse to the business, condition (financial or otherwise), properties, assets
(tangible or intangible), liabilities (whether absolute, accrued, conditional or
otherwise), operations or results of operations of such party and its
subsidiaries taken as a whole, other than any effect: (i) relating to the
Canadian or United States economies, political conditions or securities markets
in general; (ii) affecting the uranium mining or milling industry or nuclear
power generation industry in general; (iii) resulting from changes in the price
of uranium; (iv) relating to a change in the market trading price of shares of
Target or Parent, either (a) related to this Agreement and the Merger or the
announcement thereof or (b) related to such a change in the market trading price
primarily resulting from a change, effect, event or occurrence excluded from
this definition of Material Adverse Effect referred to in clause (i), (ii),
(iii) above, or (v), below or (v) relating to any generally applicable change in
applicable laws (other than orders, judgments or decrees against such person or
any of its subsidiaries) or in accounting principles or standards applicable to
Target or Parent; provided, however, that the effect referred to in (i),
(ii) or (v) above does not primarily relate only to (or have the effect of
primarily relating only to) the Target, the Parent or any Subsidiary of Parent,
taken as a whole, or disproportionately adversely the Target, the Parent or any
Subsidiary of Parent, taken as a whole, compared to other companies of similar
size operating in the industry in which it and its subsidiaries operate.
(u) Material Contract means,
with respect to a party, any contract, arrangement, commitment or understanding
(whether written or oral), that (i) is a material contract (as defined in Item
601(b)(10) of SEC Regulation S-K) with respect to the party to be performed
after the Agreement Date, (ii) materially restrains, limits or impedes the
ability of the party or any of its Subsidiaries or other affiliates to compete
with or conduct any business or any line of business (including (A) agreements
that impose geographic limitations on activities, (B) agreements that impose
restraints on the right to solicit employees and (C) any confidentiality
agreement, area of mutual interest or standstill agreement with any Person (or
any agent thereof) that contains any exclusivity or standstill provisions that
are or will be binding on a party or any of its Subsidiaries or other affiliates
(including, after the Effective Time,)), (iii) contains a provision of the type
commonly referred to as a most favored nation provision for the benefit of a
party other than the party or its Subsidiaries, (iv) contains a put, call or
other right of acquisition or disposition pursuant to which the party or any of
its Subsidiaries could be required to purchase or sell, as applicable, any
equity interests (including licensing or leasehold interests) of any Person or
assets that have a market value or purchase price of more than $100,000, (v)
entitles any current or former officer, employee, director or other independent
contractor of the a party or any Subsidiary to any change in control payment or
benefit, transaction bonus, severance pay or similar benefit, (vi) is a
partnership or joint venture relating to the formation, creation, operation,
management or control of any material partnership or joint venture, or (vii)
relates to Indebtedness in excess of $100,000 of Target, or (viii) relates to
the sale of uranium concentrates where the value of the uranium concentrates to
be sold is in excess of $100,000.
(v) Material Mitigation Measure"
means any mitigation measure proposed by CFIUS that (i) requires Parent to hold
its ownership interests in Target indirectly, such as through proxy holders or
in a voting trust; (ii) materially interferes with Parents ability to
participate in the management of Target; (iii) requires the exclusion of any
material asset from the scope of the transaction or Parent or Target to dispose
of any material portion of its businesses, operations, assets or product lines
(or any combination thereof); or (iv) otherwise is reasonably likely to result
in a Material Adverse Effect on Target or Parent.
B-78
(w) NI 43-101 means National
Instrument 43-101 Standards of Disclosure for Mineral Projects adopted
by the Canadian Securities Administrators.
(x) Parent Common Shares means
common shares in the capital of Parent, no par value, as constituted on the
Agreement Date.
(y) Parent Material
Subsidiaries means each of Energy Fuels Holdings Corp., Titan Uranium Inc.,
Uranium Power Corp., Energy Fuels Wyoming Inc., Magnum Uranium Corp., Magnum
Mineral USA Corp., Colorado Plateau Partners LLC, EFR White Canyon Corp., EFR
White Mesa LLC, EFR Arizona Strip LLC, EFR Henry Mountains LLC, EFR Colorado
Plateau LLC, Energy Fuels Resources (USA) Inc., and Strathmore Minerals Corp.,
Strathmore Resources (US) Ltd., Roca Honda Resources LLC, Wyoming Gold Mining
Company, CK Mining Corp., Saratoga Gold Company Ltd.
(z) Permitted Lien means (i)
Liens for Taxes and other governmental charges and assessments (except
assessments for public improvements levied, pending or deferred against the Real
Property) that are not yet due and payable or which are being contested in good
faith by appropriate proceedings (provided required payments have been made in
connection with any such contest), (ii) Liens of carriers, warehousemen,
mechanics and materialmen and other like Liens arising in the ordinary course
of business (provided lien statements have not been filed as of the Closing
Date), (iii) easements, rights of way and restrictions, zoning ordinances and
other similar Liens affecting the Real Property and which do not adversely
affect title to, detract from the value of, or impair the existing or proposed
use of, the property affected by such lien or imperfection, (iv) statutory Liens
in favor of lessors arising in connection with any property leased to Target or
any Subsidiary and (v) liens granted by Uranerz under the Wyoming Bond Financing
Agreement, including the mortgage, assignment of revenues, security agreement,
fixture filing and financing statement between Target, as mortgagor, and UMB
Bank, n.a., as trustee and mortgagee dated as of November 26, 2013 with respect
to the $20,000,000 Johnson County, Wyoming Taxable Industrial Development
Revenue Bond (Uranerz Energy Corporation Project) Series 2013.
(aa) Person means an
individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity or organization, including any
Governmental Authority.
(bb) Section 721 means Section
721 of the Defense Production Act of 1950, as amended by the Foreign Investment
and National Security Act of 2007.
(cc) Securities Act means the
United States Securities Act of 1933, as amended;
(dd) Subsidiary means, with
respect to any Person, another Person in which such first Person owns, directly
or indirectly, an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a majority
of its board of directors or other governing body (or, if there are no such
voting interests, fifty percent (50%) or more of the equity interests of such
Person).
(ee) Superior Proposal means a
bona fide Acquisition Proposal that is made in writing after the date hereof and
did not result from the breach of Section 7.2 by Target, Parent, or their
Representatives and that the board of directors of Target or the board of
directors of Parent determines in good faith after consultation with its legal
and financial advisors:
B-79
(i) is made to Target (or Parent)
or all the Target common shareholders (or Parent common shareholders) and in
compliance with applicable securities Laws, and is made for all or substantially
all of the assets of Target or Parent or all Target shares, or Parent shares not
owned by the person making the Acquisition Proposal;
(ii) that funds or other consideration necessary for the
consummation of such Acquisition Proposal are available to ensure that the third
party will have the funds or other consideration necessary for the consummation
of the Acquisition Proposal;
(iii) if consummated in accordance with its terms (but not
assuming away any risk of non-completion), would result in a transaction
financially superior for Target or Parent and its security holders than the
transaction contemplated by this Agreement, taking into account the form and
amount of consideration, the likelihood and timing of completion and the other
terms thereof (after due consideration of the legal, financial, regulatory and
other aspects of such proposal and other factors deemed relevant by the board of
directors of Target or the board of directors of Parent);
(iv) is reasonably capable of completion in accordance with its
terms taking into account all legal, financial, regulatory and other aspects of
such Acquisition Proposal;
(v) is not subject to approval by the board of directors or the
equivalent of the third party, is not subject to the third party receiving a
fairness opinion or similar evaluation, and is not subject to a due diligence
condition; and
(vi) that the taking of action in respect of such Acquisition
Proposal is necessary for the board of directors of Target or board of directors
of Parent in the discharge of its fiduciary duties under applicable Laws.
(ff) Target Book-Entry Shares
means uncertificated book-entry Target Common Shares outstanding immediately
prior to the Effective Time;
(gg) Target Common Shares means shares of common stock of
Target, $0.001 par value, as constituted on the Agreement Date;
(hh) Target
Physical Shares means Target Common Shares represented by definitive physical
share certificates immediately prior to the Effective Time;
(ii)
Tax Authority means the Internal Revenue Service and any other domestic or
foreign Governmental Authority responsible for the administration of any Taxes.
(jj) Tax Returns means all
federal, state, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended Tax Return
relating to Taxes.
(kk) Taxes means all federal,
state, local and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including any interest,
additions to tax, or penalties applicable thereto and including any obligations
to indemnify or otherwise assume or succeed to the Tax liability of any other
Person.
B-80
(ll) Wyoming Bond Financing
Agreement means the financing agreement between Target and Johnson County,
Wyoming dated as of November 2, 2013 with respect to the $20,000,000 Johnson
County, Wyoming Taxable Industrial Development Revenue Bond (Uranerz Energy
Corporation Project) Series 2013.
12.2 Additional Defined Terms
. |
|
|
|
Term |
Section |
|
|
2013Parent Balance Sheet |
5.7 |
2013Target Balance Sheet |
4.7 |
Acceptable Confidentiality Agreement |
7.2(e)(ii)(A) |
Adverse Recommendation Change |
7.2(f) |
Agreement |
Preamble |
Agreement Date |
Preamble |
Articles of Merger |
1.2
|
Assumed Warrants |
3.3(d) |
Canadian Securities Regulatory Authorities
|
5.5(b) |
Cantor |
5.27 |
Closing Date |
3.5 |
Closing |
3.5 |
Corporations Act |
2.1 |
Dissenting Shares |
3.4(a) |
EDGAR |
Preamble to Article IV |
Effective Time |
1.2 |
Enforceability Exception |
4.3
|
Exchange Agent |
3.2(a) |
Exchange Fund |
3.2(a) |
Exchange Instructions |
3.2(b) |
Exchange Ratio |
3.1(b)
|
Euro Pacific |
4.22 |
GAAP |
4.6
|
Haywood |
4.22 |
HSR Act |
4.4(b)
|
IFRS |
5.6 |
Knowledge |
11.6 |
Match Period |
7.2(f)(iv) |
Merger |
Preamble |
Merger Act |
1.1 |
Merger Sub |
Preamble |
Modified Superior Proposal |
10.1(i) |
NRS |
1.1 |
NYSE MKT |
1.3 |
Parent |
Preamble |
Parent 43-101 Technical Reports |
5.16(k) |
Parent Benefit Plan |
5.12(a) |
Parent Debentures |
5.2(a) |
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Term |
Section |
|
|
Parent Disclosure Letter |
Preamble to Article V |
Parent ERISA Affiliate |
5.12(a) |
Parent Fee Property |
5.16(a) |
Parent Improvements |
5.16(f) |
Parent Intellectual Property |
5.25 |
Parent Listed Personal Property |
5.16(f) |
Parent Meeting |
7.13 |
Parent MIC |
7.13 |
Parent Mining Claims |
5.16(a) |
Parent Options |
5.2(a) |
Parent Parties |
Preamble |
Parent Permits |
5.14 |
Parent Preferred Shares |
5.2(a) |
Parent Property Contracts |
5.16(a) |
Parent Real Property |
5.16(a) |
Parent Rights Plan |
5.2(a) |
Parent SEC Reports |
5.5(a) |
Parent SEDAR Reports |
5.5(b) |
Parent Shareholders Approval |
5.18 |
Parent Stock Option Plan |
5.2(a) |
Parent Supplemental Disclosures |
7.10 |
Parent Termination Fee |
11.1(c) |
Parent Voting Agreements |
Preamble |
Parent Warrants |
5.2(a) |
Parent Water Rights |
5.16(e) |
PCBs |
4.13(e) |
Potential Acquisition Proposal |
7.2(d) |
Proxy Statement/Prospectus |
4.19 |
Representatives |
7.2(a)
|
Roth |
5.21 |
Sarbanes-Oxley Act |
4.5(c) |
SEC |
4.4(b) |
SEDAR |
Preamble to Article IV |
September 30, 2014 Parent Balance Sheet |
5.7 |
September 30, 2014 Target Balance Sheet |
4.7 |
Substituted Options |
3.3(a) |
Superior Proposal Notice |
7.2(f)(iii) |
Surviving Entity |
1.1 |
Target |
Preamble |
Target 43-101 Technical Reports |
4.16(k) |
Target Benefit Plan |
4.12(a) |
Target Disclosure Letter |
Preamble to Article IV |
Target ERISA Affiliate |
4.12(a) |
Target Fee Property |
4.16(a) |
Target Improvements |
4.16(f) |
Target Intellectual Property |
4.20 |
Target Listed Personal Property |
4.16(f) |
Target Meeting |
7.8
|
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Term |
Section |
|
|
Target Mining Claims |
4.16(a) |
Target Permits |
4.14 |
Target Preferred Shares |
4.2(a) |
Target Property Contracts |
4.16(a) |
Target Real Property |
4.16(a) |
Target Rights Plan |
4.2(a) |
Target SEC Reports |
4.5(a)
|
Target SEDAR Reports |
4.5(b) |
Target Shareholders Approval |
4.18
|
Target Shareholder Approvals |
4.18 |
Target Stock Option |
3.3(a) |
Target Stock Option Plan |
3.3(a) |
Target Supplemental Disclosures |
7.10 |
Target Termination Fee |
11.1(b) |
Target Voting Agreements |
Preamble |
Target Warrants |
3.3(b) |
Target Warrant Indentures |
3.3(b) |
Termination Date |
10.1(b) |
Transactions |
3.5 |
Unaffiliated Shareholders Approval |
4.18 |
Voting Agreements |
Preamble |
WARN Act |
6.1(s) |
Water Rights |
4.16(e) |
[SIGNATURE PAGE FOLLOWS]
B-83
IN WITNESS WHEREOF, the parties
hereto have duly executed this Agreement as of the day and year first above
written.
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ENERGY FUELS INC. |
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By: |
/s/
Stephen P. Antony |
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Name: |
Stephen P. Antony |
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Title: |
Chief Executive Officer |
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EFR NEVADA CORP. |
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By: /s/ Stephen P. Antony |
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Name: |
Stephen P. Antony |
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Title: |
President |
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URANERZ ENERGY CORPORATION
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By: /s/ Glenn Catchpole |
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Name: |
Glenn Catchpole |
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Title: |
Chief Executive Officer |
B-84
EXHIBIT A-1
Signatories to Target Voting Agreements
Peter W. Bell
Glenn Catchpole
Arnold J. Dyck
Paul
Goranson
Dennis Higgs
Doug Hirschman
Dr. Gerhard F. Kirchner
Bruce Larson
Benjamin D. Leboe
Paul Saxton
Glenda Thomas
Mike Thomas
EXHIBIT A-2
Signatories to Parent Voting Agreements
Stephen P. Antony
J. Birks Bovaird
Paul A. Carroll
David C. Frydenlund
Larry Goldberg
Mark Goodman
Bruce Hansen
Ron F. Hochstein
Tae Hwan Kim
Richard J. Patricio
Harold R.
Roberts
Daniel G. Zang
B-81
AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO THE AGREEMENT
AND PLAN OF MERGER dated as of May 8, 2015 (this Amendment), is by and
among Uranerz Energy Corporation, a corporation organized under the laws of the
state of Nevada (the Target), Energy Fuels Inc., a corporation
organized under the laws of the province of Ontario, Canada (Parent),
and EFR Nevada Corp., a corporation organized under the laws of the state of
Nevada and an indirect wholly owned subsidiary of Parent (Merger Sub)
(each a Party and together the Parties).
WHEREAS, the Parties previously
entered into that certain Agreement and Plan of Merger dated as of January 4,
2015 (the Merger Agreement), pursuant to which, among other
things, Merger Sub shall merge with and into the Target (the Merger)
and the Target shall continue as the surviving corporation in such Merger
(capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Merger Agreement);
WHEREAS, Section 11.15 of the
Merger Agreement permits the Parties to amend the Merger Agreement; and
WHEREAS, the Parties desire to amend the Merger Agreement as
set forth below.
NOW, THEREFORE, in consideration
of the mutual covenants and agreements hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
1. Amendment to Section 1.3 of the Merger Agreement.
Section 1.3 of the Merger Agreement shall be deleted in its entirety and
replaced with the following:
1.3 Governance of Parent. The
Parent shall, in accordance with all applicable corporate, NYSE MKT LLC
(NYSE MKT) and TSX laws, rules and regulations, take all actions
necessary to cause the appointment of two (2) existing members of the board of
directors of Target to the board of directors of Parent such that the board of
directors of Parent is constituted as provided in Section 7.13 of this Agreement
as of the Effective Time.
2. Amendment to Section 3.2(h) of the Merger Agreement.
Section 3.2(h) of the Merger Agreement shall be deleted in its entirety and
replaced with the following:
(h) Withholding. Each of
Parent, the Surviving Entity and the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Target Common Shares or Target Warrants such amounts as Parent,
the Surviving Entity or the Exchange Agent determine are required to be deducted
and withheld under the Code or any provision of state, local, or foreign Tax Law
(the Withholding Amount). With respect to the making of such payment,
such withholding of Parent Common Shares issued to any holder of Target Warrants
shall be an amount determined by Parent to be reasonably necessary to satisfy
the Parents withholding obligation. To the extent that amounts are withheld by
Parent, the Surviving Entity or the Exchange Agent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of Target Common Shares or Target Warrants in respect of which such deduction
and withholding was made by Parent, the Surviving Entity or the Exchange Agent,
as the case may be. Parent and Target shall cooperate with and assist each other
with efforts to reduce or eliminate such withholding Taxes. At the Closing,
Parent and any holder of Target Common Shares (who does not also hold Target
Warrants) subject to withholding under this section will direct the Exchange
Agent to deliver 90% of the Parent Common Shares to such holder (or as it may
otherwise direct) and to sell to a third person (and under no circumstances
shall the Parent redeem, acquire, or cancel such Parent Common Shares) 10% of
the Parent Common Shares to be received in the Transaction (the Withholding
Shares) by such holder to satisfy the withholding obligation as soon as
reasonably possible after the Closing and to deliver all of the proceeds from
selling of the Withholding Shares to Parent. Parent will then remit the
Withholding Amount to the appropriate Government Authorities for the account of
such holders within the time limits prescribed by applicable Tax Laws. Parent
will have no further recourse against such holders with respect to the
Withholding Amount and, upon remittance of the required Withholding Amount under
applicable Tax Laws, such holders will have no further recourse against Parent
with respect to such Withholding Shares. If, (a) the proceeds from the sale of
the Withholding Shares is less than the Withholding Amount, such holder shall
have no liability to Parent to pay such difference, and (b) the proceeds from
the sale of the Withholding Shares is greater than the Withholding Amount, the
holder shall have no entitlement to such excess amount.
B-82
3. Amendment to Section 4.23 of the Merger Agreement.
Section 4.23 of the Merger Agreement shall be deleted in its entirety and
replaced with the following:
4.23 FIRPTA. The Target Common
Shares shall be regularly traded on an established securities market within
the meaning of Treasury Regulation section 1.897 -9T(d). Other than as disclosed
in Section 4.23 of the Target Disclosure Letter, no Target shareholder or Target
Warrant holder who is a foreign person (as defined in Section 1445(f)(3) of
the Code) holds or has held (pursuant to the constructive ownership rules of
Section 318(a) of the Code): (i) more than 5% of Target Common Shares at any
time during the 5-year period ending on Closing Date; (ii) Target Warrants with
a fair market value on the date acquired by such Target Warrant holder greater
than the fair market value on that date of 5% of the Target Common Shares; or
(iii) aggregate equity securities of Target with a fair market value on the date
acquired in excess of 5% of the fair market value of Target Common Shares on
such date.
4. Amendment to Section 7.13 of the Merger Agreement.
Section 7.13 of the Merger Agreement shall be deleted in its entirety and
replaced with the following:
B-83
7.13 Parent Shareholders
Meeting. Parent shall, as promptly as reasonably practicable after the Form
F-4 has been declared effective under the Securities Act, (i) take all steps
reasonably necessary to call, give notice of, convene and hold a special (or
annual and special) meeting of its shareholders (the Parent Meeting)
for the purpose of securing the Parent Shareholders Approval, (ii) distribute
to its shareholders a management information circular in accordance with
applicable Law (the Parent MIC), which Parent MIC shall contain the
recommendation of the Parent board of directors that its shareholders approve
this Agreement, (iii) use its commercially reasonable efforts to solicit from
its shareholders proxies in favor of the approval of this Agreement and to
secure the Parent Shareholders Approval and (iv) cooperate and consult with
Target with respect to each of the foregoing matters. Notwithstanding any
Adverse Recommendation Change by the Target board of directors or the
commencement, public proposal, public disclosure or communication to Parent by
Target of any Acquisition Proposal with respect to Target or any of its
Subsidiaries, or any other fact or circumstance (except for termination of this
Agreement pursuant to Article X), this Agreement shall be submitted to the
shareholders of Parent at the Parent Meeting for the purpose of adopting this
Agreement, with such disclosures as shall be required by applicable Law. As of
the Effective Time, and subject to applicable Law, Parent shall appoint Dennis
Higgs and Glenn Catchpole, each of which are existing members of the board of
directors of Target, to the board of directors of Parent which shall be
comprised of eight (8) members.
5. No Other Amendments. The Parties each hereby
acknowledge, agree and understand that except as expressly set forth above, this
Amendment (i) shall not amend, modify or otherwise impact any provision of the
Merger Agreement, all of which shall remain in effect, and (ii) shall not serve
as a waiver of, and shall be without prejudice to, any rights, remedies, claims
or defenses of any Party under the Merger Agreement or otherwise, all of which
are expressly reserved by the respective Parties.
6. Applicable Law. This Amendment shall be construed,
interpreted, and governed in accordance with the laws of the state of
Nevada, without reference to rules relating to conflicts of law.
7. Counterparts. This Amendment may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the Parties and delivered to the other Parties. A signed copy
of this Amendment delivered by facsimile, e-mail or other means of electronic
transmission shall be deemed to have the same legal effect as delivery of an
original signed copy of this Amendment.
[SIGNATURE PAGE FOLLOWS]
B-84
IN WITNESS WHEREOF, Parent, Merger Sub and the Target
have caused this Amendment to be executed by their respective officers thereunto
duly authorized, all as of the date first written above.
|
ENERGY FUELS INC. |
|
|
|
By:
|
|
Name: Stephen P. Antony |
|
Title: President and CEO |
|
|
|
EFR NEVADA CORP. |
|
|
|
By: |
|
Name: David Frydenlund |
|
Title: Secretary |
|
|
|
URANERZ ENERGY CORPORATION |
|
|
|
By: |
|
Name: Glenn Catchpole |
|
Title: Chief Executive Officer
|
[Signature Page to Amendment of Merger Agreement]
B-85
SCHEDULE C
FAIRNESS OPINION
January 2, 2015
Board of Directors
Energy Fuels, Inc.
225 Union Blvd
Lakewood, CO 80228
Members of the Board of Directors:
Roth Capital Partners, LLC (Roth, us or we) understands
that Energy Fuels, Inc., a corporation organized under the laws of the Province
of Ontario, Canada (the Parent), Merger Sub, a Nevada corporation and a
wholly-owned subsidiary of Parent (Merger Sub), and Uranerz Corporation., a
Nevada corporation (Target), intend to enter into an Agreement and Plan of
Merger substantially in the form of a draft dated December 20, 2014 (the Merger
Agreement) pursuant to which Merger Sub will be merged with and into Target
(the Merger), for and in consideration of an exchange of .255 shares of Parent
common stock (Parent Common Stock) for one share of Targets stock (the
Exchange Ratio), and Merger Sub will cease to exist and Target will continue
as an indirect wholly-owned subsidiary of Parent.
You have asked us to render an opinion, as of the date hereof,
with respect to the fairness, from a financial point of view, of the Exchange
Ratio to the holders of Parent Common Stock.
For purposes of the opinion set forth herein, we have reviewed
a draft of the Merger Agreement dated December 20, 2014, and also, among other
things:
(i) |
reviewed certain publicly available and other business
and financial information provided by Parent; |
|
|
(ii) |
reviewed certain internal financial statements and other
financial and operating data concerning Target provided by
Parent; |
|
|
(iii) |
reviewed certain financial forecasts relating to Target
prepared by the management of Target (the Target Forecasts) provided by
Parent; |
|
|
(iv) |
discussed the past and current operations, financial
condition and prospects of each of Target and Parent with senior
management of Parent, including the assessments of senior management of
Parent as to the liquidity needs of, and financing alternatives and other
capital resources available to, Target; |
(v) |
participated in certain discussions with senior
management of Parent regarding their assessment of the strategic rationale
for, and the potential benefits of, the Merger; |
|
|
(vi) |
compared the financial performance of Parent and Target,
and their prices and trading activity respectively with that of certain
publicly-traded companies we deemed relevant in preparing this
opinion; |
|
|
(vii) |
compared certain financial terms of the Merger to
financial terms, to the extent publicly available, of certain other
business combination transactions we deemed relevant in preparing this
opinion; |
|
|
(viii) |
participated in discussions with certain representatives
of Parent, and its professional advisors; and |
|
|
(ix) |
performed such other analyses and considered such other
data, financial studies, analyses and investigations, and financial,
economic and market criteria and factors which we deemed relevant in
preparing this opinion. |
In conducting our review and arriving at our opinion, with your
consent, we have not independently investigated or verified any of the foregoing
information and we have assumed and relied upon such information as being
accurate and complete in all material respects, and we have further relied upon
verbal or written assurances of senior management of Parent that such
information was accurate and complete in all material respects when given to us
and that they are not aware of any facts or circumstances that would make or
render any of such information inaccurate, incomplete or misleading in any
material respect. With respect to the Target Forecasts, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the management of Target as to
the future financial performance of Target. We have not been engaged to assess
the achievability of any projections or the assumptions on which they were
based, and we express no view as to such projections or assumptions. In
addition, we have not assumed any responsibility for any independent valuation
or appraisal of the assets, liabilities or business operations of Parent or
Target, nor have we been furnished with any such valuation or appraisal. In
addition, we have not assumed any obligation to conduct, nor have we actually
conducted, any physical inspection of the properties or facilities of Parent or
Target.
We also have assumed, with your consent, that the Merger will
be consummated substantially in accordance with the terms set forth in the
Merger Agreement and in compliance with the applicable provisions of the
Securities Act of 1933, as amended (the Securities Act), the Securities
Exchange Act of 1934, as amended, the Ontario Securities Act, and all other
applicable federal, state and local statutes, rules, regulations promulgated
thereunder and the rules and regulations of the NYSE MKT, Toronto Stock Exchange
and other applicable exchanges, that the representations and warranties of each
party in the Merger Agreement are true and correct, that each party to the
Merger will perform on a timely basis all covenants and agreements required to
be performed by it under the Merger Agreement and that all conditions to the
consummation of the Merger will be satisfied without waiver thereof. We have
further assumed that the final Merger Agreement when signed by all relevant
parties will conform in all material respects to the draft Merger Agreement
dated December 20, 2014, and that the Merger will be consummated as described in
the draft Merger Agreement. We have also assumed that all governmental,
regulatory and other consents and approvals contemplated by the Merger Agreement
will be timely obtained and that, in the course of obtaining any of those
consents and approvals, no modification, delay, limitation, restriction or
condition will be imposed or waivers made that would have a material adverse
effect on Parent or Target or on the contemplated benefits of the Merger.
C-2
Our opinion addresses only the fairness, from a financial point
of view, as of the date hereof, of the Exchange Ratio to the holders of Parent
Common Stock. Our opinion does not in any manner address any other aspect or
implication of the Merger or any agreement, arrangement or understanding entered
into in connection with the Merger or otherwise, including, without limitation,
the fairness of the amount or nature of any compensation to any officers,
directors or employees of, or any class of such persons, relative to the
consideration to be received by the holders of Parent Common Stock in the
Merger. Our opinion also does not address the relative merits of the Merger as
compared to any alternative business strategies that might exist for Parent, the
underlying business decision of Parent to proceed with the Merger, or the
effects of any other transaction in which Parent might engage. The issuance of
this opinion was approved by an authorized internal fairness committee of Roth
in accordance with our customary practice. Our opinion is necessarily based on
economic, monetary, market, financial and other conditions as they exist and can
be evaluated, and the information made available to us, as of the date hereof.
We express no opinion as to the underlying valuation, future performance or
long-term viability of Parent or Target. Further, we express no opinion as to
the actual value of the shares of Parent Common Stock when issued pursuant to
the Merger Agreement or the prices at which shares of Parent Common Stock will
trade at any time before, after or during the Merger. It should be understood
that, although subsequent developments or events may affect various assumptions
used by us in preparing our opinion, we do not have any obligation to update,
revise or reaffirm our opinion based on such developments or events or otherwise
and we expressly disclaim any responsibility to do so. Our opinion does not
address any legal, tax or accounting matters.
We note that, in connection with performing and rendering our
services to Parent, we were not authorized to and did not solicit any
expressions of interest from any other parties with respect to any other merger,
sale or other business combination involving all or any part of Parent.
We have acted as financial advisor to Parent in connection with
the Merger and will receive a fee for our services payable upon delivery of this
opinion to the Parents Board of Directors following a request from such Board
that our opinion be so delivered. Our fee is not contingent upon the
consummation of the Merger. We will be reimbursed for our reasonable out of
pocket expenses incurred in rendering services to Parent, subject to an agreed
maximum amount. Payment of such reimbursement is not contingent upon
consummation of the Merger. Parent has agreed to indemnify us for certain
losses, claims, damages and liabilities arising out our performance of services
pursuant to our engagement with Parent. In the two years prior to the date
hereof, we have not provided any services to the Parent where we received a fee.
Roth, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. We are a full service
securities firm engaged in securities trading and brokerage activities, as well
as providing investment banking and other financial services. In the ordinary
course of business, we and our affiliates may acquire, hold or sell, for our and
our affiliates own accounts and for the accounts of customers, equity, debt and
other securities and financial instruments (including bank loans and other
obligations) of Parent or Target, and, accordingly, may at any time hold a long
or a short position in such securities.
C-3
It is understood that this letter is solely for the information
of the Board of Directors of Parent in connection with its evaluation of the
Merger and does not constitute a recommendation to any stockholder of Parent as
to how such stockholder should vote or otherwise act or refrain from acting on
any matter relating to the Merger. This opinion may not be relied upon by any
other person, or used for any other purpose. Except as expressly contemplated by
and subject to the limitations set forth in the Merger Agreement, this opinion
may not be reproduced, disseminated, quoted or referred to at any time, in any
manner or for any purpose without our prior written consent. We acknowledge that
a copy of this opinion may be included in its entirety as an exhibit, and a
summary of the contents of this opinion may be disclosed, in any filing that
Parent is required to make with the U.S. Securities & Exchange Commission in
connection with the Merger only to the extent Parent has concluded upon advice
of counsel that such inclusion or disclosure is required by applicable law.
Very truly yours,
ROTH Capital Partners
Roth Capital Partners, LLC
C-4
SCHEDULE D
PRO FORMA FINANCIAL STATEMENTS
ENERGY FUELS INC. |
Pro Forma Condensed Consolidated Statement of Financial
Position as at March 31, 2015 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
|
Adjustments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS to conform
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
Uranerz Energy |
|
|
|
|
|
to accounting |
|
|
Uranerz Energy |
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
Corporation |
|
|
|
|
|
policies with |
|
|
Corporation |
|
|
|
|
|
Pro Forma |
|
|
Energy Fuels Inc. |
|
|
|
Energy Fuels Inc. |
|
|
(under US GAAP) |
|
|
Note |
|
|
Energy Fuels Inc. |
|
|
(under IFRS) |
|
|
Note |
|
|
Adjustments |
|
|
March 31, 2015 |
|
ASSETS |
|
(A) |
|
|
(B) |
|
|
|
|
|
(C) |
|
|
(D)=(B)+(C)
|
|
|
|
|
|
(E) |
|
|
(F)=(A)+(D)+(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
6,542 |
|
$ |
4,772 |
|
|
|
|
$ |
- $ |
|
|
4,772 |
|
|
5(c) |
|
$ |
(2,587 |
) |
$ |
8,727 |
|
Marketable securities
|
|
200 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
200 |
|
Trade and other receivables |
|
1,542 |
|
|
3,400 |
|
|
|
|
|
- |
|
|
3,400 |
|
|
|
|
|
- |
|
|
4,942 |
|
Inventories |
|
29,190 |
|
|
2,321 |
|
|
4(d) |
|
|
755 |
|
|
3,076 |
|
|
|
|
|
- |
|
|
32,266 |
|
Prepaid expenses and other assets |
|
728 |
|
|
1,235 |
|
|
|
|
|
- |
|
|
1,235 |
|
|
|
|
|
- |
|
|
1,963 |
|
Assets held for sale |
|
1,953 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,953 |
|
|
|
40,155 |
|
|
11,728 |
|
|
|
|
|
755 |
|
|
12,483 |
|
|
|
|
|
(2,587 |
) |
|
50,051 |
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
568 |
|
|
4(h) |
|
|
(206 |
) |
|
362 |
|
|
|
|
|
- |
|
|
362 |
|
Notes receivable |
|
704 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
704 |
|
Inventories |
|
4,009 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
4,009 |
|
Investment in Virginia
Energy |
|
374 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
374 |
|
Property, plant and equipment |
|
67,206 |
|
|
815 |
|
|
4(a) |
|
|
44,133 |
|
|
68,557 |
|
|
5(d) |
|
|
(15,409 |
) |
|
120,354 |
|
|
|
|
|
|
|
|
|
4(b) |
|
|
23,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
5(g) |
|
|
74,670 |
|
|
74,670 |
|
Intangible assets |
|
3,337 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
5(f) |
|
|
10,400 |
|
|
13,737 |
|
Restricted cash |
|
16,148 |
|
|
2,100 |
|
|
|
|
|
- |
|
|
2,100 |
|
|
|
|
|
- |
|
|
18,248 |
|
|
$ |
131,933
|
|
$ |
15,211 |
|
|
|
|
$ |
68,291 $ |
|
|
83,502 |
|
|
|
|
$ |
67,074 |
|
$ |
282,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
$ |
3,164
|
|
$ |
3,428 |
|
|
|
|
$ |
- $ |
|
|
3,428 |
|
|
|
|
$ |
- |
|
$ |
6,592 |
|
Current portion of
long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decommissioning liability |
|
1,142 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,142 |
|
Loans and borrowings |
|
654 |
|
|
2,204 |
|
|
|
|
|
- |
|
|
2,204 |
|
|
|
|
|
- |
|
|
2,858 |
|
|
|
4,960 |
|
|
5,632 |
|
|
|
|
|
- |
|
|
5,632 |
|
|
|
|
|
- |
|
|
10,592 |
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
1,608 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,608 |
|
Decommissioning
liability |
|
15,564 |
|
|
2,321 |
|
|
4(i) |
|
|
766 |
|
|
3,087 |
|
|
|
|
|
- |
|
|
18,651 |
|
Loans and borrowings |
|
13,938 |
|
|
16,377 |
|
|
4(h) |
|
|
(206 |
) |
|
16,171 |
|
|
|
|
|
- |
|
|
30,109 |
|
|
|
36,070 |
|
|
24,330 |
|
|
|
|
|
560 |
|
|
24,890 |
|
|
|
|
|
- |
|
|
60,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Shareholders |
|
95,863 |
|
|
(9,237 |
) |
|
|
|
|
66,139 |
|
|
56,902 |
|
|
5(a) |
|
|
119,598 |
|
|
220,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5(b) |
|
|
7,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5(c) |
|
|
4,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5(e) |
|
|
(56,902 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5(c) |
|
|
(6,644 |
) |
|
|
|
Non-controlling interests |
|
- |
|
|
118 |
|
|
4(f) |
|
|
1,592 |
|
|
1,710 |
|
|
5(d) |
|
|
(787 |
) |
|
923 |
|
|
|
95,863 |
|
|
(9,119 |
) |
|
|
|
|
67,731 |
|
|
58,612 |
|
|
|
|
|
67,074 |
|
|
221,549 |
|
|
$ |
131,933
|
|
$ |
15,211 |
|
|
|
|
$ |
68,291 $ |
|
|
83,502 |
|
|
|
|
$ |
67,074 |
|
$ |
282,509 |
|
See accompanying notes to the unaudited pro forma condensed
consolidated financial statements.
