UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
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[X]
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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[X]
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Definitive Additional Materials
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Soliciting Materials under §
240.14a-12
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Klondex Mines Ltd.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]
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No fee required.
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction
applies:
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(2)
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Aggregate number of securities to which transaction
applies:
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(3)
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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(4)
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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[ ]
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Fee paid previously with
preliminary materials.
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Check the box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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EXPLANATORY NOTE
The following supplemental information supplements the definitive proxy statement on Schedule 14A of Klondex Mines Ltd. (the “Company”) filed with the Securities and Exchange Commission on June 12, 2018 (the “Proxy Statement”) relating to the Company’s annual and special meeting of securityholders to be held on July 12, 2018. This supplemental information is being provided to:
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(i)
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update for an amendment to the arrangement agreement dated March 16, 2018 by and among the
Company, Hecla Mining Company (“Hecla”) and 1156291 B.C. Unlimited Liability Company (“Hecla
Acquisition Subco”), a wholly-owned subsidiary of Hecla, as amended on June 4, 2018 (the “Arrangement Agreement”), which amendment was entered into on July 5, 2018;
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(ii)
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update for certain changes in the composition of the management team of Havilah Mining Corporation, the Company’s subsidiary (“Havilah”), that occurred after the Proxy Statement was filed, and
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(iii)
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provide (a) audited interim financial statements of Havilah for the period from incorporation on May 3, 2018 to May 31, 2018, and (b) unaudited pro forma financial statements of Havilah for the three months ended March 31, 2018 and year ended December 31, 2017 (collectively, the “Financial Statements”), which Financial Statements were provided by Havilah to the TSX Venture Exchange (the “TSXV”) subsequent to the filing of the Proxy Statement in connection with Havilah’s listing on the TSXV.
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The
pro forma
information is not materially different from the information in the carve-out financial statements of Havilah set forth in the Proxy Statement. The information contained in the audited interim financial statements provided hereby is consistent with the information in the carve-out financial statements of Havilah set forth in the Proxy Statement.
The Financial Statements were provided in satisfaction of TSXV requirements and are being provided hereby solely for informational purposes.
Capitalized terms not defined herein have the meanings given to
them in the Proxy Statement.
This supplemental information should be read in conjunction
with the proxy statement.
2
Amendment to the Arrangement Agreement
On July 5, 2018, the Company, Hecla and Hecla Acquisition
Subco entered into an amendment (the "Amendment") to the Arrangement Agreement.
The Amendment (i) revises the terms “Maximum Cash Consideration” and “Maximum Purchaser Shares,” as each are used in the Arrangement Agreement and the plan of arrangement attached to the Arrangement Agreement (the “Plan of Arrangement”), and (ii) adds a new defined term, “Outstanding Warrant Shares,” to both the Arrangement Agreement and Plan of Arrangement, in each case, to reflect the possibility that current “in the money” Company warrants may not be exercised prior to the closing of the Arrangement, and to give effect to any such unexercised warrants in the calculation of the amounts under such defined terms, as revised. The Amendment does not change the exchange ratio or the consideration to be received by securityholders of the Company in the Arrangement. Additionally, the Amendment makes miscellaneous, conforming changes to the Plan of Arrangement that are consistent with the foregoing summary, as well as certain other immaterial changes.
The foregoing description of the Amendment does not purport
to be complete and is subject to, and qualified in its entirety by, the full
text of the Amendment, which is set forth below.
AMENDING AGREEMENT
THIS
AMENDING AGREEMENT
dated as of the 5th day of July, 2018
BETWEEN:
HECLA MINING COMPANY
, a corporation existing under the
Laws of the State of Delaware
(the
Purchaser
)
- and -
1156291 B.C. UNLIMITED LIABILITY COMPANY
, an unlimited
liability company existing under the Laws of the Province of British Columbia
(
Acquireco
)
- and -
KLONDEX MINES LTD.
, a corporation existing under the
Laws of the Province of British Columbia
(the
Company
).
WHEREAS:
A.
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The Purchaser, Acquireco and the Company are party to an
arrangement agreement dated March 16, 2018, as amended on June 4, 2018
(the
Arrangement Agreement
) pursuant to which, among other
things, the Purchaser has agreed to acquire, indirectly, all of the issued
and outstanding common shares in the capital of Klondex pursuant to an
arrangement under the
Business Corporations Act
(British Columbia);
and
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B.
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the Purchaser, Acquireco and the Company wish to further
amend the Arrangement Agreement.
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NOW THEREFORE
, in consideration of the covenants and
agreements herein contained and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
1.
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Unless otherwise defined herein, terms that are defined
in the Arrangement Agreement have the same meaning in this Amending
Agreement.
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2.
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The definition of Maximum Cash Consideration in Section
1.1 of the Arrangement Agreement is deleted in its entirety and replaced
with the following:
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Maximum Cash Consideration
means the amount equal to (a) US$161,615,917 less the amount equal to (b) the
number of Outstanding Warrant Shares multiplied by $0.8411; .
3.
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The definition of Maximum Purchaser Shares in Section
1.1 of the Arrangement Agreement is deleted in its entirety and replaced
with the following:
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Maximum Purchaser Shares
means the amount equal to (a) 79,479,859 Purchaser Shares less the amount equal
to (b) the number of Outstanding Warrant Shares multiplied by 0.4136; .
4.
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Section 1.1 of the Arrangement Agreement is amended by
adding the following new definition, to appear in Section 1.1 in
alphabetical order along with the existing provisions of Section
1.1:
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(a)
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Outstanding Warrant Shares
means any of the
Company Shares issuable immediately prior to the Effective Time under the
Company Warrants;.
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5.
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The plan of arrangement attached as Schedule A to the
Arrangement Agreement is hereby amended and replaced in its entirety with
the plan of arrangement attached as Schedule A hereto.
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6.
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All other provisions of the Arrangement Agreement remain
in full force and effect, unamended.
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7.
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This Amending Agreement shall be binding on and shall
inure to the benefit of the parties and their respective successors and
permitted assigns.
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8.
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This Amending Agreement may be executed and delivered in
any number of counterparts (including by facsimile or electronic
transmission), each of which will be deemed to be an original and all of
which taken together will be deemed to constitute one and the same
instrument.
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IN
WITNESS WHEREOF
the parties hereto have duly executed this Amending
Agreement as of the day and year first above written.
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/s/ David Sienko
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Per:
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Name: David Sienko
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Title: Vice President and General Counsel
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2
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1156291 B.C. UNLIMITED LIABILITY
COMPANY
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/s/ Dean McDonald
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Per:
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Name: Dean McDonald
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Title: Vice President
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/s/ Barry Dahl
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Per:
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Name: Barry Dahl
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Title: Chief Financial Officer
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3
SCHEDULE A
PLAN OF ARRANGEMENT
PLAN OF ARRANGEMENT
UNDER SECTION 288 OF THE
BUSINESS CORPORATIONS ACT (BRITISH COLUMBIA)
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.01
Definitions
In
this Plan of Arrangement, unless the context otherwise requires, the following
words and terms with the initial letter or letters thereof capitalized shall
have the meanings ascribed to them below:
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(a)
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0985472
means 0985472 B.C. Ltd., a corporation
existing under the BCBCA and a wholly-owned subsidiary of the Company,
and, following the completion of the step in Section 3.02(s), 0985472 B.C.
Unlimited Liability Company;
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(b)
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Acquireco
means 1156291 B.C. Unlimited Liability
Company, an unlimited liability company existing under the BCBCA and a
wholly-owned subsidiary of the Purchaser;
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(c)
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Acquireco Common Shares
means the common shares
in the capital of Acquireco;
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(d)
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Affected Securities
means the Company Shares,
the Company Options, the Company DSUs, and the Company RSUs;
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(e)
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Affected Securityholders
means the Company
Shareholders, the Company Optionholders, the Company DSU Holders, and the
Company RSU Holders;
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(f)
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Aggregate Elected Cash
means the aggregate Cash
Consideration payable to Participating Former Securityholders who make a
valid election to receive the Cash Consideration in respect of all of
their Company Shares pursuant to Section 3.02(l), without regard to
Section 3.02(m);
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(g)
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Aggregate Elected Purchaser Shares
means the
aggregate Purchaser Share Consideration payable to Participating Former
Securityholders who make a valid election to receive the Purchaser Share
Consideration in respect of all of their Company Shares pursuant to
Section 3.02(l), without regard to Section 3.02(n);
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(h)
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Amalco One ULC
shall have the meaning ascribed
to such term in Section 3.02(v);
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A-1
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(i)
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Amalco Two ULC
shall have the meaning ascribed
to such term in Section 3.02(x);
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(j)
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Arrangement Agreement
means the arrangement
agreement dated as of March 16, 2018 among the Purchaser, Acquireco and
the Company, together with the disclosure letter delivered by the Company
in connection with the Arrangement Agreement, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the terms thereof;
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(k)
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Arrangement Consideration
means the Purchaser
Shares, Spinco Shares and cash payment that Participating Former
Securityholders are entitled to receive under this Plan of
Arrangement;
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(l)
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Arrangement Resolution
shall have the meaning
ascribed to such term in the Arrangement Agreement;
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(m)
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Arrangement
means the arrangement under section
288 of the BCBCA on the terms and subject to the conditions set out in
this Plan of Arrangement, subject to any amendments or variations thereto
made in accordance with Section 8.10 of the Arrangement Agreement, this
Plan of Arrangement or at the direction of the Court;
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(n)
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Award Agreement
means an agreement between the
Company and a participant in, or pursuant to, any Company Option Plan
setting out the participants entitlement to receive any Company Options
or Company RSUs;
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(o)
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BCBCA
means the
Business Corporations Act
(British Columbia) and the regulations made thereunder, as promulgated
or amended from time to time;
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(p)
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Bison
means Bison Gold Resources Inc., a
corporation existing under the laws of the Province of Ontario and a
wholly-owned subsidiary of the Company;
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(q)
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Bison Shares
means all of the issued and
outstanding shares in the capital of Bison immediately prior to the
Effective Time;
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(r)
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Business Day
means any day other than a
Saturday, a Sunday or a statutory or civic holiday in Vancouver, British
Columbia or New York, New York;
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(s)
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Cash Consideration
means US$2.47 in cash per
Class A Share;
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(t)
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Class A Shares
shall have the meaning ascribed
to such term in Section 3.02(h)(i);
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(u)
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Combination Consideration
means the Combination
Consideration Cash and the Combination Consideration Purchaser
Shares
;
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A-2
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(v)
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Combination Consideration Cash
means US$0.8411
in cash per Class A Share;
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(w)
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Combination Consideration Purchaser Shares
means
0.4136 of a Purchaser Share per Class A Share
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(x)
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Company
means Klondex Mines Ltd., a corporation
existing under the BCBCA, and, following the completion of the step in
Section 3.02(t), Klondex Mines Unlimited Liability Company;
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(y)
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Company 2013 Options
means, at any time, options
to acquire Company Shares granted pursuant to the Company 2013 Share
Incentive Plan, which are, at such time, outstanding and unexercised,
whether or not vested;
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(z)
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Company 2013 Share Incentive Plan
means the
Share Incentive Plan of the Company dated for reference May 9,
2013;
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(aa)
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Company 2013 RSUs
means, at any time, rights to
receive Company Shares awarded under the Company 2013 Share Incentive
Plan, which are, at such time, outstanding and unexercised, whether or not
vested;
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(bb)
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Company 2016 Options
means, at any time, options
to acquire Company Shares granted pursuant to the Company 2016 Stock
Option Plan, which are, at such time, outstanding and unexercised, whether
or not vested;
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(cc)
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Company 2016 Stock Option Plan
means the Share
Option and Restricted Share Unit Plan of the Company effective May 13,
2016;
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(dd)
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Company 2016 RSUs
means, at any time, rights to
receive Company Shares awarded under the Company 2016 Stock Option Plan,
