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On April 9, 2022, Contango ORE, Inc. (the “Company”)
and Queen’s Road Capital Investment Ltd. (“QRC”), entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the Company agreed to issue a $20,000,000 unsecured convertible debenture to QRC (the “Debenture”). The closing and issuance of the Debenture is expected to occur on or prior to April 29, 2022, subject to customary closing conditions.
The Debenture bears interest at the rate of 8% per annum, payable quarterly with 6% paid in cash and 2% paid in shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”) issued at the market price at the time of payment based on a 20-day volumetric
weighted average price (“VWAP”). The Debenture will be unsecured and will mature four years after issuance. QRC may convert the Debenture into Common
Stock at any time at a conversion price of $30.50 per share, subject to adjustment as set forth in the Debenture. The Company may redeem the Debenture at any time after the third anniversary of issuance at 105% of par, provided that the
market price (based on a 20-day VWAP) of the Common Stock is at least 130% of the conversion price. The Company may also redeem the Debenture, and QRC will have the right to put the Debenture to the Company, upon a Change of Control (as
defined in the Debenture) of the Company, at a price of 130% of par for the first three years following issuance and 115% of par thereafter plus accrued interest paid at the time of redemption or put in the same form as other interest
payments.
The proceeds from issuance of the Debenture will be used to fund the Company’s commitments to the Peak Gold, LLC joint venture,
the exploration and development at the Company’s Lucky Shot properties and for general corporate purposes.
Pursuant to the Investment Agreement, the Company agreed to pay QRC an establishment fee equal to 3% of the principal amount of
the Debenture, payable in either cash or shares of Common Stock (any such shares the “Establishment Fee Shares”) at QRC’s election. The Establishment
Fee Shares will be valued at $24.82 per share, the VWAP as of the date of the Investment Agreement. QRC has elected to receive payment of the establishment fee in Establishment Fee Shares.
Pursuant to the Investment Agreement, QRC will enter into an investor rights agreement with the Company in connection with the
issuance of the Debenture (the “Investor Rights Agreement”). The Investor Rights Agreement will require QRC and its affiliates, for so long as they own
5% or more of the outstanding Common Stock to (i) standstill, (ii) not participate in any unsolicited or hostile takeover of the Company, (iii) not tender their shares of Common Stock unless the Company’s board of directors recommends such
tender, (iv) vote their shares of Common Stock in the manner recommended by the Company’s board to its stockholders and (v) not transfer their shares of Common Stock representing more than 0.5% of the outstanding shares of Common Stock
without notifying the Company in advance whereupon the Company will have a right to identify a buyer for those shares.
The Debenture, the shares of Common Stock underlying the Debenture and the Establishment Fee Shares will be issued in
transactions exempt from the registration requirements of the Securities Act of 1933 (the “Securities Act”), as amended, pursuant to the exemption
afforded by Section 230.901 of the Securities Act.
The foregoing is a summary only and does not
purport to be a complete description of all of the terms, provisions, covenants and agreements contained in the Investment Agreement, Debenture and
Investor Rights Agreement, and is subject to and qualified in its entirety by reference to the full text of the Investment Agreement, form of Debenture and form of Investor Rights Agreement, which are filed herewith as Exhibits 10.1, 4.1
and 10.2, respectively, to this Current Report on Form 8-K and are incorporated into this Item 1.01 by reference.
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