D-1
ENERGY FUELS INC. |
Pro Forma Condensed Consolidated Statement of
Comprehensive Income (Loss) |
For the Three Months Ended March 31, 2015 |
(Unaudited) |
(Expressed
in thousands of U.S. dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS
to conform |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uranerz Energy |
|
|
|
|
|
to accounting |
|
|
Uranerz Energy |
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
|
|
|
Corporation |
|
|
|
|
|
policies with |
|
|
Corporation |
|
|
|
|
|
Pro Forma |
|
|
Consolidated
|
|
|
|
Energy Fuels Inc. |
|
|
(under US GAAP) |
|
|
Note |
|
|
Energy Fuels Inc. |
|
|
(under IFRS) |
|
|
Note |
|
|
Adjustments |
|
|
Energy Fuels Inc. |
|
|
|
(A) |
|
|
(B) |
|
|
|
|
|
(C) |
|
|
(D)=(B)+(C) |
|
|
|
|
|
(E) |
|
|
(F)=(A)+(D)+(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
$ |
7,600 $ |
|
|
3,400 |
|
|
|
|
$ |
- |
|
$ |
3,400 |
|
|
|
|
$ |
- |
|
$ |
11,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production cost of sales |
|
(3,640 |
) |
|
(1,791 |
) |
|
|
|
|
- |
|
|
(1,791 |
) |
|
|
|
|
- |
|
|
(5,431 |
) |
Depreciation, depletion and
amortization |
|
(311 |
) |
|
(120 |
) |
|
4(e) |
|
|
(1,837 |
) |
|
(1,957 |
) |
|
|
|
|
- |
|
|
(2,268 |
) |
Impairment of inventories |
|
- |
|
|
- |
|
|
4(d) |
|
|
(812 |
) |
|
(812 |
) |
|
|
|
|
- |
|
|
(812 |
) |
TOTAL COST OF SALES
|
|
(3,951 |
) |
|
(1,911 |
) |
|
|
|
|
(2,649 |
) |
|
(4,560 |
) |
|
|
|
|
- |
|
|
(8,511 |
) |
GROSS PROFIT (LOSS) |
|
3,649 |
|
|
1,489 |
|
|
|
|
|
(2,649 |
) |
|
(1,160 |
) |
|
|
|
|
- |
|
|
2,489 |
|
Other operating expenses |
|
(2,861 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(2,861 |
) |
Selling, general and administrative expenses
|
|
(3,324 |
) |
|
(2,750 |
) |
|
|
|
|
- |
|
|
(2,750 |
) |
|
5(h) |
|
|
1,446 |
|
|
(4,628 |
) |
Mineral property expenditures
|
|
- |
|
|
(2,742 |
) |
|
4(c) |
|
|
2,742 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
Finance income (expense) |
|
255 |
|
|
(355 |
) |
|
|
|
|
- |
|
|
(355 |
) |
|
|
|
|
- |
|
|
(100 |
) |
Other income (expense) |
|
(80 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(80 |
) |
NET LOSS BEFORE TAXES |
|
(2,361 |
) |
|
(4,358 |
) |
|
|
|
|
93 |
|
|
(4,265 |
) |
|
|
|
|
1,446 |
|
|
(5,180 |
) |
Income tax expense |
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
NET LOSS FOR THE PERIOD |
|
(2,361 |
) |
|
(4,358 |
) |
|
|
|
|
93 |
|
|
(4,265 |
) |
|
|
|
|
1,446 |
|
|
(5,180 |
) |
ITEMS THAT MAY BE
RECLASSIFIED TO PROFIT OR LOSS |
Unrealized gain on available-for-sale
assets |
|
(68 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(68 |
) |
Share of other comprehensive
income (loss) of Virginia Energy Resources Inc. |
|
7 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
7 |
|
Foreign currency translation adjustment |
|
1,302 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,302 |
|
TOTAL OTHER COMPREHENSIVE LOSS |
|
1,241 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,241 |
|
Attributable to shareholders |
|
(1,120 |
) |
|
(4,255 |
) |
|
|
|
|
(10 |
) |
|
(4,265 |
) |
|
|
|
|
1,446 |
|
|
(3,939 |
) |
Non-controlling interests |
|
- |
|
|
(103 |
) |
|
4(c) |
|
|
103 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
NET LOSS FOR THE PERIOD |
$ |
(1,120 |
) $ |
|
(4,358 |
) |
|
|
|
$ |
93 |
|
$ |
(4,265 |
) |
|
|
|
$ |
1,446 |
|
$ |
(3,939 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND
DILUTED LOSS PER SHARE |
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.12 |
)
|
See accompanying notes to the unaudited pro forma condensed
consolidated financial statements.
D-2
ENERGY FUELS INC. |
Pro Forma Condensed Consolidated Statement of
Comprehensive Income (Loss) |
For the Year Ended December 31, 2014 |
(Unaudited) |
(Expressed
in thousands of U.S. dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS
to conform |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uranerz Energy |
|
|
|
|
|
to accounting |
|
|
Uranerz Energy |
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
|
|
|
Corporation |
|
|
|
|
|
policies with |
|
|
Corporation |
|
|
|
|
|
Pro Forma |
|
|
Consolidated
|
|
|
|
Energy Fuels Inc. |
|
|
(under US GAAP) |
|
|
Note |
|
|
Energy Fuels Inc. |
|
|
(under IFRS) |
|
|
Note |
|
|
Adjustments |
|
|
Energy Fuels Inc. |
|
|
|
(A) |
|
|
(B) |
|
|
|
|
|
(C) |
|
|
(D)=(B)+(C) |
|
|
|
|
|
(E) |
|
|
(F)=(A)+(D)+(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
$ |
46,253 $ |
|
|
10,007 |
|
|
|
|
$ |
- |
|
$ |
10,007 |
|
|
|
|
$ |
- |
|
$ |
56,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production cost of sales |
|
(27,209 |
) |
|
(6,117 |
) |
|
|
|
|
- |
|
|
(6,117 |
) |
|
|
|
|
- |
|
|
(33,326 |
) |
Depreciation, depletion and
amortization |
|
(3,073 |
) |
|
(97 |
) |
|
4(e) |
|
|
(5,801 |
) |
|
(5,898 |
) |
|
|
|
|
- |
|
|
(8,971 |
) |
Impairment of inventories |
|
- |
|
|
- |
|
|
4(d) |
|
|
(667 |
) |
|
(667 |
) |
|
|
|
|
- |
|
|
(667 |
) |
TOTAL COST OF SALES |
|
(30,282 |
) |
|
(6,214 |
) |
|
|
|
|
(6,468 |
) |
|
(12,682 |
) |
|
|
|
|
- |
|
|
(42,964 |
) |
GROSS PROFIT (LOSS) |
|
15,971 |
|
|
3,793 |
|
|
|
|
|
(6,468 |
) |
|
(2,675 |
) |
|
|
|
|
- |
|
|
13,296 |
|
Other operating expenses |
|
(7,004 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(7,004 |
) |
Selling, general and administrative expenses
|
|
(15,511 |
) |
|
(7,049 |
) |
|
|
|
|
- |
|
|
(7,049 |
) |
|
5(h) |
|
|
938 |
|
|
(21,622 |
) |
Mineral property expenditures
|
|
- |
|
|
(7,829 |
) |
|
4(c) |
|
|
7,829 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
Finance income (expense) |
|
(1,543 |
) |
|
(1,216 |
) |
|
4(g) |
|
|
444 |
|
|
(772 |
) |
|
|
|
|
- |
|
|
(2,315 |
) |
Impairment of property, plant
and equipment |
|
(35,856 |
) |
|
- |
|
|
4(a) |
|
|
(3,572 |
) |
|
(3,572 |
) |
|
|
|
|
- |
|
|
(39,428 |
) |
Impairment of Virginia Energy Resources |
|
(368 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(368 |
) |
Other income (expense) |
|
802 |
|
|
19 |
|
|
|
|
|
- |
|
|
19 |
|
|
|
|
|
- |
|
|
821 |
|
NET LOSS BEFORE TAXES |
|
(43,509 |
) |
|
(12,282 |
) |
|
|
|
|
(1,767 |
) |
|
(14,049 |
) |
|
|
|
|
938 |
|
|
(56,620 |
) |
Income tax expense |
|
(103 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(103 |
) |
NET LOSS FOR THE PERIOD |
|
(43,612 |
) |
|
(12,282 |
) |
|
|
|
|
(1,767 |
) |
|
(14,049 |
) |
|
|
|
|
938 |
|
|
(56,723 |
) |
ITEMS THAT MAY BE
RECLASSIFIED TO PROFIT OR LOSS |
Unrealized gain on available-for-sale
assets |
|
188 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
188 |
|
Gains on available-for-sale
financial assets reclassified to profit or loss |
|
(198 |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(198 |
) |
Share of other comprehensive income
(loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Virginia Energy
Resources Inc. |
|
71 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
71 |
|
Foreign currency translation adjustment |
|
1,268 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,268 |
|
TOTAL OTHER COMPREHENSIVE LOSS |
|
1,329 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
1,329 |
|
Attributable to shareholders |
|
(42,283 |
) |
|
(11,978 |
) |
|
|
|
|
(2,071 |
) |
|
(14,049 |
) |
|
|
|
|
938 |
|
|
(55,394 |
) |
Non-controlling interests |
|
- |
|
|
(304 |
) |
|
4(c) |
|
|
304 |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
COMPREHENSIVE LOSS FOR THE PERIOD |
$ |
(42,283 |
) $ |
|
(12,282 |
) |
|
|
|
$ |
(1,767 |
) |
$ |
(14,049 |
) |
|
|
|
$ |
938 |
|
$ |
(55,394 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER
SHARE |
$ |
(2.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1.26 |
) |
See accompanying notes to the unaudited pro forma condensed
consolidated financial statements.
D-3
ENERGY FUELS INC. |
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
AT MARCH 31, 2015 AND FOR THE THREE MONTHS ENDED MARCH
31, 2015 |
AND THE YEAR ENDED DECEMBER 31, 2014 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars except per share amounts, unless otherwise
noted) |
The unaudited pro forma condensed consolidated financial
statements have been prepared in connection with the proposed acquisition (the
Acquisition) of Uranerz Energy Corp. (Uranerz) by Energy Fuels Inc. (EFI,
Energy Fuels or the Company). The unaudited pro forma condensed consolidated
financial statements have been prepared for illustrative purposes only and give
effect to the Acquisition pursuant to the assumptions described in Notes 3, 4
and 5 to these unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated statement of financial position
as at March 31, 2015 gives effect to the proposed Acquisition by EFI as if it
had occurred as at March 31, 2015. The unaudited pro forma condensed
consolidated statement of comprehensive income (loss) for the year ended
December 31, 2014 and for the three months ended March 31, 2015 gives effect to
the acquisition as if had occurred as at January 1, 2014. Uranerzs financial
statements are prepared using US GAAP and have been conformed to IFRS for
inclusion in these pro from condensed consolidated financial statements. These
adjustments are discussed in Note 4.
The historical financial statements have been adjusted in the
pro forma financial statements to give effect to events that are (1) directly
attributable to the pro forma events, (2) factually supportable, and (3) with
respect to the statement of operations, expected to have a continuing impact on
the combined company. The unaudited pro forma condensed consolidated statements
of operations do not reflect any non-recurring charges directly related to the
pro forma events that may be incurred upon completion of the transactions.
The unaudited pro forma condensed consolidated financial
statements are not necessarily indicative of the operating results or financial
condition that would have been achieved if the proposed Acquisition had been
completed on the dates or for the periods presented, nor do they purport to
project the results of operations or financial position of the consolidated
entities for any future period or as of any future date.
The unaudited pro forma condensed consolidated financial
information does not reflect any cost savings, operating synergies or
enhancements that the combined company may achieve as a result of the
Acquisition or for liabilities resulting from integration planning, except for
certain severance costs related to management of Uranerz. However, liabilities
ultimately may be recorded for severance, relocation or retention costs in
subsequent periods related to employees of both companies, as well as the costs
of vacating certain leased facilities of either company or other costs
associated with exiting or transferring activities between the companies. The
ultimate recognition of such costs and liabilities would affect amounts in the
unaudited pro forma condensed consolidated financial information, and such costs
and liabilities could be material. Further, the unaudited pro forma condensed
consolidated financial information does not reflect any regulatory actions that
may impact the unaudited pro forma condensed consolidated financial information
when the acquisition is completed.
The pro forma adjustments and allocations of the purchase price
for Uranerz are based on preliminary estimates of the fair value of the
consideration paid and the fair value of the assets acquired and liabilities to
be assumed. The final purchase price allocation will be completed after the
asset and liability valuations are finalized.
In preparing the unaudited pro forma condensed consolidated
statement of financial position and the unaudited pro forma condensed
consolidated statements of income (loss), the following historical information
was used:
1. |
Pro forma statement of financial position as at March 31,
2015 combining the unaudited condensed consolidated statement of financial
position of EFI as at March 31, 2015, which was prepared in accordance
with International Financial Reporting Standards as issued by the
International Accounting Standards Board (IFRS), and the unaudited
consolidated statement of financial position of Uranerz as at March 31,
2015 prepared in accordance with United States Generally Accepted
Accounting Principles (US GAAP) as adjusted for IFRS and EFIs
accounting policies. |
|
|
2. |
Pro forma statement of comprehensive income (loss) for
the year ended December 31, 2014 combining the audited consolidated
statement of comprehensive income (loss) of EFI for the year ended
December 31, 2014, which was prepared in accordance with IFRS, and the
audited consolidated statements of comprehensive loss of Uranerz for the
year ended December 31, 2014 prepared in accordance with US GAAP and
adjusted for IFRS and EFIs accounting policy. |
|
|
3. |
Pro forma statement of comprehensive income (loss) for
the three months ended March 31, 2015 combining the unaudited condensed
consolidated statement of comprehensive income (loss) of EFI for the three
months ended March 31, 2015, which was prepared in accordance with IFRS,
and the unaudited consolidated statements of comprehensive loss of Uranerz
for three months ended March 31, 2015 prepared in accordance with US GAAP
and adjusted for IFRS and EFIs accounting policy.
|
D-4
ENERGY FUELS INC. |
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
AT MARCH 31, 2015 AND FOR THE THREE MONTHS ENDED MARCH
31, 2015 |
AND THE YEAR ENDED DECEMBER 31, 2014 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars except per share amounts, unless otherwise
noted) |
The unaudited pro forma consolidated statement of financial
position and the unaudited pro forma condensed consolidated statement of
comprehensive income (loss) should be read in conjunction with the above noted
financial statements, including the notes thereto. Certain of Uranerzs assets,
liabilities, income and expenses have been reclassified to conform to EFIs
consolidated financial statement presentation.
2. |
SIGNIFICANT ACCOUNTING
POLICIES |
The accounting policies used in preparing the unaudited pro
forma condensed consolidated financial statements are set out in EFIs audited
consolidated financial statements for the year ended December 31, 2014. In
preparing the unaudited pro forma condensed consolidated financial statements, a
review was undertaken by management of EFI to identify accounting policy
differences where the impact was potentially material and could be reasonably
estimated, and identified Uranerz use of US GAAP as a material difference. The
Company has adjusted Uranerzs financial statements to conform to IFRS and EFIs
accounting policies and these adjustments are discussed in Note 4. Additional
accounting differences may be identified after consummation of the proposed
Acquisition.
3. |
SHARE ACQUISITION OF
URANERZ |
On January 5, 2015, the Company announced the execution of a
definitive acquisition agreement (the Acquisition Agreement) with Uranerz
pursuant to which the Company will acquire all of the issued and outstanding
shares of common stock of Uranerz. The Acquisition Agreement was subsequently
amended on May 8, 2015. Under the terms of the Acquisition Agreement,
shareholders of Uranerz will receive 0.255 common shares of the Company for each
share of Uranerz common stock held. Each outstanding Uranerz option or warrant
will automatically be converted into an option or warrant (as applicable) to
acquire common shares of Company, on the same terms and conditions as were
applicable to the stock option or warrant (as applicable) prior to the
Acquisition, except that the number of shares subject to the option or warrant
and the exercise price of the option or warrant will be adjusted based on the
exchange ratio of 0.255, as to preserve the economic value of such options or
warrants. Based on the common shares outstanding of both the Company and Uranerz
as at March 31, 2015, the Companys shareholders will own approximately 45% of
the shares of the Company upon completion of the transaction and Uranerz
shareholders will own approximately 55% of the common shares of the Company.
The obligations of the Company and Uranerz to complete the
Acquisition Agreement are subject to satisfactory completion of various
conditions.
The Acquisition Agreement contains customary deal protection
mechanisms including a mutual break fee of $5,000 payable in certain events, as
well as a non-solicitation provision and the right to match a superior proposal
in favor of the Company.
The cost of the acquisition will include the fair value of the
issuance of 24,457,766 EFI common shares (based on the May 15, 2015 closing
price of $4.89 (Cdn$5.86) for the Companys shares), the issuance of 2,690,250
replacement warrants with a fair value of $1,596 and the issuance of 2,090,153
replacement options with a fair value of $6,156. In addition, EFI estimates
transaction costs of $7,060 of which $987 were incurred though March 31, 2015
and URZ transaction costs of $1,967 of which $1,397 were incurred though March
31, 2015. These costs are not reflected in the pro forma financial statements of
income/(loss) as they are non-recurring.
The acquisition will be accounted for as a business combination
under IFRS with EFI deemed to be the acquirer, owing to the fact that
post-transaction, Energy Fuels controls the board of directors with six of the
eight board seats, a majority of senior management posts, and has overall
control of the day-to-day activities of the combined entities. For the purposes
of the pro forma statement of financial position, the value of the share
consideration has been based on closing price of the Companys shares on May 15,
2015 (the effective date of presentation of the Acquisition for purposes of the
unaudited pro forma statement of financial position). The Company will value the
share consideration component based on the closing price of the Companys shares
on the date the Acquisition closes, which may result in an increase or decrease
in the consideration for accounting purposes. For every $0.01 change in share
price of the Company, the purchase price will change by $244.
D-5
ENERGY FUELS INC. |
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
AT MARCH 31, 2015 AND FOR THE THREE MONTHS ENDED MARCH
31, 2015 |
AND THE YEAR ENDED DECEMBER 31, 2014 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars except per share amounts, unless otherwise
noted) |
The allocation of the purchase price is based upon management
of EFIs preliminary estimates and certain assumptions with respect to the fair
value associated with the assets and the liabilities to be acquired. Moreover,
this preliminary fair value is supported by a preliminary third party valuation
of Uranerz assets. The actual fair values of the assets and liabilities may
differ materially from the amounts disclosed below in the assumed pro forma
purchase price allocation as further analysis is completed. Consequently, the
actual allocation of the purchase price is likely to result in different
adjustments than those in the unaudited pro forma condensed consolidated
statements. EFI will complete a full and detailed valuation of the Uranerz
assets. Therefore, it is likely that the fair values of assets and liabilities
acquired, including mineral properties and property, plant & equipment, will
vary from those shown below and the differences may be material.
The preliminary allocation of fair value assumed in these
unaudited pro forma condensed consolidated financial statements is as of March
31, 2015, subject to change and is summarized as follows:
|
|
|
|
|
|
Fair Value |
|
|
|
|
|
|
|
Carrying Value |
|
|
Adjustments |
|
|
Fair Value |
|
|
Purchase price |
|
(Under
IFRS) |
|
|
|
|
|
|
|
|
Issuance of 24,457,766 common
shares of EFI |
|
|
|
|
|
|
$ |
119,598 |
|
|
Issuance of
2,690,250 warrants |
|
|
|
|
|
|
|
1,596 |
|
|
Issuance of 2,090,153 options |
|
|
|
|
|
|
|
6,156 |
|
|
|
|
|
|
|
|
|
$ |
127,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets and
liabilities acquired |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
4,774 |
|
$ |
- |
|
$ |
4,774 |
|
|
Trade and other
receivables |
|
3,400 |
|
|
- |
|
|
3,400 |
|
|
Inventories |
|
3,076 |
|
|
- |
|
|
3,076 |
|
|
Prepaid expenses
and other assets |
|
1,597 |
|
|
- |
|
|
1,597 |
|
|
Property, plant and equipment
|
|
68,557 |
|
|
(15,409 |
) |
|
53,148 |
|
|
Intangible
assets |
|
- |
|
|
10,400 |
|
|
10,400 |
|
|
Restricted cash |
|
2,100 |
|
|
- |
|
|
2,100 |
|
|
Accounts payable
and accrued liabilities |
|
(3,428 |
) |
|
- |
|
|
(3,428 |
) |
|
Loans and borrowings |
|
(18,377 |
) |
|
- |
|
|
(18,377 |
) |
|
Decommissioning
liabilities |
|
(3,087 |
) |
|
- |
|
|
(3,087 |
) |
|
Non-controlling interest |
|
(1,710 |
) |
|
787 |
|
|
(923 |
) |
|
Goodwill |
|
- |
|
|
74,670 |
|
|
74,670 |
|
|
|
$ |
56,902 |
|
$ |
70,448 |
|
$ |
127,350 |
|
The following weighted average assumptions were used for the
Black-Scholes option pricing model to calculate the $1,596 of fair value for the
2,690,205 warrants to be issued in connection with the acquisition.
|
Risk-free rate |
|
0.901
0.930% |
|
|
Expected life |
|
0.92 2.06 years |
|
|
Expected volatility |
|
45% - 71%* |
|
|
Expected dividend yield |
|
0.0% |
|
The following weighted average assumptions were used for the
Black-Scholes option pricing model to calculate the $6,156 of fair value for the
2,090,153 options to be issued in connection with the acquisition.
|
Risk-free rate |
|
0.946
1.828% |
|
|
Expected life |
|
0.64 9.53 years |
|
|
Expected volatility |
|
38% - 93%* |
|
|
Expected dividend yield |
|
0.0% |
|
D-6
ENERGY FUELS INC. |
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
AT MARCH 31, 2015 AND FOR THE THREE MONTHS ENDED MARCH
31, 2015 |
AND THE YEAR ENDED DECEMBER 31, 2014 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars except per share amounts, unless otherwise
noted) |
|
* |
Expected volatility is measured based on the Companys
historical share price volatility over the expected life of the
warrants. |
The Company determined there would not be a tax consequence in
these pro forma condensed consolidated financial statements.
4. |
INTERNATIONAL FINANCIAL REPORTING
STANDARDS |
Differences between IFRS and U.S. GAAP
EFIs management reviewed the historic accounting records and
financial statements of Uranerz for the periods from inception to March 31, 2015
and identified the material differences between IFRS and U.S. GAAP. EFIs
accounting policies are defined in the Companys consolidated financial
statements for the year ended December 31, 2014.
To conform to IFRS the following adjustments were made:
|
a. |
Adjustment to property, plant and equipment to include
capital costs related to the building of the plant, wellfield development
and operations site development that were previously expensed under US
GAAP of $44,133, in accordance with EFIs accounting policies under IFRS.
The pro forma condensed consolidated statement of comprehensive income for
the period ended December 31, 2014 was adjusted to reflect impairment of
property, plant and equipment for the year ended December 31, 2014 of
$3,572; |
|
|
|
|
b. |
Adjustment to property, plant and equipment to include
capital costs from inception to March 31, 2015 related to exploration and
evaluation of mineral properties including acquisition costs, property
holding costs, exploration costs and development costs that were
previously expensed under US GAAP of $23,609, in accordance with EFIs
accounting policies under IFRS; |
|
|
|
|
c. |
Adjustment to mineral property expenditures to include
capital costs from January 1, 2014 to March 31, 2015 related to the
exploration and evaluation of mineral properties including acquisition
costs, property holding costs, exploration costs and development costs
that were previously expensed under US GAAP of $2,742 for the three months
ended March 31, 2015 and $7,829 for the year ended December 31, 2014. In
addition, a corresponding adjustment to non-controlling interest of $103
was made for the three months ended March 31, and $304 was made for the
year ended December 31, 2014, in accordance with EFIs accounting policies
under IFRS; |
|
|
|
|
d. |
Adjustment to inventories to include capital costs
previously expensed under US GAAP of $1,567 net of impairment to adjust
the inventory balance to its net realizable value of $812 for the three
months ended March 31, 2015 totaling a net increase of inventories of $755
at March 31, 2015. The pro forma condensed consolidated statement of
comprehensive income for the period ended December 31, 2014 was adjusted
for an inventory impairment of $667.; |
|
|
|
|
e. |
Adjustment to cost of sales to include depreciation,
depletion and amortization of property, plant and equipment which were
previously expensed under US GAAP of $1,837 for the three months ended
March 31, 2015 and of $5,801 for the year ended December 31, 2014, in
accordance with EFIs accounting policies under IFRS; |
|
|
|
|
f. |
Adjustment to non-controlling interests of $1,592 for the
capitalization of costs related to Uranerzs joint venture which were
previously expensed, in accordance with EFIs accounting policies under
IFRS; |
|
|
|
|
g. |
Adjustment to finance income (expense) of $444 for the
year ended December 31, 2014 to capitalize interest which was previously
expensed under US GAAP to property, plant and equipment, in accordance
with EFIs accounting policies under IFRS; |
D-7
ENERGY FUELS INC. |
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
AT MARCH 31, 2015 AND FOR THE THREE MONTHS ENDED MARCH
31, 2015 |
AND THE YEAR ENDED DECEMBER 31, 2014 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars except per share amounts, unless otherwise
noted) |
|
h. |
Adjustment from prepaid expenses and other assets to
loans and borrowings of $206 to change presentation of debt issuance costs
in accordance with EFIs accounting policies under IFRS; |
|
|
|
|
i. |
Adjustment to decommissioning liabilities of $ 766 due to
change in assumptions regarding discount rates in accordance with EFIs
accounting policies under IFRS. |
|
|
|
5. |
PRO FORMA ASSUMPTIONS AND
ADJUSTMENTS |
The unaudited pro forma condensed consolidated financial
statements reflect the following adjustments to give effect to the acquisition
as described in Note 3:
|
a. |
To reflect the issuance of 24,457,766 common shares of
EFI for the common shares of Uranerz at a fair value of
$119,598; |
|
|
|
|
b. |
To reflect the Companys replacement of 2,690,250
Uranerzs outstanding warrants on the same basis as the Acquisition
Consideration, estimated at a fair value of $1,596 and to reflect the
Companys replacement of 2,090,250 Uranerzs outstanding options on the
same basis as the Acquisition Consideration, estimated at a fair value of
$6,156 for a total of $7,752; |
|
|
|
|
c. |
To reflect an adjustment of $6,644 for EFIs and Uranerz
estimated costs and expenses of the transaction from April 1, 2015 to the
close of the transaction. EFIs transaction costs are comprised of cash
costs of $2,017 and by the issuance of 829,652 EFI common shares for a
total share value of $4,057. Uranerzs transaction costs are comprised of
cash costs of $570 for a total of $2,587 cash costs combined. Through
March 31, 2015, Uranerz and EFI incurred transaction costs of $2,384. (see
Note 5(h); |
|
|
|
|
d. |
An adjustment of $15,409 to reflect the decrease in fair
value of property, plant and equipment including mineral properties under
IFRS and an adjustment of $ 787 to reflect an increase in the fair value
of the non-controlling interest of the plant, property and equipment
including mineral properties, estimated using a discounted cash flow model
and various other pricing scenarios with the following
assumptions: |
Key assumptions used in the
calculation of recoverable amounts include discount rates, uranium prices,
future timing of production volume including the date when a mineral property
can be brought into production and the expected cost to produce uranium and
future care and maintenance and operating costs.
The Companys estimate of future
uranium sales prices were based primarily on the uranium prices prepared by
industry analysts. For the purpose of the valuation estimated an uranium price
of $38.50/lb. for the period up to December 31, 2015; a price range of
$42.00/lb. to $60.00/lb. for the period 2016 to 2020 and $65.00/lb. for the
period 2021 to 2026. The Company used a pre-tax real discount rate of 10.0%
based on the Companys estimated weighted-average cost of capital for
discounting the cash flow projections;
|
e. |
The elimination of the historical equity accounts of
Uranerz; |
|
|
|
|
f. |
An adjustment of $10,400 to reflect the fair value of
Uranerz sales contracts; |
|
|
|
|
g. |
Goodwill represents the excess of the preliminary
purchase price (Note 3) over the estimated fair value of assets acquired
and liabilities assumed of Uranerz; |
|
|
|
|
h. |
An adjustment of $1,446 to selling, general and
administrative expenses for transaction related costs incurred in the
three months ended March 31, 2015 and $938 for the year ended December 31,
2014 as they are non-recurring. |
D-8
ENERGY FUELS INC. |
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
AT MARCH 31, 2015 AND FOR THE THREE MONTHS ENDED MARCH
31, 2015 |
AND THE YEAR ENDED DECEMBER 31, 2014 |
(Unaudited) |
(Expressed in
thousands of U.S. dollars except per share amounts, unless otherwise
noted) |
6. |
PRO FORMA SHARES
OUTSTANDING |
The average number of shares used in the computation of pro
forma basic and diluted loss per share has been determined as follows:
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
|
Weighted average shares
outstanding of EFI |
|
19,677,552 |
|
|
19,661,661 |
|
|
Shares issued to acquire Uranerz |
|
24,457,766 |
|
|
24,457,766 |
|
|
Shares issued to settle transaction costs |
|
829,652 |
|
|
829,652 |
|
|
Pro
forma weighted average shares of EFI |
|
44,964,970 |
|
|
44,949,079 |
|
D-9
SCHEDULE E
CORPORATE GOVERNANCE DISCLOSURE
The board of directors (the Board) of Energy Fuels
Inc. (the Corporation) is currently comprised of nine directors.
The EFI Board is responsible for determining whether or not
each director is independent. This assessment is made in accordance with
standards of the Canadian Securities Administrators in National Instrument
52-110 Audit Committees (NI 52-110) and the Corporations
corporate governance policies. Under NI 52-110, a director is considered to be
unrelated and independent by the EFI Board if the EFI Board determines that the
director has no direct or indirect material relationship with the Corporation. A
material relationship is a relationship that could, in the view of the EFI
Board, be reasonably expected to interfere with the exercise of the directors
judgment independent of management. With the assistance of the Governance and
Nominating Committee, the EFI Board reviews each directors independence
annually and upon the appointment or election of a new director. The EFI Board
last considered this matter at its meeting on May 6, 2014.
Seven of the nine directors are considered by the EFI Board to
be independent within the meaning of NI 52-110. Stephen P. Antony is not an
independent director as he is the President and Chief Executive Officer
(CEO) of the Corporation. Mr. Park is regarded as having an indirect
material relationship which could reasonably be expected to interfere with his
exercise of independent judgment, considering the Corporations strategic
relationship with KEPCO, KEPCOs significant shareholding in the Corporation and
his position with KEPCO. However, each of the remaining directors, namely, J.
Birks Bovaird, Paul A. Carroll, Lawrence A. Goldberg, Mark E. Goodman, Bruce D.
Hansen, Ron F. Hochstein and Richard Patricio are independent directors of the
Corporation. Mr. Goodman is not standing for reelection at the Meeting.
A number of directors of the Corporation are also directors of
other reporting issuers. See Particulars of Matters to be Acted Upon at the
Meeting Election of Directors in the Corporations Management Information
Circular dated May 6, 2015.
The Chair of the EFI Board, J. Birks Bovaird, is not a member
of management and is an unrelated and independent director. One of his principal
responsibilities is to oversee the EFI Board processes so that it operates
efficiently and effectively in carrying out its duties and to act as a liaison
between the EFI Board and management.
The independent directors of the EFI Board are encouraged by
the EFI Board to hold private sessions as such independent directors deem
necessary in the circumstances. In the year ended December 31, 2014, the
independent directors held separate in camera sessions following four
Board meetings, and had informal discussions from time to time.
The EFI Board held a total of 7 meetings during the year ended
December 31, 2014. The following table shows the number of Board meetings each
director attended during that period.
Name |
Number of Board Meetings Held
While a director |
Number of Board Meetings Attended |
J. Birks Bovaird |
7 |
7 |
Stephen P. Antony |
7 |
7 |
Paul A. Carroll |
7 |
7 |
Eun Ho Cheong(1)
|
0 |
0 |
W. Robert
Dengler(2) |
3 |
1 |
Lawrence A. Goldberg |
7 |
6 |
Mark E. Goodman |
7 |
3 |
Bruce D. Hansen |
7 |
6 |
Ron F. Hochstein |
7 |
6 |
Steven N. Khan (3)
|
2 |
2 |
Tae Hwan Kim |
6 |
6 |
Richard J. Patricio |
7 |
7
|
Notes
(1) Mr. Cheong resigned from
the EFI Board effective January 13, 2014.
(2) Mr. Dengler did not stand for
re-election, and ceased being a director effective May 21, 2014.
(3) Mr.
Khan resigned from the EFI Board effective March 31, 2014.
Board Mandate
The EFI Boards mandate is set out in the Corporations
Corporate Governance Manual as approved by the EFI Board. The EFI Board is
responsible, directly and through its committees, for the supervision of the
management of the business and affairs of the Corporation. The EFI Board seeks
to ensure the viability and long-term financial strength of the Corporation and
the creation of enduring shareholder value. In pursuing these objectives, the
EFI Board will have regard to the best interests of shareholders and the
Corporation and to the needs of its other stakeholders, including the needs of
the communities in which the Corporation conducts its business and the needs of
its employees and suppliers.
To assist the EFI Board in the implementation of its mandate,
it delegates some of its responsibility to committees. The EFI Board reviews and
approves the structure, mandate and composition of its committees. It also
receives and reviews periodic reports of the activities and findings of those
committees.
The EFI Board selects and appoints the Corporations President
and CEO and, through him or her, other officers and senior management to whom
the EFI Board delegates certain of its power of management. The EFI Board
approves strategy, sets targets, performance standards and policies to guide
them; monitors and advises management; sets their compensation and, if
necessary, replaces them.
The EFI Board reviews and approves, for release to
shareholders, quarterly and annual reports on the performance of the
Corporation, and certain other material public communications. The EFI Board has
implemented a Corporate Disclosure Policy, which it reviews annually, to ensure
effective communication between the Corporation, its shareholders, prospective
investors, the public and other stakeholders, including the dissemination of
information on a regular and timely basis. The CEO has dedicated a portion of
his time to communicate with shareholders and prospective investors. Through its
officers, the Corporation responds to questions and provides information to
individual shareholders, institutional investors, financial analysts and the
media.
E-2
The EFI Board ensures that mechanisms are in place to guide the
organization in its activities. The EFI Board reviews and approves a broad range
of internal control and management systems, including expenditure approvals and
financial controls. Management is required by the EFI Board to comply with legal
and regulatory requirements with respect to all of the Corporations activities.
Position Descriptions
The EFI Board has adopted a written position description for
the CEO of the Corporation. The primary role of the CEO is to develop and
recommend to the EFI Board a long-term strategy and vision for the Corporation
that leads to the creation of shareholder value, to develop and recommend to the
EFI Board annual business plans and budgets that support the Corporations long
term strategy, and to ensure that the day-to day business affairs of the
Corporation are appropriately managed, including evaluation of the Corporations
operating performance and initiating appropriate action where required. In order
to fulfill this role, the CEO is expected to ensure that the Corporation has an
effective management team and to have an active plan for its development and
succession, and to foster a corporate culture that promotes ethical practices,
encourages individual integrity and fulfills social responsibility, including
ensuring that the Corporation is in compliance with its Corporate Disclosure
Policy and Environment, Health and Safety Policy and internal controls and
procedures. Finally, the CEO is expected to ensure that the Corporation builds
and maintains strong, positive relationships with its investors, employees and
the corporate and public community.
The position description for the Chair of the EFI Board is set
out in the Corporations Corporate Governance Manual. The primary role of the
Chair is to provide leadership to the EFI Board, to ensure that the EFI Board
can function independently of management and fully discharges its duties. This
involves acting as a liaison between the EFI Board and management, working with
management to schedule Board meetings and with committee chairs to coordinate
scheduling committee meetings, ensuring the appropriate agendas for meetings,
ensuring the proper flow of information to the EFI Board, and reviewing the
adequacy and timing of documented material in support of managements proposals.
The Chair of the EFI Board also works with the Governance and Nominating
Committee to ensure proper committee structure, including assignments of members
and committee Chairs, as well as chairs all meetings of the EFI Board, and when
requested by the CEO, meetings of shareholders.
The EFI Board has developed written position descriptions for
the Chair of each committee. The primary responsibilities of the Chair of each
committee are to: develop the agenda for each meeting of the committee; preside
over committee meetings; oversee the committees compliance with its Charter or
Terms of Reference and Mandate; work with management to develop the committees
annual work plan; together with management, identify, review and evaluate
matters of concern to the committee; and report regularly to the EFI Board.
Orientation and Continuing Education
New directors are provided with a comprehensive information
package on the Corporation and its management and are fully briefed by senior
management on the corporate organization and key current issues. The information
package includes contact information, the Corporations organizational chart,
the Articles and By-Laws of the Corporation, the Corporations Corporate
Governance Manual and certain key documents and plans such as the Corporations
Stock Option Plan, Shareholder Rights Plan, Directors and Officers Insurance
Policy and Indemnity Agreement. The Corporations Corporate Governance Manual
describes the roles, responsibilities and mandates of the EFI Board, its
committees, its directors, the Chair of the EFI Board, the Chairs of each
committee and the CEO, and includes copies of all of the Corporations adopted
codes and policies. In addition, new directors are introduced to the
Corporations website, which includes the Corporations most recent Annual
Information Form, Form 40-F, Management Information Circulars, press releases,
material change reports and other continuous disclosure documents, all of which
provide the information necessary for a new director to become familiar with the
nature and operation of the Corporations business. Management is also available
to answer any questions from or to provide any additional orientation for new
directors that may be required. Visits to key operations may also be arranged
for new directors.
E-3
Although the Corporation does not generally provide formal
training programs for its directors, the EFI Board encourages directors to
participate in continuing education programs. One director has successfully
completed a director certification program offered by a major Canadian
university. In addition, Board members are often provided with notices and other
correspondence from counsel and other advisors, which report on developments
affecting corporate and securities law matters and governance generally. Any
material developments affecting the ability of directors to meet their
obligations as directors are brought to the attention of the Governance
Committee by management, and appropriate actions are taken by the Governance and
Nominating Committee to ensure that directors maintain the skill and knowledge
necessary to meet their obligations.
Ethical Business Conduct Code
The Code sets out in detail the core values and the principles
by which the Corporation is governed, and addresses topics such as: conflicts of
interest, including transactions and agreements in respect of which a director
or executive officer has a material interest; protection and proper use of
corporate assets and opportunities; confidentiality of corporate information;
fair dealing with the Corporations security holders, customers, suppliers,
competitors and employees; compliance with laws, rules and regulations; and
reporting of any illegal or unethical behaviour. Under the Code and applicable
law, any director or officer who has a material interest in a transaction or
agreement is required to disclose his or her interest and refrain from voting or
participating in any decision relating to the transaction or agreement.