which are, at such time, outstanding and unexercised, whether or not
vested;
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(ee)
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Company DSU
means a deferred share unit issued
under the Company DSU Plan;
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(ff)
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Company DSU Holder
means a holder of Company
DSUs;
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(gg)
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Company DSU Plan
means the Deferred Share Unit
Plan of the Company effective May 13, 2016;
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(hh)
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Company Meeting
means the special meeting of
Affected Securityholders, including any adjournment or postponement
thereof, to be held in accordance with the Interim Order to consider the
Arrangement Resolution;
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(ii)
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Company Option Plans
means the Company 2013
Share Incentive Plan and Company 2016 Stock Option Plan;
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(jj)
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Company Optionholder
means a holder of any
Company Options;
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A-3
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(kk)
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Company Options
means the Company 2013 Options
and Company 2016 Options;
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(ll)
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Company RSU Holder
means a holder of any Company
RSUs;
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(mm)
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Company RSUs
means, at any time, Company 2013
RSUs and Company 2016 RSUs;
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(nn)
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Company Shares
means the common shares in the
capital of the Company;
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(oo)
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Company Share Value
means the five day
volume-weighted average price of the Company Shares on the Toronto Stock
Exchange determined as of the close of business on the second Business Day
immediately preceding the Effective Date;
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(pp)
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Company Shareholder
means a holder of any
Company Shares;
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(qq)
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Court
means the Supreme Court of British
Columbia;
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(rr)
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CRA
means the Canada Revenue Agency;
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(ss)
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Depositary
means any trust company, bank or
other financial institution agreed to in writing by each of the Parties
for the purpose of, among other things, exchanging certificates
representing Company Shares for the Arrangement Consideration in
connection with the Arrangement;
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(tt)
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Dissent Rights
shall have the meaning ascribed
to such term in Section 4.01;
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(uu)
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Dissenting Shareholder
means a registered
Company Shareholder who dissents in respect of the Arrangement in strict
compliance with the Dissent Rights and who is ultimately entitled to be
paid fair value for their Company Shares;
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(vv)
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Distribution Spinco Shares
shall have the
meaning ascribed to such term in Section 3.02(g);
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(ww)
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Effective Date
means the date on which the
Arrangement takes effect pursuant to the BCBCA;
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(xx)
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Effective Time
means 12:01 a.m. (Vancouver time)
on the Effective Date
,
or such other time as the Parties may agree
in writing before the Effective Date;
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(yy)
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Election Deadline
shall have the meaning
ascribed to such term in Section 3.03(b);
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(zz)
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Election Form
means:
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(i)
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with respect to any Company Share outstanding immediately
prior to the Effective Time, the Letter of Transmittal;
and
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A-4
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(ii)
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with respect to any Company Option or Company RSU
outstanding immediately prior to the Effective Time, the Option/RSU
Election Form;
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(aaa)
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Encumbrance
means any mortgage, hypothec,
pledge, assignment, charge, lien, claim, security interest, adverse
interest, other third person interest or encumbrance of any kind, whether
contingent or absolute, and any agreement, option, right or privilege
(whether by law, contract or otherwise) capable of becoming any of the
foregoing;
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(bbb)
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Existing Company Directors
means those persons
who are directors of the Company immediately prior to the Effective
Time;
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(ccc)
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Final Order
shall have the meaning ascribed to
such term in the Arrangement Agreement;
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(ddd)
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First Amalgamation
shall have the meaning
ascribed to such term in Section 3.02(v);
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(eee)
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Former Securityholders
means holders of Affected
Securities immediately prior to the Effective Time;
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(fff)
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Initial Election Deadline
shall have the meaning
ascribed to such term in Section 3.03(b);
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(ggg)
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Initial Spinco Share
shall have the meaning
ascribed to such term in Section 3.01(a);
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(hhh)
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Interim Order
means the interim order of the
Court, providing for, among other things, the calling and holding of the
Company Meeting, as the same may be amended by the Court;
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(iii)
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In-the-Money Amount
means, in respect of a
Company Option, the positive amount, if any, by which (i) the product
obtained by multiplying (A) the number of Company Shares underlying such
Company Option, by (B) the Company Share Value, exceeds (ii) the aggregate
purchase price payable under such Company Option to acquire the Company
Shares underlying such Company Option;
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(jjj)
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In-the-Money Option
means a Company Option in
respect of which the In- the-Money Amount, determined as of the last
Business Day immediately preceding the Effective Date, is a positive
amount;
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(kkk)
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Klondex Canada
means Klondex Canada Ltd., a
corporation existing under the BCBCA and a wholly-owned subsidiary of the
Company;
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(lll)
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Klondex Canada Shares
means all of the issued
and outstanding shares in the capital of Klondex Canada immediately prior
to the Effective Time;
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A-5
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(mmm)
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Klondex Canada Subco Note
shall have the meaning
ascribed to such term in the definition section of the Arrangement
Agreement;
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(nnn)
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Letter of Transmittal
means the letter of
transmittal and election form to be delivered by the Company to the
Company Shareholder, providing for the delivery of Company Shares to the
Depositary;
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(ooo)
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Maximum Cash Consideration
means the amount
equal to (a) US$161,615,917 less the amount equal to (b) the number of
Outstanding Warrant Shares multiplied by the Combination Consideration
Cash;
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(ppp)
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Maximum Purchaser Shares
means the amount equal
to (a) 79,479,859 Purchaser Shares less the amount equal to (b) the number
of Outstanding Warrant Shares multiplied by the Combination Consideration
Purchaser Shares;
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(qqq)
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New Company Directors
means Robert D. Brown and
Dean W. A. McDonald;
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(rrr)
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Newmont Warrants
means the warrants of the
Company to acquire up to 5,000,000 Company Shares at an exercise price of
C$2.15 cash per Company Share held by Newmont USA Limited represented by
warrant certificate number 2014-Feb-5;
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(sss)
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Option Consideration
means, in respect of an
In-the-Money Option, that number of Company Shares obtained by dividing:
(i) the In-the-Money Amount in respect of such Company In-the-Money
Option, by (ii) the Company Share Value, with the result rounded down to
the nearest whole number of Company Shares;
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(ttt)
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Option/RSU Election Form
means the election form
to be delivered by the Company to the Company Optionholders and Company
RSU Holders;
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(uuu)
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Out-of-the-Money Option
means each Company
Option other than an In- the-Money Option;
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(vvv)
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Outstanding Warrant Shares
means any of the
Company Shares issuable immediately prior to the Effective Time under the
Waterton Warrants and the Newmont Warrants;
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(www)
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Participating Former Securityholders
means
Former Securityholders, other than holders of Out-of-the-Money Options,
Company DSU Holders and Dissenting Shareholders;
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(xxx)
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Performance RSU
shall have the meaning ascribed
to such term in the Company 2016 Stock Option Plan;
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(yyy)
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Plan of Arrangement
means this plan of
arrangement, as amended, modified or supplemented from time to time in
accordance with Section 8.10 of the Arrangement Agreement or Article 6 hereof, in each case
with the consent of the Company and Purchaser, each acting reasonably, or
at the direction of the Court in the Final Order;
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A-6
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(zzz)
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Purchaser
means Hecla Mining Company, a
corporation incorporated under the laws of Delaware;
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(aaaa)
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Purchaser Consideration
shall have the meaning
ascribed to such term in Section 3.02(a);
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(bbbb)
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Purchaser Share
means a share of the common
stock in the authorized share capital of the Purchaser, US$0.25 par value
per share;
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(cccc)
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Purchaser Share Consideration
means 0.6272 of a
Purchaser Share per Class A Share;
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(dddd)
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Purchaser Spinco Shares
means that number of
Spinco Shares equal to the product obtained when (A) the number of issued
and outstanding Spinco Shares immediately following the Spinco Share
Consolidation, is multiplied by (B) 0.155535, rounded down to the nearest
whole number of Spinco Shares, such that immediately following the
completion of the Arrangement the Purchaser Spinco Shares shall represent
approximately 13.46% of the issued and outstanding Spinco
Shares;
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(eeee)
|
Purchaser Spinco Subscription Amount
means the
Canadian dollar equivalent of US$7,000,000, determined as at the close of
business on the second Business Day immediately preceding the Effective
Date;
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(ffff)
|
RSU Consideration
means:
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(i)
|
with respect to each Company RSU that is not a
Performance RSU, one Company Share for each Company RSU, and
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(ii)
|
with respect to each RSU that is a Performance RSU, a
cash payment in an amount determined in accordance with Section 2.16 of
the Arrangement Agreement;
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(gggg)
|
Second Amalgamation
shall have the meaning
ascribed to such term in Section 3.02(x);
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(hhhh)
|
Spinco
means a corporation to be incorporated
under the BCBCA and a wholly-owned subsidiary of the Company;
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(iiii)
|
Spinco Contribution Agreement
shall have the
meaning ascribed to such term in section 1.1 of the Arrangement
Agreement;
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(jjjj)
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Spinco Property
means the Klondex Canada Shares,
the Bison Shares, and the Klondex Canada Subco
Note;
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A-7
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(kkkk)
|
Spinco Share Consolidation
has the meaning
ascribed to such term in Section 3.02(j);
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(llll)
|
Spinco Shares
means the common shares in the
capital of Spinco;
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(mmmm)
|
Tax Act
means the Income Tax Act (Canada) and
the regulations thereunder, as amended from time to time;
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(nnnn)
|
US$
shall mean the lawful currency of the United
States of America;
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(oooo)
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U.S. Tax Code
means the United States Internal
Revenue Code of 1986, as amended; and
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(pppp)
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Waterton Warrants
means the warrants of the
Company to acquire up to 5,000,000 Company Shares at an exercise price of
C$6.00 cash per Company Share held by Waterton Nevada Splitter, LLC
represented by warrant certificate number 2016-Oct001.
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(qqqq)
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In addition, words and phrases used herein and defined in
the BCBCA and not otherwise defined herein shall have the same meaning
herein as in the BCBCA unless the context otherwise
requires.
|
Section 1.02
Interpretation Not Affected by Headings
The division of this Plan of Arrangement into articles,
sections, paragraphs and subparagraphs and the insertion of headings herein are
for convenience of reference only and shall not affect the construction or
interpretation of this Plan of Arrangement. The terms this Plan of
Arrangement, hereof, herein, hereto, hereunder and similar expressions
refer to this Plan of Arrangement and not to any particular article, section or
other portion hereof and include any instrument supplementary or ancillary
hereto.
Section 1.03
Number, Gender and Persons
In this Plan of Arrangement, unless the context otherwise
requires, words importing the singular shall include the plural and vice versa,
words importing the use of either gender shall include both genders and neuter
and the word person and words importing persons shall include a natural person,
firm, trust, partnership, association, corporation, joint venture or government
(including any governmental agency, political subdivision or instrumentality
thereof) and any other entity or group of persons of any kind or nature
whatsoever.
Section 1.04
Date for any Action
If the date on which any action is required to be taken
hereunder is not a Business Day, such action shall be required to be taken on
the next succeeding day which is a Business Day.
Section 1.05
Statutory References
Any reference in this Plan of Arrangement to a statute includes
all regulations made thereunder, all amendments to such statute or regulation in
force from time to time and any statute or regulation that supplements or
supersedes such statute or regulation.
A-8
Section 1.06
Currency
Unless otherwise stated, all references herein to $ or
amounts of money are expressed in lawful money of Canada.
Section 1.07
Governing Law
This Plan of Arrangement shall be governed, including as to
validity, interpretation and effect, by the laws of the Province of British
Columbia and the laws of Canada applicable therein.
ARTICLE 2
ARRANGEMENT AGREEMENT AND BINDING EFFECT
Section 2.01
Arrangement Agreement
This Plan of Arrangement is made pursuant to, and subject to
the provisions of, the Arrangement Agreement.
