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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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