The management of the Corporation is committed to fostering and
maintaining a culture of high ethical standards and compliance that ensures a
work environment that encourages employees to raise concerns to the attention of
management and that promptly addresses any employee compliance concerns. Under
the Code, all directors, officers, and employees must take all reasonable steps
to prevent contraventions of the Code, to identify and raise issues before they
lead to problems, and to seek additional guidance when necessary. If breaches of
the Code occur, they must be reported promptly. The Corporation maintains
appropriate records evidencing compliance with the Code. It is ultimately the
EFI Boards responsibility for monitoring compliance with the Code. The EFI
Board will review the Code periodically and review managements monitoring of
compliance with the Code, and if necessary, consult with members of the
Corporations senior management team and audit committee (the Audit
Committee), as appropriate, to resolve any reported violations of the Code.
Any waivers from the Code that are granted for the benefit of the Corporations
directors or executive officers shall be granted by the EFI Board. Violations of
the Code by a director, officer or employee are grounds for disciplinary action,
up to and including immediate termination and possible legal prosecution.
Where a material departure from the Code by a director or
executive officer constitutes a material change, the Corporation will file a
material change report disclosing the date of the departure, the parties
involved in the departure, the reason why the EFI Board has or has not
sanctioned the departure, and any measures the EFI Board has taken to address or
remedy the departure. No material change reports have been filed since the
beginning of the year ended December 31, 2014 that pertain to any conduct of a
director or executive officer that constitutes a departure from the Code.
E-4
The Corporation also expects all agents, consultants and
contractors to comply with the Code.
Nomination of Directors
The EFI Board has a Governance and Nominating Committee (the
GN Committee), which is composed entirely of independent directors. The
GN Committee has the general responsibility for developing and monitoring the
Corporations approach to corporate governance issues and for identifying and
recommending to the EFI Board nominees for appointment or election as directors.
The GN Committees responsibilities include the following: assessing the
effectiveness of the EFI Board as a whole, the Chair of the EFI Board, the
committees of the EFI Board and the contribution of individual directors on a
periodic basis; ensuring that, where necessary, appropriate structures and
procedures are in place to ensure that the EFI Board can function independently
of management; periodically examining the size of the EFI Board, with a view to
determining the impact of the number of directors upon effectiveness;
identifying individuals qualified to become new Board members and recommending
to the EFI Board all director nominees for election or appointment to the EFI
Board; assessing directors on an ongoing basis; and recommending to the EFI
Board the members to serve on the various committees. In addition, the GN
Committee reviews the Corporations disclosure of its corporate governance
practices in the Corporations Circular each year.
During the year ended December 31, 2014, the GN Committee was
responsible for proposing new candidates for Board nomination. In making its
recommendations to the EFI Board, the GN Committee considers what competencies
and skills the EFI Board, as a whole, should possess, the competencies and
skills each existing director possesses, and the competencies and skills each
new nominee will bring to the boardroom. The GN Committee also considers whether
or not each new nominee can devote sufficient time and resources to his or her
duties as a Board member.
Term Limits
It is proposed that each of the persons elected as a Director
at the Meeting will serve until the close of the next annual meeting of the
Corporation or until his successor is elected or appointed. The EFI Board has
not adopted a term limit for directors. The EFI Board believes that the
imposition of director term limits on a board may discount the value of
experience and continuity amongst board members and runs the risk of excluding
experienced and potentially valuable board members. The EFI Board relies on an
annual director assessment procedure in evaluating Board members and believes
that it can best strike the right balance between continuity and fresh
perspectives without mandated term limits. The EFI Board has demonstrated the
effectiveness of its approach, as six of the nine current directors, or 67% of
the EFI Board, have been appointed since 2010.
Board Diversity
On January 28, 2015, the EFI Board adopted a written diversity
policy that sets out the Corporations approach to diversity, including gender,
on the EFI Board and among the executive officers of the Corporation. The GN
Committee and the EFI Board aim to attract and maintain a Board and an executive
team that have an appropriate mix of diversity, skill and expertise. All Board
and executive officer appointments will be based on merit, and the skill and
contribution that the candidate is expected to bring to the EFI Board and the
executive team, with due consideration given to the benefits of diversity.
Pursuant to the diversity policy, when considering the
composition of, and individuals to nominate or hire to, the EFI Board and the
executive team, the GN Committee and the EFI Board, as applicable, shall
consider diversity from a number of aspects, including but not limited to
gender, age, ethnicity and cultural diversity. In addition, when assessing and
identifying potential new members to join the EFI Board or the executive team,
the GN Committee and the EFI Board, as applicable, consider the current level of
diversity on the EFI Board and the executive team.
E-5
The GN Committee and the EFI Board are responsible for
developing measurable objectives to implement the diversity policy and to
measure its effectiveness. The GN Committee annually considers whether to set
targets based on diversity for the appointment of individuals to the EFI Board
or the executive team, recognizing that notwithstanding any targets set in any
given year, the selection of diverse candidates will depend on the pool of
available candidates with the necessary skills, knowledge and experience. At
this time, the GN has not established a target regarding the number of women on
the EFI Board or the executive management team, as the GN Committee intends to
measure the effectiveness of the policy by looking at the increase in female
representation over time. As at the date of this Circular, there are no female
directors or members of the executive team.
Majority Voting Policy
On January 25, 2013, the EFI Board adopted a majority voting
policy. Pursuant to the majority voting policy, forms of proxy for meetings of
the shareholders of the Corporation at which directors are to be elected provide
the option of voting in favour, or withholding from voting, for each individual
nominee to the EFI Board. If, with respect to any particular nominee, the number
of shares withheld from voting exceeds the number of shares voted in favour of
the nominee, then the nominee will be considered to have not received the
support of the shareholders, and such nominee is expected to submit his or her
resignation to the EFI Board, to take effect on acceptance by the EFI Board. The
GN Committee and the compensation committee (the Compensation
Committee) will review any such resignation and make a recommendation to
the EFI Board regarding whether or not such resignation should be accepted. The
EFI Board will determine whether to accept the resignation within 90 days
following the shareholders meeting. If the resignation is accepted, subject to
any corporate law restrictions, the EFI Board may (i) leave the resultant
vacancy in the EFI Board unfilled until the next annual meeting of shareholders
of the Corporation, (ii) fill the vacancy by appointing a director whom the EFI
Board considers to merit the confidence of the shareholders, or (iii) call a
special meeting of the shareholders of the Corporation to consider the election
of a nominee recommended by the EFI Board to fill the vacant position. The
majority voting policy applies only in the case of an uncontested shareholders
meeting.
Compensation
The Corporation has a Compensation Committee, which is composed
entirely of independent directors. The Compensation Committee has been delegated
the task of reviewing and recommending to the EFI Board the Corporations
compensation policies, and reviewing such policies on a periodic basis to ensure
they remain current, competitive and consistent with the Corporations overall
goals. The Compensation Committee also has the authority and responsibility to
review and approve corporate goals and objectives relevant to the CEOs
compensation, evaluating the CEOs performance in light of those corporate goals
and objectives, and making recommendations to the EFI Board with respect to the
CEOs compensation level (including salary incentive compensation plans and
equity-based plans) based on this evaluation, as well as making recommendations
to the EFI Board with respect to any employment, severance or change of control
agreements for the CEO. The ultimate decision relating to the CEOs compensation
issues rests with the EFI Board, taking into consideration the Compensation
Committees recommendations, corporate and individual performance, and industry
standards. The Compensation Committee has also been delegated the task of
reviewing and approving for executive officers, other than the CEO, all
compensation (including salary, incentive compensation plans and equity-based
plans) and any employment, severance or change in control agreements, although
the ultimate decision relating to any stock option or other equity grants rests
with the EFI Board. The experience of Board and committee members who are also
involved as management of, or board members or advisors to, other companies also
factors into decisions concerning compensation; however no formal objectives,
criteria or analysis are used.
E-6
The Compensation Committee is also responsible for making
recommendations to the EFI Board with respect to the adequacy and form of
compensation payable to and benefits of directors in their capacity as directors
(including Board and committee retainers, meeting and committee fees, incentive
compensation plans, and equity-based plans), so as to ensure that such
compensation realistically reflects the responsibilities and risks involved in
being an effective director. Additional responsibilities of the Compensation
Committee include: (i) considering the implications of the risks associated with
the Corporations compensation policies and practices and the steps that may be
taken to mitigate any identified risks; (ii) reviewing executive compensation
disclosure before the Corporation publicly discloses such information; and (iii)
reviewing, and approving periodically managements succession plans for
executive management, including specific development plans and career planning
for potential successors, and recommending them to the EFI Board.
During the year ended December 31, 2014, the Compensation
Committee was responsible for administering the executive compensation program
of the Corporation. For further information regarding how the EFI Board
determines the compensation for the Corporations directors and officers please
see Executive Compensation in the Management Information Circular.
Other Board Committees
In addition to the GN Committee and Compensation Committee, the
Corporation has an Audit Committee and an Environment, Health and Safety
Committee (EHS Committee).
Audit Committee
The Audit Committee is a committee established and appointed by
and among the EFI Board to assist the EFI Board in fulfilling its oversight
responsibilities with respect to the Corporation. In so doing, the Audit
Committee provides an avenue of communication among the external auditor,
management, and the EFI Board. The Committees purpose is to ensure the
integrity of financial reporting and the audit process, and that sound risk
management and internal control systems are developed and maintained. In
pursuing these objectives, the Audit Committee oversees relations with the
external auditor, reviews the effectiveness of the internal audit function, and
oversees the accounting and financial reporting processes of the Corporation and
audits of financial statements of the Corporation.
EHS Committee
The mining industry, by its very nature, can have an impact on
the natural environment. As a result, environmental planning and compliance must
play a very important part in the operations of any company engaged in these
activities. The Corporation takes these issues very seriously and has
established the EHS Committee to assist the EFI Board in fulfilling its
oversight responsibilities for environmental, health and safety matters. The
mandate of the EHS Committee is to oversee the development and implementation of
policies and best practices relating to environmental, health and safety issues
in order to ensure compliance with applicable laws, regulations and policies in
the jurisdictions in which the Corporation and its subsidiaries carry on
business. Due to the complexity of uranium exploration, mining and milling, the
EFI Board determined that it was appropriate that a member of management sit on
the EHS Committee to ensure that technical expertise is properly brought before
the EHS Committee. The fact that all of the members of the EHS Committee are not
independent is balanced by the fact that a majority of the members of the EHS
Committee and the Chair of the EHS Committee are independent, and that the key
recommendations of the EHS Committee are considered by the full Board.
E-7
Assessments
The GN Committee distributes, receives and reviews the results
of written Board effectiveness assessments each year. The assessments question
members of the EFI Board as to their level of satisfaction with the functioning
of the EFI Board, its interaction with management and the performance of the
standing committees of the EFI Board. The assessments also include peer reviews
of all other directors and a self-assessment as to each directors effectiveness
and contribution as a Board member. After the assessments are reviewed, the GN
Committee reports the results to the EFI Board and makes any recommendations to
the EFI Board to improve the Corporations corporate governance practices. This
process occurs prior to the consideration by the GN Committee of nominations for
Board member elections at the Annual Meeting of Shareholders each year.
E-8
SCHEDULE F
SHAREHOLDER RIGHTS PLAN AGREEMENT
February 3, 2009
between
ENERGY FUELS INC.
and
CIBC MELLON TRUST COMPANY
as Rights Agent
Lang Michener LLP
Brookfield Place
181 Bay Street, Suite
2500
P.O. Box 747
Toronto, Ontario M5J 2T7
F-1
SHAREHOLDER RIGHTS PLAN AGREEMENT
Table of Contents
ARTICLE 1
INTERPRETATION |
5 |
1.1 |
Certain Definitions |
5 |
1.2 |
Holder |
17 |
1.3 |
Acting Jointly or in Concert |
17 |
1.4 |
Application of Statutes,
Regulations and Rules |
17 |
1.5 |
Currency |
18 |
1.6 |
Headings and References |
18 |
1.7 |
Singular, Plural, etc. |
18 |
1.8 |
Generally Accepted Accounting
Principles |
18 |
ARTICLE 2 THE RIGHTS |
18 |
2.1 |
Issuance and Legend on Common
Share Certificates |
18 |
2.2 |
Initial Exercise Price; Exercise of Rights;
Detachment of Rights |
19 |
2.3 |
Adjustments to Exercise Price,
Number of Rights |
22 |
2.4 |
Date on Which Exercise is Effective |
28 |
2.5 |
Execution, Authentication,
Delivery and Dating of Rights Certificates |
28 |
2.6 |
Registration, Registration of Transfer and
Exchange |
28 |
2.7 |
Mutilated, Destroyed, Lost and
Stolen Rights Certificates |
29 |
2.8 |
Persons Deemed Owners |
30 |
2.9 |
Delivery and Cancellation of
Certificates |
30 |
2.10 |
Agreement of Rights Holders |
30 |
ARTICLE 3 ADJUSTMENTS TO THE
RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS |
31 |
3.1 |
Flip-in Event |
31 |
ARTICLE 4 THE RIGHTS
AGENT |
32 |
4.1 |
General |
32 |
4.2 |
Merger or Amalgamation or
Change of Name of Rights Agent |
33 |
4.3 |
Duties of Rights Agent |
34 |
4.4 |
Change of Rights Agent |
35 |
ARTICLE 5 MISCELLANEOUS |
36 |
F-2
5.1 |
Redemption and Waiver |
36 |
5.2 |
Expiration |
38 |
5.3 |
Issuance of New Rights
Certificates |
38 |
5.4 |
Supplements and Amendments |
38 |
5.5 |
Fractional Rights and
Fractional Common Shares |
40 |
5.6 |
Rights of Action |
40 |
5.7 |
Holder of Rights Not Deemed a
Shareholder |
40 |
5.8 |
Notice of Proposed Actions |
40 |
5.9 |
Notices |
41 |
5.10 |
Costs of Enforcement |
42 |
5.11 |
Successors |
42 |
5.12 |
Benefits of this Agreement |
42 |
5.13 |
Governing Law |
42 |
5.14 |
Counterparts |
43 |
5.15 |
Severability |
43 |
5.16 |
Determinations and Actions by the Board of
Directors |
43 |
5.17 |
Effective Date |
43 |
5.18 |
Approval of Holders of Rights |
43 |
5.19 |
Declaration as to Non-Canadian
and Non-United States Holders |
44 |
5.20 |
Regulatory Approvals |
44 |
5.21 |
Time of the Essence |
44 |
Exhibit A |
Form of Rights Certificate
|
F-3
SHAREHOLDER RIGHTS PLAN AGREEMENT
THIS AGREEMENT is made as of February
3, 2009.
B E T W E E N:
ENERGY FUELS INC.
a
corporation existing under the laws of the Province of Ontario
(the
Corporation)
- and -
CIBC MELLON TRUST COMPANY
a
trust company existing under the laws of Canada
(the Rights Agent)
WHEREAS the board of directors of the Corporation have
determined that it is advisable and in the best interests of the Corporation to
adopt a shareholder rights plan agreement (the Rights Plan);
AND WHEREAS in implementation of the Rights Plan, the
board of directors of the Corporation: (a) authorized and declared a
distribution of one (1) right (Right) in respect of each Common Share
(as hereinafter defined) outstanding as of 5:00 p.m. (Toronto time) on February
3, 2009 (the Record Time) to each holder of record of Common Shares at
the Record Time; and (b) authorized the issuance of one (1) Right (subject to
adjustment as hereinafter provided) in respect of each Common Share issued after
the Record Time and prior to the earlier of the Separation Time and the
Expiration Time (each as hereinafter defined);
AND WHEREAS, each Right entitles the holder thereof,
after the Separation Time, to purchase securities of the Corporation pursuant to
the terms and subject to the conditions set forth herein;
AND WHEREAS, the Rights Agent has agreed with the
Corporation to act on behalf of the Corporation in connection with the issuance,
transfer, exchange and replacement of Rights Certificates (as hereinafter
defined), the exercise of Rights and other matters referred to herein;
NOW, THEREFORE, in consideration of the premises and
respective agreements set forth herein, the parties hereby agree as follows:
F-4
ARTICLE 1
INTERPRETATION
In this Agreement, unless the context
otherwise requires:
Acquiring Person means any
Person who is the Beneficial Owner of 20% or more of the outstanding Common
Shares; provided, however, that the term Acquiring Person shall
not include:
|
(i) |
the Corporation or any Subsidiary of the
Corporation; |
|
|
|
|
|
(ii) |
an underwriter or member of a banking or selling group
that acquires Common Shares from the Corporation in connection with a
distribution by the Corporation to the public of securities; |
|
|
|
|
|
(iii) |
any Person who becomes the Beneficial Owner of 20% or
more of the outstanding Common Shares solely as a result of one or any
combination of: |
|
|
|
|
|
|
(A) |
a Common Share Reduction; |
|
|
|
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|
|
(B) |
a Permitted Bid Acquisition; |
|
|
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|
|
|
(C) |
an Exempt Acquisition; |
|
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|
(D) |
a Pro-Rata Acquisition; or |
|
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|
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(E) |
a Convertible Security
Acquisition, |
in each such case, until such time
thereafter as such Person shall become the Beneficial Owner (otherwise than
pursuant to any one or more of a Common Share Reduction, a Permitted Bid
Acquisition, an Exempt Acquisition, a Pro-Rata Acquisition, or a Convertible
Security Acquisition) of additional Common Shares constituting more than 1% of
the Common Shares then outstanding, in which event such Person shall become an
Acquiring Person as of the date and time of acquisition of such additional
Common Shares;
|
(iv) |
for a period of 10 days after the Disqualification Date
(as hereinafter defined), any Person who becomes the Beneficial Owner of
20% or more of the outstanding Common Shares as a result of such Person
becoming disqualified from relying on clause (iii) C of the definition of
Beneficial Owner. In this definition, Disqualification Date means
the first date of public announcement of facts indicating that such Person
has or is making or has announced an intention to make a Take-over Bid
alone or by acting jointly or in concert with any other Person;
or |
|
|
|
|
(v) |
any Person (a Grandfathered Person) who is the
Beneficial Owner of 20% or more of the Common Shares determined as at the
Record Time, provided, however, that this exception shall not, and shall
cease to, apply if, after the Record Time the Grandfathered Person: (A)
ceases to own 20% or more of the outstanding Common Shares; or (B) becomes
the Beneficial Owner of more than 1% of the number of outstanding Common
Shares then outstanding in addition to those Common Shares such Person
already holds other than pursuant to a Common Share Reduction, a Permitted
Bid Acquisition, an Exempt Acquisition, a Pro Rata Acquisition, or a
Convertible Security Acquisition or any combination thereof.
|
F-5
Affiliate, when used to
indicate a relationship with a specified Person, means a Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such specified Person and a body corporate
shall be deemed to be an Affiliate of another body corporate if one of them is
the Subsidiary of the other or if both are Subsidiaries of the same body
corporate or if each of them is controlled by the same Person.
Associate, when used to
indicate a relationship with a specified Person, means (i) a spouse of such
specified Person, (ii) any Person of either sex with whom such specified Person
is living in a conjugal relationship outside marriage, or (iii) any relative of
such specified Person or of a Person mentioned in clauses (i) or (ii) of this
definition if that relative has the same residence as the specified Person.
A Person shall be deemed the
Beneficial Owner and to have Beneficial Ownership of and to
Beneficially Own:
|
(i) |
any securities of which such Person or any of such
Persons Affiliates or Associates is the owner at law or in
equity; |
|
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|
(ii) |
any securities of which such Person or any of such
Persons Affiliates or Associates has the right to become the owner at law
or in equity within 60 days (where such right is exercisable immediately
or within a period of 60 days, whether or not upon the condition or
occurrence of any contingency or the making of one or more payments) upon
the exercise of any conversion right, exchange right, share purchase right
(other than the Rights) or pursuant to any agreement, arrangement, pledge
or understanding, whether or not in writing, other than: |
|
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|
(A) |
customary agreements with and between underwriters and
banking group or selling group members with respect to a distribution of
securities; and |
|
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|
(B) |
pledges of securities in the ordinary course of the
pledgees business; and |
|
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|
|
(iii) |
any securities that are Beneficially Owned within the
meaning of clauses (i) or (ii) of this definition by any other Person with
which such Person is acting jointly or in concert, provided that a Person
shall not be deemed the Beneficial Owner of, or to have
Beneficial Ownership of, or to Beneficially Own, any
security solely because: |
|
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|
(A) |
the holder of such security has agreed to deposit or
tender such security to a Take-over Bid made by such Person or any of such
Persons Affiliates or Associates or any other Person referred to in
clause (iii) of this definition pursuant to a Permitted Lock-up
Agreement; |
F-6
|
(B) |
such security has been deposited or tendered pursuant to
a Take-over Bid made by such Person or any of such Persons Affiliates or
Associates or made by any other Person acting jointly or in concert with
such Person until such deposited or tendered security has been taken up or
paid for, whichever shall first occur; |
|
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(C) |
such Person, any Affiliate or Associate of such Person or
any other Person acting jointly or in concert with such Person holds such
security where: |
|
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|
(i) |
the ordinary business of such Person (the Portfolio
Manager) includes the management or administration of investment
funds or mutual funds for other Persons and such security is held by the
Portfolio Manager in the ordinary course of such business in the
performance of the Portfolio Managers duties for the account of any other
Person (a Client) including non- discretionary accounts held on
behalf of a Client by a broker or dealer or broker-dealer registered under
applicable law; |
|
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|
(ii) |
such Person (the Trust Company) is licensed to
carry on the business of a trust company under applicable law and, as
such, acts as trustee or administrator or in a similar capacity in
relation to the estates of deceased or incompetent Persons (each, an
Estate Account) or in relation to other accounts (each, an
Other Account) and holds such security in the ordinary course of
and for the purposes of the activities of such Estate Accounts or for such
Other Accounts; |
|
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|
(iii) |
such Person (the Crown Agent) is established by
statute for purposes that include, and the ordinary business or activity
of such Person includes, the management of investment funds for employee
benefit plans, pension plans, insurance plans, or various public bodies
and the Crown Agent holds such security in the ordinary course of and for
the purposes of its activities as such; |
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(iv) |
such Person (in this definition, a Statutory
Body) is established by statute for purposes that include the
management of investment funds for employee benefit plans, pension plans
and insurance plans (other than insurance plans administered by insurance
companies) of various public bodies, if such security is held by the
Statutory Body for the purposes of its activities as Statutory Body;
or |
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(v) |
such Person (the Plan Administrator) is the
administrator or the trustee of one or more pension funds or plans
registered under the laws of Canada or the United States of America or any
province or state thereof (each, a Plan) or is a Plan and such
security is Beneficially Owned or held by the Person in the ordinary
course of and for the purposes of its activities as
such; |
F-7
|
|
provided, however, that in any of the foregoing cases,
the Portfolio Manager, the Trust Company, the Crown Agent, the Statutory
Body, the Plan Administrator or the Plan, as the case may be, is not then
making or has not then announced an intention to make a Take-over Bid,
alone or by acting jointly or in concert with any other Person, other than
an Offer to Acquire Common Shares or other securities pursuant to a
distribution by the Corporation, a Permitted Bid or by means of ordinary
market transactions (including pre-arranged trades entered into in the
ordinary course of business of such Person) executed through the
facilities of a stock exchange or organized over-the-counter market in
respect of securities of the Corporation; |
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(D) |
such Person is a Client of the same Portfolio Manager as
another Person on whose account the Portfolio Manager holds such security,
or because such Person is an Estate Account or an Other Account of the
same Trust Company as another Person on whose account the Trust Company
holds such security or because such Person is a Plan with the same Plan
Administrator as another Plan on whose account the Plan Administrator
holds such security; |
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(E) |
such Person is a Client of a Portfolio Manager and such
security is owned at law or in equity by the Portfolio Manager or because
such Person is an Estate Account or an Other Account of a Trust Company
and such security is owned at law or in equity by the Trust Company or
such Person is a Plan and such security is owned at law or in equity by
the Plan Administrator of such Plan; or |
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(F) |
such Person is the registered holder of securities as a
result of carrying on the business, or acting as a nominee, of a
securities depositary. |
For purposes of this Agreement, the
percentage of Common Shares Beneficially Owned by any Person at any time shall
be and be deemed to be the product determined by the formula:
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where: |
A = |
the number of votes for the election of all
directors generally attached to the Common Shares Beneficially Owned by
such Person at such time; and |
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B = |
the number of votes for the election of all
directors generally attaching to all Common Shares actually outstanding.
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Notwithstanding the foregoing, where
any Person is deemed to Beneficially Own unissued Common Shares, such Common
Shares shall be deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person, but unissued
Common Shares which another Person may be deemed to Beneficially Own shall not
be included in the denominator of the above formula.
Board of Directors means the
board of directors for the time being of the Corporation or any duly constituted
or empowered committee thereof.
F-8
Business Day means any day
other than a Saturday, Sunday or, unless otherwise specified, a day on which
Canadian chartered banks in Toronto, Ontario, (or after the Separation Time, the
principal office of the Rights Agent in Toronto, Ontario) are generally
authorized or obligated by law to close.
Canadian-U.S. Exchange Rate
means, on any date, the inverse of the U.S.-Canadian Exchange Rate.
Canadian Dollar Equivalent of
any amount which is expressed in United States dollars means, on any date, the
Canadian dollar equivalent of such amount determined by reference to the
Canadian-U.S. Exchange Rate on such date.
Close of Business on any given
date means 5:00 p.m. (Toronto time, unless otherwise specified), on such date
provided, however, that if such date is not a Business Day, Close of
Business on such date shall mean 5:00 p.m., (Toronto time, unless otherwise
specified), on the next succeeding Business Day.
Common Shares means the common
shares which the Corporation is authorized to issue, as such shares may be
subdivided, consolidated, reclassified or otherwise changed from time to time,
and common shares when used with reference to any Person other than the
Corporation means the class or classes of shares (or similar equity interests)
with the greatest per share voting power entitled to vote generally in the
election of all directors of such other Person or the equity securities or other
equity interest having power (whether or not exercised) to control or direct the
management of such other Person or, if such other Person is a Subsidiary of
another Person, of the Person or Persons (other than an individual) which
ultimately control such first mentioned other Person.
Common Share Reduction means
an acquisition, redemption or cancellation by the Corporation of Common Shares
which by reducing the number of Common Shares outstanding, increases the
percentage of Common Shares Beneficially Owned by any Person to 20% or more of
the Common Shares then outstanding.
Competing Permitted Bid means
a Take-over Bid that:
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(i) |
is made after a Permitted Bid or Competing Permitted Bid
has been made and prior to the expiry of that Permitted Bid or Competing
Permitted Bid (in this definition, the Prior Bid); |
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(ii) |
satisfies all components of the definition of a Permitted
Bid other than the requirements set out in clauses (ii)(A), (B), and (D)
of that definition; and |
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(iii) |
contains, and the taking up and payment for securities
tendered or deposited thereunder are subject to, irrevocable and
unqualified conditions that: |
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(A) |
no Common Shares shall be taken up or paid for pursuant
to the Take- over Bid (x) prior to the Close of Business on a date that is
not earlier than the later of 35 days after the date of such Take- over
Bid and the earliest date on which Common Shares may be taken up or paid
for under any Prior Bid in existence at the date of such Take-over Bid,
and (y) then only if, at the time that such Common Shares are first taken
up or paid for, more than 50% of the then outstanding Common Shares held
by Independent Shareholders have been deposited or tendered pursuant to
the Take-over Bid and not withdrawn; |
F-9
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(B) |
Common Shares may be deposited pursuant to such Take-over
Bid, unless the Take- over Bid is withdrawn, at any time prior to the
Close of Business on the date that the Prior Bid described in clause (A)
above expires; and |
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(C) |
in the event that the requirement set forth in subclause
(iii)(A)(y) of this definition is satisfied, the Offeror will make a
public announcement of that fact and the Take-over Bid will remain open
for deposits and tenders of Common Shares for not less than 10 days from
the date of such public announcement. |
provided always that a Competing
Permitted Bid will cease to be a Competing Permitted Bid at any time when such
bid ceases to meet any of the provisions of this definition and provided that,
at such time, any acquisition of Common Shares made pursuant to such Competing
Permitted Bid, including any acquisition of Common Shares theretofore made, will
cease to be a Permitted Bid Acquisition.
controlled: a Person shall be
deemed to be controlled by another Person or two or more Persons if:
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(i) |
securities entitled to vote in the election of directors
(including, for Persons other than corporations, the administrators,
managers, trustees or other persons performing similar functions in
respect of any such Person) carrying more than 50% of the votes for the
election of directors are held, directly or indirectly, by or for the
benefit of the other Person or Persons; and |
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(ii) |
the votes carried by such securities are entitled, if
exercised, to elect, appoint or designate a majority of the board of
directors of such corporation or other Person; |
and controls,
controlling and under common control with shall be interpreted
accordingly.
Convertible Securities means
at any time any securities issued by the Corporation from time to time (other
than the Rights) carrying any exercise, conversion, or exchange right pursuant
to which the holder thereof may acquire Common Shares or other securities which
are convertible into or exercisable or exchangeable for Common Shares.
Convertible Security
Acquisition means the acquisition of Common Shares upon the exercise of
Convertible Securities received by a Person pursuant to a Permitted Bid
Acquisition, an Exempt Acquisition or a Pro-Rata Acquisition.
Effective Date is the date as
defined in Section 5.17.
F-10
Exempt Acquisition means a
Share acquisition: (i) in respect of which the Board of Directors has waived the
application of Section 3.1 pursuant to the provisions of subsections 5.1(c), (d)
or (e) hereof; (ii) pursuant to a regular dividend reinvestment or other plan of
the Corporation made available by it to all holders of Common Shares of a class
or series or Common Shares where such plan permits the holder to direct that
dividends paid in respect of such Common Shares be applied to the purchase from
the Corporation of further securities of the Corporation; (iii) pursuant to a
distribution of Common Shares, or securities convertible into or exchangeable
for Common Shares made by the Corporation pursuant to a prospectus or a
securities exchange take-over bid or by way of a private placement, provided
that the Person does not acquire a greater percentage of the securities offered
in the distribution than the percentage of Common Shares Beneficially Owned by
that Person immediately prior to the distribution, or (iv) pursuant to an
amalgamation, merger or other statutory procedure requiring shareholder
approval.
Exercise Price means, as of
any date, the price at which a holder may purchase the securities issuable upon
exercise of one (1) whole Right. Until adjustment thereof in accordance with the
terms hereof, the Exercise Price shall equal $10.00.
Expansion Factor has the
meaning ascribed to such term in subsection 2.3(a) hereof.
Expiration Time means the
earliest of: (i) the Termination Time; (ii) the Close of Business on the date of
the Corporations annual meeting of shareholders in 2012; and (iii) the time
this Agreement becomes void pursuant to the provisions of Section 5.17.
Fiduciary means, when acting
in that capacity, a trust company registered under the trust company legislation
of Canada or any province thereof, a trust company organized under the laws of
any state of the United States, a portfolio manager registered under the
securities legislation of one or more provinces of Canada or an investment
adviser registered under the United States Investment Advisers Act of
1940, as amended, or any other securities legislation of the United States
or any state of the United States.
Flip-in Event means a
transaction or event that results in a Person becoming an Acquiring Person.
Independent Shareholders means
all holders of Common Shares other than (i) any Acquiring Person, (ii) any
Offeror, (iii) any Affiliate or Associate of any Acquiring Person or Offeror,
(iv) any Person acting jointly or in concert with any Person referred to in
clauses (i), (ii) or (iii) above, and (v) any employee benefit plan, deferred
profit sharing plan, stock participation plan or trust for the benefit of
employees of the Corporation or a wholly-owned Subsidiary of the Corporation,
unless the beneficiaries of such plan or trust direct the manner in which such
Common Shares are to be voted or direct whether the Common Shares are to be
tendered to a Take-over Bid, in which case the plan or trust shall be considered
to be an Independent Shareholder.
Market Price per security of
any securities on any date means the average of the daily closing prices per
security of such securities (determined as described below) on each of the 20
consecutive Trading Days through and including the Trading Day immediately
preceding such date; provided, however, that if an event of a type
analogous to any of the events described in Section 2.3 hereof shall have caused
the closing prices used to determine the Market Price on any Trading Days not to
be fully comparable with the closing price on such date (or, if such date is not
a Trading Day, on the immediately preceding Trading Day), each such closing
price so used shall be appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 hereof in order to make it
fully comparable with the closing price on such date (or, if such date is not a
Trading Day, on the immediately preceding Trading Day). The closing price per
security of any securities on any date shall be:
F-11
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(i) |
the closing board lot sale price on such date or, if such
price is not available, the average of the closing bid and asked prices
per security, as reported by the principal stock exchange or securities
quotation system in Canada on which such securities are listed or admitted
to trading (based on the volume of securities traded during the most
recently completed financial year), or if for any reason neither of such
prices is available on such day or the securities are not listed or
admitted to trading on a stock exchange or securities quotation system in
Canada, the closing board lot sale price or, if such price is not
available, the average of the closing bid and asked prices, for such
securities as reported by such other securities exchange on which such
securities are listed or admitted for trading; |
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(ii) |
if, for any reason, none of such prices is available on
such date or the securities are not listed or admitted to trading on a
stock exchange or other securities exchange or securities quotation system
in Canada, the last sale price, or in case no sale takes place on such
date, the average of the high bid and low asked prices for such securities
in the over-the-counter market, as quoted by any reporting system then in
use (as selected by the Board of Directors); or |
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(iii) |
if the securities are not listed or admitted to trading
as contemplated in clauses (i) or (ii) above, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the securities selected by the Board of
Directors; |
provided, however, that if on
any such date the closing price per security cannot be determined in accordance
with the foregoing, the closing price per security of such securities on such
date shall mean the fair value per security of such securities on such date as
determined by the Board of Directors, after consultation with an internationally
recognized investment banking firm as to the fair value per security of such
securities. The Market Price shall be expressed in Canadian dollars and if
initially determined in respect of any day forming part of the 20 consecutive
Trading Day period in question in United States dollars, such amount shall be
translated into Canadian dollars at the Canadian Dollar Equivalent thereof.
Offer to Acquire includes:
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(i) |
an offer to purchase, or a solicitation of an offer to
sell, Common Shares or Convertible Securities; and |
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(ii) |
an acceptance of an offer to sell Common Shares or
Convertible Securities, whether or not such offer to sell has been
solicited; |
or any combination thereof, and the
Person accepting an offer to sell shall be deemed to be making an Offer to
Acquire to the Person that made the offer to sell.
Offeror means a Person who is
making or has announced a current intention to make a Take-over Bid (including a
Permitted Bid or Competing Permitted Bid but excluding an ordinary market
transaction (including a prearranged trade in the ordinary course of business)
contemplated in clause (iii)(C) of the definition of Beneficial Owner) but only
so long as the Take-over Bid so announced or made has not been withdrawn or
terminated or has not expired.
F-12
Permitted Bid means a
Take-over Bid which is made by means of a Take-over Bid circular and which also
complies with the following additional provisions:
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(i) |
the Take-over Bid is made to all holders of record of
Common Shares, other than the Offeror; |
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(ii) |
the Take-over Bid shall contain, and the take-up and
payment for securities tendered or deposited thereunder shall be subject
to, irrevocable and unqualified conditions that: |
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(A) |
no Common Shares shall be taken up or paid for pursuant
to the Take- over Bid (x) prior to the Close of Business (Toronto time) on
a date which is not earlier than 60 days following the date the Take-over
Bid circular is sent to shareholders of the Corporation and (y) then only
if, at the Close of Business on the date Common Shares are first taken up
or paid for under the Take-over Bid, more than 50% of the then outstanding
Common Shares held by Independent Shareholders have been deposited or
tendered pursuant to the Take-over Bid and not withdrawn; |
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(B) |
Common Shares may be deposited pursuant to such Take-over
Bid, unless such Take-over Bid is withdrawn, at any time prior to the
Close of Business on the date Common Shares are first taken up or paid for
under the Take-over Bid; |
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(C) |
any Common Shares deposited or tendered pursuant to the
Take-over Bid may be withdrawn until taken up and paid for; and |
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(D) |
in the event that the requirement set forth in subclause
(A)(y) of this definition is satisfied, the Offeror will make a public
announcement of that fact and the Take-over Bid will remain open for
deposits and tender of Common Shares for not less than 10 days from the
date of such public announcement; |
provided always that a Permitted Bid
will cease to be a Permitted Bid at any time when such bid ceases to meet any of
the provisions of this definition and any acquisitions of Common Shares made
pursuant to such Permitted Bid, including any acquisition of Common Shares
theretofore made, will cease to be a Permitted Bid Acquisition.
Permitted Bid Acquisition
means a Share acquisition made pursuant to a Permitted Bid or Competing
Permitted Bid.