Section 2.02
Binding Effect
As of and from the Effective Time, this Plan of Arrangement
shall be binding upon:
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(a)
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the Purchaser;
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(b)
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the Company;
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(c)
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Acquireco;
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(d)
|
Spinco;
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(e)
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Klondex Canada;
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(f)
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0985472;
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(g)
|
each of the Former Securityholders; and
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(h)
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the Depositary.
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Section 2.03
Effective Date and Time
The exchanges, issuances and cancellations provided for in
Section 3.02 shall be deemed to occur on the Effective Date at the time and in
the order specified, notwithstanding that certain of the procedures related
thereto are not completed until after the Effective Date.
ARTICLE 3
ARRANGEMENT
Section 3.01
Preliminary Steps Prior to the
Arrangement
The following preliminary events or transactions shall occur prior to, and shall
be conditions precedent to, the implementation of the Arrangement.
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(a)
|
The Company shall have incorporated Spinco under the
BCBCA and Spinco shall have issued one common share (the
Initial
Spinco Share
) to the Company.
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(b)
|
The Company and Spinco shall have entered into the Spinco
Contribution Agreement.
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A-9
Section 3.02
Arrangement
At
the Effective Time, unless otherwise specifically provided in this Section 3.02,
the following events or transactions shall occur and shall be deemed to occur
sequentially in the following order without any further act or formality:
|
(a)
|
the Purchaser shall subscribe for that number of
Acquireco Common Shares, at a price of $1.00 per share, equal to the
quotient obtained when (A) the fair market value of the Maximum Purchaser
Shares and Maximum Cash Consideration is divided by (B) $1.00, and for
greater certainty for the purposes of determining variable (A) in relation
to the quotient under this Section 3.02(a), the fair market value of the
Maximum Purchaser Shares and the Maximum Cash Consideration will be no
less than the fair market value of the Class A Shares immediately prior to
the acquisition of the Class A Shares by Acquireco pursuant to Section
3.02(k), and in connection with such share
subscription:
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(i)
|
the Purchaser shall be deemed to have directed the
Depositary to hold, and the Depositary shall hold, the cash and
certificates representing the Purchaser Shares delivered by the Purchaser
to the Depositary in accordance with Section 3.05(a)(i) (such cash and
Purchaser Shares, collectively, the
Purchaser Consideration
) for
and on behalf of Acquireco, in satisfaction of the subscription price
payable by the Purchaser for such Acquireco Common Shares; and
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(ii)
|
Acquireco shall be deemed to have issued such fully paid
and non-assessable Acquireco Common Shares to the Purchaser, and the
stated capital account maintained by Acquireco in respect of the Acquireco
Common Shares shall be increased, in respect of the Acquireco Common
Shares issued pursuant to this Section 3.02(a), by an amount equal to the
fair market value of the Purchaser
Consideration;
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(b)
|
notwithstanding any vesting or exercise provisions to
which a Company Option might otherwise be subject (whether by contract,
the terms and conditions of any Award Agreement or grant, the terms and
conditions of the Company 2013 Share Incentive Plan or Company 2016 Stock
Option Plan, or applicable law):
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(i)
|
each In-the-Money Option issued and outstanding
immediately prior to the Effective Time shall, without any further action
by or on behalf of any holder of such In-the- Money Option, be deemed to
be fully vested and shall be transferred and disposed by the holder
thereof to the Company (free and clear of all Encumbrances) and cancelled
in exchange for the Option Consideration, and the holder of such
In-the-Money Option shall become the holder of the Company Shares
comprising such Option Consideration and the central securities register
of the Company shall be revised accordingly, but the holder of such Option
Consideration shall not be entitled to receive a share certificate or
other document representing the Option Consideration;
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(ii)
|
each Out-of-the-Money Option issued and outstanding
immediately prior to the Effective Time shall, without any further action
by or on behalf of any holder of such Out-of-the-Money Option, be
cancelled without any payment therefor;
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(iii)
|
with respect to each Company
Option:
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(A)
|
the holder thereof shall cease to be the holder of such
Company Option, and shall cease to have any rights as a holder in respect
of such Company Option under the applicable Company Option Plan,
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(B)
|
such holders name shall be removed from the register of
Company Options, and
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(C)
|
all option agreements, Award Agreements, grants and
similar instruments relating thereto shall be cancelled;
|
A-10
|
(c)
|
notwithstanding any vesting provisions to which a Company
RSU might otherwise be subject (whether by contract, the terms and
conditions of any Award Agreement or grant, the terms and conditions of
the Company 2013 Share Incentive Plan or Company 2016 Stock Option Plan,
or applicable law):
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(i)
|
each Company RSU issued and outstanding immediately prior
to the Effective Time shall, without any further action by or on behalf of
any holder of such Company RSU, be deemed to be fully vested and shall be
transferred and disposed by the holder thereof to the Company (free and
clear of all Encumbrances) and cancelled in exchange for the applicable
RSU Consideration, and the holder of such Company RSU shall become the
holder of the Company Shares comprising such RSU Consideration and the
central securities register of the Company shall be revised accordingly,
but the holder of such RSU Consideration shall not be entitled to receive
a share certificate or other document representing the RSU
Consideration;
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|
(ii)
|
with respect to each Company
RSU:
|
|
(A)
|
the holder thereof shall cease to be the holder of such
Company RSU, and shall cease to have any rights as a holder in respect of
such Company RSU under the applicable Company Option Plan,
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(B)
|
such holders name shall be removed from the register of
Company RSUs, and
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(C)
|
all Award Agreements, grants and similar instruments
relating thereto will be cancelled;
|
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(d)
|
the Company Option Plans shall be terminated;
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(e)
|
each Company Share held by a Dissenting Shareholder shall
be, and shall be deemed to be, surrendered to the Company by the holder
thereof, without any further act or formality by such Dissenting
Shareholder, free and clear of all Encumbrances, and each such Company
Share so surrendered shall be cancelled and thereupon each Dissenting
Shareholder shall cease to have any rights as a holder of such Company
Shares other than a claim against the Company in an amount determined and
payable in accordance with Article 4 and the name of such Dissenting
Shareholder shall be removed from the securities register of holders of
Company Shares;
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(f)
|
concurrently with the surrender and cancellation of
Company Shares held by Dissenting Shareholders pursuant to Section
3.02(e), the stated capital account maintained by the Company in respect
of the Company Shares shall be reduced, in respect of the Company Shares
cancelled pursuant to Section 3.02(e), by an amount equal to the product
obtained when (A) the stated capital of all the issued and outstanding
Company Shares immediately prior to the step in Section 3.02(e), is
multiplied by (B) a fraction, the numerator of which is the number of
Company Shares surrendered and cancelled pursuant to Section 3.02(e), and
the denominator of which is the number of issued and outstanding Company
Shares immediately prior to the step in Section 3.02(e);
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(g)
|
the Company shall transfer all of its entire legal and
beneficial right, title and interest in and to the Spinco Property to
Spinco in consideration for the issuance by Spinco to the Company of that
number of fully paid and non-assessable Spinco Shares (the
Distribution Spinco Shares
) equal to the number of Company Shares
issued and outstanding immediately prior to the transfer in this Section
3.02(g) (for the avoidance of doubt, excluding any Company Shares in
respect of which Dissenting Shareholders have exercised Dissent Rights),
all in accordance with the terms of the Spinco Contribution
Agreement;
|
A-11
|
(h)
|
in the course of a reorganization of the Companys
authorized and issued share capital:
|
|
(i)
|
the notice of articles and articles of the Company shall
be amended to create a new class of shares without par value, of which an
unlimited number may be issued and which shall be designated the Class A
Shares (the
Class A Shares
), which shall have the special rights
and restrictions set forth in Schedule A to this Plan of
Arrangement;
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(ii)
|
each Company Share issued and outstanding immediately
before the reorganization of the Companys share capital pursuant to this
Section 3.02(h) (including, without limitation, the Company Shares issued
to former holders of In-the-Money Options and Company RSUs pursuant to
Section 3.02(b) and Section 3.02(c), respectively, but excluding any
Company Shares surrendered and cancelled in accordance with Section
3.02(e)) shall be exchanged with the Company, free and clear of any
Encumbrances, for one Class A Share and one Distribution Spinco Share, and
upon such exchange:
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(A)
|
each such exchanged Company Share shall be cancelled, and
the holders of such exchanged Company Shares shall be removed from the
Companys register of holders of Company Shares;
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(B)
|
each holder of such exchanged Company Shares shall be
entered in the Companys register of holders of Class A Shares in respect
of the Class A Shares issued to such holder;
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(C)
|
the Company shall be removed from the Spincos register
of holders of Spinco Shares in respect of the Distribution Spinco Shares;
and
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(D)
|
each holder of such exchanged Company Shares shall be
entered in Spincos register of holders of Spinco Shares in respect of the
Distribution Spinco Shares exchanged with such holder by the
Company;
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(iii)
|
concurrently with the exchange in Section 3.02(h)(ii),
the stated capital account in respect of the Company Shares shall be
reduced by an amount equal to the stated capital of the Company Shares
immediately prior to the reorganization in Section 3.02(h), and there
shall be added to the stated capital account maintained by the Company in
respect of the Class A Shares, in respect of the Class A Shares issued
pursuant to Section 3.02(h)(ii), the amount by which (A) the amount by
which the stated capital account of the Company Shares is reduced pursuant
to this Section 3.02(h)(iii), exceeds (B) the fair market value of the
Distribution Spinco Shares transferred to the former holders of Company
Shares pursuant to Section 3.02(h)(ii);
|
|
(i)
|
the Initial Spinco Share held by the Company shall be
cancelled without any repayment thereon, and the Company shall be removed
from the Spinco register of holders of Spinco Shares;
|
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|
(j)
|
all of the issued and outstanding Spinco Shares shall be
consolidated (the
Spinco Share Consolidation
) on the basis of one
post-consolidation Spinco Share for each eight (8) pre- consolidation
Spinco Shares held by a holder of Spinco Shares, and any fractional Spinco
Shares resulting from such Spinco Share Consolidation shall be cancelled
without payment or compensation therefor, and upon such Spinco Share
Consolidation the register of holders of Spinco Shares shall be amended to
reflect the Spinco Share Consolidation;
|
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|
(k)
|
each Participating Former Securityholder receiving Class
A Shares pursuant to Section 3.02(h)(ii) who:
|
|
(i)
|
duly and validly completes and delivers the applicable
Election Form(s) in accordance with Section 3.03 and Section 3.04 electing to receive
the Combination Consideration in respect of all of such Participating
Former Securityholders Company Shares;
|
A-12
|
(ii)
|
has not completed and delivered the applicable Election
Form(s) by the Election Deadline or who has otherwise failed to make a
valid election to receive the Cash Consideration or the Purchaser Share
Consideration is respect of all of such Participating Former
Securityholders Company Shares; or
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(iii)
|
exercises Dissent Rights and is ultimately not entitled,
for any reason, to be paid fair value for its Company
Shares,
|
shall transfer, and shall be deemed to
have transferred, to Acquireco, without any further act or formality by such
Participating Former Securityholder, free and clear of all Encumbrances, each
Class A Share held by such Participating Former Securityholder immediately prior
to the exchange in this Section 3.02(k) in exchange for the Combination
Consideration Cash and the Combination Consideration Purchaser Shares, and upon
such exchange:
|
(iv)
|
each such Participating Former Securityholder shall be
removed from the Companys securities register of holders of Class A
Shares,
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|
(v)
|
Acquireco shall be entered in the Companys securities
register of holders of Class A Shares as the legal and beneficial owner of
such Class A Shares, free of all Encumbrances; and
|
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|
(vi)
|
each such Participating Former Securityholder shall,
subject to the provisions of Section 3.06, be entered in the Purchasers
securities register of holders of Purchaser Shares in respect of the
Purchaser Shares payable to such Participating Former Securityholder
pursuant to this Section 3.02(k);
|
|
(l)
|
each Participating Former Securityholder receiving Class