Permitted Lock-Up Agreement
means an agreement between a Person and one or more holders of Common Shares
(each, a Locked-up Person) (the terms of which are publicly disclosed
and a copy of which is made available to the public, including the Corporation,
not later than the date of the Lock-up Bid (as defined below) or, if the Lockup
Bid has been made prior to the date on which such agreement is entered into, not
later than the date of such agreement and if such date is not a Business Day,
the next Business Day) pursuant to which each such Locked-up Person agrees to
deposit or tender Common Shares to a Take-over Bid (the Lock-up Bid)
made or to be made by the Person, any of such Person's Affiliates or Associates
or any other Person acting jointly or in concert with such Person, provided
that:
F-13
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(i) |
the agreement permits any Locked-up Person to terminate
its obligation to deposit or tender to or not to withdraw Common Shares
from the Lock-up Bid in order to tender or deposit the Common Shares to
another Take-over Bid or support another transaction: |
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(A) |
where the price or value per Common Share offered under
such other Take-over Bid or transaction is higher than the price or value
per Common Share offered under the Lock-up Bid; or |
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(B) |
if: |
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(1) |
the price or value per Common Share offered under the
other Take-over Bid or transaction exceeds by as much as or more than a
specified amount (the Specified Amount) the price or value per
Common Share offered under the Lock-up Bid, provided that such Specified
Amount is not greater than 7% of the price or value per Common Share
offered under the Lock-up Bid; or |
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(2) |
the number of Common Shares to be purchased under the
other Take-over Bid or transaction exceeds by as much as or more than a
specified number (the Specified Number) the number of Common
Shares that the Offeror has offered to purchase under the Lock-up Bid at a
price or value per Common Share that is not less than the price or value
per Common Share offered under the Lock-up Bid, provided that the
Specified Number is not greater than 7% of the number of Common Shares
offered to be purchased under the Lockup Bid, |
and, for greater clarity, the
agreement may contain a right of first refusal or require a period of delay to
give such Person an opportunity to match a higher price in another Take-over Bid
or transaction or other similar limitation on a Locked-up Person's right to
withdraw Common Shares from the agreement, so long as the limitation does not
preclude the exercise by the Locked-up Person of the right to withdraw Common
Shares during the period of the other Take-over Bid or transaction; and
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no break-up fees, top-up fees, penalties, expenses or
other amounts that exceed in the aggregate the greater of: |
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(A) |
the cash equivalent of 2.5% of the price or value of the
consideration payable under the Lock-up Bid to a Locked-up Person;
and |
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(B) |
50% of the amount by which the price or value of the
consideration payable under another Take-over Bid or transaction to a
Locked-up Person exceeds the price or value of the consideration that such
Locked-up Person would have received under the Lock-up Bid,
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F-14
shall be payable by a Locked-up Person
pursuant to the agreement in the event a Locked-up Bid is not successfully
concluded or if any Locked-up Person fails to deposit or tender Common Shares to
the Lock-up Bid or withdraws Common Shares in order to accept the other
Take-over Bid or support another transaction.
Person includes any
individual, firm, partnership, association, trust, body corporate, joint
venture, syndicate or other form of unincorporated organization, government and
its agencies and instrumentalities or other entity or group (whether or not
having legal personality) and any successor (by merger, statutory amalgamation
or arrangement, or otherwise) thereof.
Pro-Rata Acquisition means the
acquisition of Common Shares (i) as a result of a stock dividend, stock split or
other event pursuant to which a Person receives or acquires Common Shares or
securities convertible into or exchangeable for Common Shares on the same
pro-rata basis as all other holders of Common Shares of the same class or
series, or (ii) pursuant to a regular dividend reinvestment plan or other plan
of the Corporation made available by the Corporation to the holders of Common
Shares where such plan permits the holder to direct that the dividends paid in
respect of such Common Shares be applied to the purchase from the Corporation of
further securities of the Corporation, or (iii) pursuant to the receipt and/or
exercise of rights (other than the Rights) issued by the Corporation on a
pro-rata basis to all holders of a class or series of Common Shares to subscribe
for or purchase Common Shares or securities convertible into or exchangeable for
Common Shares provided that the Person does not acquire a greater percentage of
the securities issuable on exercise of such rights than the percentage of Common
Shares Beneficially Owned by that Person immediately prior to the commencement
of the offering of the rights and that such rights are acquired directly from
the Corporation and not from any other Person.
Record Time has the meaning
ascribed to that term in the second recital hereto.
Redemption Price has the
meaning ascribed to that term in subsection 5.1(b) hereof.
Regular Periodic Cash
Dividends means cash dividends paid at regular intervals in any fiscal year
of the Corporation to the extent that such cash dividends do not exceed, in the
aggregate, the greatest of:
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(i) |
200% of the aggregate amount of cash dividends declared
payable by the Corporation on its Common Shares in its immediately
preceding fiscal year; |
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(ii) |
300% of the arithmetic mean of the aggregate amounts of
cash dividends declared payable by the Corporation on its Common Shares in
its three immediately preceding fiscal years; and |
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(iii) |
100% of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its immediately preceding
fiscal year. |
Rights means the herein
described rights to purchase securities pursuant to the terms and subject to the
conditions set forth herein;
F-15
Rights Agent means CIBC Mellon
Trust Company, a trust company existing under the laws of Canada, and any
successor Rights Agent appointed pursuant to the provisions hereof.
Rights Certificate has the
meaning ascribed to that term in subsection 2.2(c) hereof.
Rights Register and Rights
Registrar shall have the respective meanings ascribed thereto in subsection
2.6(a) hereof.
Securities Act
(Ontario) means the Securities Act, R.S.O. 1990, c.S.5, as amended,
and the regulations thereunder, unless otherwise specified, as the same exist on
the date hereof.
Separation Time means the
Close of Business (Toronto time) on the tenth Business Day after the earliest
of:
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the Stock Acquisition Date; |
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(ii) |
the date of the commencement of, or first public
announcement of the intent of any Person (other than the Corporation or
any Subsidiary of the Corporation) to commence, a Take-over Bid (other
than a Permitted Bid or a Competing Permitted Bid, as the case may be);
and |
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(iii) |
the date upon which a Permitted Bid or Competing
Permitted Bid ceases to be such; |
or such later date as may be determined
by the Board of Directors in good faith, provided that: (x) if the foregoing
results in a Separation Time being prior to the Record Time, the Separation Time
shall (subject to any determination of the Board of Directors as aforesaid) be
the Record Time, (y) if any such Take-over Bid expires, is cancelled, is
terminated or is otherwise withdrawn prior to the Separation Time without
securities deposited thereunder being taken up and paid for, then such Take-over
Bid shall be deemed, for purposes of this definition never to have been made,
and (z) if the Board of Directors determines, pursuant to Section 5.1, to waive
the application of Section 3.1 to a Flip-In Event, then the Separation Time in
respect of such Flip-In Event shall be deemed never to have occurred.
Shares means shares in the
capital of the Corporation.
Stock Acquisition Date means
the first date of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to Section 102.1 or
102.2 of the Securities Act (Ontario) or National Instrument 62-103, each
as amended from time to time and any provision substituted therefor) by the
Corporation or an Acquiring Person of facts indicating that a Person has become
an Acquiring Person.
Subsidiary:
A body corporate is a Subsidiary of
another body corporate if:
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(i) |
it is controlled by (A) that other, or (B) that other and
one or more bodies corporate, each of which is controlled by that other,
or (C) two or more bodies corporate, each of which is controlled by that
other, or |
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it is a Subsidiary of a body corporate that is that
others Subsidiary. |
F-16
Take-over Bid means an Offer
to Acquire Common Shares or Convertible Securities (or both), where the
securities subject to the Offer to Acquire, together with the Common Shares, if
any, into which the securities subject to the Offer to Acquire are convertible
and the Common Shares Beneficially Owned by the Offeror at the date of the Offer
to Acquire constitute, in the aggregate, 20% or more of the then outstanding
Common Shares.
Termination Time means the
time at which the right to exercise Rights shall terminate pursuant to Section
5.1 hereof.
Trading Day, when used with
respect to any securities, means a day on which the principal securities
exchange or securities quotation system in Canada on which such securities are
listed or admitted to trading is open for the transaction of business, or if the
securities are not listed or admitted to trading on any securities exchange or
securities quotation system in Canada, a Business Day.
U.S.-Canadian Exchange Rate
means, on any date:
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if on such date the Bank of Canada sets an average noon
spot rate of exchange for the conversion of one (1) United States dollar
into Canadian dollars, such rate; and |
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in any other case, the rate for such date for the
conversion of one (1) United States dollar into Canadian dollars
calculated in the manner which shall be determined by the Board of
Directors from time to time. |
U.S. Dollar Equivalent of any
amount which is expressed in Canadian dollars means, on any date, the United
States dollar equivalent of such amount determined by reference to the
U.S.-Canadian Exchange Rate on such date.
As used in this Agreement, unless the context otherwise
requires, the term holder when used with reference to Rights, means the
registered holder of such Rights or, prior to the Separation Time, the
associated Common Shares.
1.3 |
Acting Jointly or in
Concert |
For purposes of this Agreement, it is a question of fact
whether a Person is acting jointly or in concert with another Person but a
Person shall be deemed to be acting jointly or in concert with every other
Person who (i) is an Associate or Affiliate of such first mentioned Person; or
(ii) who is a party to any agreement, commitment or understanding, whether
formal or informal, with the first mentioned Person or any Associate or
Affiliate thereof, to acquire Common Shares (other than customary agreements
with and between underwriters and/or members of banking groups and/or selling
group members with respect to a distribution of securities pursuant to a
prospectus or by way of private placement and other than pursuant to pledges of
securities in the ordinary course of business).
1.4 |
Application of Statutes, Regulations and
Rules |
Unless the context otherwise requires, any reference to a
specific section, subsection, clause or rule of any act or regulation shall be
deemed to refer to the same as it may be amended, re-enacted or replaced or, if
repealed and there shall be no replacement therefor, to the same as it is in
effect on the date of this Agreement.
F-17
All sums of money which are referred to in this Agreement are
expressed in lawful money of Canada, unless otherwise specified.
1.6 |
Headings and References |
The headings of the Articles and Sections of this Agreement and
the Table of Contents are inserted for convenience of reference only and shall
not affect the construction or interpretation of this Agreement. All references
to Articles, Sections and Exhibits are to articles and sections of and exhibits
to, and forming part of, this Agreement. The words hereto,
herein, hereof, hereunder, this Agreement,
the Rights Agreement and similar expressions refer to this Agreement
including the Exhibits, as the same may be amended, modified or supplemented at
any time or from time to time.
1.7 |
Singular, Plural, etc. |
In this Agreement, where the context so admits, words importing
the singular number include the plural and vice versa and words importing gender
include the masculine, feminine and neuter genders.
1.8 |
Generally Accepted Accounting
Principles |
Wherever in this Agreement reference is made to generally
accepted accounting principles, such reference shall be deemed to be the
recommendations at the relevant time of the Canadian Institute of Chartered
Accountants, or any successor institute, applicable on a consolidated basis
(unless otherwise specifically provided herein to be applicable on an
unconsolidated basis) as at the date on which a calculation is made or required
to be made in accordance with generally accepted accounting principles. Where
the character or amount of any asset or liability or item of revenue or expense
is required to be determined, or any consolidation or other accounting
computation is required to be made for the purpose of this Agreement or any
document, such determination or calculation shall, to the extent applicable and
except as otherwise specified herein or as otherwise agreed in writing by the
parties, be made in accordance with generally accepted accounting principles
applied on a consistent basis.
ARTICLE 2
THE RIGHTS
2.1 |
Issuance and Legend on Common Share
Certificates |
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(a) |
One (1) right in respect of each Common Share outstanding
at the Record Time and each Common Share that may be issued after the
Record Time and prior to the earlier of the Separation Time and the
Expiration Time shall be issued in accordance with the terms
hereof. |
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(b) |
Certificates for Common Shares issued after the Record
Time hereof but prior to the Separation Time (and whether upon the
conversion of Convertible Securities or otherwise) shall evidence one (1)
Right for each Common Share represented thereby and shall have impressed,
printed, or written thereon or otherwise affixed thereto a legend in
substantially the following form: |
F-18
Until the Separation Time (as such
term is defined in the Rights Agreement referred to below), this certificate
also evidences and entitles the holder hereof to certain Rights as set forth in
a Rights Agreement, made as of February 3, 2009, (the Rights
Agreement), between Energy Fuels Inc. (the Corporation) and CIBC
Mellon Trust Company, as Rights Agent, the terms of which are hereby
incorporated herein by reference and a copy of which is on file and may be
inspected during normal business hours at the principal executive offices of the
Corporation. Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be amended or redeemed, may expire, may become void (if, in
certain circumstances, they are Beneficially Owned by a Person who is or
becomes an Acquiring Person or any Person acting jointly or in concert with an
Acquiring Person or with an Affiliate or Associate of an Acquiring Person,
as such terms are defined in the Rights Agreement, or a transferee thereof), or
may be evidenced by separate certificates and may no longer be evidenced by this
certificate. The Corporation will mail or arrange for the mailing of a copy of
the Rights Agreement to the holder of this certificate without charge within
five days after the receipt of a written request therefor.
Failure to legend any certificate
representing Common Shares shall not affect the validity of this Agreement or
the Rights issued hereunder.
Certificates representing Common
Shares that are issued and outstanding at the Record Time shall evidence one (1)
Right for each Common Share evidenced thereby notwithstanding the absence of a
legend in substantially the foregoing form until the earlier of the Separation
Time and the Expiration Time.
2.2 |
Initial Exercise Price; Exercise of Rights; Detachment
of Rights |
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(a) |
Subject to adjustment as herein set forth, each Right
will entitle the holder thereof, after the Separation Time and prior to
the Expiration Time, to purchase, for the Exercise Price (or its U.S.
Dollar Equivalent on the Business Day immediately preceding the date of
exercise of the Right), one (1) Common Share. Notwithstanding any other
provision of this Agreement, any Rights held by the Corporation or any of
its Subsidiaries shall be void. |
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(b) |
Until the Separation Time: |
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(i) |
the Rights shall not be exercisable and no Right may be
exercised; and |
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(ii) |
for administrative purposes, each Right shall be
evidenced by the certificate for the associated Common Share registered in
the name of the holder thereof (which certificate shall be deemed to
represent a Rights Certificate) and shall be transferable only together
with, and shall be transferred by a transfer of, such associated Common
Share. |
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(c) |
From and after the Separation Time and prior to the
Expiration Time, the Rights (i) may be exercised and (ii) shall be
registered and transferable independent of Common Shares. Promptly
following the Separation Time, the Corporation shall prepare and the
Rights Agent shall mail to each holder of record of Common Shares as of
the Separation Time (other than an Acquiring Person, any other Person
whose Rights are or become void pursuant to the provisions of subsection
3.1(b) hereof and, in respect of any Rights Beneficially Owned by such
Acquiring Person which are not held of record by such Acquiring Person,
the holder of record of such Rights), at such holders address as shown in
the records of the Corporation (the Corporation hereby agreeing to furnish
copies of such records to the Rights Agent for this
purpose): |
F-19
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(i) |
a certificate (a Rights Certificate) in
substantially the form of Exhibit A hereto appropriately completed and
registered in such holders name, representing the number of Rights held
by such holder at the Separation Time and having such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required
to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to time be listed or
traded, or to conform to usage; and |
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(ii) |
a disclosure statement describing the Rights. |
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(d) |
Rights may be exercised in whole at any time or in part
from time to time on any Business Day (or other day that is not a bank
holiday at the place of exercise) after the Separation Time and prior to
the Expiration Time by submitting to the Rights Agent at its office in the
City of Toronto, Ontario or at any other office of the Rights Agent in the
cities specified in the Rights Certificate or designated from time to time
for that purpose by the Corporation after consultation with the Rights
Agent: |
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(i) |
the Rights Certificate evidencing such Rights with an
Election to Exercise (an Election to Exercise) substantially in
the form attached to the Rights Certificate, appropriately completed and
duly executed by the holder or his executors or administrators or other
personal representatives or his legal attorney duly appointed by
instrument in writing in form and executed in a manner satisfactory to the
Rights Agent; and |
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(ii) |
payment by certified cheque or money order payable to the
order of the Rights Agent, of a sum equal to the Exercise Price multiplied
by the number of Rights being exercised and a sum sufficient to cover any
transfer tax or charge which may be payable in respect of any transfer
involved in the issuance, transfer or delivery of Rights Certificates or
the issuance, transfer or delivery of certificates for Common Shares in a
name other than that of the holder of the Rights being
exercised. |
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(e) |
Upon receipt of a Rights Certificate accompanied by a
duly completed and executed Election to Exercise which does not indicate
that Rights evidenced by such Rights Certificate have become void pursuant
to subsection 3.1(b) hereof and payment as set forth in subsection 2.2(d)
above, the Rights Agent (unless otherwise instructed by the Corporation)
shall thereupon promptly: |
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(i) |
requisition from a transfer agent of the Common Shares
certificates for the number of Common Shares to be purchased (the
Corporation hereby irrevocably authorizing its transfer agents to comply
with all such requisitions); |
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(ii) |
after receipt of such certificates referred to in Section
2.2(e)(i) above, deliver such certificates to or upon the order of the
registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder; |
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(iii) |
when appropriate, requisition from the Corporation the
amount of cash to be paid in lieu of issuing fractional Common
Shares; |
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(iv) |
after receipt of such certificates, deliver the same to
or upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder
together with, where applicable, any cash payment in lieu of a fractional
interest; and |
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(v) |
tender to the Corporation all payments received on
exercise of the Rights. |
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(f) |
In case the holder of any Rights shall exercise less than
all the Rights evidenced by such holders Rights Certificate, a new Rights
Certificate evidencing (subject to the provisions of subsection 5.5(a)
hereof) the Rights remaining unexercised will be issued by the Rights
Agent to such holder or to such holders duly authorized
assigns. |
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(g) |
The Corporation covenants and agrees to: |
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(h) |
take all such action as may be necessary on its part and
within its powers to ensure that all Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates evidencing such
Shares (subject to payment of the Exercise Price), be duly and validly
authorized, executed, issued and delivered and be fully paid and non-
assessable; |
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(i) |
take all reasonable action as may be necessary on its
part and within its power to comply with any applicable requirements of
the Business Corporations Act (Ontario), the Securities Act
(Ontario) or comparable legislation of each of the provinces and
territories of Canada and of the United States of America, and the rules
and regulations thereunder, and any other applicable law, rule or
regulation, in connection with the issuance and delivery of Rights
Certificates and of any securities of the Corporation upon exercise of
Rights; |
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(j) |
use its reasonable efforts to cause all Shares of the
Corporation issued upon exercise of Rights to be listed upon The Toronto
Stock Exchange or such other stock exchange and/or securities quotation
system on which the Common Shares are listed at that time; |
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(k) |
pay when due and payable any and all Canadian federal,
provincial transfer taxes (not including any taxes referable to the income
or profit of the holder or exercising Person or any liability of the
Corporation to withhold tax) and charges which may be payable in respect
of the original issuance or delivery of the Rights Certificates or of any
Shares of the Corporation issued upon the exercise of Rights, provided
that the Corporation shall not be required to pay any transfer tax or
charge which may be payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the issuance or delivery of
certificates for securities in a name other than that of the holder of the
Rights being transferred or exercised; |
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(l) |
if necessary, cause to be reserved and kept available out
of its authorized and unissued Common Shares the number of Common Shares
that, as provided in this Agreement, will from time to time be sufficient
to permit the exercise in full of all outstanding rights; and |
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(m) |
after the Separation Time, except as permitted by Section
5.1 or Section 5.4, not take (or permit any Subsidiary to take) any action
if at the time such action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights. |
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2.3 |
Adjustments to Exercise Price, Number of
Rights |
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(a) |
Subject to Section 5.19, the Exercise Price, the number
and kind of securities subject to purchase upon exercise of each Right and
the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 2.3. |
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(b) |
If the Corporation shall at any time after the Record
Time and prior to the Expiration Time: |
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(i) |
declare or pay a dividend on Common Shares payable in
Common Shares (or other Shares or securities exchangeable for or
convertible into or giving a right to acquire Common Shares or other
Shares) otherwise than pursuant to any optional share dividend program,
dividend reinvestment plan or if the dividend payable is paid in Common
Shares in lieu of a regular periodic cash dividend; |
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(ii) |
subdivide or change the outstanding Common Shares into a
greater number of Common Shares; |
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(iii) |
consolidate or change the outstanding Common Shares into
a smaller number of Common Shares; or |
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(iv) |
issue any Common Shares (or other Shares or securities
exchangeable for or convertible into or giving a right to acquire Common
Shares or other Shares) in respect of, in lieu of, or in exchange for,
existing Common Shares in a reclassification or redesignation of Common
Shares, an amalgamation or a statutory arrangement, |
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(v) |
the Exercise Price and the number of Rights outstanding,
or, if the payment or effective date therefor shall occur after the
Separation Time, the securities purchasable upon exercise of Rights shall
be adjusted in the manner set forth below. If an event occurs which would
require an adjustment under both this Section 2.3 and subsection 3.1(a),
the adjustment provided for in this Section 2.3 shall be in addition to,
and shall be made prior to, any adjustment required under subsection
3.1(a). If the Exercise Price and number of Rights are to be
adjusted: |
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(A) |
the Exercise Price in effect after such adjustment shall
be equal to the Exercise Price in effect immediately prior to such
adjustment divided by the number of Common Shares (or other Shares of
capital) (the Expansion Factor) that a holder of one (1) Common
Share immediately prior to such dividend, subdivision, change,
consolidation or issuance would hold immediately thereafter as a result
thereof (assuming the exercise of all such exchange or conversion rights,
if any); and |
F-22
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(B) |
each Right held prior to such adjustment shall become
that number of Rights equal to the Expansion Factor, and the adjusted
number of Rights shall be deemed to be distributed among the Common Shares
with respect to which the original Rights were associated (if they remain
outstanding) and the Shares issued in respect of such dividend,
subdivision, change, consolidation or issuance, so that each such Common
Share (or other whole share or security exchangeable for or convertible
into a whole Share of capital) shall have exactly one (1) Right associated
with it. |
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(c) |
If the securities purchasable upon exercise of Rights are
to be adjusted, the securities purchasable upon exercise of each Right
after such adjustment shall be the securities that a holder of the
securities purchasable upon exercise of one (1) Right immediately prior to
such dividend, subdivision, change, consolidation or issuance would hold
immediately thereafter as a result thereof. To the extent that any such
rights of purchase, exchange, conversion or acquisition are not exercised
prior to the expiration thereof, the Exercise Price shall be readjusted to
the Exercise Price which would then be in effect based upon the number of
Common Shares (or securities convertible into or exchangeable for Common
Shares) actually issued upon the exercise of such rights. If after the
Record Time and prior to the Expiration Time the Corporation shall issue
any shares of its authorized capital other than Common Shares in a
transaction of a type described in the first sentence of this subsection
2.3(a), such shares shall be treated herein as nearly equivalent to Common
Shares as may be practicable and appropriate under the circumstances and
the Corporation and the Rights Agent agree to amend this Agreement in
order to effect such treatment. |
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(d) |
If the Corporation shall at any time after the Record
Time and prior to the Separation Time issue any Common Shares otherwise
than in a transaction referred to in the preceding paragraph, each such
Common Share so issued shall automatically have one (1) new Right
associated with it, which Right shall be evidenced by the certificate
representing such Share. |
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(e) |
If the Corporation shall at any time after the Record
Time and prior to the Separation Time fix a record date for the making of
a distribution to all holders of Common Shares of rights or warrants
entitling them (for a period expiring within 45 days after such record
date) to subscribe for or purchase Common Shares (or securities
convertible into or exchangeable for or carrying a right to purchase or
subscribe for Common Shares) at a price per Common Share (or, in the case
of a security convertible into or exchangeable for or carrying a right to
purchase or subscribe for Common Shares, having a conversion, exchange or
exercise price per share (including the price required to be paid to
purchase such convertible or exchangeable security or right)) that is less
than 90% of the Market Price per Common Share on such record date, the
Exercise Price shall be adjusted. The Exercise Price in effect after such
record date shall equal the Exercise Price in effect immediately prior to
such record date multiplied by a fraction, of which the numerator shall be
the number of Common Shares outstanding on such record date plus the
number of Common Shares which the aggregate offering price of the total
number of Common Shares so to be offered (and/or the aggregate initial
conversion, exchange or exercise price of the convertible or exchangeable
securities or rights so to be offered (including the price required to be
paid to purchase such convertible or exchangeable securities or rights))
would purchase at such Market Price and of which the denominator shall be
the number of shares of Common Shares outstanding on such record date plus
the number of additional Common Shares to be offered for subscription or
purchase (or into which the convertible or exchangeable securities or
rights so to be offered are initially convertible, exchangeable or
exercisable). In case such subscription price may be paid in a form other
than cash, the value of such non-cash consideration shall be as determined
by the Board of Directors. To the extent that any such rights or warrants
are not so issued or, if issued, are not exercised prior to the expiration
thereof, the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect if such record date had not been fixed or to
the Exercise Price which would then be in effect based upon the number of
Common Shares (or securities convertible into or exchangeable for Common
Shares) actually issued upon the exercise of such rights or warrants, as
the case may be. For purposes of this Agreement, the granting of the right
to purchase Common Shares (whether previously unissued, treasury shares or
otherwise) pursuant to any optional dividend reinvestment plan and/or any
Common Share purchase plan providing for the reinvestment of dividends
payable on securities of the Corporation and/or employee stock option,
stock purchase or other employee benefit plan (so long as such right to
purchase is in no case evidenced by the delivery of rights or warrants)
shall not be deemed to constitute an issue of rights or warrants by the
Corporation; provided, however, that, in the case of any dividend
reinvestment plan, the right to purchase Common Shares is at a price per
share of not less than 90% of the then current market price per share
(determined as provided in such plan) of the Common
Shares. |
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(f) |
If the Corporation shall at any time after the Record
Time and prior to the Separation Time fix a record date for the making of
a distribution to all holders of Common Shares of evidences of
indebtedness or assets (other than a Regular Periodic Cash Dividend or a
dividend paid in Common Shares) or rights or warrants (excluding those
referred to in subsection 2.3(a) or 2.3(b)), the Exercise Price shall be
adjusted. The Exercise Price in effect after such record date shall,
subject to adjustment as provided in the penultimate sentence of
subsection 2.3(b), equal the Exercise Price in effect immediately prior to
such record date less the fair market value (as determined by the Board of
Directors) of the portion of the assets, evidences of indebtedness, rights
or warrants so to be distributed applicable to the securities purchasable
upon exercise of one (1) Right. Such adjustment shall be made
successively/whenever such a record date is fixed. |
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(g) |
Each adjustment made pursuant to this Section 2.3 shall
be made as of: |
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(h) |
the payment or effective date for the applicable
dividend, subdivision, change, consolidation or issuance in the case of an
adjustment made pursuant to subsection 2.3(a) above;
and |
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(i) |
the record date for the applicable dividend or
distribution, in the case of an adjustment made pursuant to subsections
2.3(b) or (c) above, subject to readjustment to reverse same is such
distribution shall not be made. |
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(j) |
Subject to the prior consent of the holders of Common
Shares or Rights obtained in accordance with the provisions of subsection
5.4(b) or (c), as applicable, if the Corporation shall at any time after
the Record Time and prior to the Expiration Time issue any Shares (other
than Common Shares), or rights or warrants to subscribe for or purchase
any such Shares, or securities convertible into or exchangeable for any
such Shares, in a transaction referred to in clause (a)(i) or (a)(iv)
above and if the Board of Directors determines that the adjustments
contemplated by subsections 2.3(a), (b) and (d) above in connection with
such transaction will not appropriately protect the interests of the
holders of Rights, the Board of Directors may determine what other
adjustments to the Exercise Price, number of Rights and/or securities
purchasable upon exercise of Rights would be appropriate and,
notwithstanding such clauses, such adjustments (rather than the
adjustments contemplated by subsections 2.3(a), (b) and (d) above) shall
be made and the Corporation and the Rights Agent shall amend or supplement
this Agreement as appropriate to provide for such adjustments. |
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(k) |
Notwithstanding anything herein to the contrary, no
adjustment to the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such Exercise
Price; provided, however, that any adjustments which by reason of
this subsection 2.3(f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. Each
adjustment made pursuant to this Section 2.3 shall be calculated to the
nearest cent or to the nearest one one-hundredth of a Common Share or
Right, as the case may be. |
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(l) |
If as a result of an adjustment made pursuant to Section
3.1, the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Common Shares, thereafter the number of
such other securities so receivable upon exercise of any Right and the
applicable Exercise Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Shares contained in the provisions
of this Section 2.3 and the provisions of this Agreement with respect to
the Common Shares shall apply on like terms to any such other
securities. |
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(m) |
All Rights originally issued by the Corporation
subsequent to any adjustment made to an Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise Price, the number
of Common Shares purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided
herein. |
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(n) |
Unless the Corporation shall have exercised its election
as provided in subsection 2.3(a)(i), upon each adjustment of an Exercise
Price as a result of the calculations made in subsections 2.3(b) and (c),
each Right outstanding immediately prior to the making of such adjustment
shall thereafter evidence the |
F-25
(i)
multiplying (A) the number of Common Shares covered by a Right immediately prior
to this adjustment, by (B) the Exercise Price in effect immediately prior to
such adjustment of the Exercise Price; and
(ii) dividing the
product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
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(o) |
The Corporation may elect on or after the date of any
adjustment of an Exercise Price to adjust the number of Rights, in lieu of
any adjustment in the number of Common Shares purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of Common
Shares for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record immediately prior to such adjustment
of the number of Rights shall become the number of Rights (calculated to
the nearest one one-hundredth) obtained by dividing the Exercise Price in
effect immediately prior to the adjustment of the Exercise Price by the
Exercise Price in effect immediately after adjustment of the Exercise
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment
and, if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Exercise Price is adjusted or any
date thereafter, but, if the Rights Certificates have been issued, shall
be at least 10 calendar days after the date of the public announcement. If
Rights Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this subsection 2.3(j), the Corporation shall, as
promptly as practicable, cause to be distributed to holders of record of
Rights Certificates on such record date, Rights Certificates evidencing
the additional Rights to which such holder shall be entitled as a result
of such adjustment, or, at the option of the Corporation, shall cause to
be distributed to such holders of record in substitution or replacement
for the Rights Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Corporation,
new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein and may bear, at the option of the Corporation, the
adjusted Exercise Price and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement. |
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(p) |
Irrespective of any adjustment or change in the
securities purchasable upon exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
securities so purchasable which were expressed in the initial Rights
Certificates issued hereunder. |
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(q) |
If, as a result of an adjustment made pursuant to Section
3.1, the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Common Shares, thereafter the number of
such other securities so receivable upon exercise of any Right and the
applicable Exercise Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as may be
practicable to the provisions with respect to the Common Shares contained
in the foregoing subsections of this Section 2.3 and the provisions of
this Agreement with respect to the Common Shares shall apply on like terms
to any such other securities. |
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(r) |
In any case in which this Section 2.3 shall require that
any adjustment in the Exercise Price be made effective as of a record date
for a specified event, the Corporation may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised
after such record date of the number of Common Shares and other securities
of the Corporation, if any, issuable upon such exercise over and above the
number of Common Shares and other securities of the Corporation, if any,
issuable upon such exercise on the basis of the Exercise Price in effect
prior to such adjustment; provided, however, that the Corporation
shall deliver to such holder an appropriate instrument evidencing such
holders right to receive such additional Common Shares or other
securities upon the occurrence of the event requiring such
adjustment. |
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(s) |
Notwithstanding anything in this Section 2.3 to the
contrary, the Corporation shall be entitled to make such reductions in the
Exercise Price, in addition to those adjustments expressly required by
this Section 2.3, as and to the extent that, in their judgment, the Board
of Directors determines advisable in order that any (i) subdivision or
consolidation of the Common Shares, (ii) issuance wholly for cash of any
Common Shares at less than the applicable Market Price, (iii) issuance
wholly for cash of any Common Shares or securities that by their terms are
exchangeable for or convertible into or give a right to acquire Common
Shares, (iv) stock dividends, or (v) issuance of rights, options or
warrants referred to in this Section 2.3, hereafter made by the
Corporation to holders of its Common Shares, and subject to applicable
taxation laws, shall not be taxable to such shareholders. |
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(t) |
After the Separation Time, the Corporation will not,
except as permitted by the provisions hereof, take (or permit any
Subsidiary of the Corporation to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights. |
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(u) |
Whenever an adjustment to the Exercise Price or a change
in the securities purchasable upon the exercise of Rights is made pursuant
to this Section 2.3, the Corporation shall
promptly: |
(i) prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment;
(ii) file with the
Rights Agent and with each transfer agent for the Common Shares, a copy of such
certificate; and
(iii) cause notice of the
particulars of such adjustment or change to be given to the holders of the
Rights.
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(v) |
Failure to file such certificate or to cause such notice
to be given as aforesaid, or any defect therein, shall not affect the
validity of any such adjustment or change. |
2.4 |
Date on Which Exercise is
Effective |
Each Person in whose name any certificate for Shares is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Shares represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly submitted (together with a duly completed Election to Exercise)
and payment of the Exercise Price for such Rights (and any applicable transfer
taxes and other charges payable by the exercising holder hereunder) was made;
provided, however, that if the date of such exercise is a date upon which
the relevant Share transfer books of the Corporation are closed, such Person
shall be deemed to have become the recorded holder of such Shares on, and such
certificate shall be dated, the next succeeding Business Day on which the said
Share transfer books of the Corporation are open.
2.5 |
Execution, Authentication, Delivery and Dating of
Rights Certificates |
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(a) |
The Rights Certificates shall be executed on behalf of
the Corporation by any two of its Chairman, President, Chief Executive
Officer, Chief Financial Officer or Corporate Secretary. The signature of
any of these officers on the Rights Certificates may be manual or
facsimile. |
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(b) |
Rights Certificates bearing the manual or facsimile
signatures of individuals who were at the relevant time the proper
officers of the Corporation shall bind the Corporation, notwithstanding
that such individuals or any of them have ceased to hold such offices
prior to the countersignature and delivery of such Rights
Certificates. |
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(c) |
Promptly after the Corporation learns of the Separation
Time, the Corporation shall notify the Rights Agent of such Separation
Time and shall deliver disclosure statements and Rights Certificates
executed by the Corporation to the Rights Agent for countersignature, and
the Rights Agent shall countersign (manually or by facsimile signature in
a manner satisfactory to the Corporation) and deliver such disclosure
statements and Rights Certificates to the holders of the Rights pursuant
to subsection 2.2(c) hereof. No Rights Certificate shall be valid for any
purpose until countersigned by the Rights Agent in the manner described
above. |
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(d) |
Each Rights Certificate shall be dated the date of
countersignature thereof. |
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2.6 |
Registration, Registration of Transfer and
Exchange |
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(a) |
From and after the Separation Time, the Corporation shall
cause to be kept a register (the Rights Register) in which,
subject to such reasonable regulations as it may prescribe, the
Corporation shall provide for the registration and transfer of Rights. The
Rights Agent is hereby appointed registrar (the Rights Registrar)
for the purpose of maintaining the Rights Register for the Corporation and
registering Rights and transfers of Rights as herein provided. If the
Rights Agent shall cease to be the Rights Registrar, the Rights Agent
shall have the right to examine the Rights Register at all reasonable
times. |
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(b) |
After the Separation Time and prior to the Expiration
Time, upon surrender for registration of transfer or exchange of any
Rights Certificate, and subject to the provisions of subsection 2.6(c)
below, the Corporation shall execute, and the Rights Agent shall
countersign and deliver, in the name of the holder or the designated
transferee or transferees, as required pursuant to the holders
instructions, one or more new Rights Certificates evidencing the same
aggregate number of Rights as did the Rights Certificate so
surrendered. |
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(c) |
All Rights issued upon any registration of transfer or
exchange of Rights Certificates shall be the valid obligations of the
Corporation, and such Rights shall be entitled to the same benefits under
this Agreement as the Rights surrendered upon such registration of
transfer or exchange. |
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(d) |
Every Rights Certificate surrendered for registration of
transfer or exchange shall have the form of assignment thereon duly
completed and endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Corporation or the Rights Agent, as
the case may be, duly executed by the holder thereof or such holders
attorney duly authorized in writing. As a condition to the issuance of any
new Rights Certificate under this Section 2.6, the Corporation may require
the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and other expenses
(including the reasonable fees and expenses of its Rights Agent) connected
therewith. |
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(e) |
The Corporation shall not be required to register the
transfer or exchange of any Rights after the Rights have been terminated
pursuant to the provisions of this Agreement. |
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2.7 |
Mutilated, Destroyed, Lost and Stolen Rights
Certificates |
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(a) |
If any mutilated Rights Certificate is surrendered to the
Rights Agent prior to the Expiration Time, the Corporation shall execute
and the Rights Agent shall countersign and deliver a new Rights
Certificate evidencing the same number of Rights as did the Rights
Certificate so surrendered. |
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(b) |
If there shall be delivered to the Corporation and the
Rights Agent prior to the Expiration Time (i) evidence to their
satisfaction of the destruction, loss or theft of any Rights Certificate
and (ii) such security or indemnity as may be required by them to save
each of them and their respective agents harmless, then, in the absence of
notice to the Corporation or the Rights Agent that such Rights Certificate
has been acquired by a bona fide purchaser, the Corporation shall execute
and upon the Corporations request, the Rights Agent shall countersign and
deliver, in lieu of any such destroyed, lost or stolen Rights Certificate,
a new Rights Certificate evidencing the same number of Rights as did the
Rights Certificate so destroyed, lost or stolen. |
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(c) |
As a condition to the issuance of any new Rights
Certificate under this Section 2.7, the Corporation may require the
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including
the reasonable fees and expenses of the Rights Agent) connected
therewith. |
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(d) |
Every new Rights Certificate issued pursuant to this
Section 2.7 in lieu of any destroyed, lost or stolen Rights Certificate
shall evidence an original additional contractual obligation of the
Corporation, whether or not the destroyed, lost or stolen Rights
Certificate shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Agreement equally and proportionately
with any and all other Rights duly issued hereunder.
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F-29
2.8 |
Persons Deemed Owners |
Prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Share certificate) for registration of
transfer, the Corporation, the Rights Agent and any agent of the Corporation or
the Rights Agent may deem and treat the Person in whose name such Rights
Certificate (or, prior to the Separation Time, such Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever.
2.9 |
Delivery and Cancellation of
Certificates |
All Rights Certificates
surrendered upon exercise or for redemption, registration of transfer or
exchange shall, if surrendered to any Person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly cancelled by
the Rights Agent. The Corporation may at any time deliver to the Rights Agent
for cancellation any Rights Certificates previously countersigned and delivered
hereunder which the Corporation may have acquired in any manner whatsoever, and
all Rights Certificates so delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificates shall be countersigned in lieu of or in exchange
for any Rights Certificates cancelled as provided in this Section 2.9, except as
expressly permitted by this Agreement. The Rights Agent shall destroy all
cancelled Rights Certificates and deliver a certificate of destruction to the
Corporation.
2.10 |
Agreement of Rights
Holders |
Every holder of Rights by accepting the same consents and
agrees with the Corporation and the Rights Agent and with every other holder of
Rights that:
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(a) |
such holder is otherwise bound by and subject to the
provisions of this Agreement, as amended from time to time in accordance
with the terms hereof in respect of all Rights held; |
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(b) |
prior to the Separation Time, each Right shall be
transferable only together with, and shall be transferred by a transfer
of, the associated Share; |
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(c) |
after the Separation Time, the Rights Certificates shall
be transferable only on the Rights Register as provided herein; |
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(d) |
prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Share certificate) for
registration of transfer, the Corporation, the Rights Agent and any agent
of the Corporation or the Rights Agent may deem and treat the Person in
whose name the Rights Certificate (or, prior to the Separation Time, the
associated Share certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on such Rights Certificate or the associated Share
certificate made by anyone other than the Corporation or the Rights Agent)
for all purposes whatsoever, and neither the Corporation nor the Rights
Agent shall be affected by any notice to the
contrary; |
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(e) |
such holder has waived all rights to receive any
fractional Right or fractional Share upon exercise of a Right; |
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(f) |
this Agreement may be supplemented or amended from time
to time pursuant to subsection 5.4(a) or the last sentence of the
penultimate paragraph of subsection 2.3(a) hereof upon the sole authority
of the Board of Directors without the approval of any holder of Rights;
and |
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(g) |
notwithstanding anything in this Agreement to the
contrary, neither the Corporation nor the Rights Agent shall have any
liability to any holder of a Right or any other Person as a result of its
inability to perform any of its obligations under this Agreement by reason
of any preliminary or permanent injunction or other order, decree or
ruling by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such
obligation. |
ARTICLE 3
ADJUSTMENTS TO THE RIGHTS IN THE EVENT
OF CERTAIN TRANSACTIONS
3.1 |
Flip-in Event |
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(a) |
Subject to the provisions of Section 2.2 and subsections
5.1(c), (d) and (e) hereof and except as provided below, if prior to the
Expiration Time a Flip-in Event shall occur, each Right shall thereafter
constitute, effective at the Close of Business on the tenth Business Day
after the relevant Stock Acquisition Date, the right to purchase from the
Corporation, upon exercise thereof in accordance with the terms hereof,
that number of Common Shares of the Corporation having an aggregate Market
Price on the date of consummation or occurrence of such Flip- in Event
equal to twice the Exercise Price for an amount in cash equal to the
Exercise Price (such right to be appropriately adjusted in a manner
analogous to the applicable adjustment provided for in Section 2.3 hereof
in the event that, after such date of consummation or occurrence, an event
of a type analogous to any of the events described in Section 2.3 hereof
shall have occurred with respect to such Common Shares). |
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(b) |
Notwithstanding anything in this Agreement to the
contrary, upon the occurrence of a Flip-in Event, any Rights that are or
were Beneficially Owned on or after the earlier of the Separation Time and
the Stock Acquisition Date by: |
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(i) |
an Acquiring Person (or any Person acting jointly or in concert with
an Acquiring Person or with an Affiliate or Associate of an Acquiring
Person); or |
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(ii) |
a direct or indirect transferee of, or other successor in title to,
such Rights (a Transferee), who becomes a Transferee concurrently
with or subsequent to the Acquiring Person becoming an Acquiring Person,
in a transfer, whether or not for consideration, that the Board of
Directors has determined is part of a plan, understanding or scheme of an
Acquiring Person (or an Affiliate or Associate of an Acquiring Person or
any Person acting jointly or in concert with an Acquiring Person or an
Affiliate or Associate of an Acquiring Person) that has the purpose or
effect of avoiding the provisions of this subsection 3.1(b) applicable in
the circumstances contemplated in clause (i) hereof; |
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(c) |
shall thereupon become and be null and void and any
holder of such Rights (including any Transferee) shall thereafter have no
rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise. The holder of any Rights represented by a
Rights Certificate which is submitted to the Rights Agent, or any Co-
Rights Agent, upon exercise or for registration of transfer or exchange
which does not contain the necessary certifications set forth in the
Rights Certificate establishing that such Rights are not void under this
subsection 3.1(b) shall be deemed to be an Acquiring Person for the
purposes of this subsection 3.1(b) and such rights shall be null and
void. |
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(d) |
Any Rights Certificate that represents Rights
Beneficially Owned by a Person described in either clauses (i) or (ii) of
subsection 3.1(b) hereof or transferred to any nominee of any such Person,
and any Rights Certificate issued upon the transfer, exchange or
replacement of any other Rights Certificate referred to in this sentence
shall contain the following legend: |
The Rights represented by this Rights
Certificate were issued to a Person who was an Acquiring Person or an Affiliate
or an Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement) or was acting jointly or in concert with any of them. This Rights
Certificate and the Rights represented hereby shall become void in the
circumstances specified in subsection 3.1(b) of the Rights Agreement.,
provided, however, that the
Rights Agent shall not be under any responsibility to ascertain the existence of
facts that would require the imposition of such legend but shall be required to
impose such legend only if instructed to do so by the Corporation or if a holder
fails to certify upon transfer or exchange in the space provided on the Rights
Certificate that such holder is not an Acquiring Person or an Affiliate or
Associate thereof or acting jointly or in concert with any of them. The issuance
of a Rights Certificate without the legend referred to in this subsection shall
be of no effect on the provisions of this subsection.
ARTICLE 4
THE RIGHTS AGENT
4.1 |
General |
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(a) |
The Corporation hereby appoints the Rights Agent to act
as agent for the Corporation and the holders of Rights in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint one or more
co-rights agents (each, a Co-Rights Agent) as it may deem
necessary or desirable after consultation with the Rights Agent. In such
event, the respective duties of the Rights Agent and any Co-Rights Agent
shall be as the Corporation may determine with the written approval of the
Rights Agent. The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution
of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent, its
officers, directors, employees and agents for, and to hold them harmless
against, any loss, liability, cost, claim, action, damage, suit or
expense, incurred without negligence, bad faith or wilful misconduct on
the part of the Rights Agent, its officers, directors, employees or
agents, for anything done or omitted by them in connection with the
acceptance and performance of this Agreement, including legal costs and
expenses, which right to indemnification shall survive the termination of
this Agreement or the resignation or removal of the Rights Agent. In the
event of any disagreement arising regarding the terms of this Agreement
the Rights Agent shall be entitled, at its option, to refuse to comply
with any and all demands whatsoever until the dispute is settled either by
written agreement amongst the parties to this Agreement or by a court of
competent jurisdiction. |
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(b) |
The Rights Agent shall be protected from, and shall incur
no liability for or in respect of, any action taken, suffered or omitted
by it in connection with its performance of this Agreement in reliance
upon any certificate for Shares, Rights or for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
opinion, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged,
by the proper Person or Persons. |
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(c) |
The Corporation shall inform the Rights Agent in a
reasonably timely manner of events which may materially affect the
administration of this Agreement by the Rights Agent and, at any time upon
written request, shall provide to the Rights Agent an incumbency
certificate certifying the then current officers of the
Corporation. |
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4.2 |
Merger or Amalgamation or Change of Name of Rights
Agent |
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(a) |
Any body corporate into which the Rights Agent or any
successor Rights Agent may be merged or amalgamated with or into, or any
body corporate succeeding to the securityholder services business of the
Rights Agent or any successor Rights Agent shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto,
provided that such body corporate would be eligible for appointment as a
successor Rights Agent under the provisions of Section 4.4
hereof. |
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(b) |
In case at the time such successor Rights Agent succeeds
to the agency created by this Agreement any of the Rights Certificates
have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver
such Rights Certificates so countersigned; and in case at that time any of
the Rights Certificates have not been countersigned, any successor Rights
Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement. |
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(c) |
In case at any time the name of the Rights Agent is
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and
in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
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F-33
4.3 |
Duties of Rights Agent |
The Rights Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, by all of which the
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
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(a) |
The Rights Agent may retain and consult with legal
counsel (who may be legal counsel for the Corporation), and the opinion of
such counsel will be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion. |
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(b) |
Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that any fact
or matter be proved or established by the Corporation prior to taking or
suffering any action or refraining from taking any action hereunder, such
fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by an individual believed by the
Rights Agent to be the Chief Executive Officer, Chief Financial Officer or
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken, omitted or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate. |
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(c) |
The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or wilful misconduct. |
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(d) |
The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or
in the certificates for Shares or the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but all such
statements and recitals are and will be deemed to have been made by the
Corporation only. |
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(e) |
The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Share
certificate or Rights Certificate (except its countersignature thereof);
nor will it be responsible for any breach by the Corporation of any
covenant or condition contained in this Agreement or in any Rights
Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to subsection 3.1(b) hereof) or any adjustment required under the
provisions of Section 2.3 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights after receipt of the certificate contemplated by
Section 2.3 hereof describing any such adjustment); nor will it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Shares to be issued pursuant to this
Agreement or any Rights or as to whether any Shares shall, when issued, be
duly and validly authorized, executed, issued and delivered and be fully
paid and non-assessable. |
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(f) |
The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and assurances
as may reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this
Agreement. |
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(g) |
The Rights Agent is hereby authorized to rely upon and
directed to accept written instructions with respect to the performance of
its duties hereunder from any individual believed by the Rights Agent to
be the Chief Executive Officer, Chief Financial Officer or Secretary of
the Corporation, and to apply to such individuals for advice or
instructions in connection with its duties, and it shall not be liable for
any action taken, omitted or suffered by it in good faith in accordance
with instructions of any such individual. |
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(h) |
The Rights Agent and any shareholder, director, officer
or employee of the Rights Agent may buy, sell or deal in Shares, Rights or
other securities of the Corporation or become pecuniarily interested in
any transaction in which the Corporation may be interested, or contract
with or lend money to the Corporation or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for the
Corporation or for any other legal entity. |
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(i) |
The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the
Corporation resulting from any such act, omission, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof. |
4.4 |
Change of Rights Agent |
The Rights Agent may resign and be discharged from its duties
under this Agreement upon 60 days notice (or such lesser notice as is
acceptable to the Corporation) in writing delivered or mailed to the Corporation
and to each transfer agent of Shares by first class mail, and mailed or
delivered to the holders of the Rights in accordance with Section 5.9 hereof.
The Corporation may remove the Rights Agent upon 60 days notice in writing,
mailed or delivered to the Rights Agent and to each transfer agent of the Shares
by first class mail, and mailed to the holders of the Rights in accordance with
Section 5.9 hereof. If the Rights Agent should resign or be removed or otherwise
become incapable of acting, the Corporation shall appoint a successor to the
Rights Agent. If the Corporation fails to make such appointment within a period
of 30 days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of any Rights (which holder shall, with such notice, submit such
holders Rights Certificate for inspection by the Corporation), then the Rights
Agent or the holder of any Rights may apply, at the Corporations expense, to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Corporation or by such a
court, shall be a body corporate incorporated under the laws of Canada or a
province thereof and authorized to carry on business in the Province of Ontario.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
upon receipt of all fees and expenses outstanding to the predecessor Rights
Agent by the Corporation shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Shares, and mail a notice thereof in writing to the holders of the
Rights. Failure to give any notice provided for in this Section 4.4, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
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ARTICLE 5
MISCELLANEOUS
5.1 |
Redemption and Waiver |
The Corporation shall give prompt written notice to the Rights
Agent of any waiver of the application of Section 3.1 made by the Board of
Directors acting in good faith under this Section 5.1. In addition,
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(a) |
The Board of Directors, at any time prior to the special
meeting of shareholders of the Corporation to be held on or around March
19, 2009, may terminate this Agreement by passing a resolution. |
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(b) |
With the prior consent of the holders of Common Shares or
Rights obtained in accordance with subsection 5.4(b) or (c), as
applicable, the Board of Directors, at any time prior to the occurrence of
a Flip- in Event as to which the application of Section 3.1 has not been
waived pursuant to this Section 5.1, may elect to redeem all but not less
than all of the then outstanding Rights at a redemption price of $0.00001
per Right appropriately adjusted in a manner analogous to the applicable
adjustment to the Exercise Price provided for in Section 2.3 hereof if an
event analogous to any of the events described in Section 2.3 shall have
occurred (such redemption price being herein referred to as the
Redemption Price). |
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(c) |
With the prior consent of the holders of Common Shares
obtained in accordance with subsection 5.4(b), the Board of Directors may,
at any time prior to the occurrence of a Flip-in Event as to which the
application of Section 3.1 has not been waived pursuant to this Section
5.1, if such Flip-in Event would occur by reason of an acquisition of
Common Shares otherwise than pursuant to a Take-over Bid made by means of
a Take- over Bid circular to all holders of record of Common Shares and
otherwise than in the circumstances set forth in subsection 5.1(e), waive
the application of Section 3.1 to such Flip-in Event. In such event, the
Board of Directors shall extend the Separation Time to a date at least 10
Business Days subsequent to the meeting of shareholders called to approve
such waiver. |
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(d) |
Prior to the occurrence of a Flip-in Event, as to which
the application of Section 3.1 has not been waived pursuant to this
paragraph, upon written notice to the Rights Agent, the Board of Directors
may waive the application of Section 3.1 to such Flip- in Event but only
if such Flip-in Event occurs as a result of a Take-over Bid made by way of
a Take- over Bid circular sent to all holders of record of Common Shares;
provided, however, that if the Board of Directors waives the
application of Section 3.1 to a particular Flip-in Event, the Board of
Directors shall be deemed to have waived the application of Section 3.1 to
any other Flip-in Event occurring by reason of any Take-over Bid which is
made by means of a Take-over Bid circular to all holders of record of
Common Shares (i) prior to the granting of such a waiver, or (ii)
thereafter and prior to the expiry of any Take-over Bid in respect of
which a waiver is, or is deemed to have been, granted under this
subsection 5.1(d) . |
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(e) |
The Board of Directors may waive the application of
Section 3.1 to a Flip-in Event provided that the following conditions are
satisfied: |
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(i) |
the Board of Directors has determined that the Acquiring
Person became an Acquiring Person by inadvertence and without any
intention to become, or knowledge that it would become, an Acquiring
Person; and |
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(ii) |
such Acquiring Person has reduced its Beneficial
Ownership of Common Shares such that at the time of the waiver pursuant to
this subsection 5.1(e), it is no longer an Acquiring Person. |
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(f) |
If a Person acquires, pursuant to a Permitted Bid or a
Competing Permitted Bid or pursuant to an Exempt Acquisition occurring
under subsection 5.1(d) hereof, more than 50% of the outstanding Common
Shares other than Common Shares Beneficially Owned at the date of such
Permitted Bid, Competing Permitted Bid or Exempt Acquisition by such
Person, the Board of Directors of the Corporation shall, notwithstanding
the provisions of subsection 5.1(b) hereof, immediately upon such
acquisition and without further formality be deemed to have elected to
redeem the Rights at the Redemption Price. |
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(g) |
If the Board of Directors elects to or is deemed to have
elected to redeem the Rights and, in circumstances where subsection 5.1(b)
is applicable, the requisite consent is given by the holders of Common
Shares or Rights, as applicable, (i) the right to exercise the Rights will
thereupon, without further action and without notice, terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price, and (ii) no further Rights shall thereafter be
issued. |
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(h) |
Within 10 Business Days of the Board of Directors
electing or having been deemed to have elected to redeem the Rights or, if
subsection 5.1(c), is applicable, within 10 Business Days after the
requisite consent being given by the holders of Common Shares or Rights,
as applicable, the Corporation shall give notice of redemption to the
holders of the then outstanding Rights by mailing such notice to each such
holder at his last address as it appears upon the Rights Register of the
Rights Agent, or, prior to the Separation Time, on the share register
maintained by the Corporations transfer agent. Each such notice of
redemption shall state the method by which the payment of the Redemption
Price shall be made. |
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(i) |
Where a Take- over Bid that is not a Permitted Bid or
Competing Permitted Bid expires, is withdrawn or otherwise terminated
after the Separation Time has occurred and prior to the occurrence of a
Flip-in Event, the Board of Directors may elect to redeem all of the
outstanding Rights at the Redemption Price. |
F-37
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(j) |
Upon the rights being redeemed pursuant to subsection
5.1(i), all the provisions of this Agreement shall continue to apply as if
the Separation Time had not occurred and Rights Certificates representing
the number of Rights held by each holder of record of Common Shares as of
the Separation Time had not been mailed to each such holder and for all
purposes of this Agreement, the Separation Time shall be deemed not to
have occurred and Rights shall remain attached to the Outstanding Common
Shares, subject to and in accordance with the provisions of this
Agreement. |
No Person shall have any rights pursuant to this Agreement or
any Right after the Expiration Time, except as provided in Section 4.1 hereof.
5.3 |
Issuance of New Rights
Certificates |
Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Corporation may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board of
Directors to reflect any adjustment or change in the number or kind or class of
Shares purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement.
5.4 |
Supplements and Amendments |
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(a) |
The Corporation may make, without the approval of the
holders of Rights or Common Shares, any supplements or amendments to this
Agreement: (i) specifically contemplated in subsections 2.10(f) or any
other provision hereof, (ii) to correct any clerical or typographical
error, or (iii) which are required to maintain the validity and
effectiveness of the Agreement as a result of any change in any applicable
laws, rules or regulatory requirements. The Corporation may, prior to the
date of any shareholders meeting referred to in Section 5.17, supplement,
amend, vary or delete any of the provisions of this Agreement without the
approval of any holder of Rights or Common Shares (whether or not such
action would materially adversely affect the interests of the holders of
Rights generally), where the Board of Directors deems (in good faith) such
action necessary or desirable. Notwithstanding anything in this Section
5.4 to the contrary, no amendment shall be made to the provisions of
Article 4 except with the written concurrence of the Rights Agent to such
supplement or amendment. |
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(b) |
Subject to subsection 5.4(a), the Corporation, with the
prior consent of the holders of Common Shares obtained as set forth below,
at any time before the Separation Time, may redeem Rights pursuant to
subsection 5.1(b), waive a Flip-in Event pursuant to subsection 5.1(c) or
otherwise amend, vary or rescind any of the provisions of this Agreement
and the Rights (whether or not such action would materially adversely
affect the interests of the holders of Rights generally). Such consent
shall be deemed to have been given if provided by the holders of Common
Shares at a special meeting called and held in compliance with applicable
laws, rules and regulatory requirements and the requirements in the
articles and by-laws of the Corporation. Subject to compliance with any
requirements imposed by the foregoing, consent shall be given if the
proposed amendment, variation or rescission is approved by the affirmative
vote of a majority of the votes cast by all Independent Shareholders
represented in person or by proxy at the special
meeting. |
F-38
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(c) |
The Corporation, with the prior consent of the holders of
Rights obtained as set forth below, at any time after the Separation Time
and before the Expiration Time, may redeem Rights pursuant to subsection
5.1(b) or otherwise amend, vary or rescind any of the provisions of this
Agreement and the Rights (whether or not such action would materially
adversely affect the interests of the holders of Rights generally). Such
consent shall be deemed to have been given if provided by the holders of
Rights at a special meeting of holders of Rights called and held in
compliance with applicable laws, rules and regulatory requirements and, to
the extent possible, with the requirements in the articles and by-laws of
the Corporation applicable to meetings of holders of Common Shares,
applied mutatis mutandis. Subject to compliance with any
requirements imposed by the foregoing, consent shall be given if the
proposed amendment, variation or rescission is approved by the affirmative
vote of a majority of the votes cast by holders of Rights (other than
holders of Rights whose Rights have become null and void pursuant to
subsection 3.1(b)), represented in person or by proxy at the special
meeting. |
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(d) |
Any amendments, supplements or restatements made by the
Corporation to this Agreement pursuant to subsection 5.4(a) which are
required to maintain the validity and effectiveness of this Agreement as a
result of any change in any applicable laws, rules or regulatory
requirements shall: |
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(i) |
if made before the Separation Time, be submitted to the
holders of Common Shares at the next meeting of shareholders and the
shareholders may, by the majority referred to in subsection 5.4(b),
confirm or reject such amendment, supplement or restatement; |
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(ii) |
if made after the Separation Time, be submitted to the
holders of Rights at a meeting to be called in accordance with the
provisions of subsection 5.4(c) hereof and the holders of Rights may, by a
majority referred to in subsection 5.4(c), confirm or reject such
amendment, supplement or restatement. |
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(e) |
The Corporation shall be required to provide the Rights
Agent with notice in writing of any such amendment, rescission or
variation to this Agreement as referred to in this Section 5.4 within five
days or effecting such amendment, rescission or
variation. |
Any such amendment, supplement or restatement shall be
effective from the date of the resolution of the Board of Directors adopting
such amendment (unless the Board of Directors stipulates that such amendment is
to become effective at a later date), until it is confirmed or rejected or until
it ceases to be effective (as described in the next sentence) and, where such
amendment is confirmed, it continues in effect in the form so confirmed. If such
amendment, supplement or restatement is rejected by the shareholders of the
Corporation or the holders of Rights or is not submitted to the shareholders of
the Corporation or holders of Rights as required, then such amendment,
supplement or restatement shall cease to be effective from and after the
termination of the meeting at which it was rejected or to which it should have
been but was not submitted or if such a meeting of the holders of Rights is not
called within a period of 90 days of the making of any such agreement, at the
end of such period, and no subsequent resolution of Board of Directors to amend,
supplement or restate this Agreement to substantially the same effect shall be
effective until confirmed by the shareholders of the Corporation or holders of
Rights as the case may be.
F-39
5.5 |
Fractional Rights and Fractional Common
Shares |
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(a) |
The Corporation shall not be required to issue fractions
of Rights or to distribute Right Certificates which evidence fractional
Rights. In lieu of issuing fractional Rights, the Corporation shall pay to
the registered holders of the Right Certificates, at the time such
fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the Market Price of one (1) whole Right that the
fraction of a Right that would otherwise be issuable is of one (1) whole
Right. The Rights Agent shall have no obligation to make any payments in
lieu of fractional Rights unless the Corporation shall have provided the
Rights Agent with the necessary funds to pay in full all amounts payable
in accordance with subsection 2.2(e). |
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(b) |
The Corporation shall not be required to issue fractions
of Common Shares upon exercise of the Rights or to distribute certificates
which evidence fractional Common Shares. In lieu of issuing fractional
Common Shares, the Corporation shall pay to the registered holders of
Right Certificates at the time such Rights are exercised as herein
provided, an amount in cash equal to the same fraction of the Market Price
of one (1) Common Share that the fraction of a Common Share that would
otherwise be issuable upon the exercise of such Right is of a whole Common
Share. The Rights Agent shall have no obligation to make any payments in
lieu of fractional Common Shares unless the Corporation shall have
provided the Rights Agent with the necessary funds to pay in full all
amounts payable in accordance with subsection 2.2(e). |
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5.6 |
Rights of Action |
Subject to the terms of this Agreement, rights of action in
respect of this Agreement, other than rights of action vested solely in the
Rights Agent, are vested in the respective holders of the Rights, and any holder
of any Rights, without the consent of the Rights Agent or of the holder of any
other Rights may, on such holders own behalf and for such holders own benefit
and the benefit of other holders of Rights, enforce, and may institute and
maintain any suit, action or proceeding against the Corporation to enforce, or
otherwise act in respect of, such holders right to exercise such holders
Rights in the manner provided in such holders Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
5.7 |
Holder of Rights Not Deemed a
Shareholder |
No holder, as such, of any Rights shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of Common Shares or
any other securities which may at any time be issuable on the exercise of such
Rights, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights, as such, any of the rights of
a shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in Section
5.8 hereof), or to receive dividends or subscription rights, or otherwise, until
such Rights shall have been exercised in accordance with the provisions
hereof.
F-40
5.8 |
Notice of Proposed Actions |
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(a) |
If after the Separation Time and prior to the Expiration
Time: |
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(i) |
there shall occur an adjustment in the Rights attaching
to the Rights pursuant to Section 3.1 as a result of the occurrence of a
Flip-in Event; or |
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(ii) |
the Corporation proposes to effect the liquidation,
dissolution or winding up of the Corporation or the sale of all or
substantially all of the Corporations assets; |
then, in each such case, the
Corporation shall give to each holder of a Right, in accordance with Section
5.9, a notice of such event or proposed action, which shall specify the date on
which such change to the Rights, liquidation, dissolution or winding up occurred
or is to take place, and such notice shall be so given within 10 Business Days
after the occurrence of a change to the Rights and not less than 20 Business
Days prior to the date of taking such proposed action by the Corporation.
Any notice, demand or other communication required or permitted
to be given or made by the Rights Agent or by the holder of any Rights to or on
the Corporation or by the Corporation or by the holder of any Rights to or on
the Rights Agent shall be in writing and shall be well and sufficiently given or
made if:
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(i) |
delivered in person during normal business hours on a
Business Day and left with the receptionist or other responsible employee
at the relevant address set forth below; or |
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(ii) |
except during any general interruption of postal services
due to strike, lockout or other cause, sent by first-class mail;
or |
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(iii) |
sent by telegraph, facsimile or other form of recorded
electronic communication, charges prepaid and confirmed in writing as
aforesaid; |
if to the Corporation, addressed to it at:
Energy Fuels Inc.
2 Toronto
Street, Suite 500
Toronto, ON M5C 2B6
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Attention: |
Michael Skutezky |
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Fax No.: |
416-214-2727 |
and if to the Rights Agent, addressed to it at:
CIBC Mellon Trust Company
320 Bay
Street, Ground Level
Toronto, ON M5H 4A6
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Attention: |
Vice-President, Client Services |
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Fax No.: |
416-643-5570 |
F-41
Notices, demands or other communications required or permitted
to be given or made by the Corporation or the Rights Agent to or on the holder
of any Rights shall be in writing and shall be well and sufficiently given or
made if delivered personally to such holder or delivered or mailed by first
class mail to the address of such holder as it appears on the Rights Register
maintained by the Rights Registrar, or, prior to the Separation Time, in the
register of Shareholders maintained by the transfer agent for the Common
Shares.
Any notice so given or made shall be deemed to have been given
and to have been received on the day of delivery, if so delivered; on the third
Business Day (excluding each day during which there exists any general
interruption of postal service due to strike, lockout, or other cause) following
the mailing thereof, if so mailed; and on the day of telegraphing, telecopying
or sending of the same by other means of recorded electronic communication
(provided such sending is during the normal business hours of the addressee on a
Business Day and if not, on the first Business Day thereafter). Each of the
Corporation and the Rights Agent may from time to time change its address for
notice by notice to the other given in the manner aforesaid.
If mail service is or is threatened to be interrupted at a time
when the Corporation or the Rights Agent wishes to give a notice or demand
hereunder to or on the holders of the Rights, the Corporation or the Rights
Agent may, notwithstanding the foregoing provisions of this Section 5.9, give
such notice by means, of publication once in each of two successive weeks in the
business section of the Financial Post and, if the Corporation has a transfer
agent in the United States, in a daily publication in the United States, in a
daily publication in the United States designated by the Corporation and notice
so published shall be deemed to have been given on the date on which the first
publication of such notice in any such publication has taken place.
5.10 |
Costs of Enforcement |
The Corporation agrees that if the Corporation fails to fulfill
any of its obligations pursuant to this Agreement, then the Corporation shall
reimburse the holder of any Rights for the costs and expenses (including
reasonable legal fees) incurred by such holder and actions to enforce his rights
pursuant to any Rights or this Agreement.
All the covenants and provisions of this Agreement by or for
the benefit of the Corporation or the Rights Agent shall bind and enure to the
benefit of their respective successors and permitted assigns hereunder.
5.12 |
Benefits of this Agreement |
Nothing in this Agreement shall be construed to give to any
Person other than the Corporation, the Rights Agent and the holders of the
Rights any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Corporation,
the Rights Agent and the holders of the Rights.
This Agreement and each Right issued hereunder shall be deemed
to be a contract made under the laws of the Province of Ontario and for all
purposes shall be governed by and construed in accordance with the laws of such
Province applicable to contracts to be made and performed entirely within such
Province.
F-42
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
If any term or provision hereof or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable.
5.16 |
Determinations and Actions by the Board of
Directors |
All actions, calculations and determinations (including all
omissions with respect to the foregoing) which are done or made by the Board of
Directors, in good faith, shall not subject the Board of Directors to any
liability to the holders of the Rights.
This Agreement is effective in accordance with its terms from
the date hereof; provided that unless confirmed by ordinary resolution passed by
a majority of the votes cast by Independent Shareholders present in person or
voting by proxy and who vote in respect of confirmation of this Agreement at a
meeting of shareholders of the Corporation to be held not later than the date
that is six months from the date hereof, this Agreement shall be of no further
force or effect and all Rights issued hereunder shall be void from the first to
occur of (i) the termination of such meeting, and (ii) the Close of Business
(Toronto time) on the date that is six months from the date hereof.
5.18 |
Approval of Holders of
Rights |
If, after the Separation Time, the approval of holders of
Rights is required in respect of a supplement or amendment to this Agreement
made pursuant to Section 5.4 hereof, the Board of Directors shall, within 35
days after the implementation of any such supplement or amendment, call, and
thereafter hold a special meeting of the holders of Rights to consider, and if
thought fit, to pass a resolution approving the supplement or amendment, and
such supplement or amendment shall be deemed to have been approved if such
resolution receives the affirmative vote of a majority of the votes cast by
holders of Rights represented at the meeting in person or by proxy excluding any
Rights which are then void pursuant to the provisions of subsection 3.1(b)
hereof. In respect of any such meeting required to be held:
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(a) |
the Board of Directors shall fix a date for the meeting,
which date shall be as soon as practicable after the implementation of any
supplement or amendment requiring approval, but not more than 110 days
thereafter; |
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(b) |
the Board of Directors of the Corporation shall fix a
record date for determining the holders of Rights entitled to receive
notice of such meeting in a manner analogous to the procedures set out in
National Instrument 54-101 of the Canadian Securities Administrators (as
such policy may be amended or replaced from time to time, and as required
in order to conform to the requirements of any applicable securities
legislation or policy) and the rules of any stock exchange on which the
Common Shares are then listed, and the articles and by-laws of the
Corporation; and |
F-43
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(c) |
each Right shall be entitled to one (1) vote at such
meeting and, in all other respects, the rules applicable to meetings of
shareholders set forth in the articles and bylaws of the Corporation shall
apply in respect of such meeting of holders of Rights, mutatis
mutandis. |
5.19 |
Declaration as to Non-Canadian and Non- United States
Holders |
If, upon the advice of outside counsel, any action or event
contemplated by this Agreement would require compliance with the securities laws
or comparable legislation of a jurisdiction outside of Canada and the United
States of America, the Board of Directors acting in good faith may take such
actions as it may deem appropriate to ensure that such compliance, including
without limitation establishing procedures for the issuance to a Canadian
resident Fiduciary of Rights or securities issuable on exercise of Rights, the
holding thereof in trust for the Persons entitled thereto (but reserving to the
Fiduciary or to the Fiduciary and the Corporation, as the Corporation may
determine, absolute discretion with respect thereto) and the sale thereof and
remittance of the proceeds of such sale, if any, to the Persons entitled
thereto. In no event shall the Corporation or the Rights Agent be required to
issue or deliver Rights or securities issuable on exercise of Rights to Persons
who are citizens, residents or nationals of any jurisdiction other than Canada
and any province or territory thereof and the United States of America and any
state thereof in which such issue or delivery would be unlawful without
registration of the relevant Persons or securities for such purposes.
5.20 |
Regulatory Approvals |
Any obligation of the Corporation or action or event
contemplated by this Agreement, or any amendment or supplement to this
Agreement, shall be subject to receipt of any requisite approval or consent from
any governmental or regulatory authority having jurisdiction including the
Toronto Stock Exchange while any securities of the Corporation are listed and
posted for trading thereon and for a period of three (3) months thereafter.
Time shall be of the essence in this
Agreement.
[Signature page follows]
F-44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written,
ENERGY FUELS INC. |
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By: |
George E.L. Glasier |
Name: |
George E.L. Glasier |
Title: |
President and CEO |
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CIBC MELLON TRUST COMPANY |
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By: |
Charito De Vera |
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Authorized Signing Officer |
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By: |
Bruce Cornish |
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Authorized Signing
Officer |
F-45
EXHIBIT A
[Form of Rights Certificate]
Certificate No. |
Rights |
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THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE CORPORATION, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN THE RIGHTS
AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY
PERSON ACTING JOINTLY OR IN CONCERT WITH AN ACQUIRING PERSON OR
WITH AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF
THE FOREGOING WILL BECOME VOID WITHOUT FURTHER ACTION.
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RIGHTS CERTIFICATE
This certifies that ________________________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entities the registered holder thereof, subject to the terms,
provisions and conditions of a Shareholder Rights Plan Agreement made as of
February 3, 2009 (the Rights Agreement) between ENERGY FUELS INC., a
corporation existing under the laws of the Province of Ontario (the
Corporation), and CIBC MELLON TRUST COMPANY, as Rights Agent, to
purchase from the Corporation at any time after the Separation Time and prior to
the Expiration Time (as such terms are defined in the Rights Agreement), one (1)
fully paid common share in the capital of the Corporation (a Common
Share) (subject to adjustment as provided in the Rights Agreement) at the
Exercise Price referred to below, upon presentation and surrender of this Rights
Certificate with a duly completed and executed Form of Election to Exercise at
the principal office of the Rights Agent at its principal office in Toronto,
Ontario or with approval of the Rights Agent, at any other office of the Rights
Agent in the cities designated from time to time by the Corporation. The
Exercise Price shall initially be $10.00 per Right and shall be subject to
adjustment in certain events as provided in the Rights Agreement.
This Rights Certificate is subject to all the terms, provisions
and conditions of the Rights Agreement which terms, provisions and conditions
are hereby incorporated herein by this reference and made a part hereof and to
which Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities thereunder of
the Rights Agent, the Corporation and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the registered office of the
Corporation and are available upon written request.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at any office of the Rights Agent or any Co-Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing an
aggregate number of Rights equal to the aggregate number of Rights evidenced by
the Rights Certificate or Rights Certificates so surrendered. If this Rights
Certificate shall be exercised in part, the registered holder shall be entitled
to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
F-46
Subject to the provision of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Corporation at a redemption
price of $0.00001 per Right, subject to adjustment in certain events.
No fractional Common Shares will be issued upon the exercise of
any Right or Rights evidenced hereby nor will Rights Certificates be issued for
less than one (1) whole Right. In lieu thereof, a cash payment will be made as
provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
Common Shares or of any other securities which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Rights evidenced by this Rights Certificate shall have been exercised
as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal.
Date: |
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ATTEST: |
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ENERGY FUELS INC.
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By: |
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Countersigned: |
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CIBC MELLON TRUST COMPANY |
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By: |
Authorized
Signature |
F-47
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Rights Certificates.)
FOR VALUE RECEIVED
______________________________________________________________________
hereby
sells, assigns and transfers
Unto
_____________________________________________________________________________________
__________________________________________________________________________________________
(Please
print name and address transferee)
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_______________________ Attorney, to transfer the within Rights Certificate on
the books of the within-named Corporation, with full power of substitution.
Dated: |
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Signature Guaranteed |
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Signature |
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(Signature must correspond to name as written
upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever) |
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(Signature must be guaranteed by a Canadian
Schedule I chartered bank, or a financial institution that is a member of
a recognized Medallion Signature Guarantee Program. |
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(To be completed if true)
CERTIFICATION
The undersigned hereby represents and certifies, for the
benefit of all holders of Rights and Common Shares, that the Rights evidenced by
this Rights Certificate are not, and, to the knowledge of the undersigned, have
not been, Beneficially Owned by an Acquiring Person or any Person acting jointly
or in concert with any Acquiring Person or with any Affiliate or Associate
thereof (all as defined in the Rights Agreement).
F-48
NOTICE
In the event the certification set forth above is not
completed in connection with a purported assignment, the Beneficial Owner of the
Rights evidenced by this Rights Certificate will be deemed to be an Acquiring
Person or a Person acting jointly or in concert with such Acquiring Person or an
Affiliate or Associate of such Acquiring Person (all as defined in the Rights
Agreement) and accordingly the Rights evidenced by this Rights Certificate will
be null and void.
F-49
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to
exercise the Rights
Certificate.)