A Shares pursuant to Section 3.02(h)(ii) who duly and validly completes
and delivers the applicable Election Form(s) in accordance with Section
3.03 and Section 3.04 electing to receive either the Cash Consideration or
the Purchaser Share Consideration in respect of all of such Participating
Former Securityholders Company Shares shall transfer, and shall be deemed
to have transferred, to Acquireco, without any further act or formality by
such Participating Former Securityholder, free and clear of all
Encumbrances, each Class A Share held by such Participating Former
Securityholder immediately prior to the exchange in this Section 3.02(l)
in exchange for:
|
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(i)
|
in the case of a Participating Former Securityholder
validly electing to receive the Cash Consideration, the Cash
Consideration, subject to the provisions of Section 3.02(m); and
|
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(ii)
|
in the case of a Participating Former Securityholder
validly electing to receive the Purchaser Share Consideration, the
Purchaser Share Consideration, subject to the provisions of Section
3.02(n),
|
and upon such exchange:
|
(iii)
|
each such Participating Former Securityholder shall be
removed from the Companys securities register of holders of Class A
Shares,
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|
(iv)
|
Acquireco shall be entered in the Companys securities
register of holders of Class A Shares as the sole legal and beneficial
owner of such Class A Shares, free of all Encumbrances; and
|
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(v)
|
each such Participating Former Securityholder shall,
subject to the provisions of Section 3.02(m) or Section 3.02(n), as
applicable, and Section 3.06, be entered in the Purchasers securities register
of holders of Purchaser Shares in respect of the Purchaser Shares, if any,
payable to such Participating Former Securityholder;
|
A-13
|
(m)
|
in the event that (A) the sum of (I) the aggregate
Combination Consideration Cash payable pursuant to Section 3.02(k) and
(II) the Aggregate Elected Cash, exceeds (B) the Maximum Cash
Consideration, each Participating Former Securityholder who validly elects
to receive the Cash Consideration in respect of all of such Participating
Former Securityholders Company Shares shall, notwithstanding Section
3.02(l)(i):
|
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(i)
|
only be entitled to receive the Cash Consideration for
that portion of their Class A Shares equal to a fraction, rounded to six
decimal places, the numerator of which is the Maximum Cash Consideration
minus the aggregate Combination Consideration Cash payable pursuant to
Section 3.02(k), and the denominator of which is the Aggregate Elected
Cash; and
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(ii)
|
be entitled to receive the Purchaser Share Consideration
for the remaining portion of their Class A Shares (including, for the
avoidance of doubt, a corresponding portion of the Purchaser Share
Consideration for any fractional Class A Share included in such remaining
portion);
|
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(n)
|
in the event that (A) the sum of (I) the aggregate
Combination Consideration Purchaser Shares payable pursuant to Section
3.02(k) and (II) the Aggregate Elected Purchaser Shares, exceeds (B) the
Maximum Purchaser Shares, each Participating Former Securityholder who
validly elects to receive the Purchaser Share Consideration shall,
notwithstanding Section 3.02(l)(ii):
|
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(i)
|
only be entitled to receive the Purchaser Share
Consideration for that portion of their Class A Shares equal to a
fraction, rounded to six decimal places, the numerator of which is the
Maximum Purchaser Shares minus the aggregate Combination Consideration
Purchaser Shares payable pursuant to Section 3.02(k), and the denominator
of which is the Aggregate Elected Purchaser Shares; and
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(ii)
|
be entitled to receive the Cash Consideration for the
remaining portion of their Class A Shares (including, for the avoidance of
doubt, any fractional Class A Share included in such remaining
portion);
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(o)
|
the resignations of the Existing Company Directors, and
the appointment of the New Company Directors, shall be deemed to be
effective immediately following the transfers of the Class A Shares to
Acquireco pursuant to Section 3.02(k) and Section 3.02(l);
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(p)
|
upon the resignation of the Existing Company Directors
becoming effective, each Company DSU outstanding immediately prior to the
Effective Time shall be cancelled in exchange for a cash payment by the
Company to the holder of such Company DSU equal to the Company Share
Value;
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(q)
|
the Company DSU Plan shall be terminated;
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(r)
|
the Company shall file with the CRA an election pursuant
to section 89(1) of the Tax Act to cease to be a public corporation for
purposes of the Tax Act;
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(s)
|
the notice of articles of 0985472 shall be altered to
provide that 0985472 shall become an unlimited liability company, and that
the name of 0985472 shall be 0985472 BC Unlimited Liability
Company;
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(t)
|
the notice of articles of the Company shall be altered to
provide that the Company shall become an unlimited liability company, and
that the name of the Company shall be Klondex Mines Unlimited Liability Company;
|
A-14
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(u)
|
the aggregate stated capital maintained by 0985472 in
respect of its shares shall be reduced to $1.00 without any repayment of
capital in respect thereof;
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(v)
|
Klondex Mines Unlimited Liability Company and 0985472
shall amalgamate (the
First Amalgamation
) to form one unlimited
liability company (
Amalco One ULC
) under section 288 of the
BCBCA, and from and after the Effective Date at the time of the step
contemplated by this Section 3.02(v):
|
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(i)
|
the property, rights and interests of each of the Company
and 0985472 shall continue to be the property, rights and interests of
Amalco One ULC, and for greater certainty the First Amalgamation will not
constitute a transfer or assignment of the rights or obligations of either
of the Company or 0985472 under any such rights, contracts, permits and
interests;
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(ii)
|
Amalco One ULC shall continue to be liable for the
obligations of each of the Company and 0985472;
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(iii)
|
an existing cause of action, claim or liability to
prosecution of the Company or Amalco One ULC shall be
unaffected;
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(iv)
|
a legal proceeding being prosecuted or pending by or
against the Company or Amalco One ULC may be prosecuted, or its
prosecution may be continued, as the case may be, by or against Amalco One
ULC;
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(v)
|
a conviction against, or a ruling, order or judgment in
favour of or against the Company or 0985472 may be enforced by or against
Amalco One ULC;
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(vi)
|
Acquireco shall receive on the amalgamation one Amalco
One ULC common share in exchange for each Class A Share held by it
immediately prior to the First Amalgamation, and all of the issued and
outstanding shares in the capital of 0985472 shall be cancelled without
any repayment of capital in respect thereof;
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(vii)
|
the name of Amalco One ULC shall be Klondex Mines
Unlimited Liability Company;
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(viii)
|
Amalco One ULC shall be authorized to issue an unlimited
number of common shares without par value;
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(ix)
|
the articles and notice of articles of Amalco One ULC
shall be in the form of the Companys articles and notice of
articles;
|
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(x)
|
the first directors of Amalco One ULC following the
amalgamation shall be the New Company Directors; and
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(xi)
|
the stated capital of the common shares of Amalco One ULC
will be an amount equal to the stated capital attributable to the Class A
Shares of the Company immediately prior to the
amalgamation;
|
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(w)
|
the aggregate stated capital maintained by Amalco One ULC
in respect of its common shares shall be reduced to $1.00 without any
repayment of capital in respect thereof;
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(x)
|
Acquireco and Amalco One ULC shall amalgamate (the
Second Amalgamation
) to form one unlimited liability company
(
Amalco Two ULC
) under section 288 of the BCBCA, and from and
after the Effective Date at the time of the step contemplated by this
Section 3.02(x):
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(i)
|
the property, rights and interests of each of Acquireco
and Amalco One ULC shall continue to be the property, rights and interests of
Amalco Two ULC, and for greater certainty, the Second Amalgamation will
not constitute a transfer or assignment of the rights or obligations of
either of Acquireco or Amalco One ULC under any such rights, contracts,
permits and interests;
|
A-15
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(ii)
|
Amalco Two ULC shall continue to be liable for the
obligations of each of Acquireco and Amalco One ULC;
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(iii)
|
an existing cause of action, claim or liability to
prosecution of Acquireco or Amalco One ULC shall be unaffected;
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(iv)
|
a legal proceeding being prosecuted or pending by or
against Acquireco or Amalco One ULC may be prosecuted, or its prosecution
may be continued, as the case may be, by or against Amalco Two
ULC;
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(v)
|
a conviction against, or a ruling, order or judgment in
favour of or against Acquireco or Amalco One ULC may be enforced by or
against Amalco Two ULC;
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(vi)
|
the Purchaser shall receive on the amalgamation one
Amalco Two ULC common share in exchange for each Acquireco Common Share
held by it immediately prior to the Second Amalgamation, and all of the
issued and outstanding common shares of Amalco One ULC shall be cancelled
without any repayment of capital in respect thereof;
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(vii)
|
the name of Amalco Two ULC shall be Klondex Mines
Unlimited Liability Company;
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(viii)
|
Amalco Two ULC shall be authorized to issue an unlimited
number of common shares without par value;
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(ix)
|
the articles and notice of articles of Amalco Two ULC
shall be in the form of Acquirecos articles and notice of
articles;
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(x)
|
the first annual general meeting of Amalco Two ULC shall
be held within 18 months from the Effective Date;
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(xi)
|
the first directors of Amalco Two ULC following the
amalgamation shall be the New Company Directors; and
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(xii)
|
the stated capital of the common shares of Amalco Two ULC
will be an amount equal to the stated capital attributable to the
Acquireco Common Shares immediately prior to the amalgamation;
and
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(y)
|
Spinco shall issue the Purchaser Spinco Shares to the
Purchaser in consideration for the payment of the Purchaser Spinco
Subscription Amount, and the Depositary shall release the Purchaser Spinco
Subscription Amount to Spinco, and upon payment of the Purchaser Spinco
Subscription Amount in accordance with this Section 3.02(y) Spinco shall
be deemed to have issued such fully paid and non-assessable Purchaser
Spinco Shares to the Purchaser, and the stated capital account maintained
by Spinco in respect of the Spinco Shares shall be increased, in respect
of the Purchaser Spinco Shares issued pursuant to this Section 3.02(y), by
an amount equal to the Canadian dollar equivalent of the Purchaser Spinco
Subscription Amount.
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Section 3.03
Consideration Election
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(a)
|
Each Participating Former Securityholder will be entitled
to make an election in the applicable Election Form(s), in accordance with
the provisions of this Section 3.03 and Section 3.04 and the applicable
Election Form(s), to receive either (i) the Combination Consideration,
(ii) the Cash Consideration or (iii) the Purchaser Share
Consideration with respect to all, but not less than all, of their Company
Shares (including, for the avoidance of doubt, any Company Shares issued
to holders of In-the-Money Options and Company RSUs pursuant to Section
3.02(b) and Section 3.02(c), respectively). Any such election, in the case
of Participating Former Securityholders electing to receive the Cash
Consideration or the Purchaser Share Consideration, shall be subject to
the pro-ration limitations in Section 3.02(m) and Section 3.02(n), as
applicable. A Participating Former Securityholder who fails to make a
valid election in accordance with the provisions of this Section 3.03 and
Section 3.04 will be deemed to have made an election to receive the
Combination Consideration with respect to all of such Participating Former
Securityholders Company Shares.
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A-16
|
(b)
|
The deadline by which the election must be received by
the Depositary (the
Election Deadline
) shall be 5:00 p.m.
(Vancouver time) on , 2018 (the
Initial Election Deadline
),
unless otherwise extended by the Purchaser and the Company in writing in
accordance with this Section 3.03.
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(c)
|
If, after the Election Forms have been mailed to
Participating Former Securityholders, the Purchaser and the Company
determine that the Effective Date is not reasonably likely to occur by the
tenth Business Day after the Initial Election Deadline, then the Election
Deadline shall be extended to a date which the Purchaser and the Company
expect to be not more than ten Business Days before the Effective
Date.
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(d)
|
If the Election Deadline is extended, then the Company
shall provide at least five days notice of the new Election Deadline (and
shall provide such notice prior to the Initial Election Deadline if
practicable) to Participating Former Securityholders by means of
publication, at least once, in The Globe and Mail (national edition) or
any other English language daily newspaper of general circulation in
Canada.
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(e)
|
Any duly completed Election Form deposited by the Initial
Election Deadline shall not be required to be re-deposited if the Election
Deadline is extended pursuant to this Section 3.03.