TO:
The undersigned hereby irrevocably elects to exercise
______________________ whole Rights represented by the attached Rights
Certificate to purchase the Shares issuable upon the exercise of such Rights and
requests that certificates for such Shares be issued in the name of:
Social Insurance, Social Security or |
|
Other Taxpayer Identification Number: |
|
If such number of Rights shall not be all the whole Rights
evidenced by this Rights Certificate, a new Rights Certificate for the balance
of such whole Rights shall be registered in the name of and delivered to:
Address:
|
|
|
|
Social Insurance, Social Security or |
|
Other Taxpayer Identification Number: |
|
|
|
|
|
Dated: |
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Signature Guaranteed: |
|
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Signature |
|
|
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(Signature must correspond to name as written
upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever) |
F-50
(Signature must be guaranteed by a Canadian Schedule I
chartered bank, or a financial institution that is a member of a recognized
Medallion Signature Guarantee Program.
(To be completed
if true) |
CERTIFICATION
The undersigned hereby represents, for the benefit of all
holders of Rights and Shares, that the Rights evidenced by this Rights
Certificate are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or any Person acting jointly or in
concert with any Acquiring Person or with any Affiliate or Associate thereof
(all as defined in the Rights Agreement).
NOTICE
In the event the certification set forth above is not
completed in connection with a purported exercise, the Beneficial Owner of the
Rights evidenced by this Rights Certificate will be deemed to be an Acquiring
Person or a Person acting jointly or in concert with an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (all as defined in the Rights
Agreement) and accordingly will deem the Rights evidenced by this Rights
Certificate will be null and void and not transferable or reversible.
F-51
SCHEDULE G
ENERGY FUELS INC.
2015 OMNIBUS EQUITY INCENTIVE COMPENSATION PLAN
TABLE OF CONTENTS
|
|
Page |
|
|
|
ARTICLE 1. ESTABLISHMENT, PURPOSE
AND DURATION |
1 |
1.1 |
Establishment of the Plan |
1 |
1.2 |
Purpose of the Plan |
1 |
1.3 |
Duration of the Plan |
1 |
1.4 |
Successor Plan |
1 |
ARTICLE 2. DEFINITIONS |
1 |
ARTICLE 3. ADMINISTRATION |
7 |
3.1 |
General |
7 |
3.2 |
Authority of the
Committee |
8 |
3.3 |
Delegation |
8 |
ARTICLE 4. SHARES SUBJECT TO THE
PLAN AND MAXIMUM AWARDS |
8 |
4.1 |
Number of Shares Available for Awards
|
8 |
4.2 |
Adjustments in Authorized
Shares |
9 |
ARTICLE 5. ELIGIBILITY AND PARTICIPATION |
10 |
5.1 |
Eligibility |
10 |
5.2 |
Actual Participation |
10 |
ARTICLE 6. STOCK OPTIONS |
10 |
6.1 |
Grant of Options |
10 |
6.2 |
Award Agreement |
10 |
6.3 |
Option Price |
10 |
6.4 |
Duration of Options |
10 |
6.5 |
Exercise of Options |
10 |
6.6 |
Payment |
11 |
6.7 |
Restrictions on Share Transferability
|
11 |
6.8 |
Death, Retirement and
Termination of Employment |
11 |
6.9 |
Nontransferability of Options |
13 |
6.10 |
Notification of
Disqualifying Disposition |
13 |
6.11 |
$100,000 Annual ISO Limitation |
13 |
ARTICLE 7. STOCK APPRECIATION
RIGHTS |
14 |
7.1 |
Grant of SARs |
14 |
7.2 |
SAR Agreement |
14 |
7.3 |
Term of SAR |
14 |
7.4 |
Exercise of Freestanding
SARs |
14 |
7.5 |
Exercise of Tandem SARs |
14 |
7.6 |
Payment of SAR Amount
|
15 |
7.7 |
Termination of Employment |
15 |
7.8 |
Nontransferability of
SARs |
15 |
7.9 |
Other Restrictions |
15 |
G-i
ARTICLE 8. RESTRICTED STOCK AND
RESTRICTED STOCK UNITS |
15 |
8.1 |
Grant of Restricted Stock or Restricted
Stock Units |
15 |
8.2 |
Restricted Stock or
Restricted Stock Unit Agreement |
15 |
8.3 |
Nontransferability of Restricted Stock and
Restricted Stock Units |
16 |
8.4 |
Other Restrictions |
16 |
8.5 |
Certificate Legend |
16 |
8.6 |
Voting Rights |
17 |
8.7 |
Dividends and Other Distributions |
17 |
8.8 |
Death and other Termination
of Employment |
17 |
8.9 |
Payment in Settlement of Restricted Stock
Units |
18 |
ARTICLE 9. DEFERRED SHARES UNITS
|
18 |
9.1 |
Grant of Deferred Share Units |
18 |
9.2 |
Deferred Share Unit
Agreement |
18 |
9.3 |
Nontransferability of Restricted Stock and
Restricted Stock Units |
19 |
9.4 |
Termination of
Employment |
19 |
ARTICLE 10. PERFORMANCE SHARES AND PERFORMANCE
UNITS |
19 |
10.1 |
Grant of Performance Shares
and Performance Units |
19 |
10.2 |
Value of Performance Shares and Performance
Units |
19 |
10.3 |
Earning of Performance
Shares and Performance Units |
19 |
10.4 |
Form and Timing of Payment of Performance
Shares and Performance Units |
19 |
10.5 |
Dividends and Other
Distributions |
20 |
10.6 |
Termination of Employment |
20 |
10.7 |
Nontransferability of
Performance Shares and Performance Units |
20 |
ARTICLE 11. FULL VALUE STOCK-BASED AWARDS |
20 |
11.1 |
Stock-Based Awards |
20 |
11.2 |
Termination of Employment |
20 |
11.3 |
Nontransferability of
Stock-Based Awards |
20 |
ARTICLE 12. PERFORMANCE MEASURES |
21 |
ARTICLE 13. BENEFICIARY
DESIGNATION |
23 |
ARTICLE 14. DEFERRALS |
23 |
ARTICLE 15. RIGHTS OF PERSONS
ELIGIBLE TO PARTICIPATE |
23 |
15.1 |
Employment |
23 |
15.2 |
Participation |
24 |
15.3 |
Rights as a Shareholder |
24 |
ARTICLE 16. CHANGE OF CONTROL |
24 |
16.1 |
Accelerated Vesting and Payment |
24 |
16.2 |
Alternative Awards |
25 |
16.3 |
Compliance with Section 280G of the Code
|
25 |
ARTICLE 17. AMENDMENT,
MODIFICATION, SUSPENSION AND TERMINATION |
26 |
17.1 |
Amendment, Modification, Suspension and
Termination |
26 |
G-ii
17.2 |
Adjustment of Awards Upon
the Occurrence of Unusual or Nonrecurring Events |
27 |
17.3 |
Awards Previously
Granted |
27 |
ARTICLE 18. WITHHOLDING |
27 |
ARTICLE 19. SUCCESSORS |
28 |
ARTICLE 20. GENERAL PROVISIONS
|
28 |
20.1 |
Forfeiture Events |
28 |
20.2 |
Legend |
28 |
20.3 |
Delivery of Title |
28 |
20.4 |
Investment
Representations |
29 |
20.5 |
Uncertificated Shares
|
29 |
20.6 |
Unfunded Plan |
29 |
20.7 |
No Fractional Shares |
29 |
20.8 |
Other Compensation and
Benefit Plans |
29 |
20.9 |
No Constraint on Corporate
Action |
29 |
20.10 |
Compliance with United
States Securities Laws |
29 |
ARTICLE 21. LEGAL CONSTRUCTION
|
30 |
21.1 |
Gender and Number |
30 |
21.2 |
Severability |
30 |
21.3 |
Requirements of Law |
30 |
21.4 |
Governing Law |
30 |
21.5 |
Compliance with Section 409A
of the Code |
30 |
G-iii
ENERGY FUELS INC.
2015 OMNIBUS EQUITY INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE AND DURATION
1.1
Establishment of the Plan. Energy Fuels Inc., an Ontario corporation (the
Company), hereby establishes an incentive compensation plan to be known as the
2015 Omnibus Equity Incentive Compensation Plan (the Plan). The Plan permits
the grant of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock
Units, Performance Shares, Performance Units and Stock-Based Awards. The Plan
shall be adopted and become effective on the date approved by the Board (the
Effective Date), provided that no Awards may be exercised or redeemed until
the Plan has been approved by the shareholders of the Company and the TSX.
1.2 Purpose
of the Plan. The purpose of the Plan is to promote the success and enhance
the value of the Company by linking the personal interests of the Participants
to those of the Companys stockholders, and by providing Participants with an
incentive for outstanding performance. The Plan is further intended to provide
flexibility to the Company in its ability to attract, motivate and retain the
services of Participants upon whose judgment, interest and special effort the
success of the Company is substantially dependent.
1.3
Duration of the Plan. The Plan shall commence as of the Effective Date,
as described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Committee or the Board to amend or terminate the Plan at any time
pursuant to Article 17 hereof, until the earlier of (i) the tenth anniversary of
the Effective Date, or (ii) all Shares subject to the Plan have been purchased
or acquired according to the Plans provisions.
1.4
Successor Plan. This Plan shall serve as the successor to the Companys
current Stock Option Plan, (the Predecessor Plan), and no further awards shall
be made under the Predecessor Plan from and after the Effective Date of this
Plan. All outstanding awards under the Predecessor Plan immediately prior to the
Effective Date of this Plan are hereby incorporated into this Plan and shall
accordingly be treated as Awards under this Plan. However, each such Award shall
continue to be governed solely by the terms and conditions of the instrument
evidencing such grant or issuance, and, except as otherwise expressly provided
herein or by the Committee, no provision of this Plan shall affect or otherwise
modify the rights or obligations of holders of such incorporated awards.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
respective meanings set forth below, unless the context clearly requires
otherwise, and when such meaning is intended, such term shall be
capitalized.
2.1
Affiliate shall have the meaning ascribed to such term in the OSA.
G-1
2.2
Award means, individually or collectively, a grant under this Plan of
NQSOs, ISOs, SARs, Restricted Stock, Restricted Stock Units, Performance Shares,
Performance Units or Stock-Based Awards, in each case subject to the terms of
this Plan.
2.3 Award
Agreement means either (i) a written agreement entered into by the Company
or an Affiliate of the Company and a Participant setting forth the terms and
provisions applicable to Awards granted under this Plan; or (ii) a written
statement issued by the Company or an Affiliate of the Company to a Participant
describing the terms and provisions of such Award. All Award Agreements shall be
deemed to incorporate the provisions of the Plan. An Award Agreement need not be
identical to other Award Agreements either in form or substance.
2.4
Beneficial Ownership shall have the meaning ascribed to such term in
Section 90 of the OSA.
2.5
Blackout Period means a period of time during which the Participant
cannot sell Shares, due to applicable law or policies of the Company in respect
of insider trading.
2.6
Board or Board of Directors means the Board of Directors of
the Company.
2.7 Change
of Control shall occur if any of the following events occur:
(i) any
transaction at any time and by whatever means pursuant to which (A) the Company
goes out of existence by any means, except for any corporate transaction or
reorganization in which the proportionate voting power among holders of
securities of the entity resulting from such corporate transaction or
reorganization is substantially the same as the proportionate voting power of
such holders of Company voting securities immediately prior to such corporate
transaction or reorganization or (B) any Person or any group of two or more
Persons acting jointly or in concert (other than the Company, a wholly-owned
Subsidiary of the Company, an employee benefit plan of the Company or of any of
its wholly-owned Subsidiaries, including the trustee of any such plan acting as
trustee) hereafter acquires the direct or indirect beneficial ownership (as
defined by the Business Corporations Act (Ontario) of, or acquires the
right to exercise control or direction over, securities of the Company
representing 50% or more of the Companys then issued and outstanding securities
in any manner whatsoever, including, without limitation, as a result of a
take-over bid, an exchange of securities, an amalgamation of the Company with
any other entity, an arrangement, a capital reorganization or any other business
combination or reorganization;
(ii) the sale,
assignment or other transfer of all or substantially all of the assets of the
Company to a Person other than a wholly-owned Subsidiary of the Company;
(iii) the
dissolution or liquidation of the Company except in connection with the
distribution of assets of the Company to one or more Persons which were
wholly-owned Subsidiaries of the Company immediately prior to such event;
(iv) the
occurrence of a transaction requiring approval of the Companys shareholders
whereby the Company is acquired through consolidation, merger, exchange of
securities, purchase of assets, amalgamation, arrangement or otherwise by any
other Person (other than a short form amalgamation or exchange of securities
with a wholly-owned Subsidiary of the Company);
G-2
(v) with
respect to holders of Options who are employed by a subsidiary of the Company,
an event set forth in (i), (ii), (iii) or (iv) has occurred with respect to such
subsidiary (the Employing Subsidiary), in which case the term Company in
those paragraphs will be read to mean Employing Subsidiary and the phrase
wholly-owned Subsidiary(ies) will be read to mean Affiliate(s) or
wholly-owned Subsidiary(ies); or
(vi) the Board
passes a resolution to the effect that, for the purposes of some or all of the
Award Agreements, an event set forth in (i), (ii), (iii), (iv) or (v) above has
occurred.
Notwithstanding the foregoing, the Committee may modify the
definition of a Change of Control for a particular Award or Awards as the
Committee deems appropriate to comply with Section 409A of the Code.
2.8 Change
of Control Price means the highest price per Share offered in conjunction
with any transaction resulting in a Change of Control (as determined in good
faith by the Committee if any part of the offered price is payable other than in
cash). In the case of a Change of Control occurring solely by reason of a change
in the composition of the Board, the highest Fair Market Value of the Shares on
any of the thirty (30) trading days immediately preceding the date on which a
Change of Control occurs, except if the relevant participant is subject to
taxation under the ITA such Change of Control price shall be deemed to be a
price determined by the Committee based on the closing price of a Share on the
TSX or the NYSE on the trading day preceding the Change of Control date or based
on the volume weighted average trading price of the Shares on the TSX and NYSE
for the five trading days immediately preceding the Change of Control date.
2.9
Code means the U.S. Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
2.10
Committee means the Board of Directors, or, if so delegated in whole or
in part by the Board, the Compensation Committee, or any other duly authorized
committee of the Board appointed by the Board to administer the Plan.
2.11 Company
means Energy Fuels Inc., an Ontario corporation, and any successor thereto as
provided in Article 19 herein.
2.12
Constructively Terminated means, unless otherwise specified by the
Committee in the Award Agreement, a voluntary termination of employment by an
Employee within ten (10) business days after any of the following actions by the
Company, an Affiliate, or a person acting on behalf of either:
(i) Requiring
the Employee to be based as his/her regular or customary place of employment at
any office or location more than fifty (50) miles from the location at which the
Employee performed his/her duties immediately prior to the Change of Control, or
in a state or province other than the one in which the Employee performed
his/her duties immediately prior to the Change of Control, in each case except
for travel reasonably required in the performance of the individuals
responsibilities;
G-3
(ii)
Materially reducing the Employees base salary below the rate in effect at the
time of a Change of Control;
(iii) Failing
to pay the Employees base salary, other wages or employment-related benefits as
required by law; or
(iv) A
material reduction or diminution in the level of responsibility, or office of
the Employee, provided that before any claim of material reduction or diminution
of responsibility may be relied upon by the Employee, the Employee must have
provided written notice to the Employees supervisor and the Board of the
alleged material reduction or diminution of responsibility and have given the
Company or Affiliate, as the case may be, at least thirty (30) calendar days
within which to cure the alleged material reduction or diminution of
responsibility.
2.13
Consultant means a Person that:
|
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(i) |
is engaged to provide services to the Company or an
Affiliate other than services provided in relation to a distribution of
securities of the Company or an Affiliate; |
|
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|
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|
(ii) |
provides the services under a written contract with the
Company or an Affiliate; and |
|
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|
|
|
|
(iii) |
spends or will spend a significant amount of time and
attention on the affairs and business of the Company or an
Affiliate; |
provided that with respect to
Consultants who are U.S. Persons, such Consultants shall be granted Awards under
this Plan only if:
|
(i) |
they are natural persons; |
|
|
|
|
(ii) |
they provide bona fide services to the Company or its
majority-owned subsidiaries; and |
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(iii) |
such services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly
or indirectly promote or maintain a market for the Companys
securities. |
2.14
Covered Employee means an Employee who is, or who the Committee expects
to become, a covered employee within the meaning of Section 162(m) of the
Code.
2.14A Deferred
Share Unit means an Award denominated in units that provides the holder
thereof with a right to receive Shares or cash or a combination thereof upon
settlement of the Award, granted under Article 9 herein and subject to
the terms of this Plan.
2.15
Director means any individual who is a member of the Board of Directors
of the Company.
G-4
2.16
Dividend Equivalent means a right with respect to an Award to receive
cash, Shares or other property equal in value and form to dividends declared by
the Board and paid with respect to outstanding Shares. Dividend Equivalents
shall not apply to an Award unless specifically provided for in the Award
Agreement, and if specifically provided for in the Award Agreement shall be
subject to such terms and conditions set forth in the Award Agreement as the
Committee shall determine.
2.17
Employee means any employee of the Company or an Affiliate. Directors
who are not otherwise employed by the Company or an Affiliate shall not be
considered Employees under this Plan.
2.18
Exchange Act means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.
2.19 Fair
Market Value or FMV means, unless otherwise required by any
applicable provision of the Code or any regulations thereunder or by any
applicable accounting standard for the Companys desired accounting for Awards
or by the rules of the NYSE or the TSX, a price that is determined by the
Committee, provided that such price cannot be less than the greater of (i) the
volume weighted average trading price of the Shares on the TSX or the NYSE for
the five trading days immediately prior to the grant date or (ii) the closing
price of the Shares on the TSX or the NYSE on the trading day immediately prior
to the grant date.
2.20
Fiscal Year means the Companys fiscal year commencing on January 1 and
ending on December 31 or such other fiscal year as approved by the Board.
2.21
Freestanding SAR means a SAR that is not a Tandem SAR, as described in
Article 7 herein.
2.22 Grant
Price means the price against which the amount payable is determined upon
exercise of an SAR.
2.23
Incentive Stock Option or ISO means an Option to purchase
Shares granted under Article 6 herein and that is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the
Code, or any successor provision.
2.24
ITA means the Income Tax Act (Canada).
2.25
Non-Employee Director means a Director who is not an Employee.
2.26
Nonqualified Stock Option or NQSO means an Option to purchase
Shares, granted under Article 6 herein, which is not intended to be an Incentive
Stock Option or that otherwise does not meet the requirements for treatment as
an Incentive Stock Option under Section 422 of the Code, or any successor
provision.
2.27
NYSE means the NYSE MKT LLC.
G-5
2.28
Option means the conditional right to purchase Shares at a stated
Option Price for a specified period of time in the form of an Incentive Stock
Option or a Nonqualified Stock Option subject to the terms of this Plan.
2.29
Option Price means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee.
2.30
OSA means the Securities Act (Ontario), as may be amended from
time to time.
2.31
Participant means an Employee, Non-Employee Director or Consultant who
has been selected to receive an Award, or who has an outstanding Award granted
under the Plan.
2.32
Performance-Based Compensation means compensation under an Award that
is granted in order to provide remuneration solely on account of the attainment
of one or more Performance Goals under circumstances that satisfy the
requirements of Section 162(m) of the Code.
2.33
Performance Goal means a performance criterion selected by the
Committee for a given Award for purposes of Article 11 based on one or more
Performance Measures.
2.34
Performance Measures means measures as described in Article 12, the
attainment of one or more of which shall, as determined by the Committee,
determine the vesting, payability or value of an Award to a Covered Employee
that is designated to qualify as Performance-Based Compensation.
2.35
Performance Period means the period of time during which the assigned
performance criteria must be met in order to determine the degree of payout
and/or vesting with respect to an Award.
2.36
Performance Share means an Award granted under Article 10 herein and
subject to the terms of this Plan, denominated in Shares, the value of which at
the time it is payable is determined as a function of the extent to which
corresponding performance criteria have been achieved.
2.37
Performance Unit means an Award granted under Article 10 herein and
subject to the terms of this Plan, denominated in units, the value of which at
the time it is payable is determined as a function of the extent to which
corresponding performance criteria have been achieved.
2.38
Period of Restriction means the period when an Award of Restricted
Stock or Restricted Stock Units is subject to forfeiture based on the passage of
time, the achievement of performance criteria, and/or upon the occurrence of
other events as determined by the Committee, in its discretion.
2.39
Person shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
group as defined in Section 13(d) thereof; provided, however, that Person
shall not include (i) the Company or any Affiliate, or (ii) any employee benefit
plan (including an employee stock ownership plan) sponsored by the Company or
any Affiliate.
G-6
2.40
Restricted Stock means an Award of Shares subject to a Period of
Restriction, granted under Article 8 herein and subject to the terms of this
Plan.
2.41
Restricted Stock Unit means an Award denominated in units subject to a
Period of Restriction, with a right to receive Shares or cash or a combination
thereof upon settlement of the Award, granted under Article 8 herein and subject
to the terms of this Plan.
2.42
Shares means common shares of the Company.
2.43
Significant Stockholder means a person who at the time of a grant of an
ISO to such person owns (or is deemed to own pursuant to Section 424(d) of the
Code) stock possessing more than ten percent (10%) of the total combined voting
power of all classes of shares of the Company or any of its Affiliates.
2.44 Stock
Appreciation Right or SAR means the conditional right to receive
the difference between the FMV of a Share on the date of exercise over the Grant
Price, pursuant to the terms of Article 7 herein and subject to the terms of
this Plan.
2.45
Stock-Based Award means an equity-based or equity-related Award granted
under Article 11 herein and subject to the terms of this Plan, and not otherwise
described by the terms of this Plan.
2.46
Tandem SAR means a SAR that the Committee specifies is granted in
connection with a related Option pursuant to Article 7 herein and subject to the
terms of this Plan, the exercise of which shall require forfeiture of the right
to purchase a Share under the related Option (and when a Share is purchased
under the Option, the Tandem SAR shall similarly be cancelled) or a SAR that is
granted in tandem with an Option but the exercise of such Option does not cancel
the SAR, but rather results in the exercise of the related SAR. Regardless of
whether an Option is granted coincident with a SAR, a SAR is not a Tandem SAR
unless so specified by the Committee at the time of grant.
2.47
TSX means the Toronto Stock Exchange.
2.48
Voting Power shall mean such number of Voting Securities as shall
enable the holders thereof to cast all the votes which could be cast in an
annual election of directors of a company.
2.49
Voting Securities shall mean all securities entitling the holders
thereof to vote in an annual election of directors of a company.
ARTICLE 3. ADMINISTRATION
3.1 The
Committee shall be responsible for administering the Plan. The Committee may
employ attorneys, consultants, accountants, agents and other individuals, any of
whom may be an Employee, and the Committee, the Company, and its officers and
Directors shall be entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations and determinations
made by the Committee shall be final, conclusive and binding upon the
Participants, the Company, and all other interested parties.
G-7
3.2
Authority of the Committee. The Committee shall have full and exclusive
discretionary power to interpret the terms and the intent of the Plan and any
Award Agreement or other agreement ancillary to or in connection with the Plan,
to determine eligibility for Awards, and to adopt such rules, regulations and
guidelines for administering the Plan as the Committee may deem necessary or
proper. Such authority shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions, including grant and
exercise price, and vesting terms and, subject to Article 17, adopting
modifications and amendments, or subplans to the Plan or any Award Agreement,
including, without limitation, any that are necessary or appropriate to comply
with the laws or compensation practices of the jurisdictions in which the
Company and Affiliates operate.
3.3
Delegation. The Committee may delegate to one or more of its members any
of the Committees administrative duties or powers as it may deem advisable;
provided, however, that any such delegation shall not be inconsistent with the
provisions of Rule 16b-3 under the Exchange Act or Section 162(m) of the Code as
to actions to be taken by the Committee in connection therewith, and must be
permitted under applicable corporate law.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 Number
of Shares Available for Awards. Subject to adjustment as provided in Section
4.2 herein, the number of Shares hereby reserved for issuance to Participants
under the Plan shall not exceed the number which represents 10% of the issued
and outstanding Shares from time to time (the Total Share Authorization).
Subject to applicable law, the requirements of the TSX or the NYSE and any
shareholder or other approval which may be required, the Board may in its
discretion amend the Plan to increase such limit without notice to any
Participants.
(a) The number
of Shares reserved for issue to Insiders pursuant to this Plan, together with
Shares reserved for issue to Insiders under any other existing share
compensation arrangement of the Company, shall not exceed 10% of the aggregate
outstanding Shares of the Company. Within any one-year period, the number of
Shares issued to Insiders pursuant to this Plan and all other existing share
compensation arrangement of the Company shall not exceed 10% of the aggregate
outstanding Shares of the Company. If the number of Shares shall be increased or
decreased as a result of a stock split, consolidation reclassification or
recapitalization and not as a result of the issuance of Shares for additional
consideration or by way of a stock dividend in the ordinary course, the Company
may make appropriate adjustments to the maximum number of Shares which may be
issued from the treasury of the Company under the Plan.
(b) For greater
clarity, any Awards that are not settled in Shares shall not reduce any of these
reserves. Any Shares related to Awards (or, after the Effective Date, awards
granted under the Predecessor Plan) which (i) terminate by expiration,
forfeiture, cancellation or otherwise without the issuance of such Shares, (ii)
are settled in cash either in lieu of Shares or otherwise, or (iii) are
exchanged with the Committees approval for Awards not involving Shares, shall
be available again for issuance under the Plan. The maximum number of Shares
available for issuance under the Plan shall not be reduced to reflect any
dividends or Dividend Equivalents that are reinvested into additional Shares or
credited as additional Restricted Stock, Restricted Stock Units, Performance
Shares or Stock-Based Awards. The Shares available for issuance under the Plan
may be authorized and unissued Shares or treasury Shares.
G-8
4.2
Adjustments in Authorized Shares. In the event of any corporate event or
transaction (collectively, a Corporate Reorganization) (including, but
not limited to, a change in the Shares of the Company or the capitalization of
the Company) such as a merger, arrangement, amalgamation, consolidation,
reorganization, recapitalization, separation, stock dividend, extraordinary
dividend, stock split, reverse stock split, split up, spin-off or other
distribution of stock or property of the Company, combination of securities,
exchange of securities, dividend in kind, or other like change in capital
structure or distribution (other than normal cash dividends) to stockholders of
the Company, or any similar corporate event or transaction, the Committee shall
make or provide for such adjustments or substitutions, as applicable, in the
number and kind of Shares that may be issued under the Plan, the number and kind
of Shares subject to outstanding Awards, the Option Price or Grant Price
applicable to outstanding Awards, the Award Limits, the limit on issuing Awards
other than Options granted with an Option Price equal to at least the FMV of a
Share on the date of grant or Stock Appreciation Rights with a Grant Price equal
to at least the FMV of a Share on the date of grant, and any other value
determinations applicable to outstanding Awards or to this Plan, as are
equitably necessary to prevent dilution or enlargement of Participants rights
under the Plan that otherwise would result from such corporate event or
transaction. In connection with a Corporate Reorganization, the Committee shall
have the discretion to permit a holder of Options to purchase (at the times, for
the consideration, and subject to the terms and conditions set out in this Plan)
and the holder will then accept on the exercise of such Option, in lieu of the
Shares that such holder would otherwise have been entitled to purchase, the kind
and amount of shares or other securities or property that such holder would have
been entitled to receive as a result of the Corporate Reorganization if, on the
effective date thereof, that holder had owned all Shares that were subject to
the Option. Such adjustments shall be made automatically, without the necessity
of Committee action, on the customary arithmetical basis in the case of any
stock split, including a stock split effected by means of a stock dividend, and
in the case of any other dividend paid in Shares.
The Committee shall also make appropriate adjustments in the
terms of any Awards under the Plan as are equitably necessary to reflect such
corporate event or transaction and may modify any other terms of outstanding
Awards, including modifications of performance criteria and changes in the
length of Performance Periods. The determination of the Committee as to the
foregoing adjustments, if any, shall be conclusive and binding on Participants
under the Plan., provided that any such adjustments must comply with Section
409A of the Code with respect to any U.S. Participants.
Subject to the provisions of Article 15 and any applicable law
or regulatory requirement, without affecting the number of Shares reserved or
available hereunder, the Committee may authorize the issuance, assumption,
substitution or conversion of Awards under this Plan in connection with any such
corporate event or transaction, upon such terms and conditions as it may deem
appropriate. Additionally, the Committee may amend the Plan, or adopt
supplements to the Plan, in such manner as it deems appropriate to provide for
such issuance, assumption, substitution or conversion as provided in the
previous sentence.
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ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1
Eligibility. Individuals eligible to participate in the Plan include all
Employees, Non-Employee Directors and Consultants.
5.2 Actual
Participation. Subject to the provisions of the Plan, the Committee may,
from time to time, in its sole discretion select from among eligible Employees,
Non-Employee Directors and Consultants, those to whom Awards shall be granted
under the Plan, and shall determine in its discretion the nature, terms,
conditions and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of
Options. Subject to the terms and provisions of the Plan, Options may be
granted to Participants in such number, and upon such terms, and at any time and
from time to time as shall be determined by the Committee in its discretion.
ISOs may be granted only to Employees of the Company or a parent or subsidiary
corporation of the Company within the meaning of Section 424 of the Code, and no
ISOs may be granted more than ten (10) years after the Effective Date.
Notwithstanding Section 4.1 of the Plan, the maximum number of Shares issuable
upon the exercise of ISOs is 4,200,000.
6.2 Award
Agreement. Each Option grant shall be evidenced by an Award Agreement that
shall specify the Option Price, the duration of the Option, the number of Shares
to which the Option pertains, the conditions upon which an Option shall become
vested and exercisable, and any such other provisions as the Committee shall
determine. The Award Agreement shall also specify whether the Option is intended
to be an ISO or a NQSO.
6.3 Option
Price. The Option Price for each grant of an Option under this Plan shall be
determined by the Committee and shall be specified in the Award Agreement. The
Option Price for an Option shall be not less than the FMV of the Shares on the
date of grant; provided, however, that the Option Price for an ISO granted to a
Significant Stockholder shall be not less than one hundred ten percent (110%) of
the FMV of the Shares on the date of grant.
6.4 Duration
of Options. Each Option granted to a Participant shall expire at such time
as the Committee shall determine at the time of grant; provided, however, that
no Option shall be exercisable later than the tenth (10th) anniversary date of
its grant, and provided further that no ISO granted to a Significant Stockholder
shall be exercisable after the expiration of five (5) years from the date of
grant. Notwithstanding the foregoing, the expiry date of any NQSO shall be
extended to the tenth business day following the last day of a Blackout Period
if the expiry date would otherwise occur in a Blackout Period or within five
days of the end of the Blackout Period.
6.5 Exercise
of Options. Options granted under this Article 6 shall be exercisable at
such times and on the occurrence of such events, and be subject to such
restrictions and conditions, as the Committee shall in each instance approve,
which need not be the same for each grant or for each Participant.
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6.6
Payment. Options granted under this Article 6 shall be exercised by the
delivery of a notice of exercise to the Company or an agent designated by the
Company in a form specified or accepted by the Committee, or by complying with
any alternative procedures which may be authorized by the Committee, setting
forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable
to the Company in full either: (a) in cash, certified cheque or wire transfer;
or (b) by any other method approved or accepted by the Committee in its sole
discretion subject to the rules of the TSX and NYSE, as applicable and such
rules and regulations as the Committee may establish.
Subject to Section 6.7 and any governing rules or regulations,
as soon as practicable after receipt of a notification of exercise and full
payment for the Shares, the Shares in respect of which the Option has been
exercised shall be issued as fully-paid and non-assessable shares of the
Company. As of the business day the Company receives such notice and such
payment, the Participant (or the person claiming through him, as the case may
be) shall be entitled to be entered on the share register of the Company as the
holder of the number of Shares in respect of which the Option was exercised and
to receive as promptly as possible thereafter a certificate or evidence of book
entry representing the said number of Shares. The Company shall cause to be
delivered to the Participant Share certificates or evidence of book entry Shares
in an appropriate amount based upon the number of Shares purchased under the
Option(s), but in any event, on or before the 15th day of the third
month of the year following the year in which the Option was exercised.
6.7
Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted pursuant to this Plan as it may deem advisable, including, without
limitation, requiring the Participant to hold the Shares acquired pursuant to
exercise for a specified period of time, or restrictions under applicable laws
or under the requirements of any stock exchange or market upon which such Shares
are listed and/or traded.
6.8 Death,
Retirement and Termination of Employment.
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Death: |
If a Participant dies while an Employee, officer or
director of or Consultant to the Company or an Affiliate: |
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the executor or administrator of the Participants estate
may exercise Options of the Participant equal to the number of Options
that were exercisable at the Termination Date (as defined below);
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(ii) |
the right to exercise such Options terminates on the
earlier of: (i) the date that is 12 months after the Termination Date; and
(ii) the date on which the exercise period of the particular Option
expires. Any Options held by the Participant that are not yet vested at
the Termination Date immediately expire and are cancelled and forfeited to
the Company on the Termination Date; and |
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(iii) |
such Participants eligibility to receive further grants
of Options under the Plan ceases as of the Termination Date. |
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Retirement: If a Participant voluntarily retires
then: |
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(i) |
any Options held by the Participant that are exercisable
at the Termination Date continue to be exercisable by the Participant
until the earlier of: (i) the date that is six months after the
Termination Date, provided that if an ISO is exercised after the date that
is three months from the Termination Date, then such Option shall no
longer be considered to be an ISO; and (ii) the date on which the exercise
period of the particular Option expires. Any Options held by the
Participant that are not yet vested at the Termination Date immediately
expire and are cancelled and forfeited to the Company on the Termination
Date, |
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(ii) |
the eligibility of a Participant to receive further
grants under the Plan ceases as of the date that the Company or an
Affiliate, as the case may be, provides the Participant with written
notification that the Participants employment or term of office or
engagement, is terminated, notwithstanding that such date may be prior to
the Termination Date, and |
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(iii) |
notwithstanding (b)(i) and (ii) above, unless the
Committee, in its sole discretion, otherwise determines, at any time and
from time to time, Options are not affected by a change of employment
arrangement within or among the Company or an Affiliate for so long as the
Participant continues to be an employee of the Company or an
Affiliate. |
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Termination of Employment: Where a Participants
employment or term of office or engagement terminates (for any reason
other than death or voluntary retirement (whether such termination occurs
with or without any or adequate notice or reasonable notice, or with or
without any or adequate compensation in lieu of such notice)),
then: |
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any Options held by the Participant that are exercisable
at the Termination Date continue to be exercisable by the Participant
until the earlier of: (i) the date that is three months after the
Termination Date; and (ii) the date on which the exercise period of the
particular Option expires. Any Options held by the Participant that are
not yet vested at the Termination Date immediately expire and are
cancelled and forfeited to the Company on the Termination Date, |
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(ii) |
the eligibility of a Participant to receive further
grants under the Plan ceases as of the date that the Company or an
Affiliate, as the case may be, provides the Participant with written
notification that the Participants employment or term of office or
engagement, is terminated, notwithstanding that such date may be prior to
the Termination Date, and |
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(iii) |
notwithstanding (c)(i) and (ii) above, unless the
Committee, in its sole discretion, otherwise determines, at any time and
from time to time, Options are not affected by a change of employment
arrangement within or among the Company or an Affiliate for so long as the
Participant continues to be an employee of the Company or an
Affiliate. |
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(d) |
For purposes of section 6.8, the term, Termination Date
means, in the case of a Participant whose employment or term of office or
engagement with the Company or an Affiliate terminates: |
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by reason of the Participants death, the date of
death; |
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for any reason whatsoever other than death, the date of
the Participants last day actively at work for or actively engaged by the
Company or the Affiliate, as the case may be; and for greater certainty
Termination Date in any such case specifically does not mean the date on
which any period of contractual notice or reasonable notice that the
Company or the Affiliate, as the case may be, may be required at law to
provide to a Participant would expire; and |
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the resignation of a director or the expiry of a
directors term on the Board without re-election (or nomination for
election) shall be considered to be a termination of his or her term of
office. |
6.9
Nontransferability of Options.
(a)
Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all ISOs
granted to a Participant under this Article 6 shall be exercisable during such
Participants lifetime only by such Participant.
(b)
Nonqualified Stock Options. Except as otherwise provided in a
Participants Award Agreement at the time of grant or thereafter by the
Committee, a NQSO granted under this Article 6 may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Further, except as otherwise provided
in a Participants Award Agreement at the time of grant or thereafter by the
Committee, all NQSOs granted to a Participant under this Article 6 shall be
exercisable during such Participants lifetime only by such Participant.
6.10
Notification of Disqualifying Disposition. The Participant to whom an ISO
is granted shall notify the Company upon the disposition of Shares issued
pursuant to the exercise of an ISO or Shares received as a dividend on ISO
stock. The Company shall use such information to determine whether a
disqualifying disposition as described in Section 421(b) of the Code has
occurred.
6.11
$100,000 Annual ISO Limitation. To the extent that the aggregate FMV of
Shares (determined as of the time the ISOs with respect to such Shares are
granted) with respect to which ISOs are exercisable for the first time by any
Participant during any calendar year (under this Plan and all other plans of the
Company and any Affiliate) exceeds $100,000 (or such other amount as may be
allowed under Section 422 of the Code), such ISOs shall be treated as NQSOs. The
foregoing provisions shall be applied by taking ISOs into account in the order
in which they were granted.
G-13
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grant of
SARs. Subject to the terms and conditions of the Plan, SARs may be granted
to Participants at any time and from time to time and upon such terms as shall
be determined by the Committee in its discretion. The Committee may grant
Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
The SAR Grant Price for each grant of a Freestanding SAR shall
be determined by the Committee and shall be specified in the Award Agreement.
The SAR Grant Price may include a Grant Price based on one hundred percent
(100%) of the FMV of the Shares on the date of grant, a Grant Price that is set
at a premium to the FMV of the Shares on the date of grant, or is indexed to the
FMV of the Shares on the date of grant, with the index determined by the
Committee, in its discretion, provided that the Grant Price may never be less
than the FMV of the Shares on the date of Grant. The Grant Price of Tandem SARs
shall be equal to the Option Price of the related Option.
7.2 SAR
Agreement. Each SAR Award shall be evidenced by an Award Agreement that
shall specify the Grant Price, the term of the SAR, and any such other
provisions as the Committee shall determine.
7.3 Term of
SAR. The term of an SAR granted under the Plan shall be determined by the
Committee, in its sole discretion, and except as determined otherwise by the
Committee and specified in the SAR Award Agreement, no SAR shall be exercisable
later than the tenth (10th) anniversary date of its grant.
7.4 Exercise
of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms
and conditions the Committee, in its sole discretion, imposes.
7.5 Exercise
of Tandem SARs. With respect to Participants who are not subject to taxation
under the ITA, Tandem SARs may be exercised for all or part of the Shares
subject to the related Option upon the surrender of the right to exercise the
equivalent portion of the related Option. With respect to Participants subject
to taxation under the ITA, prior to exercising a Tandem SAR the Participant must
elect to receive the Tandem SAR in consideration for the disposition of that
Participants right to receive shares under the Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the
contrary, with respect to a Tandem SAR granted in connection with an ISO: (a)
the Tandem SAR will expire no later than the expiration of the underlying ISO;
(b) the value of the payout with respect to the Tandem SAR may be for no more
than one hundred percent (100%) of the difference between the Option Price of
the underlying ISO and the FMV of the Shares subject to the underlying ISO at
the time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised
only when the FMV of the Shares subject to the ISO exceeds the Option Price of
the ISO.
G-14
7.6 Payment
of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled
to receive payment from the Company in an amount representing the difference
between the FMV of the underlying Shares on the date of exercise over the Grant
Price. At the discretion of the Committee, the payment upon SAR exercise may be
in cash, Shares of equivalent value (based on the FMV on the date of exercise of
the SAR, as defined in the Award Agreement or otherwise defined by the Committee
thereafter), in some combination thereof, or in any other form approved by the
Committee at its sole discretion. Payment shall be made no earlier than the date
of exercise nor later than 2-1/2 months after the close of the year in which the
SAR is exercised. The Committees determination regarding the form of SAR payout
shall be set forth or reserved for later determination in the Award Agreement
for the grant of the SAR.
7.7
Termination of Employment. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participants employment or other relationship with
the Company or Affiliates. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all SARs issued pursuant
to the Plan, and may reflect distinctions based on the reasons for
termination.
7.8
Nontransferability of SARs. Except as otherwise provided in a
Participants Award Agreement at the time of grant or thereafter by the
Committee, an SAR granted under the Plan may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participants Award Agreement at the time of grant or thereafter by the
Committee, all SARs granted to a Participant under the Plan shall be exercisable
during such Participants lifetime only by such Participant.
7.9 Other
Restrictions. Without limiting the generality of any other provision of this
Plan, the Committee may impose such other conditions and/or restrictions on any
Shares received upon exercise of an SAR granted pursuant to the Plan as it may
deem advisable. This includes, but is not limited to, requiring the Participant
to hold the Shares received upon exercise of an SAR for a specified period of
time.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1 Grant of
Restricted Stock or Restricted Stock Units. Subject to the terms and
conditions of the Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock and/or Restricted Stock Units to Participants
in such amounts and upon such terms as the Committee shall determine.
8.2
Restricted Stock or Restricted Stock Unit Agreement. Each Restricted
Stock and/or Restricted Stock Unit grant shall be evidenced by an Award
Agreement that shall specify the Period(s) of Restriction, the number of Shares
of Restricted Stock or the number of Restricted Stock Units granted, the
settlement date for Restricted Stock Units, and any such other provisions as the
Committee shall determine, provided that unless otherwise determined by the
Committee or as set out in any Award Agreement, no Restricted Stock Unit shall
vest later than three years after the date of grant.
G-15
8.3
Nontransferability of Restricted Stock and Restricted Stock Units. Except
as otherwise provided in this Plan or the Award Agreement, the Shares of
Restricted Stock and/or Restricted Stock Units granted herein may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction specified in the Award Agreement
(and in the case of Restricted Stock Units until the date of settlement through
delivery or other payment), or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Award Agreement at the time of grant or thereafter by the Committee. All
rights with respect to the Restricted Stock and/or Restricted Stock Units
granted to a Participant under the Plan shall be available during such
Participants lifetime only to such Participant, except as otherwise provided in
the Award Agreement at the time of grant or thereafter by the Committee.
8.4 Other
Restrictions. The Committee shall impose, in the Award Agreement at the time
of grant or anytime thereafter, such other conditions and/or restrictions on any
Shares of Restricted Stock or Restricted Stock Units granted pursuant to this
Plan as it may deem advisable, including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock
or each Restricted Stock Unit, restrictions based upon the achievement of
specific performance criteria, time-based restrictions on vesting following the
attainment of the performance criteria, time-based restrictions, restrictions
under applicable laws or under the requirements of any stock exchange or market
upon which such Shares are listed or traded, or holding requirements or sale
restrictions placed on the Shares by the Company upon vesting of such Restricted
Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, subject to
Section 19.5, the Company may retain the certificates representing Shares of
Restricted Stock, or Shares delivered in settlement of Restricted Stock Units,
in the Companys possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied or lapse, but in no
event will delivery of such Shares be made later than the earlier of (i) 2-1/2
months after the close of the year in which such conditions or restrictions were
satisfied or lapsed and (ii) December 31 of the third year following the year of
the grant date.
Except as otherwise provided in this Article 8, Shares of
Restricted Stock covered by each Restricted Stock Award shall become freely
transferable by the Participant after all conditions and restrictions applicable
to such Shares have been satisfied or lapse, and Restricted Stock Units shall be
settled through payment in cash, Shares, or a combination of cash and Shares as
the Committee, in its sole discretion, shall determine.
8.5
Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing Shares of
Restricted Stock granted pursuant to the Plan may bear a legend such as the
following:
The sale or other transfer of the shares of stock represented
by this certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer as set forth in the 2015 Omnibus
Equity Incentive Compensation Plan and in the associated Award Agreement. A copy
of the Plan and such Award Agreement may be obtained from Energy Fuels Inc.
G-16
8.6 Voting
Rights. To the extent required by law, Participants holding Shares of
Restricted Stock granted hereunder shall have the right to exercise full voting
rights with respect to those Shares during the Period of Restriction. A
Participant shall have no voting rights with respect to any Restricted Stock
Units granted hereunder.
8.7
Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock or Restricted Stock Units
granted hereunder may, if the Committee so determines, be credited with
dividends paid with respect to the underlying Shares or Dividend Equivalents
while they are so held in a manner determined by the Committee in its sole
discretion. Dividend Equivalents shall not apply to an Award unless specifically
provided for in the Award Agreement. The Committee may apply any restrictions to
the dividends or Dividend Equivalents that the Committee deems appropriate. The
Committee, in its sole discretion, may determine the form of payment of
dividends or Dividend Equivalents, including cash, Shares, Restricted Stock or
Restricted Stock Units.
8.8 Death
and other Termination of Employment.
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(a) |
Death: |
If a Participant dies while an Employee, officer or
director of or Consultant to the Company or an Affiliate: |
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any Restricted Stock Units held by the Participant that
have vested as at the Termination Date (as defined below), shall be paid
to the Recipients estate. Any Restricted Stock Units that have not vested
as at the Termination Date will be immediately cancelled and forfeited to
the Company on the Termination Date; and |
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such Participants eligibility to receive further grants
of Restricted Stock Units under the Plan ceases as of the Termination
Date. |
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Termination other than Death: Where a Participants
employment or term of office or engagement terminates for any reason other
than death (whether such termination occurs with or without any or
adequate notice or reasonable notice, or with or without any or adequate
compensation in lieu of such notice), then: |
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any Restricted Stock Units held by the Participant that
have vested before the Termination Date shall be paid to the Recipient.
Any Restricted Stock Units held by the Participant that are not yet vested
at the Termination Date will be immediately cancelled and forfeited to the
Company on the Termination Date; |
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the eligibility of a Participant to receive further
grants under the Plan ceases as of the date that the Company or an
Affiliate, as the case may be, provides the Participant with written
notification that the Participants employment or term of office or
engagement, is terminated, notwithstanding that such date may be prior to
the Termination Date; and |
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(iii) |
notwithstanding (b)(i) and (ii) above, unless the
Committee, in its sole discretion, otherwise determines, at any time and
from time to time, Restricted Stock Units are not affected by a change of
employment arrangement within or among the Company or an Affiliate for so
long as the Participant continues to be an employee of the Company or an
Affiliate. |
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For purposes of section 8.8, the term, Termination Date
means, in the case of a Participant whose employment or term of office or
engagement with the Company or an Affiliate terminates: |
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by reason of the Participants death, the date of
death; |
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for any reason whatsoever other than death, the date of
the Participants last day actively at work for or actively engaged by the
Company or the Affiliate, as the case may be; and for greater certainty
Termination Date in any such case specifically does not mean the date on
which any period of contractual notice or reasonable notice that the
Company or the Affiliate, as the case may be, may be required at law to
provide to a Participant would expire; and |
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the resignation of a director or the expiry of a
directors term on the Board without re-election (or nomination for
election) shall be considered to be a termination of his or her term of
office. |
8.9 Payment
in Settlement of Restricted Stock Units. When and if Restricted Stock Units
become payable, a Participant having received the grant of such units shall be
entitled to receive payment from the Company in settlement of such units in
cash, Shares of equivalent value (based on the FMV, as defined in the Award
Agreement at the time of grant or thereafter by the Committee), in some
combination thereof, or in any other form determined by the Committee at its
sole discretion. The Committees determination regarding the form of payout
shall be set forth or reserved for later determination in the Award Agreement
for the grant of the Restricted Stock Unit.
ARTICLE 9. DEFERRED SHARES UNITS
9.1 Grant of
Deferred Share Units. Subject to the terms and conditions of the Plan, the
Committee, at any time and from time to time, may grant Deferred Share Units to
Participants in such amounts and upon such terms as the Committee shall
determine.
9.2 Deferred
Share Unit Agreement. Each Deferred Share Unit grant shall be evidenced by
an Award Agreement that shall specify the number of Deferred Share Units
granted, the settlement date for Deferred Share Units, and any other provisions
as the Committee shall determine, including, but not limited to a requirement
that Participants pay a stipulated purchase price for each Deferred Share Unit,
restrictions based upon the achievement of specific performance criteria,
time-based restrictions, restrictions under applicable laws or under the
requirements of any stock exchange or market upon which the Shares are listed or
traded, or holding requirements or sale restrictions placed on the Shares by the
Company upon vesting of such Deferred Share Units.
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9.3
Nontransferability of Restricted Stock and Restricted Stock Units. Except
as otherwise provided in this Plan or the Award Agreement, the Deferred Share
Units granted herein may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated. All rights with respect to the Deferred
Share Units granted to a Participant under the Plan shall be available during
such Participants lifetime only to such Participant, except as otherwise
provided in the Award Agreement at the time of grant or thereafter by the
Committee.
9.4
Termination of Employment. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain Deferred Share
Units following termination of the Participants employment or other
relationship with the Company or Affiliates. Such provisions shall be determined
in the sole discretion of the Committee, need not be uniform among all Deferred
Share Units issued pursuant to the Plan, and may reflect distinctions based on
the reasons for termination.
ARTICLE 10. PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1 Grant
of Performance Shares and Performance Units. Subject to the terms and
conditions of the Plan, the Committee, at any time and from time to time, may
grant Performance Shares and/or Performance Units to Participants in such
amounts and upon such terms as the Committee shall determine.
10.2 Value
of Performance Shares and Performance Units. Each Performance Share and
Performance Unit shall have an initial value equal to the FMV of a Share on the
date of grant. The Committee shall set performance criteria for a Performance
Period in its discretion, which, depending on the extent to which they are met,
will determine, in the manner determined by the Committee and set forth in the
Award Agreement, the value and/or number of each Performance Share or
Performance Unit that will be paid to the Participant.
10.3 Earning
of Performance Shares and Performance Units. Subject to the terms of this
Plan and the applicable Award Agreement, after the applicable Performance Period
has ended, the holder of Performance Shares/Performance Units shall be entitled
to receive payout on the value and number of Performance Shares/Performance
Units, determined as a function of the extent to which the corresponding
performance criteria have been achieved. Notwithstanding the foregoing, the
Company shall have the ability to require the Participant to hold any Shares
received pursuant to such Award for a specified period of time.
10.4 Form
and Timing of Payment of Performance Shares and Performance Units. Payment
of earned Performance Shares/Performance Units shall be as determined by the
Committee and as set forth in the Award Agreement. Subject to the terms of the
Plan, the Committee, in its sole discretion, may pay earned Performance
Shares/Performance Units in the form of cash or in Shares (or in a combination
thereof) equal to the value of the earned Performance Shares/Performance Units
at the end of the applicable Performance Period. Any Shares may be granted
subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement for the grant of the Award or reserved
for later determination.
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10.5
Dividends and Other Distributions. The Committee shall determine whether
Participants holding Performance Shares will receive Dividend Equivalents with
respect to dividends declared with respect to the Shares. Dividends or Dividend
Equivalents may be subject to accrual, forfeiture or payout restrictions as
determined by the Committee in its sole discretion.
10.6
Termination of Employment. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain Performance
Shares/Performance Units following termination of the Participants employment
or other relationship with the Company or an Affiliate. Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among
all Awards of Performance Shares/Performance Units issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination.
10.7
Nontransferability of Performance Shares and Performance Units. Except as
otherwise provided in a Participants Award Agreement at the time of grant or
thereafter by the Committee, Performance Shares/Performance Units may not be
sold, transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, except
as otherwise provided in a Participants Award Agreement or otherwise by the
Committee at any time, a Participants rights under the Plan shall inure during
such Participants lifetime only to such Participant.
ARTICLE 11. FULL VALUE STOCK-BASED AWARDS
11.1
Stock-Based Awards. The Committee may grant other types of equity-based
or equity-related Awards not otherwise described by the terms of this Plan
(including the grant or offer for sale of unrestricted Shares) in such amounts
and subject to such terms and conditions, including, but not limited to, being
subject to performance criteria, or in satisfaction of such obligations, as the
Committee shall determine. Such Awards may involve the transfer of actual Shares
to Participants, or payment in cash or otherwise of amounts based on the value
of Shares.
11.2
Termination of Employment. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to receive Stock-Based
Awards following termination of the Participants employment or other
relationship with the Company or Affiliates. Such provisions shall be determined
in the sole discretion of the Committee, need not be uniform among all
Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination.
11.3
Nontransferability of Stock-Based Awards. Except as otherwise provided in
a Participants Award Agreement at the time of grant or thereafter by the
Committee, Stock-Based Awards may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, except as otherwise provided in a
Participants Award Agreement at the time of grant or thereafter by the
Committee, a Participants rights under the Plan shall be exercisable during
such Participants lifetime only by such Participant.
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ARTICLE 12. PERFORMANCE MEASURES
Notwithstanding any other terms of this Plan, the vesting,
payability or value (as determined by the Committee) of each Award other than an
Option or SAR that, at the time of grant, the Committee intends to be
Performance-Based Compensation to a Covered Employee, shall be determined by the
attainment of one or more Performance Goals as determined by the Committee in
conformity with Section 162(m) of the Code, if such provision is applicable to
the Company. The Committee shall specify in writing, by resolution or otherwise,
the Participants eligible to receive such an Award (which may be expressed in
terms of a class of individuals) and the Performance Goal(s) applicable to such
Awards within ninety (90) days after the commencement of the period to which the
Performance Goal(s) relate(s), or such earlier time as required to comply with
Section 162(m) of the Code. No such Award shall be payable unless the Committee
certifies in writing, by resolution or otherwise, that the Performance Goal(s)
applicable to the Award were satisfied. In no case may the Committee increase
the value of an Award of Performance-Based Compensation above the maximum value
determined under the performance formula by the attainment of the applicable
Performance Goal(s), but the Committee may retain the discretion to reduce the
value below such maximum.
Unless and until the Committee proposes for shareholder vote
and the shareholders approve a change in the general Performance Measures set
forth in this Article 12, the Performance Goal(s) upon which the payment or
vesting of an Award to a Covered Employee that is intended to qualify as
Performance-Based Compensation shall be limited to the following Performance
Measures:
(a) Net
earnings or net income (before or after taxes);
(b) Earnings
per share;
(c) Net sales
growth;
(d) Revenue
growth;
(e) Net
operating profit;
(f) Operating
earnings;
(g) Operating
earnings per share;
(h) Return
measures (including, but not limited to, return on assets, capital, equity or
sales);
(i) Cash flow
(including, but not limited to, operating cash flow, free cash flow and cash
flow return on capital);
(j) Earnings
before or after taxes, interest, depreciation and/or amortization, and
including/excluding capital gains and losses;
(k) Gross or
operating margins;
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(l)
Productivity ratios;
(m) Share
price (including, but not limited to, growth measures and total stockholder
return);
(n) Operating
and/or non-operating expense levels or reductions;
(o) Operating
efficiency;
(p) Employee
satisfaction;
(q) Working
capital levels or targets;
(r) Permitting
or project development milestones;
(s) Market
capitalization; (t) Increases in long term sales contracts;
(u) Increases
in resources, reserves or production; and
(v)
Environmental, health and safety goals or performance of the Company or any
subsidiary or division thereof.
Any Performance Measure(s) may be used to measure the
performance of the Company as a whole and/or any Affiliate, business unit or
regional operation of the Company or any combination thereof, as the Committee
may deem appropriate, and any of the above Performance Measures may be used in
comparison to the performance of a group of peer companies, or a published or
special index that the Committee, in its sole discretion, deems appropriate. The
Committee shall also have the authority to provide in Award Agreements for
accelerated vesting of an Award based on the achievement of Performance
Goal(s).
The Committee may provide in any Award Agreement that any
evaluation of attainment of a Performance Goal may include or exclude any of the
following events that occurs during the relevant period: (a) asset write-downs;
(b) litigation or claim judgments or settlements; (c) the effect of changes in
tax laws, accounting principles, or other laws or provisions affecting reported
results; (d) any reorganization or restructuring transactions; (e) extraordinary
nonrecurring items as described in managements discussion and analysis of
financial condition and results of operations appearing in the Companys annual
financial statements for the applicable year; and (f) significant acquisitions
or divestitures. To the extent such inclusions or exclusions affect Awards to
Covered Employees, they shall be prescribed in a form that meets the
requirements of Section 162(m) of the Code for deductibility.
In the event that applicable tax and/or securities laws change
to permit discretion by the Committee to alter the governing Performance
Measures without obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without obtaining stockholder
approval. In addition, in the event that the Committee determines that it is
advisable to grant Awards to Covered Employees or Awards to Employees who are
subject to taxation under the ITA that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the
requirements of Section 162(m) of the Code.
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ARTICLE 13. BENEFICIARY DESIGNATION
A Participants beneficiary is the person or persons entitled
to receive payments or other benefits or exercise rights that are available
under the Plan in the event of the Participants death. A Participant may
designate a beneficiary or change a previous beneficiary designation at such
times as prescribed by the Committee and by using such forms and following such
procedures approved or accepted by the Committee for that purpose. If no
beneficiary designated by the Participant is eligible to receive payments or
other benefits or exercise rights that are available under the Plan at the
Participants death, the beneficiary shall be the Participants estate.
Notwithstanding the provisions above, the Committee may, in its
discretion, after notifying the affected Participants, modify the foregoing
requirements, institute additional requirements for beneficiary designations, or
suspend the existing beneficiary designations of living Participants or the
process of determining beneficiaries under this Article 13, or both, in favor of
another method of determining beneficiaries.
ARTICLE 14. DEFERRALS
The Committee may permit or require a Participant to defer such
Participants receipt of any Award, or payment in settlement or exercise of any
Award, provided that any such deferral must comply with the applicable
requirements of Section 409A of the Code and the Treasury regulations thereunder
so that such deferral does not cause the Participant to be subject to taxes and
interest pursuant to Section 409A of the Code.
ARTICLE 15. RIGHTS OF PERSONS ELIGIBLE TO PARTICIPATE
15.1
Employment. Nothing in the Plan or an Award Agreement shall interfere
with or limit in any way the right of the Company or an Affiliate to terminate
any Participants employment, consulting or other service relationship with the
Company or an Affiliate at any time, nor confer upon any Participant any right
to continue in the capacity in which he or she is employed or otherwise serves
the Company or an Affiliate.
Neither an Award nor any benefits arising under this Plan shall
constitute part of an employment or service contract with the Company or an
Affiliate, and, accordingly, subject to the terms of this Plan, this Plan may be
terminated or modified at any time in the sole and exclusive discretion of the
Committee or the Board without giving rise to liability on the part of the
Company or an Affiliate for severance payments or otherwise, except as provided
in this Plan.
For purposes of the Plan, unless otherwise provided by the
Committee, a transfer of employment of a Participant between the Company and an
Affiliate or among Affiliates, shall not be deemed a termination of employment.
The Committee may provide in a Participants Award Agreement or otherwise the
conditions under which a transfer of employment to an entity that is spun off
from the Company or an Affiliate shall not be deemed a termination of employment
for purposes of an Award.
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15.2
Participation. No Employee or other Person eligible to participate in the
Plan shall have the right to be selected to receive an Award. No person selected
to receive an Award shall have the right to be selected to receive a future
Award, or, if selected to receive a future Award, the right to receive such
future Award on terms and conditions identical or in proportion in any way to
any prior Award.
15.3 Rights
as a Shareholder. A Participant shall have none of the rights of a
shareholder with respect to Shares covered by any Award until the Participant
becomes the record holder of such Shares.
ARTICLE 16. CHANGE OF CONTROL
16.1
Accelerated Vesting and Payment. Subject to the provisions of Section
16.2 or as otherwise provided in the Award Agreement, in the event of a Change
of Control, unless otherwise specifically prohibited under law or by the rules
and regulations of a national securities exchange or market on which Shares are
listed or traded:
(a) Any and
all Options and SARs granted hereunder shall be accelerated to become
immediately exercisable in full;
(b) Any Period
of Restriction and other restrictions imposed on Restricted Stock or Restricted
Stock Units shall lapse, and Restricted Stock Units shall be immediately settled
and payable;
(c) The target
payout opportunities attainable under all outstanding Awards of
performance-based Restricted Stock, performance-based Restricted Stock Units,
Performance Units and Performance Shares (including, but not limited to, Awards
intended to be Performance-Based Compensation) shall be deemed to have been
fully earned based on targeted performance being attained as of the effective
date of the Change of Control, and:
(i) The
vesting of all Awards denominated in Shares shall be accelerated as of the
effective date of the Change of Control, (or such other time prior to the time
of the Change of Control, if the Committee in its reasonable discretion
determines is appropriate) and shall be paid out to Participants within thirty
(30) days following the effective date of the Change of Control; and
(ii) Awards
denominated in cash shall be paid to Participants in cash within thirty (30)
days following the effective date of the Change of Control;
(d) Upon a
Change of Control, unless otherwise specifically provided in a written agreement
entered into between the Participant and the Company or an Affiliate, the
Committee shall immediately cause all other Stock-Based Awards to vest and be
paid out as determined by the Committee; and
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(e) The
Committee shall have the discretion to unilaterally determine that all
outstanding Awards shall be cancelled upon a Change of Control, and that the
value of such Awards, as determined by the Committee in accordance with the
terms of the Plan and the Award Agreements, shall be paid out in cash in an
amount based on the Change of Control Price within a reasonable time subsequent
to the Change of Control; provided, however, that no such payment shall be made
on account of an ISO using a value higher than the FMV of the underlying Shares
on the date of settlement.
16.2
Alternative Awards. Notwithstanding Section 16.1, no cancellation,
acceleration of vesting, lapsing of restrictions, payment of an Award, cash
settlement or other payment shall occur with respect to any Award if the
Committee reasonably determines in good faith prior to the occurrence of a
Change of Control that such Award shall be honored or assumed, or new rights
substituted therefor (with such honored, assumed or substituted Award
hereinafter referred to as an Alternative Award) by any successor to the
Company or an Affiliate as described in Article 18; provided, however, that any
such Alternative Award must:
(a) Be based on
stock which is traded on the TSX and/or an established U.S. securities market;
(b) Provide
such Participant with rights and entitlements substantially equivalent to or
better than the rights, terms and conditions applicable under such Award,
including, but not limited to, an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;
(c) recognize,
for the purpose of vesting provisions, the time that the Award has been held
prior to the Change of Control;
(d) Have
substantially equivalent economic value to such Award (determined prior to the
time of the Change of Control); and
(e) Have terms
and conditions which provide that in the event that the Participants employment
with the Company, an Affiliate or any successor as described in Article 19 is
involuntarily terminated or Constructively Terminated at any time within at
least twelve months following a Change of Control, any conditions on a
Participants rights under, or any restrictions on transfer or exercisability
applicable to, each such Alternative Award shall be waived or shall lapse, as
the case may be.
16.3
Compliance with Section 280G of the Code. In the event that any
accelerated Award vesting or payment received or to be received by a Participant
pursuant to Section 16.1 herein (the Benefit) would (i) constitute a
parachute payment within the meaning of and subject to Section 280G of the
Code and (ii) but for this Section 16.3, be subject to the excise tax imposed by
Section 4999 of the Code (the Excise Tax), then such Benefit shall be reduced
to the extent necessary so that no portion of the Benefit will be subject to the
Excise Tax, as determined in good faith by the Committee; provided, however,
that if, in the absence of any such reduction (or after such reduction), the
Participant believes that the Benefit or any portion thereof (as reduced, if
applicable) would be subject to the Excise Tax, the Benefit shall be reduced (or
further reduced) to the extent determined by the Participant in his or her
discretion so that the Excise Tax would not apply. If, notwithstanding any such
reduction (or in the absence of such reduction), the Internal Revenue Service
(IRS) determines that the Participant is liable for the Excise Tax as a result
of the Benefit, then the Participant shall be obligated to return to the
Company, within thirty days of such determination by the IRS, a portion of the
Benefit sufficient such that none of the Benefit retained by the Participant
constitutes a parachute payment within the meaning of Section 280G of the Code
that is subject to the Excise Tax.
G-25
ARTICLE 17. AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION
17.1
Amendment, Modification, Suspension and Termination.
(a) Except as
set out in clauses (b) and (c) below, and as otherwise provided by law, or stock
exchange rules, the Committee or Board may, at any time and from time to time,
alter, amend, modify, suspend or terminate the Plan or any Award in whole or in
part without notice to, or approval from, shareholders, including, but not
limited to for the purposes of:
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i. |
making any acceleration of or other amendments to the
general vesting provisions of any Award; |
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ii. |
waiving any termination of, extending the expiry date of,
or making any other amendments to the general term of any Award or
exercise period thereunder provided that no Award held by an Insider may
be extended beyond its original expiry date; |
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iii. |
making any amendments to add covenants or obligations of
the Company for the protection of Participants; |
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iv. |
making any amendments not inconsistent with the Plan as
may be necessary or desirable with respect to matters or questions which,
in the good faith opinion of the Board, it may be expedient to make,
including amendments that are desirable as a result of changes in law or
as a housekeeping matter; or |
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v. |
making such changes or corrections which are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or manifest
error. |
(b) Other than
as expressly provided in an Award Agreement or as set out herein with respect to
a Change of Control, the Committee shall not alter or impair any rights or
increase any obligations with respect to an Award previously granted under the
Plan without the consent of the Participant.
(c) The
following amendments to the Plan shall require the prior approval of the
Companys shareholders:
|
i. |
A reduction in the Option Price of a previously granted
Option or the Grant Price of a previously granted SAR benefitting an
Insider of the Company or one of its Affiliates except for adjustments to
the Option Price or Grant Price applicable to outstanding Awards pursuant
to Section 4.2 hereof. |
G-26
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ii. |
Any amendment or modification which would increase the
total number of Shares available for issuance under the Plan or the total
number of Shares available for ISOs under the Plan. |
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iii. |
An increase to the limit on the number of Shares issued
or issuable under the Plan to Insiders of the Company; |
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iv. |
An extension of the expiry date of an Option or SAR,
other than as otherwise permitted hereunder in relation to a Blackout
Period; or |
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v. |
Any amendment to the amendment provisions of the Plan
under this Article 17.1. |
17.2
Adjustment of Awards Upon the Occurrence of Unusual or Nonrecurring
Events. The Committee may make adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual or nonrecurring
events in addition to the events described in Section 4.2 hereof affecting the
Company or the financial statements of the Company or of changes in applicable
laws, regulations or accounting principles, whenever the Committee determines
that such adjustments are appropriate in order to prevent unintended dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan. The determination of the Committee as to the foregoing
adjustments, if any, shall be conclusive and binding on Participants under the
Plan. To the extent such adjustment affects Awards to Covered Employees intended
to be Performance-Based Compensation, they shall be prescribed in a form that
meets the requirements of Section 162(m) of the Code for deductibility.
17.3 Awards
Previously Granted. Notwithstanding any other provision of the Plan to the
contrary, no termination, amendment, suspension or modification of the Plan
shall adversely affect in any material way any Award previously granted under
the Plan, without the written consent of the Participant holding such Award.
ARTICLE 18. WITHHOLDING
The Company or any Affiliate shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company or any
Affiliate, an amount sufficient to satisfy federal, state and local taxes or
provincial, domestic or foreign (including the Participants FICA obligation),
required by law or regulation to be withheld with respect to any taxable event
arising or as a result of this Plan or any Award hereunder. The Committee may
provide for Participants to satisfy withholding requirements by having the
Company withhold and sell Shares or the Participant making such other
arrangements, including the sale of Shares, in either case on such conditions as
the Committee specifies.
Participant acknowledges and agrees that the ultimate liability
for all taxes legally payable by Participant is and remains Participants
responsibility and may exceed the amount actually withheld by the Company.
Participant further acknowledges that the Company (a) makes no representations
or undertakings regarding the treatment of any taxes in in connection with any
aspect of this Plan; and (b) does not commit to and is under no obligation to
structure the terms of this Plan to reduce or eliminate Participants liability
for taxes or achieve any particular tax result. Further, if Participant has
become subject to tax in more than one jurisdiction, Participant acknowledges
that the Company may be required to withhold or account for taxes in more than
one jurisdiction.
G-27
ARTICLE 19. SUCCESSORS
Any obligations of the Company or an Affiliate under the Plan
with respect to Awards granted hereunder shall be binding on any successor to
the Company or Affiliate, respectively, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation or
otherwise, of all or substantially all of the businesses and/or assets of the
Company or Affiliate, as applicable.
ARTICLE 20. GENERAL PROVISIONS
20.1
Forfeiture Events. Without limiting in any way the generality of the
Committees power to specify any terms and conditions of an Award consistent
with law, and for greater clarity, the Committee may specify in an Award
Agreement that the Participants rights, payments and benefits with respect to
an Award shall be subject to reduction, cancellation, forfeiture or recoupment
upon the occurrence of certain specified events, in addition to any otherwise
applicable vesting or performance conditions of an Award. Such events may
include, but shall not be limited to, failure to accept the terms of the Award
Agreement, termination of employment under certain or all circumstances,
violation of material Company and Affiliate policies, breach of noncompetition,
confidentiality, nonsolicitation, noninterference, corporate property protection
or other agreements that may apply to the Participant, or other conduct by the
Participant that is detrimental to the business or reputation of the Company and
Affiliates.
Except as expressly otherwise provided in this Plan or an Award
Agreement, the termination and the expiry of the period within which an Award
will vest and may be exercised by a Participant shall be based upon the last day
of actual service by the Participant to the Company and specifically does not
include any period of notice that the Company may be required to provide to the
Participant under applicable employment law.
20.2
Legend. The certificates for Shares may include any legend that the
Committee deems appropriate to reflect any restrictions on transfer of such
Shares.
20.3
Delivery of Title. The Company shall have no obligation to issue or
deliver evidence of title for Shares issued under the Plan prior to:
(a) Obtaining
any approvals from governmental agencies that the Company determines are
necessary or advisable; and
(b) Completion
of any registration or other qualification of the Shares under any applicable
law or ruling of any governmental body that the Company determines to be
necessary or advisable.
G-28
20.4
Investment Representations. The Committee may require each Participant
receiving Shares pursuant to an Award under this Plan to represent and warrant
in writing that the Participant is acquiring the Shares for investment and
without any present intention to sell or distribute such Shares.
20.5
Uncertificated Shares. To the extent that the Plan provides for issuance
of certificates to reflect the transfer of Shares, the transfer of such Shares
may be effected on a noncertificated basis to the extent not prohibited by
applicable law or the rules of any applicable stock exchange.
20.6
Unfunded Plan. Participants shall have no right, title or interest
whatsoever in or to any investments that the Company or an Affiliate may make to
aid it in meeting its obligations under the Plan. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company or
an Affiliate and any Participant, beneficiary, legal representative or any other
person. Awards shall be general unsecured obligations of the Company, except
that if an Affiliate executes an Award Agreement instead of the Company the
Award shall be a general unsecured obligation of the Affiliate and not any
obligation of the Company. To the extent that any individual acquires a right to
receive payments from the Company or an Affiliate, such right shall be no
greater than the right of an unsecured general creditor of the Company or
Affiliate, as applicable. All payments to be made hereunder shall be paid from
the general funds of the Company or Affiliate, as applicable, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such amounts except as expressly set forth in the Plan. The
Plan is not intended to be subject to ERISA.
20.7 No
Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award Agreement. In such an instance, unless the
Committee determines otherwise, fractional Shares and any rights thereto shall
be forfeited or otherwise eliminated.
20.8 Other
Compensation and Benefit Plans. Nothing in this Plan shall be construed to
limit the right of the Company or an Affiliate to establish other compensation
or benefit plans, programs, policies or arrangements. Except as may be otherwise
specifically stated in any other benefit plan, policy, program or arrangement,
no Award shall be treated as compensation for purposes of calculating a
Participants rights under any such other plan, policy, program or arrangement.
20.9 No
Constraint on Corporate Action. Nothing in this Plan shall be construed (i)
to limit, impair or otherwise affect the Companys or an Affiliates right or
power to make adjustments, reclassifications, reorganizations or changes in its
capital or business structure, or to merge or consolidate, or dissolve,
liquidate, sell or transfer all or any part of its business or assets, or (ii)
to limit the right or power of the Company or an Affiliate to take any action
which such entity deems to be necessary or appropriate.
20.10
Compliance with United States Securities Laws. All Awards and the
issuance of Shares underlying such Awards issued pursuant to the Plan will be
issued pursuant to the registration requirements of the United States Securities
Act of 1933, as amended, or an exemption from such registration
requirements.
G-29
ARTICLE 21. LEGAL CONSTRUCTION
21.1 Gender
and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
21.2
Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
21.3
Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. The Company or an Affiliate shall receive the
consideration required by law for the issuance of Awards under the Plan.
The inability of the Company or an Affiliate to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company or an Affiliate to be necessary for the lawful issuance
and sale of any Shares hereunder, shall relieve the Company or Affiliate of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
21.4
Governing Law. The Plan and each Award Agreement shall be governed by the
laws of the Province of Ontario excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation of the Plan
to the substantive law of another jurisdiction.
21.5
Compliance with Section 409A of the Code.
(a) To
the extent applicable, it is intended that this Plan and any Awards made
hereunder shall not provide for the payment of deferred compensation within
the meaning of Section 409A of the Code or shall be structured in a manner and
have such terms and conditions that would not cause a Participant to be subject
to taxes and interest pursuant to Section 409A of the Code. This Plan and any
Awards made hereunder shall be administrated and interpreted in a manner
consistent with this intent, and any provision that would cause this Plan or any
Award made hereunder to become subject to taxation under Section 409A of the
Code shall have no force and effect until amended to comply with Section 409A of
the Code (which amendment may be retroactive to the extent permitted by Section
409A of the Code and may be made by the Company without the consent of
Participants).
(b)
Notwithstanding anything in this Plan or in any Award Agreement to the contrary,
but subject to Article 20.5(2) to the extent that any amount or benefit that
would constitute deferred compensation for purposes of Section 409A of the
Code would otherwise be payable or distributable under this Plan or any Award
Agreement by reason of the occurrence of a Change of Control or the
Participants disability or separation from service, such amount or benefit will
not be payable or distributable to the Participant by reason of such
circumstance unless (i) the circumstances giving rise to such Change of Control,
disability or separation from service meet the description or definition of
change in control event, disability, or separation from service, as the
case may be, in Section 409A of the Code and applicable proposed or final
Treasury regulations thereunder, and (ii) the payment or distribution of such
amount or benefit would otherwise comply with Section 409A of the Code and not
subject the Participant to taxes and interest pursuant to Section 409A of the
Code (which may require, if the Participant is a specified employee within the
meaning of Section 409A of the Code, that the payment date shall not be earlier
than the date that is six (6) months after the date of the Participants
separation from service). This provision does not prohibit the vesting of any
Award or the vesting of any right to eventual payment or distribution of any
amount or benefit under this Plan or any Award Agreement.