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(f)
|
Not less than 21 days prior to the Initial Election
Deadline, the Company shall send or cause to be sent (i) a Letter of
Transmittal to each holder of record of Company Shares, and (ii) an
Option/RSU Election Form to each Company Optionholder and Company RSU
Holder.
|
Section 3.04
Method of Election
|
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The election contemplated by Section 3.03(a) shall be
made as follows:
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|
(a)
|
a Participating Former Securityholder shall make such
election by depositing with the Depositary by the Election
Deadline:
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(i)
|
the applicable irrevocable Election Form(s) duly signed
and completed in accordance with the provisions thereof, indicating such
Participating Former Securityholders election; and
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(ii)
|
if applicable, the certificates representing such
Participating Former Securityholders Company
Shares;
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(b)
|
any Election Form, once so deposited with the Depositary,
shall be irrevocable and may not be withdrawn by the Participating Former
Securityholder;
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(c)
|
a Participating Former Securityholder who does not
deposit with the Depositary the applicable Election Form(s) duly
completed, together with any certificates representing such Participating
Former Securityholders Company Shares, prior to the Election Deadline, or
who otherwise fails to fully comply with the requirements of Section
3.03 and this Section 3.04 (including any Participating Former
Securityholder who attempts to exercise but does not validly exercise
Dissent Rights), shall be deemed to have elected to receive the
Combination Consideration in respect of all such Participating Former
Securityholders Company Shares;
|
A-17
|
(d)
|
any deposit of an Election Form, and any accompanying
certificates may be made at any of the addresses of the Depositary
specified in the Election Form; and
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(e)
|
a Company Shareholder who holds Company Shares as a
nominee, custodian, depositary, trustee or in any other representative
capacity for beneficial owners of Company Shares may submit a separate
Election Form for each beneficial owner of such Company
Shares.
|
Section 3.05
Pre-Effective Time Procedures
|
(a)
|
Following the receipt of the Final Order and no later
than one Business Day prior to the Effective
Date:
|
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(i)
|
the Purchaser and Acquireco shall deliver or arrange to
be delivered to the Depositary (A) the Maximum Cash Consideration and (B)
certificates representing the Maximum Purchaser Shares, which Maximum Cash
Consideration and certificates shall be held by the Depositary as agent
and nominee for such Participating Former Securityholders for distribution
to such Participating Former Securityholders in accordance with the
provisions of Article 5;
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(ii)
|
the Purchaser shall deliver or arrange to be delivered to
the Depositary cash in an amount sufficient to pay the Purchaser Spinco
Subscription Amount, which cash shall be held by the Depositary as agent
and nominee for Spinco for distribution to Spinco in accordance with the
provisions of Section 3.02(y);
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(iii)
|
Spinco shall deliver or arrange to be delivered to the
Depositary certificates representing the Spinco Shares required to be
delivered to Participating Former Securityholders pursuant to Section 3.02
(after giving effect to the Spinco Share Consolidation), which
certificates shall be held by the Depositary as agent and nominee for such
Participating Former Securityholders for distribution to such
Participating Former Securityholders in accordance with the provisions of
Article 5; and
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(iv)
|
Spinco shall deliver or arrange to be delivered to the
Depositary certificates representing the Purchaser Spinco Shares, which
certificates shall be held by the Depositary as agent and nominee for the
Purchaser for distribution to the Purchaser in accordance with the
provisions of Section 3.02(y);
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(b)
|
Subject to the provisions of Section 3.06 and Article 5,
on the Effective Date the Participating Former Securityholders shall be
entitled to receive delivery of the cash and share certificates comprising
the Arrangement Consideration to which they are entitled pursuant to
Section 3.02.
|
Section 3.06
No Fractional Shares
No
fractional Purchaser Shares or Spinco Shares shall be issued to Former
Securityholders in connection with this Plan of Arrangement. The total number of
Purchaser Shares or Spinco Shares to be issued to any Former Securityholder
shall, without additional compensation, be rounded down to the nearest whole
Purchaser Share or Spinco Share, as applicable, in the event that a Former
Securityholder is entitled to a fractional share.
A-18
ARTICLE 4
DISSENT RIGHTS
Section 4.01
Dissent Rights
Pursuant
to the Interim Order, registered Company Shareholders may exercise rights of
dissent (
Dissent Rights
) under Division 2 of Part 8 of the BCBCA, as
modified by this Article 4, the Interim Order and the Final Order, with respect
to Company Shares in connection with the Arrangement, provided that the written
notice of dissent to the Arrangement Resolution contemplated by Section 242 of
the BCBCA must be sent to the Company by holders who wish to dissent at least
two Business Days before the Company Meeting (or any date to which the Company
Meeting may be postponed or adjourned), and provided further that holders who
exercise such rights of dissent and who:
|
(a)
|
are ultimately entitled to be paid fair value for their
Company Shares (which fair value shall be the fair value of such shares
immediately before the passing by the Affected Securityholders of the
Arrangement Resolution) shall be paid an amount in cash equal to such fair
value by the Company (including any successor or successors to the Company
by amalgamation); and
|
|
(b)
|
are ultimately not entitled, for any reason, to be paid
fair value for their Company Shares shall be deemed to have participated
in the Arrangement, as of the Effective Time, on the same basis as a
non-dissenting Company Shareholder who validly elected to receive the
Combination Consideration in respect of all of their Company
Shares,
|
but in no case shall the Purchaser, the Company, Acquireco or
any other person be required to recognize Company Shareholders who exercise
Dissent Rights as Company Shareholders after the time that is immediately prior
to the Effective Time, and the names of such registered Company Shareholders who
exercise Dissent Rights shall be deleted from the central securities register as
holders of Company Shares at the Effective Time and their Company Shares shall
be deemed to be surrendered to the Company and cancelled in accordance with
Section 3.02(e) .
ARTICLE 5
DELIVERY OF ARRANGEMENT CONSIDERATION
Section 5.01
Delivery of Arrangement Consideration
|
(a)
|
On the Effective Date, each Participating Former
Securityholder shall be entitled to receive, and the Depositary shall,
provided such Participating Former Securityholder has otherwise complied
with this Article 5, deliver to such Participating Former Securityholder,
following the Effective Time, the Arrangement Consideration that such
Former Securityholder is entitled to receive in accordance with Section
3.02 and Section 3.06.
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|
|
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(b)
|
Upon surrender to the Depositary for cancellation of a
certificate that immediately before the Effective Time represented one or
more outstanding Company Shares that were exchanged for Class A Shares and
Spinco Shares in accordance with Section 3.02, together with such other
documents and instruments as would have been required to effect the
transfer of the Company Shares formerly represented by such certificate
under the terms of such certificate, the BCBCA or the articles of the
Company, and such additional documents and instruments as the Depositary
may reasonably require, the holder of such surrendered certificate shall
be entitled to receive in exchange therefor, and the Depositary shall
deliver to such holder following the Effective Time, the Arrangement
Consideration that such holder is entitled to receive in accordance with
Section 3.02 and Section 3.06.
|
A-19
|
(c)
|
After the Effective Time and until surrendered for
cancellation as contemplated by Section 5.01(b) hereof, each certificate
that immediately prior to the Effective Time represented one or more
Company Shares shall, following completion of the transactions described
in Section 3.02, be deemed at all times to represent only the right to
receive in exchange therefor the Arrangement Consideration that the holder
of such certificate is entitled to receive in accordance with Section
3.02.
|
Section 5.02
Lost Certificates
In
the event any certificate that, immediately prior to the Effective Time,
represented one or more outstanding Company Shares that were exchanged for Class
A Shares and Spinco Shares in accordance with Section 3.02 shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the holder
claiming such certificate to be lost, stolen or destroyed, the Depositary shall
deliver, in exchange for such lost, stolen or destroyed certificate, the cash
and certificates representing the aggregate Arrangement Consideration that such
holder is entitled to receive in accordance with Section 3.02. When authorizing
such delivery of a certificate representing Purchaser Shares or Spinco Shares
that such holder is entitled to receive in exchange for such lost, stolen or
destroyed certificate, the holder to whom certificates representing such
Purchaser Shares or Spinco Shares is to be delivered shall, as a condition
precedent to the delivery of the cash and certificates representing such
Arrangement Consideration, give a bond satisfactory to the Purchaser, Spinco and
the Depositary in such amount as the Purchaser, Spinco and the Depositary may
direct, or otherwise indemnify the Purchaser, Spinco and the Depositary, in a
manner satisfactory to the Purchaser, Spinco and the Depositary, against any
claim that may be made against the Purchaser, Spinco or the Depositary with
respect to the certificate alleged to have been lost, stolen or destroyed, and
shall otherwise take such actions as may be required by the articles of the
Company.
Section 5.03
Distributions with Respect to Unsurrendered
Certificates
No
dividend or other distribution declared or made after the Effective Time with
respect to Purchaser Shares or Spinco Shares with a record date after the
Effective Time shall be delivered to the holder of any unsurrendered certificate
that, immediately prior to the Effective Time, represented outstanding Company
Shares unless and until the holder of such certificate shall have complied with
the provisions of Section 5.01 or Section 5.02. Subject to applicable law and to
Section 5.04, at the time of such compliaance, there shall, in addition to the
delivery of a certificate representing the Purchaser Shares and Spinco Shares to
which such holder is thereby entitled, be delivered to such holder, without
interest, the amount of any dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such Purchaser Shares
and Spinco Shares, as applicable.
Section 5.04
Withholding Rights
The
Purchaser, Acquireco, the Company, Spinco and the Depositary shall be entitled
to deduct and withhold from any consideration payable or otherwise deliverable
to a Former Securityholder pursuant to the Arrangement and from any and all
dividends or other distributions otherwise payable to any Former Securityholder
such amounts as the Purchaser, Acquireco, the Company, Spinco or the Depositary
is required or permitted to deduct and withhold with respect to such payment
under the Tax Act, the U.S. Tax Code or any provision of any applicable federal,
provincial, state, local or foreign tax law or treaty, in each case, as amended,
and may sell on behalf of a Former Securityholder any Purchaser Shares or Spinco
Shares deliverable to such Former Securityholder, in order to remit to a taxing
authority a sufficient amount to comply with such tax laws. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to the particular person in respect of which such
deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. Without
restricting the intent of the above, the Purchaser, Acquireco, the Company,
Spinco or the Depositary shall withhold from any Arrangement Consideration
payable to a Company Optionholder or Company RSU Holder, and/or sell any
component of the Arrangement Consideration deliverable to any Company
Optionholder or Company RSU Holder in order to remit to a taxing authority or
remit to the Company for remittance to a taxing authority, a sufficient amount
to comply with tax laws in respect of the cancellation of the Company Options
and Company RSUs pursuant to the Plan of Arrangement.
A-20
Section 5.05
Limitation and Proscription
To
the extent that a Participating Former Securityholder shall not have complied
with the provisions of Section 5.01 or Section 5.02 on or before the date that
is three years after the Effective Date (the
final proscription date
),
then the aggregate Cash Consideration to which such Participating Former
Securityholder was entitled shall be returned to the Purchaser and the Purchaser
Shares and Spinco Shares that such Participating Former Securityholder was
entitled to receive shall be automatically cancelled without any repayment of
capital in respect thereof and the certificates representing such Purchaser
Shares and the Spinco Shares shall be delivered by the Depositary to the
Purchaser or Spinco, as applicable, and the interest of the Participating Former
Securityholder in such Cash Consideration, Purchaser Shares and Spinco Shares to
which it was entitled shall be terminated as of such final proscription
date.