G-30
(c)
Notwithstanding anything in this Plan or in any Award Agreement to the contrary,
but subject to Article 21.5(2) to the extent necessary to avoid the application
of Section 409A of the Code, (i) the Committee may not amend an outstanding
Option, SAR or similar Award to extend the time to exercise such Award beyond
the later of the 15th day of the third month following the date at which, or
December 31 of the calendar year in which, the Award would otherwise have
expired if the Award had not been extended, based on the terms of the Award at
the original grant date (the Safe Harbor Extension Period), provided that, in
any event, Options and SARs granted to U.S. Participants may not be extended
past the 10th anniversary of the original date of grant, and (ii) any purported
extension of the exercise period of an outstanding Award beyond the Safe Harbor
Extension Period shall be deemed to be an amendment to the last day of the Safe
Harbor Extension Period and no later.
(d) The
Committee shall use its reasonable discretion to determine the extent to which
the provisions of Article 21.5 will apply to a Participant who is subject to
taxation under the ITA.
G-31
ENERGY FUELS INC.
REVISED PROXY FOR USE AT THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD ON JUNE 18, 2015
SOLICITED ON BEHALF OF
MANAGEMENT
The annual and special meeting of Energy Fuels Inc. that was
previously scheduled for Tuesday June 16, 2015 to consider items 1-4 below is
now being held on Thursday June 18, 2015 to consider items 1-5. This Proxy
replaces the proxy previously sent to shareholders relating to the Meeting.
The undersigned shareholder of Energy Fuels Inc. (the
Corporation) hereby appoints Stephen P. Antony, President and Chief
Executive Officer, whom failing, Daniel G. Zang, Chief Financial Officer, or
instead of either of
them,
, as nominee of the undersigned, with the power of substitution, to attend,
vote and act for and on behalf of the undersigned at the annual and special
meeting of shareholders of the Corporation to be held on June 18, 2015
(the Meeting) and at any adjournments thereof, and, without
limiting the general authority and power hereby given to such nominee, the
shares represented by this proxy are specifically directed to be voted as
indicated below:
1. [ ] VOTE FOR or [ ] WITHHOLD
FROM VOTING with respect to the election of J. Birks Bovaird as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Stephen P. Antony as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Paul A. Carroll as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Lawrence A. Goldberg as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Bruce D. Hansen as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Ron F. Hochstein as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Joo Soo Park as director;
[ ] VOTE FOR or [ ] WITHHOLD FROM
VOTING with respect to the election of Richard J. Patricio as director;
2. [ ] VOTE FOR or [ ] WITHHOLD
FROM VOTING with respect to the appointment of KPMG LLP, Chartered
Accountants as auditors and to authorize the directors to fix the
remuneration of the auditors;
3. [ ] VOTE FOR or [ ] VOTE
AGAINST the ordinary resolution ratifying the extension of the
Corporations Shareholder Rights Plan, as described in the Management
Information Circular dated May 21, 2015 (the Circular); |
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4. [ ] VOTE FOR or [ ] VOTE
AGAINST the ordinary resolution ratifying the Corporations 2015 Omnibus
Equity Incentive Compensation Plan and the awards previously granted under
such plan, as described in the Circular;
5. [ ] VOTE FOR or [ ] VOTE
AGAINST the ordinary resolution approving the acquisition of all of the
outstanding shares of Uranerz Energy Corporation and the issuance of
common shares of the Corporation as consideration for, or related to, such
transaction, as described in the Circular;
6. IN HIS/HER DISCRETION with respect to amendments to
the above matters and on such other business as may properly come before
the meeting or any adjournment thereof.
This proxy revokes and supersedes all proxies
of earlier date. Dated this _______day of _________________, 2015.
________________________________________
Signature of Shareholder
________________________________________
Name of Shareholder (Print) |
Notes:
1. |
Shareholders may vote at the Meeting either in person or by proxy. A proxy should be dated and signed by the shareholder or by the shareholder's attorney authorized in writing. If not dated, this proxy shall be deemed to bear the
date on which it was mailed by management of the Corporation.
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2. |
You have the right to appoint a person other than as designated herein to represent you at the Meeting either by striking out the names of the persons designated above and inserting such other person's name in the blank space
provided or by completing another proper form of proxy and, in either case, delivering the completed proxy to CST Trust Company Inc. in the envelope provided.
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3. |
The common shares represented by this proxy will be voted in accordance with the instructions of the shareholder on any ballot that may be called for. In the absence of direction, this proxy will be voted for each of the
matters referred to herein.
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4. |
A completed proxy must be delivered to CST Trust Company Inc. by mail at c/o Cover-All, P.O. Box 721, Agincourt, Ontario, Canada, M1S 0A1 or by fax to 1-866-781- 3111 (toll free) or 416-368-2502, or by email to
proxy@canstockta.com no later than 5:00 p.m. (Toronto time) on June 16, 2015, or if the Meeting is adjourned, no later than 10:00 a.m. (Toronto time) on the last business day preceding the day to which the Meeting is adjourned.
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REVISED NOTIFICATION
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Notification of Availability of Revised Investor
Materials
Dear Investor:
Please find attached your revised form of proxy or voting
instruction form for the Annual and Special Meeting of shareholders of Energy
Fuels Inc. (the Corporation) to be held at the offices of Borden Ladner
Gervais LLP, 44th Floor, Scotia Plaza, 40 King Street West, Toronto,
Ontario Canada M5H 3Y4 on Thursday, June 18, 2015 at 10:00 am (Toronto time)
(the Meeting). The Annual and Special Meeting of shareholders of the
Corporation that was originally scheduled for Tuesday, June 16, 2015 (the
Originally Scheduled Meeting) to consider items 1 to 4 below is now being held
on Thursday June 18, 2015 to consider items 1 to 5 set out below. The enclosed
form of proxy or voting instruction form replaces the form of proxy or voting
instruction form previously sent to shareholders relating to the Originally
Scheduled Meeting.
The following matters will be considered and voted upon at the
Meeting:
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1. |
Election of directors, as described under the heading
Election of Directors in the management information circular of the
Corporation dated May 21, 2015 (the Circular); |
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2. |
Appointment of auditors, as described under the heading
Appointment of Auditors in the Circular; |
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3. |
Ratifying the extension of the Shareholder Rights Plan of
the Corporation, as described under Extension of Shareholder Rights Plan
in the Circular; |
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4. |
Ratifying the 2015 Omnibus Equity Incentive Compensation
Plan of the Corporation and the awards previously granted under such plan,
as described under the heading Approval of 2015 Omnibus Equity Incentive
Compensation Plan in the Circular; |
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5. |
Approving the acquisition of all of the outstanding
shares of Uranerz Energy Corporation (the Transaction) and the
issuance of common shares of the Corporation as consideration for, or
related to, the Transaction as detailed in the section entitled
Particulars of Matters Relating to the Proposed Acquisition of Uranerz
in the Circular; and |
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6. |
Other business as may be properly brought before the
meeting |
Under recent changes to Canadian securities rules, Canadian
companies are no longer required to distribute physical copies of certain annual
meeting related materials such as management information circulars and annual
financial statements to their investors. Instead, they may post electronic
versions of such material on a website for investor review. This process, known
as notice-and-access, directly benefits the Corporation through a substantial
reduction in both postage and material costs and also helps the environment
through a decrease in paper documents that are ultimately discarded.
Electronic copies of investor materials related to the Meeting,
including the Management Information Circular, may therefore be found at and
downloaded from www.meetingdocuments.com/cst/EFR or from the Corporations web
page on SEDAR at www.sedar.com. Investors are reminded to review the Management
Information Circular before voting at the Meeting.
You have a number of options to vote your proxy:
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Fax your signed proxy to 1-866-781-3111 |
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Return your signed proxy by mail using the
enclosed business reply envelope |
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Scan and send your signed proxy to
proxy@canstockta.com . |
However you choose to vote, we must receive your vote by no
later than 5:00 pm (Toronto time) on June 16, 2015, or if the Meeting is
adjourned, no later than 10:00 am. (Toronto time) on the last business day
preceding the day to which the Meeting is adjourned. We also strongly encourage
you to first review the matters under discussion for the meeting as described in
the Management Information Circular at www.meetingdocuments.com/cst/EFR.
Should you wish to receive paper copies of investor materials
related to the Meeting, or have any questions, please contact us at
1-888-433-6443 or fulfilment@canstockta.com prior to June 4, 2015 and we will
send them within three business days, giving you sufficient time to vote your
proxy. Following the Meeting, the documents will remain available at the website
listed above for a period of one year.
CONSENT OF DOUGLASS H. GRAVES
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding (a) the technical report entitled Technical
Report, North Rolling Pin Property, Campbell County, Wyoming, U.S.A.
dated June 4, 2010, (b) the technical report entitled Technical Report,
Reno Creek Property, Campbell County, Wyoming, U.S.A. dated October 13,
2010, and (c) the technical report entitled Technical Report, West North
Butte Satellite Properties, Campbell County, Wyoming, U.S.A. dated
December 9, 2008, in the Management Information Circular (the MIC) of
Energy Fuels Inc. (the Company) being included as an exhibit to the
Companys Form 6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the MIC, the 6-K and the
F-10. |
(signed)Douglass H.
Graves
Douglass H. Graves, P.E.
Date: May 26, 2015
CONSENT OF BRUCE LARSON
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding the technical disclosure contained in the news
release dated January 5, 2015 related to Uranerz Energy Corp. (Uranerz)
included as an exhibit to the Current Report on Form 8-K of Uranerz dated
January 5, 2015 (the 8-K) which is incorporated by reference into the
Management Information Circular (the MIC) of Energy Fuels Inc. (the
Company) which is being included as an exhibit to the Companys Form 6-K
(the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the 8-K, the MIC and the 6-K into the Companys Registration
Statement on Form F-10, and any amendments thereto (File No.
333-194916)(the F-10), filed with the United States Securities and
Exchange Commission; and |
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(iii) |
the use of my name in the MIC, the 6-K, the 8-K and the
F-10. |
/s/ Bruce Larson
________________________
Bruce Larson, P.G., Vice
President,
Exploration for Uranerz Energy Corp.
Date: May 26, 2015
CONSENT OF ROSCOE POSTLE ASSOCIATES INC.
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding: |
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(a) |
the technical report entitled Technical Report on the
Arizona Strip Uranium Project, Arizona, U.S.A. dated June 27,
2012; |
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(b) |
the technical report entitled Technical Report on the
EZ1 and EZ2 Breccia Pipes, Arizona Strip District, U.S.A. dated June 27,
2012; |
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(c) |
the technical report entitled Technical Report on the
Henry Mountains Complex Uranium Property, Utah, U.S.A. dated June 27,
2012; and |
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(d) |
the technical report entitled Technical Report on the
Roca Honda Project, McKinley County, New Mexico, U.S.A." dated February
27, 2015; |
contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) being included as an exhibit to the Companys Form 6-K (the 6-K);
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of our name in the AIF, the 6-K, the MIC, and the
F-10. |
ROSCOE POSTLE ASSOCIATES INC.
(Signed)Deborah A.
McCombe
Deborah A. McCombe, P.Geo.
President & CEO
Date: May 26, 2015
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Professionals in resources, mining, processing,
construction and the environment |
www.cam-llc.com |
CONSENT OF CHLUMSKY, ARMBRUST & MEYER LLC
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report Update of Gas Hills Uranium
Project Freemont and Natrona Counties, Wyoming, USA dated March 22, 2013
(the Technical Disclosure), contained in the Annual Information Form for
the period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of our name in the AIF, the 6- K, the MIC, and
the F-10. |
CHLUMSKY, ARMBRUST & MEYER LLC |
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Name: Michael J. Read |
Title: Principal Mine Engineer |
Date: May 26, 2015
12600 W. Colfax Ave., Suite A-140 |
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Lakewood, Colorado 80215 |
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Telephone: (303) 716-1617 |
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Fax: (303) 716-3386 |
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CONSENT OF TERENCE P. MCNULTY
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding the technical report entitled Juniper Ridge
Uranium Project, Carbon County, Wyoming, USA dated January 27, 2014,
contained in the Annual Information Form for the period ended December 31,
2014 (the AIF) of Energy Fuels Inc. (the Company) being incorporated
by reference into the Companys Management Information Circular (the
MIC) which is being included as an exhibit to the Companys Form 6-K
(the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
Terence P. McNulty |
Terence P. McNulty, P.E., D.Sc. |
Date: May 26, 2015
MINE
DEVELOPMENT ASSOCIATES |
MINE ENGINEERING SERVICES |
CONSENT OF MINE DEVELOPMENT ASSOCIATES
The undersigned hereby consents to:
(i) the filing of the written
disclosure regarding the technical report entitled Technical Report on the
Copper King Project, Laramie County, Wyoming dated August 24, 2012 (the
Technical Disclosure) in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) the incorporation by reference of
the Technical Disclosure, the MIC and the 6-K into the Companys Registration
Statement on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission; and
(iii) the use of our name in the AIF, the
6-K, the MIC, and the F-10.
MINE DEVELOPMENT ASSOCIATES
Michael
Gustin |
Michael Gustin |
Title: President |
Date: May 26, 2015
775-856-5700
210 South Rock Blvd.
Reno, Nevada
89502
FAX: 775-856-6053
MINE
DEVELOPMENT ASSOCIATES |
MINE ENGINEERING SERVICES |
CONSENT OF NEIL PRENN
The undersigned hereby consents to:
(i) the filing of the written
disclosure regarding the technical report entitled Technical Report on the
Copper King Project, Laramie County, Wyoming dated August 24, 2012 (the
Technical Disclosure) in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) the incorporation by reference of the
Technical Disclosure, the MIC and the 6-K into the Companys Registration
Statement on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission; and
(iii) the use of my name in the AIF, the 6-K, the
MIC, and the F-10.
Neil
Prenn |
Neil Prenn, Registered Professional Mining Engineer
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Date: May 21, 2015
775-856-5700
210 South Rock Blvd.
Reno, Nevada
89502
FAX: 775-856-6053
CONSENT OF RICHARD WHITE
The undersigned hereby consents to:
(i) |
the filing of the disclosure of scientific or technical
information concerning mineral projects (the Technical Disclosure) in
the Annual Information Form for the period ended December 31, 2014 (the
AIF) of Energy Fuels Inc. (the Company) being incorporated by
reference into the Companys Management Information Circular (the MIC)
which is being included as an exhibit to the Companys Form 6-K (the
6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
/s/ Richard White |
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Richard White |
Date: May 26, 2015
CONSENT OF WILLIAM E. ROSCOE
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Henry Mountains Complex
Uranium Property, Utah, U.S.A. dated June 27, 2012 (the Technical
Disclosure), contained in the Annual Information Form for the period
ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company)
being incorporated by reference into the Companys Management Information
Circular (the MIC) being included as an exhibit to the Companys Form
6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed)
William E. Roscoe
William E. Roscoe,
Ph.D., P.Eng.
Date: May 26, 2015
CONSENT OF DOUGLAS H. UNDERHILL
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Henry Mountains Complex
Uranium Property, Utah, U.S.A. dated June 27, 2012, (the Technical
Disclosure) contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed) Douglas H.
Underhill
Douglas H. Underhill, Ph.D., C.P.G.
Date: May 26, 2015
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Professionals in resources, mining, processing,
construction and the environment |
www.cam-llc.com
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CONSENT OF THOMAS C. POOL
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding (a) the technical report entitled Technical Report
on the Arizona Strip Uranium Project, Arizona, U.S.A. dated June 27,
2012, (b) the technical report entitled Technical Report Update of Gas
Hills Uranium Project Freemont and Natrona Counties, Wyoming, USA dated
March 22, 2013, and (c) the technical report entitled Technical Report on
the Henry Mountains Complex Uranium Property, Utah, U.S.A. dated June 27,
2012, contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
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Thomas C. Pool, P.E. |
Date: May 26, 2015
12600 W. Colfax Ave., Suite A-140 |
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Lakewood, Colorado 80215 |
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Telephone: (303) 716-1617 |
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Fax: (303) 716-3386 |
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CONSENT OF DAVID A. ROSS
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding (a) the technical report entitled Technical Report
on the Arizona Strip Uranium Project, Arizona, U.S.A. dated June 27, 2012
and (b) the technical report entitled Technical Report on the EZ1 and EZ2
Breccia Pipes, Arizona Strip District, U.S.A. dated June 27, 2012,
contained in the Annual Information Form for the period ended December 31,
2014 (the AIF) of Energy Fuels Inc. (the Company) being incorporated
by reference into the Companys Management Information Circular (the
MIC) which is being included as an exhibit to the Companys Form 6-K
(the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed) David A.
Ross
David A. Ross, P.Geo.
Date: May 26, 2015
CONSENT OF CHRISTOPHER MORETON
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding the technical report entitled Technical Report on
the EZ1 and EZ2 Breccia Pipes, Arizona Strip District, U.S.A. dated June
27, 2012, contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information
Circular (the MIC) being included as an exhibit to the Companys Form
6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed) Christopher
Morton
Christopher Moreton, Ph.D., P.Geo.
Date: May 26, 2015
CONSENT OF DOUGLAS C. PETERS
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding: |
|
(a) |
the technical report entitled The Daneros Mine Project,
San Juan County, Utah, U.S.A. dated July 18, 2012; |
|
(b) |
the technical report entitled Updated Technical Report
on Energy Fuels Resources Corporations Whirlwind Property (Including
Whirlwind, Far West, and Crosswind Claim Groups and Utah State
Metalliferous Minerals Lease ML- 49312), Mesa County, Colorado and Grand
County, Utah, dated March 15, 2011; |
|
(c) |
the technical report entitled Updated Technical Report
on Energy Fuels Resources Corporations Energy Queen Project, San Juan
County, Utah dated March 15, 2011; |
|
(d) |
the technical report entitled Amended Technical Report
on Energy Fuels Resources Corporations Willhunt Property, San Miguel
County, Colorado dated November 30, 2008; |
|
(e) |
the technical report entitled Updated Technical Report
on Sage Plain Project (Including the Calliham Mine), San Juan County, Utah
USA dated March 18, 2015; and |
|
(f) |
the technical report entitled Technical Report on Energy
Fuels Inc.s La Sal District Project, dated March 25,
2014, |
contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) |
incorporation by reference of the Technical Disclosure,
the MIC and the 6-K into the Companys Registration Statement on Form
F-10, and any amendments thereto (File No. 333-194916)(the F-10), filed
with the United States Securities and Exchange Commission; and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
|
Douglas C. Peters, Certified Professional Geologist
|
Date: May 26, 2015
CONSENT OF PETERS GEOSCIENCES
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding: |
|
(a) |
the technical report entitled The Daneros Mine Project,
San Juan County, Utah, U.S.A. dated July 18, 2012; |
|
(b) |
the technical report entitled Updated Technical Report
on Energy Fuels Resources Corporations Whirlwind Property (Including
Whirlwind, Far West, and Crosswind Claim Groups and Utah State
Metalliferous Minerals Lease ML- 49312), Mesa County, Colorado and Grand
County, Utah, dated March 15, 2011; |
|
(c) |
the technical report entitled Updated Technical Report
on Energy Fuels Resources Corporations Energy Queen Project, San Juan
County, Utah dated March 15, 2011; |
|
(d) |
the technical report entitled Amended Technical Report
on Energy Fuels Resources Corporations Willhunt Property, San Miguel
County, Colorado dated November 30, 2008; |
|
(e) |
the technical report entitled Updated Technical Report
on Sage Plain Project (Including the Calliham Mine), San Juan County, Utah
USA dated March 18, 2015; and |
|
(f) |
the technical report entitled Technical Report on Energy
Fuels Inc.s La Sal District Project, dated March 25,
2014, |
contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) |
incorporation by reference of the Technical Disclosure,
the MIC and the 6-K into the Companys Registration Statement on Form
F-10, and any amendments thereto (File No. 333-194916)(the F-10), filed
with the United States Securities and Exchange Commission; and |
|
|
(iii) |
the use of our name in the AIF, the 6-K, the MIC, and the
F-10. |
PETERS GEOSCIENCES
|
Name: Douglas C. Peters |
Title Owner |
Date: May 26, 2015
CONSENT OF BRS ENGINEERING
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Energy Fuels
Technical Disclosure) regarding (a) the technical report entitled Sheep
Mountain Uranium Project, Fremont County, Wyoming, USA, Updated
Preliminary Feasibility Study, National Instrument 43-101 Technical
Report dated April 13, 2012, and (b) the technical report entitled
Juniper Ridge Uranium Project, Carbon County, Wyoming, USA dated January
27, 2014, contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6-K (the 6-K); |
|
|
(ii) |
the filing of the written disclosure (the Uranerz
Technical Disclosure) regarding (a) the technical report entitled
Nichols Ranch Uranium Project, 43-101 Technical Report, Preliminary
Economic Assessment dated February 28, 2015, and (b) Arkose Uranium
Project, Mineral Resource and Exploration Target, 43-101 Technical Report
dated February 28, 2015, in the MIC which is being included as an exhibit
to the 6-K; |
|
|
(iii) |
the incorporation by reference of the Energy Fuels
Technical Disclosure and the Uranerz Technical Disclosure from the MIC and
the 6-K into the Companys Registration Statement on Form F-10, as amended
(File No. 333-194916)(the F-10) filed with the United States Securities
and Exchange Commission (the SEC); |
|
|
(iv) |
the filing of the Uranerz Technical Disclosure in the
Form 8-K of Uranerz Energy Corporation filed with the SEC on March 19,
2015 (the 8-K) and the incorporation by reference of such technical
disclosure into the MIC, the 6-K and the F-10; and |
|
|
(v) |
the use of our name in the AIF, the MIC, the 8-K, the
F-10 and the 6-K. |
BRS ENGINEERING
/s/ Douglas L. Beahm |
Name: Douglas L. Beahm |
Title: President BRS Engineering
|
Date: May 26, 2015
CONSENT OF DOUGLAS L. BEAHM
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Energy Fuels
Technical Disclosure) regarding (a) the technical report entitled Sheep
Mountain Uranium Project, Fremont County, Wyoming, USA, Updated
Preliminary Feasibility Study, National Instrument 43-101 Technical
Report dated April 13, 2012, and (b) the technical report entitled
Juniper Ridge Uranium Project, Carbon County, Wyoming, USA dated January
27, 2014, contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6-K (the 6-K); |
|
|
(ii) |
the filing of the written disclosure (the Uranerz
Technical Disclosure) regarding (a) the technical report entitled
Nichols Ranch Uranium Project, 43-101 Technical Report, Preliminary
Economic Assessment dated February 28, 2015, and (b) Arkose Uranium
Project, Mineral Resource and Exploration Target, 43-101 Technical Report
dated February 28, 2015, in the MIC which is being included as an exhibit
to the 6-K; |
|
|
(iii) |
the incorporation by reference of the Energy Fuels
Technical Disclosure and the Uranerz Technical Disclosure from the MIC and
the 6-K into the Companys Registration Statement on Form F-10, as amended
(File No. 333-194916)(the F-10) filed with the United States Securities
and Exchange Commission (the SEC); |
|
|
(iv) |
the filing of the Uranerz Technical Disclosure in the
Form 8-K of Uranerz Energy Corporation filed with the SEC on March 19,
2015 (the 8-K) and the incorporation by reference of such technical
disclosure into the MIC, the 6-K and the F-10; and |
|
|
(v) |
the use of my name in the AIF, the MIC, the 8-K, the F-10
and the 6-K. |
/s/ Douglas L. Beahm |
Douglas L. Beahm, P.E., P.G.
|
Date: May 26, 2015
|
|
Professionals in resources, mining,
processing, construction and the environment |
www.cam-llc.com |
CONSENT OF ROBERT L. SANDEFUR
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report Update of Gas Hills Uranium
Project Freemont and Natrona Counties, Wyoming, USA dated March 22, 2013
(the Technical Disclosure) contained in the Annual Information Form for
the period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
|
Robert L. Sandefur, Certified Professional Engineer |
Date: May 26, 2015
12600 W. Colfax Ave., Suite A-140 |
|
Lakewood, Colorado 80215 |
|
Telephone: (303) 716-1617 |
|
Fax: (303) 716-3386 |
|
CONSENT OF ROBERT MICHAUD
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Roca Honda Project,
McKinley County, New Mexico, U.S.A." dated February 27, 2015, (the
Technical Disclosure), contained in the Annual Information Form for the
period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed)
Robert Michaud
Robert Michaud, P.Eng.
Date: May 26, 2015
CONSENT OF STUART E. COLLINS
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Roca Honda Project,
McKinley County, New Mexico, U.S.A." dated February 27, 2015, (the
Technical Disclosure), contained in the Annual Information Form for the
period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed) Stuart
E. Collins
Stuart E. Collins, P.E.
Date: May 26, 2015
|
|
Professionals in resources, mining, processing,
construction and the environment |
www.cam-llc.com |
CONSENT OF RICHARD L. NIELSEN
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report Update of Gas Hills Uranium
Project Freemont and Natrona Counties, Wyoming, USA dated March 22, 2013
(the Technical Disclosure), contained in the Annual Information Form for
the period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
|
Richard L. Nielsen, Professional Geologist
|
Date: May 26, 2015
12600 W. Colfax Ave., Suite A-140 |
|
Lakewood, Colorado 80215 |
|
Telephone: (303) 716-1617 |
|
Fax: (303) 716-3386 |
|
|
|
Professionals in
resources, mining, processing, construction and the environment |
www.cam-llc.com |
CONSENT OF MATTHEW P. REILLY
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report Update of Gas Hills Uranium
Project Freemont and Natrona Counties, Wyoming, USA dated March 22, 2013
(the Technical Disclosure), contained in the Annual Information Form for
the period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
|
Matthew P. Reilly, Professional Engineer
|
Date: May 26, 2015
12600 W. Colfax Ave., Suite A-140 |
|
Lakewood, Colorado 80215 |
|
Telephone: (303) 716-1617 |
|
Fax: (303) 716-3386 |
|
MINE
DEVELOPMENT ASSOCIATES |
MINE ENGINEERING SERVICES |
CONSENT OF PAUL TIETZ
The undersigned hereby consents to:
(i) the filing of the written
disclosure regarding the technical report entitled Technical Report on the
Copper King Project, Laramie County, Wyoming dated August 24, 2012 (the
Technical Disclosure) in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) the incorporation by reference of the
Technical Disclosure, the MIC and the 6-K into the Companys Registration
Statement on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission; and
(iii) the use of my name in the AIF, the 6-K, the
MIC, and the F-10.
Paul
Tietz |
Paul Tietz, Certified Professional Geologist
|
Date: May 26, 2015
775-856-5700
210 South Rock Blvd.
Reno, Nevada 89502
FAX:
775-856-6053
CONSENT OF STEPHEN P. ANTONY
The undersigned hereby consents to:
(i) |
the incorporation by reference of disclosure of
scientific or technical information concerning mineral projects (the
Technical Disclosure) of Energy Fuels Inc. (the Company) in
the: |
|
|
|
|
a. |
Management Discussion and Analysis for the period ended
December 31, 2014 (the 2014 MD&A) of the Company; |
|
b. |
Management Discussion and Analysis for the period ended
March 31, 2015 (the March 2015 MD&A) of the Company; |
|
c. |
News release dated January 5, 2015 included with the
Current Report on Form 8-K of Uranerz Energy Corporation dated January 5,
2015 (the 8-K); |
|
|
|
|
into the Companys Management Information Circular (the
MIC) being included as an exhibit to the Company Form 6-K (the
6-K); |
|
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Form F-10 Registration
statement filed with the United States Securities and Exchange Commission,
and any amendments thereto (File No. 333-194916)(the F-10);
and |
|
|
|
(iii) |
the use of my name in the 2014 MD&A, March 2015
MD&A, the 6-K, the MIC, the 8-K and the
F-10. |
/s/
Stephen P. Antony |
Name: Stephen P. Antony, P.E. |
Title: President and Chief Executive |
Officer, Energy Fuels Inc. |
Date: May 26, 2015
CONSENT OF SRK CONSULTING (U.S.) INC.
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled NI 43- 101 Technical Report on Resources Wate
Uranium Breccia Pipe Northern Arizona, USA dated March 10, 2015 (the
Technical Disclosure) in the Annual Information Form for the period
ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company)
being incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6- K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of our name in the AIF, the 6- K, the MIC, and
the F-10. |
SRK CONSULTING (U.S.) INC. |
|
Name: Corolla Hoag |
Title: Practice Leader |
Date: May 26, 2015
CONSENT OF BARTON G. STONE
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Roca Honda Project,
McKinley County, New Mexico, U.S.A." dated February 27, 2015, (the
Technical Disclosure), contained in the Annual Information Form for the
period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed) Barton G. Stone
Barton G. Stone, C.P.G.
Date: May 26, 2015
CONSENT OF MARK B. MATHISEN
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Roca Honda Project,
McKinley County, New Mexico, U.S.A." dated February 27, 2015, (the
Technical Disclosure), contained in the Annual Information Form for the
period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
(Signed) Mark B.
Mathisen
Mark B. Mathisen, C.P.G.
Date: May 26, 2015
CONSENT OF ALINCO GEOSERVICES, INC.
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding: |
|
|
|
|
(a) |
the technical report entitled Amended Technical Report
on Energy Fuels Resources Corporations Farmer Girl Property, Montrose
County, Colorado dated December 16, 2008; |
|
(b) |
the technical report entitled Amended Technical Report
on Energy Fuels Resources Corporations Torbyn Property, Mesa County,
Colorado dated January 7, 2009; |
|
(c) |
the technical report entitled Marquez Uranium Property,
McKinley and Sandoval Counties, New Mexico dated June 10, 2010;
and |
|
(d) |
the technical report entitled Technical Report on
Section 1, T18N, R12W, Nose Rock Uranium Property, McKinley County, New
Mexico, dated February 9, 2009, |
contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of our name in the AIF, the 6-K, the MIC, and the
F-10. |
ALINCO GEOSERVICES, INC. |
|
|
/s/ M. Hassan Alief |
|
Name: M. Hassan Alief |
Title: President |
Date: May 26, 2015
CONSENT OF M. HASSAN ALIEF
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding: |
|
(a) |
the technical report entitled Amended Technical Report
on Energy Fuels Resources Corporations Farmer Girl Property, Montrose
County, Colorado dated December 16, 2008; |
|
(b) |
the technical report entitled Amended Technical Report
on Energy Fuels Resources Corporations Torbyn Property, Mesa County,
Colorado dated January 7, 2009; |
|
(c) |
the technical report entitled Marquez Uranium Property,
McKinley and Sandoval Counties, New Mexico dated June 10, 2010;
and |
|
(d) |
the technical report entitled Technical Report on
Section 1, T18N, R12W, Nose Rock Uranium Property, McKinley County, New
Mexico, dated February 9, 2009, |
contained in the Annual Information Form for the period ended
December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company) being
incorporated by reference into the Companys Management Information Circular
(the MIC) which is being included as an exhibit to the Companys Form 6-K (the
6-K);
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
/s/ M. Hassan Alief |
M. Hassan Alief |
Date: May 26, 2015
CONSENT OF HAROLD R. ROBERTS
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Technical Report on the Roca Honda Project,
McKinley County, New Mexico, U.S.A." dated February 27, 2015, (the
Technical Disclosure), contained in the Annual Information Form for the
period ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the
Company) being incorporated by reference into the Companys Management
Information Circular (the MIC) which is being included as an exhibit to
the Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
/s/ Harold R. Roberts |
|
Harold R. Roberts, P.E., Executive Vice |
President and Chief Operating Officer of |
Energy Fuels Inc. |
Date: May 26, 2015
CONSENT OF FRANK A. DAVIESS
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled NI 43- 101 Technical Report on Resources Wate
Uranium Breccia Pipe Northern Arizona, USA dated March 10, 2015 (the
Technical Disclosure) in the Annual Information Form for the period
ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company)
being incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
/s/ Frank A. Daviess |
Frank A. Daviess |
Date: May 26, 2015
CONSENT OF ALLAN MORAN
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled NI 43- 101 Technical Report on Resources Wate
Uranium Breccia Pipe Northern Arizona, USA dated March 10, 2015 (the
Technical Disclosure) in the Annual Information Form for the period
ended December 31, 2014 (the AIF) of Energy Fuels Inc. (the Company)
being incorporated by reference into the Companys Management Information
Circular (the MIC) which is being included as an exhibit to the
Companys Form 6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
|
|
(iii) |
the use of my name in the AIF, the 6-K, the MIC, and the
F-10. |
/s/ Allan Moran |
Allan Moran |
Date: May 26, 2015
CONSENT OF PAUL GORANSON
The undersigned hereby consents to:
(i) |
the filing of the written disclosure regarding the
technical report entitled Nichols Ranch Uranium Project, 43-101 Technical
Report, Preliminary Economic Assessment dated February 28, 2015 (the
PEA) in the Management Information Circular (the MIC) of Energy Fuels
Inc. (the Company) being included as an exhibit to the Companys Form
6-K (the 6-K); |
|
|
(ii) |
the incorporation by reference of the technical
disclosure derived from the PEA and the technical report entitled the
Arkose Uranium Project Mineral Resource and Exploration Target 43-101
Technical Report Wyoming, USA dated February 28, 2015, in the Form 8-K
of Uranerz Energy Corporation filed with the SEC on March 19, 2015 (the
8-K) into the MIC and the 6-K; |
|
|
(i) |
the incorporation by reference of the technical
disclosure in the PEA, the 6-K and the 8-K into the Companys Registration
Statement on Form F-10, and any amendments thereto (File No.
333-194916)(the F-10) filed with the United States Securities and
Exchange Commission; and |
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(iii) |
the use of my name in the MIC, the 8-K, the F-10 and the
6-K. |
s/ Paul Goranson |
Paul Goranson, P.E. |
Date: May 26, 2015
CONSENT OF DON R. WOODY
The undersigned hereby consents to:
(i) |
the filing of the written disclosure (the Technical
Disclosure) regarding the technical report entitled Technical Report,
West North Butte Satellite Properties, Campbell County, Wyoming, U.S.A.
dated December 9, 2008, in the Management Information Circular (the MIC)
of Energy Fuels Inc. (the Company) being included as an exhibit to the
Companys Form 6-K (the 6-K); |
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(ii) |
the incorporation by reference of the Technical
Disclosure, the MIC and the 6-K into the Companys Registration Statement
on Form F-10, and any amendments thereto (File No. 333-194916)(the
F-10), filed with the United States Securities and Exchange Commission;
and |
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|
(iii) |
the use of my name in the MIC, the 6-K and the
F-10. |
|
(Signed) Don R. Woody |
|
Don R. Woody |
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Date: |
May 26,
2015 |
|
KPMG LLP Bay Adelaide Centre 333
Bay Street Suite 4600 Toronto ON M5H 2S5 Canada |
Telephone Fax Internet
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(416) 777-8500 (416) 777-8818
www.kpmg.ca
|
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Consent of Independent Registered Public Accounting Firm
The Board of Directors
Energy Fuels Inc.
We consent to the use of our report dated March 18, 2015, with
respect to the consolidated financial statements of Energy Fuels Inc.
incorporated by reference in this Form 6-K.
We also consent to the incorporation by reference of such
report in the registration statements No. 333-194916 on Form F-10 of Energy
Fuels Inc.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
May 26, 2015
May 26, 2015
Dear Sirs,
Reference is made to our opinion letter, dated January 2, 2015,
with respect to the fairness from a financial point of view of the exchange
ratio of 0.255 common shares, no par value per share, of Energy Fuels Inc.
(Energy Fuels) to be paid for each outstanding share of common stock,
$0.001 par value (the Shares) of Uranerz Energy Corporation (the
Uranerz), pursuant to the Agreement and Plan of Merger, dated as of
January 4, 2015, as amended on May 8 2015, by and among Energy Fuels, EFR Nevada
Corp., a corporation organized under the laws of the state of Nevada and an
indirect wholly-owned subsidiary of Energy Fuels and Uranerz.
The foregoing opinion letter is provided for the information
and assistance of the Board of Directors of Energy Fuels thereof in connection
with their consideration of the transaction contemplated therein and is not to
be reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor is it to be filed with, included in or referred to in whole
or in part in any registration statement, proxy statement or any other document,
except in accordance with our prior written consent. We understand that Energy
Fuels has determined to include our opinion in its Amended Management
Information Circular (the MIC), which is included as an exhibit to the
Form 6-K of Energy Fuels (the 6-K) which is incorporated by reference
into the Registration Statement on Form F-10 of Energy Fuels, as amended, filed
with the United States Securities and Exchange Commission (File No.
333-194916)(the F-10).
In that regard, we hereby consent to the disclosure regarding
our fairness opinion, and the inclusion of the foregoing opinion and related
disclosure in the MIC, the 6-K and the incorporation by reference of such
opinion and disclosure into the F-10. We also consent to the use of our name in
the MIC, the 6-K and the F-10.
Yours very truly,
Managing Director
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We hereby consent to the incorporation by reference into the
Registration Statement on Form F-10 of Energy Fuels Inc., as amended (File No.
333-194916), filed with the United States Securities and Exchange Commission of
our reports dated March 11, 2015 relating to the financial statements, and the
effectiveness of internal control over financial reporting of Uranerz Energy
Corporation, which appear in Uranerz Energy Corporations Annual Report on Form
10-K for the year ended December 31, 2014, which is incorporated by reference
into the Management Information Circular of Energy Fuels Inc. (the MIC) which
is included as an exhibit to the Form 6-K of Energy Fuels Inc. We also consent
to the reference to us under the heading Interests of Experts in the MIC.
/s/Manning Elliott LLP |
|
CHARTERED ACCOUNTANTS |
Vancouver, Canada |
May 26, 2015 |
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