ARTICLE 6
AMENDMENTS
Section 6.01
Amendments to Plan of Arrangement
|
(a)
|
The Purchaser and the Company reserve the right to amend,
modify or supplement this Plan of Arrangement at any time and from time to
time, provided that each such amendment, modification or supplement must
be (i) set out in writing, (ii) agreed to in writing by the Purchaser and
the Company, (iii) filed with the Court and, if made following the Company
Meeting, approved by the Court, and (iv) communicated to Affected
Securityholders if and as required by the Court.
|
|
|
|
|
(b)
|
Any amendment, modification or supplement to this Plan of
Arrangement may be proposed by the Company at any time prior to the
Company Meeting provided that the Purchaser shall have consented thereto
in writing, with or without any other prior notice or communication, and,
if so proposed and accepted by the persons voting at the Company Meeting
(other than as may be required under the Interim Order), shall become part
of this Plan of Arrangement for all purposes.
|
|
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|
|
(c)
|
Any amendment, modification or supplement to this Plan of
Arrangement that is approved by the Court following the Company Meeting
shall be effective only if: (i) it is consented to in writing by each of
the Purchaser and the Company; and (ii) if required by the Court, it is
consented to by the Affected Securityholders voting in the manner directed
by the Court.
|
A-21
Schedule A to Plan of Arrangement
Special Rights and Restrictions of the Class A Shares
The Class A Shares shall have the following rights, privileges,
restrictions and conditions attached thereto:
|
(a)
|
Dividends
: The holders of the Class A Shares are
entitled to receive dividends, if, as and when declared by the board of
directors of the Company out of the assets of the Company properly
applicable to the payment of dividends in such amounts and payable at such
times and at such place or places in Canada as the board of directors of
the Company may from time-to-time determine. Subject to the rights of the
holders of any other class of shares of the Company entitled to receive
dividends in priority to or rateably with the Class A Shares, the board of
directors of the Company may in its sole discretion declare dividends on
the Class A Shares to the exclusion of any other class of shares of the
Company;
|
|
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|
(b)
|
Voting Rights
: The holders of the Class A Shares
are entitled to receive notice of and to attend all annual and special
meetings of the shareholders of the Company, and to two votes at all such
meetings in respect of each Class A Share held;
|
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(c)
|
Participation upon Liquidation, Dissolution or
Winding-Up
: In the event of the liquidation, dissolution or winding-up
of the Company or other distribution of assets of the Company among its
shareholders for the purpose of winding-up its affairs, the holders of the
Class A Shares shall, subject to the rights of the holders of any other
class of shares of the Company upon such a distribution in priority to the
Class A Shares, be entitled to participate rateably in any distribution of
the assets of the Company; and
|
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(d)
|
Modification of Rights
: The rights and
restrictions attached to the Class A Shares shall not be modified unless
the holders of the Class A Shares consent thereto by separate resolution.
Such consent may be obtained in writing signed by the holders of all of
the issued and outstanding Class A Shares or by a resolution passed by at
least 75% of the votes cast at a separate meeting of the holders of Class
A Shares who are present in person or represented by proxy at such
meeting;
|
A-22
Supplemental Information Regarding Management of Havilah
Effective June 29, 2018, the board of directors of Havilah (the
Havilah Board) appointed Blair Schultz as the Interim Chief Executive Officer
of Havilah to replace John Antwi. In connection with his appointment, Mr. Blair
resigned his position as Interim Chief Financial Officer of Havilah, effective
June 29, 2018. Mr. Blair remains Chairman of the Havilah Board. Other than the
appointment of Mr. Schultz as Interim Chief Executive Officer of Havilah and his
resignation from his prior position as Interim Chief Financial Officer of
Havilah, Mr. Schultzs biography set forth in the Proxy Statement remains
accurate.
Effective June 29, 2018, the Havilah Board appointed Shaun
Heinrichs as the Interim Chief Financial Officer of Havilah, to replace Mr.
Schultz.
Mr. Heinrichs, 44, brings 20 years of financial accounting
experience, primarily in the mining industry. His career began with seven years
of public practice experience with Ernst & Young in Vancouver, where he
provided assurance and advisory services to several U.S and Canadian public
companies. He subsequently held senior management roles in several public
companies including serving as the Chief Financial Officer of Veris Gold Corp.,
a precious metals producer listed in Canada and the U.S., from 2008 to 2015.
Since February 2017, Mr. Heinrichs has served as Chief Financial Officer of
Group Eleven Resources Corp., a zinc exploration company based in Ireland. Mr.
Heinrichs holds a business degree from Simon Fraser University and is both a
Chartered Accountant in Canada and a Certified Public Accountant in the United
States.
Additional disclosure regarding Mr. Heinrichs is provided
below.
Occupation and Security Holding
The municipality of residence, positions with Havilah and the
principal occupations of Mr. Heinrichs after giving effect to the Arrangement
are set out below, together with his
pro forma
holdings of Havilah
Shares.
|
|
|
|
|
Pro forma
|
|
|
|
|
|
Holdings
|
|
|
|
|
|
of
|
Name and
|
|
|
Principal Occupation
|
|
Havilah
|
Province of Residence
|
Position
|
|
During Last Five Years
|
|
Shares
|
Shaun Heinrichs
Vancouver, British Columbia,
Canada
|
Interim Chief Financial Officer
|
|
Chief Financial
Officer of Veris Gold Corp. from January 2008 to August 2015; Chief Financial Officer, VMS Ventures Inc. from December 2015 to May 2016; Strategic Advisor, Adventus Realty Trust from August 2016 to June 2017; Chief Financial Officer of Group Eleven Resources Corp. from February 2017 to present; Chief Financial Officer, Corporate Secretary and Director of Ring the Bell Capital Corp. from June 2017 to present; Chief Financial Officer of Havilah Mining Corporation from June 2018 to present.
|
|
Nil
|
Other Reporting Issuer Experience
The following table is a list of directorships and other
applicable positions in other reporting issuers held by the Mr. Heinrichs:
|
Name and Jurisdiction of
|
|
Name of Trading
|
|
Position
|
|
|
Name
|
Other Reporting Issuer
|
|
Market(s)
|
|
Held
|
|
Dates
|
Shaun Heinrichs
|
Ring the Bell Capital Corp.
Ontario
|
|
TSXV
|
|
Chief Financial Officer,
Corporate Secretary and Director
|
|
2017 Present
|
|
|
|
|
|
|
|
|
|
Group Eleven Resources Corp.
British Columbia
|
|
TSXV
|
|
Chief Financial Officer
|
|
2017 Present
|
3
Corporate Cease Trade Orders or Bankruptcies
Except as disclosed below, Mr. Heinrichs has not, within the last ten years prior to the
date of this document, been a director, chief executive officer or chief
financial officer of any issuer (including Havilah) that, (i) while he was
acting in the capacity as director, chief executive officer or chief financial
officer, was the subject of a cease trade or similar order or an order that
denied the relevant issuer access to any exemption under securities legislation,
that was in effect for a period of more than thirty (30) consecutive days; or
(ii) was subject to an order that resulted, after he ceased to be a director,
chief executive officer or chief financial officer of an issuer, in the issuer
being the subject of a cease trade or similar order or an order that denied the
relevant issuer access to any exemption under securities legislation, for a
period of more than thirty (30) consecutive days, which resulted from an event
that occurred while he was acting as a director, chief executive officer or
chief financial officer of the issuer.
Except as disclosed below, Mr. Heinrichs has not, within the last ten years prior to the
date of this document, been a director or executive officer of any company
(including Havilah) that, while he was acting in that capacity, or within a year
of him 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.
On April 1, 2014 the British Columbia Securities Commission ordered under section 164(1) of the Securities Act (British Columbia) that all trading by Insiders in the securities of Veris Gold Corp. cease until the annual statements were filed. As the Chief Financial Officer at the time, Mr. Heinrichs was subject to the order. The annual statements were filed on April 15, 2014 and the cease trade order was revoked.
Mr. Heinrichs was acting as Chief Financial Officer of Veris Gold Corp. when on June 9, 2014 such company made an application under the CCAA in the Supreme Court of British Columbia. On June 9, 2014, Veris Gold Corp. also has filed a petition seeking protection under Chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Nevada.
Penalties or Sanctions
Mr. Heinrichs has not been subject to: (i) any penalties or
sanctions imposed by a court relating to securities legislation or by a
securities regulatory authority or entered into a settlement agreement with a
securities regulatory authority; or (ii) any other penalties or sanctions
imposed by a court or regulatory body that would likely be considered important
to a reasonable investor in making an investment decision.
Personal Bankruptcies
Mr. Heinrichs has not, within the last ten years prior to the
date of this document, been a director or executive officer of any company
(including Havilah) that, while he was acting in that capacity, or within a year
of him 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 for compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold its assets.
In addition, Mr. Heinrichs has not, within the last ten years
prior to the date of this document, 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 the assets of the
director, officer or securityholder.
Conflicts of Interest
There are potential conflicts of interest to which Mr.
Heinrichs will be subject in connection with the operations of Havilah. In
particular, Mr. Heinrichs is involved in managerial or director positions with
other mining companies whose operations may, from time to time, be in direct
competition with those of Havilah or with entities which may, from time to time,
provide financing to, or make equity investments in, competitors of Havilah.
Conflicts, if any, will be subject to the procedures and remedies available
under the BCBCA. As at the date of this document, Havilah is not aware of any
existing or potential material conflicts of interest between Havilah and Mr.
Heinrichs.
Executive Compensation
No material changes to executive compensation, as set forth in
Appendix I to the Proxy Statement, are anticipated, and Mr. Heinrichss
compensation is expected to fall within the ranges for base salary and bonus
specified for his position in the Proxy Statement.
To the extent that the information set forth above differs from
or updates information contained in any part of the Proxy Statement, the
information set forth above shall supersede or supplement the information in the
Proxy Statement.
4
Supplemental Information Regarding Audited Interim Financial
Statements of Havilah For the period from
Incorporation on May 3,
2018 to May 31, 2018
Enclosed is Havilahs audited interim financial statements for
the period from incorporation on May 3, 2018 to May 31, 2018.
5
Havilah Mining Corporation
Audited Interim
Financial Statements
For the period from Incorporation on May 3, 2018
to May 31, 2018
(Expressed in Canadian dollars)
Havilah Mining Corporation
Interim Financial
Statements
For the period from Incorporation on May 3, 2018 to May 31,
2018
TABLE OF CONTENTS
June 25, 2018
Independent Auditors Report
To the Directors of Havilah Mining Corporation
We have audited the accompanying interim financial statements
of Havilah Mining Corporation, which comprise the interim statement of financial
position as at May 31, 2018 and the interim statements of comprehensive (loss),
cash flows and changes in equity for the period from May 3, 2018 (date of
incorporation) to May 31, 2018, and the related notes, which comprise a summary
of significant accounting policies and other explanatory information.
Managements responsibility for the interim financial
statements
Management is responsible for the preparation and fair
presentation of these interim financial statements in accordance with
International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of interim
financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these interim
financial statements based on our audit. We conducted our audit in accordance
with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the interim financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the interim financial statements.
The procedures selected depend on the auditors judgment, including the
assessment of the risks of material misstatement of the interim financial
statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entitys preparation and fair
presentation of the interim financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entitys internal control. An
audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the interim financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the interim financial statements present
fairly, in all material respects, the financial position of Havilah Mining
Corporation as at May 31, 2018 and its financial performance and its cash flows
for the period from May 3, 2018 (date of incorporation) to May 31, 2018 in
accordance with International Financial Reporting Standards.
(Signed) PricewaterhouseCoopers LLP
Chartered Professional Accountants
PricewaterhouseCoopers LLP
PricewaterhouseCoopers
Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806
PwC refers to PricewaterhouseCoopers LLP, an Ontario limited
liability partnership.
2
HAVILAH MINING CORPORATION
INTERIM STATEMENT OF
FINANCIAL POSITION
(CDN dollars)
|
|
May 31, 2018
|
|
Assets
|
|
|
|
Current assets
|
|
|
|
Cash and
cash equivalents
|
$
|
1
|
|
Total assets
|
$
|
1
|
|
Liabilities
|
|
|
|
Current liabilities
|
|
|
|
Accounts
payable and accrued liabilities
|
$
|
5,000
|
|
Total liabilities
|
|
5,000
|
|
Shareholder's Equity
|
|
|
|
Share capital
(Note
4)
|
|
1
|
|
Accumulated deficit
|
|
(5,000
|
)
|
Total equity
|
|
(4,999
|
)
|
Total liabilities and equity
|
$
|
1
|
|
On behalf of the Board:
/s/ Blair Schultz
|
|
/s/
James Haggerty
|
Chairman
|
|
Director
|
The accompanying notes are an integral part of these interim
financial statements.
3
HAVILAH MINING CORPORATION
INTERIM STATEMENT OF
COMPREHENSIVE (LOSS)
(CDN dollars)
|
|
Period from
|
|
|
|
incorporation on
|
|
|
|
May 3, 2018 to
|
|
|
|
May 31, 2018
|
|
Expenses
|
|
|
|
Professional fees
|
$
|
5,000
|
|
Net (loss) and
comprehensive (loss)
|
$
|
(5,000
|
)
|
|
|
|
|
Loss per share
|
|
|
|
Basic and diluted
|
$
|
(5,000
|
)
|
|
|
|
|
Weighted average common shares
outstanding
|
|
1
|
|
The accompanying notes are an integral part of these interim
financial statements.
4
HAVILAH MINING CORPORATION
INTERIM STATEMENTS OF
CASH FLOWS
(CDN dollars)
|
|
Period from
|
|
|
|
incorporation on
|
|
|
|
May 3, 2018 to
|
|
|
|
May 31, 2018
|
|
Operating activities:
|
|
|
|
Net (loss) and comprehensive (loss)
|
$
|
(5,000
|
)
|
Changes in non-cash working
capital
|
|
|
|
Accounts payable and
accrued liabilities
|
|
5,000
|
|
|
|
|
|
Financing activities:
|
|
|
|
Share
subscription
|
|
1
|
|
|
|
|
|
Net increase in cash
|
|
1
|
|
Cash, beginning of period
|
|
|
|
Cash, end of period
|
$
|
1
|
|
The accompanying notes are an integral part of these interim
financial statements.
5
HAVILAH MINING CORPORATION
INTERIM STATEMENT OF
CHANGES IN EQUITY
(CDN dollars)
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
shares issued
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
and outstanding
|
|
|
Share capital
|
|
|
deficit
|
|
|
Total
|
|
Balance at May 3, 2018
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Shares issued on incorporation
(Note 4)
|
|
1
|
|
|
1
|
|
|
|
|
|
1
|
|
Net (loss) and
comprehensive (loss)
|
|
|
|
|
|
|
|
(5,000
|
)
|
|
(5,000
|
)
|
Balance at May 31, 2018
|
|
1
|
|
$
|
1
|
|
$
|
(5,000
|
)
|
$
|
(4,999
|
)
|
The accompanying notes are an integral part of these interim
financial statements.
6
Havilah Mining Corporation
Notes to the Interim
Financial Statements
(All amounts expressed in thousands of CDN
dollars)
1. Nature of Operations
On March 16, 2018, Klondex Mines Ltd. ("Klondex") entered into
an arrangement agreement (the "Arrangement Agreement") with Hecla Mining Company
("Hecla") and 1156291 B.C. Unlimited Liability Company, a wholly-owned
subsidiary of Hecla. Under the terms of the Arrangement Agreement, Hecla will
acquire all the outstanding common shares of Klondex. As part of the Arrangement
Agreement, Klondex shareholders will receive consideration consisting of cash,
shares of Hecla common stock, or a combination of cash and Hecla common stock,
plus shares of a new company, Havilah Mining Corporation ("Havilah" or the
"Company"), formed to hold Klondexs Canadian assets comprised of Klondex Canada
Ltd. and Bison Gold Resources, Inc. The Arrangement Agreement terms contain a
provision in which Hecla will subscribe for a 13.46% interest in Havilah for
US$7.0 million. The Arrangement Agreement has been approved by the boards of
directors of Klondex and Hecla and is subject to the approval of Klondex's
shareholders. Havilah's ability to settle its existing liabilities and continue
as a going concern is dependent upon the Company securing financing through the
closing of the Arrangement Agreement and continued support from its current
parent company, Klondex.
About Havilah
Havilah Mining Corporation was incorporated under the British
Columbia Business Corporations Act on May 3, 2018. Havilahs registered office
is located at 1055 West Hastings Street, Suite 2200, Vancouver, BC, V6E 2E9, and
its head office is located at 82 Richmond Street East, Toronto, ON, M5C 1P1.
Havilah is currently a wholly-owned subsidiary of Klondex which was formed for
the sole purpose of facilitating the completion of the Arrangement Agreement, if
approved.
If the Arrangement Agreement is approved by Klondex
shareholders, Havilah will hold Klondex's Canadian assets, which are comprised
of Klondex Canada Ltd., which holds the True North gold mine and mill ("True
North") and Bison Gold Resources Inc. which holds the Ogama-Rockland properties
("Ogama"), the 10% buy-back rights on the Snow Lake Property, and various
early-stage assets located in Manitoba and Ontario, Canada. True North and Ogama
were acquired by Klondex on January 22, 2016 and October 19, 2017, respectively,
and, as such, the Canadian Spinco of Klondex had no operations or assets prior
to 2016. Klondex placed True North into production in the third quarter of 2016
and operations continued until January 9, 2018, when True North was placed on
care and maintenance. Ogama is an exploration stage property located
approximately 19 miles from True North.
2. Basis of presentation
These interim financial statements have been prepared on a
historical cost basis in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
("IASB") and interpretations issued by the International Financial Reporting
Interpretations Committee ("IFRIC").
These consolidated financial statements were authorized for
issuance by the Board of Directors of the Company on June 25, 2018.
3. Summary of significant accounting policies
a) Functional and presentation currency
The functional and presentation currency of the Company is the
Canadian dollar.
b) Financial instrument classification and risks
In respect of the recognition and measurement of financial
instruments, the Company has adopted the following policies:
Accounting classification of the
following
|
|
|
Other financial
|
|
financial instruments
|
|
|
liabilities
|
|
Measured at amortized
cost:
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
5,000
|
|
c) Current and deferred income tax
The Company follows the liability method of accounting for
income taxes. Under the liability method, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, unused tax losses and other
income tax deductions. Deferred income tax assets are recognized for deductible
temporary differences, unused tax losses and other income tax deductions to the
extent that it is probable the Company will have taxable income against which
those deductible temporary differences, unused tax losses and other income tax
deductions can be utilized.
7
Deferred income tax assets and liabilities are measured using
enacted or substantively enacted tax rates expected to apply when the related
assets are realized or the liabilities are settled. The measurement of deferred
income tax assets and liabilities reflects the tax consequences that would
follow from the manner in which the Company expects, at the reporting date, to
recover and settle the carrying amounts of its assets and liabilities,
respectively. The effect on deferred income tax assets and liabilities of a
change in tax rates is recognized in the period in which the change is
substantively enacted.
4. Share Capital
The Company is authorized to issue an unlimited number of
common shares, without par value. On May 3, 2018, the Company issued one common
share upon incorporation to Klondex Mines Ltd.
5. Capital Management
The Companys objectives when managing capital are to safeguard
its ability to continue as a going concern until the date in which the
Arrangement Agreement is completed (see
Note 1. Nature of Operations
for
additional detail)
.
In the management and definition of capital, the
Company considers the items included in shareholders equity to be capital.
Havilah's ability to settle its existing liabilities and continue as a going
concern is dependent upon the Company securing financing through the closing of
the Arrangement Agreement and continued support from its current parent company,
Klondex.
6. Management of Financial Risks
The Company relies upon Klondex, its current parent company, in
managing its capital structure. The Companys financial instruments are exposed
to the following financial risk: (a) Liquidity risks associated with the
inability to meet obligations as they become due is minimized through its
dependence on Klondex. Accounts payable are due within twelve months of the
Statement of Financial Position date.
7. Income taxes
A reconciliation of current income taxes at statutory rates
with the period income tax is as follows:
|
|
May 31, 2018
|
|
Net loss before taxes
|
$
|
(5,000
|
)
|
Statutory tax rate
|
|
27.00%
|
|
Income tax benefit at
statutory rate
|
|
(1,350
|
)
|
Income tax benefits not recognized
|
|
1,350
|
|
Future income tax recovery
|
$
|
|
|
The income tax benefit, if any, of these losses have not been
recorded in the condensed interim financial statements due to the uncertainty of
their recovery.
8
Supplemental Information Regarding Unaudited Pro Forma Financial Statements for the three months ended March 31, 2018 and the year ended December 31, 2017
Enclosed is Havilah's unaudited pro forma financial statements for the three months ended March 31, 2018 and the year ended December 31, 2017.
Havilah Mining Corporation
Pro Forma Financial
Statements (Unaudited)
March 31, 2018
(expressed in thousands
of Canadian dollars)
Havilah Mining Corporation
Pro Forma Financial
Statements (Unaudited)
TABLE OF CONTENTS
HAVILAH MINING CORPORATION
PRO FORMA CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
AS AT MARCH 31, 2018
(Unaudited - prepared by management)
(CDN dollars in
thousands)
|
|
|
|
|
|
Canadian
|
|
|
|
|
|
|
Havilah
|
|
|
|
|
|
|
|
Spinco of
|
|
|
|
|
|
|
Mining Corp.
|
|
|
|
Havilah
|
|
|
|
Klondex
|
|
|
Pro forma
|
|
|
|
Consolidated
|
|
|
|
Mining Corp.
|
|
|
|
Carve-out
|
|
|
adjustments
|
|
Note
|
|
Pro Forma
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
|
|
(1
)
|
$
|
1,569
|
|
$
|
9,182
|
|
4a
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,569
|
)
|
4b
|
$
|
9,182
|
|
Inventories
|
|
|
|
|
|
5,873
|
|
|
(2,782
|
)
|
4b
|
|
3,091
|
|
Prepaid expenses and other
|
|
|
|
|
|
637
|
|
|
|
|
|
|
637
|
|
Total current assets
|
|
|
|
|
|
8,079
|
|
|
4,831
|
|
|
|
12,910
|
|
Mineral properties, plant and
equipment, net
|
|
|
|
|
|
53,084
|
|
|
|
|
|
|
53,084
|
|
Total assets
|
$
|
|
|
|
$
|
61,163
|
|
$
|
4,831
|
|
|
$
|
65,994
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
5
|
|
|
$
|
2,898
|
|
$
|
|
|
|
$
|
2,903
|
|
Accrued compensation
and benefits
|
|
|
|
|
|
433
|
|
|
|
|
|
|
433
|
|
Total current liabilities
|
|
5
|
|
|
|
3,331
|
|
|
|
|
|
|
3,336
|
|
Reclamation obligations
|
|
|
|
|
|
2,345
|
|
|
|
|
|
|
2,345
|
|
Total liabilities
|
|
5
|
|
|
|
5,676
|
|
|
|
|
|
|
5,681
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
(1
)
|
|
|
|
|
9,182
|
|
4a
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,569
|
)
|
4b
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,782
|
)
|
4b
|
|
|
|
|
|
|
|
|
|
|
|
|
133,248
|
|
4c
|
|
138,079
|
|
Parent company
investment
|
|
|
|
|
|
133,248
|
|
|
(133,248
|
)
|
4c
|
|
|
|
Accumulated deficit
|
|
(5
|
)
|
|
|
(77,761
|
)
|
|
|
|
|
|
(77,766
|
)
|
Total equity
|
|
(5
|
)
|
|
|
55,487
|
|
|
4,831
|
|
|
|
60,313
|
|
Total liabilities and equity
|
$
|
|
|
|
$
|
61,163
|
|
$
|
4,831
|
|
|
$
|
65,994
|
|
(1)
Havilah Mining Corporation's initial
capitalization consisted of one share issued for one dollar.
The accompanying notes are an integral part of these unaudited
pro forma consolidated financial statements.
2
HAVILAH MINING CORPORATION
PRO FORMA CONSOLIDATED
STATEMENT OF COMPREHENSIVE (LOSS)
THREE MONTHS ENDED MARCH 31, 2018
(Unaudited - prepared by management)
(CDN dollars in
thousands except shares and per share amounts)
|
|
|
|
|
Canadian
|
|
|
|
|
|
|
Havilah
|
|
|
|
|
|
|
Spinco of
|
|
|
|
|
|
|
Mining Corp.
|
|
|
|
Havilah
|
|
|
Klondex
|
|
|
Pro forma
|
|
|
|
Consolidated
|
|
|
|
Mining Corp.
|
|
|
Carve-out
|
|
|
adjustments
|
|
Note
|
|
Pro Forma
|
|
Revenues
|
$
|
|
|
$
|
8,688
|
|
$
|
|
|
|
$
|
8,688
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs
|
|
|
|
|
12,156
|
|
|
|
|
|
|
12,156
|
|
Depreciation and depletion
|
|
|
|
|
1,559
|
|
|
|
|
|
|
1,559
|
|
Write-down of
production inventories
|
|
|
|
|
622
|
|
|
|
|
|
|
622
|
|
|
|
|
|
|
(5,649
|
)
|
|
|
|
|
|
(5,649
|
)
|
Other operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
5
|
|
|
1,746
|
|
|
|
|
|
|
1,751
|
|
(Loss) from operations
|
|
(5
|
)
|
|
(7,395
|
)
|
|
|
|
|
|
(7,400
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance charges, net
|
|
|
|
|
(1,941
|
)
|
|
|
|
|
|
(1,941
|
)
|
Foreign currency (loss) gain, net
|
|
|
|
|
(504
|
)
|
|
|
|
|
|
(504
|
)
|
(Loss) before tax
|
$
|
(5
|
)
|
$
|
(9,840
|
)
|
$
|
|
|
|
$
|
(9,845
|
)
|
Income tax (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) and
comprehensive (loss)
|
$
|
(5
|
)
|
$
|
(9,840
|
)
|
$
|
|
|
|
$
|
(9,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(5.00
|
)
|
$
|
|
|
$
|
|
|
|
$
|
(0.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
1
|
|
|
|
|
|
25,943,919
|
|
4d
|
|
25,943,920
|
|
The accompanying notes are an integral part of these unaudited
pro forma consolidated financial statements.
3
HAVILAH MINING CORPORATION
PRO FORMA CONSOLIDATED
STATEMENT OF COMPREHENSIVE (LOSS)
YEAR ENDED DECEMBER 31, 2017
(Unaudited - prepared by management)
(CDN dollars in
thousands except shares and per share amounts)
|
|
|
|
|
Canadian
|
|
|
|
|
|
|
Havilah
|
|
|
|
|
|
|
Spinco of
|
|
|
|
|
|
|
Mining Corp.
|
|
|
|
Havilah
|
|
|
Klondex
|
|
|
Pro forma
|
|
|
|
Consolidated
|
|
|
|
Mining Corp.
|
|
|
Carve-out
|
|
|
adjustments
|
|
Note
|
|
Pro Forma
|
|
Revenues
|
$
|
|
|
$
|
42,174
|
|
$
|
|
|
|
$
|
42,174
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs
|
|
|
|
|
41,427
|
|
|
|
|
|
|
41,427
|
|
Depreciation and depletion
|
|
|
|
|
5,449
|
|
|
|
|
|
|
5,449
|
|
Write-down of
production inventories
|
|
|
|
|
8,306
|
|
|
|
|
|
|
8,306
|
|
|
|
|
|
|
(13,008
|
)
|
|
|
|
|
|
(13,008
|
)
|
Other operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
5
|
|
|
5,201
|
|
|
|
|
|
|
5,206
|
|
Impairment on mineral
properties, plant and equipment
|
|
|
|
|
28,230
|
|
|
|
|
|
|
28,230
|
|
(Gain) loss on equipment disposal
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
(32
|
)
|
(Loss) from operations
|
|
(5
|
)
|
|
(46,407
|
)
|
|
|
|
|
|
(46,412
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance charges, net
|
|
|
|
|
(6,108
|
)
|
|
|
|
|
|
(6,108
|
)
|
Foreign currency (loss) gain, net
|
|
|
|
|
1,187
|
|
|
|
|
|
|
1,187
|
|
Other income (expense),
net
|
|
|
|
|
135
|
|
|
|
|
|
|
135
|
|
(Loss) before tax
|
$
|
(5
|
)
|
$
|
(51,193
|
)
|
$
|
|
|
|
$
|
(51,198
|
)
|
Income tax (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) and comprehensive (loss)
|
$
|
(5
|
)
|
$
|
(51,193
|
)
|
$
|
|
|
|
$
|
(51,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(5.00
|
)
|
$
|
|
|
$
|
|
|
|
$
|
(1.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding
|
|
1
|
|
|
|
|
|
25,943,919
|
|
4d
|
|
25,943,920
|
|
The accompanying notes are an integral part of these unaudited
pro forma consolidated financial statements.
4
Havilah Mining Corporation
Notes to the Pro Forma
Consolidated Financial Statements
As at and for the three months ended
March 31, 2018 and for the year ended December 31, 2017
(Unaudited -
prepared by management)
(All amounts expressed in thousands of CDN
dollars)
1. About the Arrangement Agreement
Spin-out from Klondex Mines Ltd.
On March 16, 2018, Klondex Mines Ltd. ("Klondex") entered into
an arrangement agreement (the "Arrangement Agreement") with Hecla Mining Company
("Hecla") and 1156291 B.C. Unlimited Liability Company, a wholly-owned
subsidiary of Hecla. Under the terms of the Arrangement Agreement, Hecla will
acquire all the outstanding common shares of Klondex. As part of the Arrangement
Agreement, Klondex shareholders will receive consideration consisting of cash,
shares of Hecla common stock, or a combination of cash and Hecla common stock,
plus shares of a new company, Havilah Mining Corporation ("Havilah"), formed to
hold Klondexs Canadian assets comprised of Klondex Canada Ltd. and Bison Gold
Resources, Inc. The Arrangement Agreement terms contain a provision in which
Hecla will subscribe for a 13.46% interest in Havilah for US$7.0 million. The
Arrangement Agreement has been approved by the boards of directors of Klondex
and Hecla and is subject to the approval of Klondex's shareholders.
About Havilah
If the Arrangement Agreement is approved by Klondex
shareholders, Havilah will hold Klondex's Canadian assets, which are comprised
of Klondex Canada Ltd., which holds the True North gold mine and mill ("True
North") and Bison Gold Resources Inc. which holds the Ogama-Rockland properties
("Ogama"), the 10% buy-back rights on the Snow Lake Property, and various
early-stage assets located in Manitoba and Ontario, Canada. True North and Ogama
were acquired by Klondex on January 22, 2016 and October 19, 2017, respectively,
and, as such, the Canadian Spinco of Klondex had no operations or assets prior
to 2016. Klondex placed True North into production in the third quarter of 2016
and operations continued until January 9, 2018, when True North was placed on
care and maintenance. Ogama is an exploration stage property located
approximately 19 miles from True North.
Havilah Mining Corporation was incorporated under the BCBCA on
May 3, 2018. Havilahs registered office is located at 1055 West Hastings
Street, Suite 2200, Vancouver, BC, V6E 2E9, and its head office is located at 82
Richmond Street East, Toronto, ON, M5C 1P1.
2. Basis of presentation
The unaudited pro forma consolidated financial statements are
prepared to give effect to and reflect the transactions as described in
Note
1. About the Arrangement Agreement
and the pro-forma
assumptions and adjustment described in
Note
4. Pro Forma Assumptions
and Adjustments
below and include:
-
Unaudited pro forma consolidated statement of financial position as at
March 31, 2018 prepared from the financial statements of Havilah Mining
Corporation for the period ended May 31, 2018 and the carve-out financial
statements of the Canadian Spinco of Klondex for the period ended March 31,
2018, as included in the Management Information Circular, reflecting the
Arrangement Agreement as if it had occurred on March 31, 2018.
-
Unaudited pro forma consolidated statement of comprehensive loss for the
period from January 1, 2018 to March 31, 2018, prepared from the financial
statements of Havilah Mining Corporation for the period ended May 31, 2018 and
the carve-out financial statements of the Canadian Spinco of Klondex for the
period ended March 31, 2018, as included in the Management Information
Circular, reflecting the Arrangement Agreement as if it had occurred on
January 1, 2018.
-
Unaudited pro forma consolidated statement of comprehensive loss for the
year ended December 31, 2017, prepared from the financial statements of
Havilah Mining Corporation for the period ended May 31, 2018 and the carve-out
financial statements of the Canadian Spinco of Klondex for the year ended
December 31, 2017, as included in the Management Information Circular,
reflecting the Arrangement Agreement as if it had occurred on January 1, 2017.
These unaudited pro forma consolidated financial statements are
not intended to reflect the financial position and results of operations that
would have occurred if the events reflected therein had been in effect at the
dates indicated. Further, these pro forma consolidated financial statements are
not necessarily indicative of the financial position and results of operations
that may be obtained in the future.
3. Summary of significant accounting policies
The accounting policies used in the preparation of these
unaudited pro forma financial statements are those as set out in the most recent
audited carve-out financial statements for the Canadian Spinco of Klondex Mines
Ltd.
4. Pro Forma Assumptions and Adjustments
The unaudited pro forma consolidated financial statements
incorporate the following pro forma adjustments and/or assumptions:
5
|
a.
|
As part of the Arrangement Agreement, Havilah receives
US$7.0 million ($9.2 million) in cash from Hecla's subscription for a
13.46% interest in Havilah.
|
|
|
|
|
b.
|
As part of the Arrangement Agreement, Klondex will
transfer all but one dollar of cash ($1.6 million at March 31, 2018) and
all dore inventory ($2.8 million at March 31, 2018) to Hecla.
|
|
|
|
|
c.
|
Following the Arrangement Agreement, the parent company
net investment from Klondex will be transferred to share
capital.
|
|
|
|
|
d.
|
As disclosed in the Management Information Circular, the
consolidated March 31, 2018 capitalization of Havilah following completion
of the Arrangement Agreement was comprised of 25,943,919 common shares and
1,250,000 warrants.
|
5. Share Capital
The following table provides the changes in the number of
shares and warrants pursuant to the Arrangement Agreement (in ones):
|
|
Number of
|
|
|
Number of
|
|
Issued on incorporation
|
|
common shares
|
|
|
warrants
|
|
|
|
1
|
|
|
|
|
Issued under the Arrangement
Agreement
|
|
25,943,919
|
|
|
1,250,000
|
|
|
|
25,943,920
|
|
|
1,250,000
|
|
The following table provides the changes in share capital
pursuant to the Arrangement Agreement (in thousands):
|
|
Amount
|
|
Capital from initial incorporation
|
$
|
|
(1)
|
Capital effects of the Arrangement Agreement:
|
|
|
|
Transfer of Klondex parent company
investment
|
|
133,248
|
|
Subscription by Hecla
|
|
9,182
|
|
Cash and dore finished goods
transferred to Hecla
|
|
(4,351
|
)
|
|
$
|
138,079
|
|
(1)
Havilah Mining Corporation's initial
capitalization consisted of one share issued for one dollar.
6. Calculation of Basic and Diluted Loss per Share
Pro forma basic and diluted loss per share are calculated based
upon the weighted average number of Havilah common shares that would have been
outstanding, assuming that any shares issued under the Arrangement Agreement
would have been issued and outstanding for the periods presented. The weighted
average number of shares outstanding for the basic and diluted loss per share
calculations for the interim period ended March 31, 2018 and the year ended
December 31, 2017 was assumed to be 25,943,920 and excludes the effects of
1,250,000 warrants as such instruments would have been anti-dilutive.
6
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