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As filed with the Securities and Exchange Commission on May 22, 2024
Registration No. 333-  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MCEWEN MINING INC.
(Exact name of registrant as specified in its charter)
Colorado
1040
84-0796160
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer
Identification Number)
150 King Street West, Suite 800
Toronto, Ontario
Canada M5H 1J9
(866) 441-0690
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Carmen Diges
150 King Street West, Suite 2800
Toronto, Ontario
Canada M5H 1J9
(866) 441-0690
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
George A. Hagerty
Richard Aftanas
Hogan Lovells US LLP
1601 Wewatta Street, Suite 900
Denver, CO 80202
Ted R. Sharp
Chief Financial Officer
Timberline Resources
Corporation
9030 North Hess Street,
Suite 161
Hayden, ID 83835
Brian Boonstra
Davis Graham & Stubbs LLP
1550 17th Street, Suite 500
Denver, CO 80202
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective and upon completion of the merger described in the enclosed document.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filter
Non-accelerated filter
 
Smaller report company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross Border Issuer Tender Offer)
Exchange Act Rule 14d-1(d) (Cross Border Third Party Tender Offer)
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.

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The information in this proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell or a solicitation of an offer to buy any securities in any state where the offer, solicitation or sale is not permitted.
PRELIMINARY, SUBJECT TO COMPLETION, DATED MAY 22, 2024


TRANSACTION PROPOSED—YOUR VOTE IS VERY IMPORTANT
Dear Stockholders of Timberline Resources Corporation,
On April 16, 2024, Timberline Resources Corporation (“Timberline” or the “Company”), McEwen Mining Inc. (“McEwen”) and Lookout Merger Sub, Inc., a direct, wholly owned subsidiary of McEwen (“Merger Sub”), entered into an Agreement and Plan of Merger, as it may be amended time to time, which is referred to as the “merger agreement” under which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Timberline, with Timberline surviving as a direct, wholly owned subsidiary of McEwen (the “merger”). If the merger is completed, Timberline stockholders will receive, in exchange for each share of Timberline common stock held immediately prior to the merger, 0.01 of a share of McEwen common stock. The Timberline Board of Directors (the “Timberline Board”) has unanimously approved the merger agreement and recommends that Timberline stockholders vote in favor of adopting the merger agreement.
Based on Timberline’s closing stock price on [•], 2024, the most recent practicable date for which such information was available, the merger consideration represented approximately $[•] in value per share of Timberline common stock, which represents a premium of approximately [•]% over Timberline’s closing stock price on April 15, 2024, the last trading day before the public announcement of the execution of the merger agreement with McEwen. The value of the merger consideration to be received in exchange for each share of Timberline common stock will fluctuate with the market value of McEwen common stock until the transaction is complete. The common stock of Timberline is listed on the TSX Venture Exchange under the symbol “TBR” and quoted on the OTCQB Venture Market under the symbol “TLRS”. The common stock of McEwen is listed on the New York Stock Exchange (“NYSE”) and on the Toronto Stock Exchange (“TSX”) under the symbol “MUX”. Upon completion of the merger, former Timberline stockholders are expected to own approximately [•]% of the then outstanding McEwen common stock, based on McEwen outstanding common stock as of [•], 2024.
The merger cannot be completed without approval of the proposal to adopt the merger agreement by the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon. Because of this, Timberline is holding a special meeting of its stockholders on [], 2024 to vote on the proposal necessary to complete the merger. Information about the meeting, the merger, the merger agreement, and the other business to be considered by stockholders at the special meeting is contained in this proxy statement/prospectus. The Timberline Board has fixed the close of business on [], 2024 as the record date for the determination of Timberline stockholders entitled to notice of, and to vote at, the special meeting. Any stockholder entitled to attend and vote at the special meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of Timberline common stock. We urge you to read this proxy statement/prospectus and the annexes and documents incorporated by reference carefully. You should also carefully consider the risks that are described in the “Risk Factors” section beginning on page 23.
The Timberline Board has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of the Timberline stockholders, approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and directed that the merger agreement be submitted to the Timberline stockholders for adoption at a meeting of such stockholders, and unanimously recommends that Timberline stockholders vote “FOR” the proposal to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger.
Your vote on these matters is very important, regardless of the number of shares of Timberline common stock that you own. Whether or not you plan to attend the special meeting, we urge you to submit your vote in advance of the meeting. If your shares are held in the name of a broker, bank or other nominee, please vote by following the instructions on the voting instruction form furnished by the broker, bank or other nominee. If you hold your shares in your own name, submit a proxy to vote your shares as promptly as possible by (i) visiting the internet site listed on the accompanying proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the self-addressed, stamped envelope provided.
Thank you for your continued support, interest and investment in Timberline.
Very truly yours,

Patrick Highsmith
President and Chief Executive Officer
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the other transactions described in this proxy statement/prospectus or the securities to be issued in connection with the merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated [•], 2024, and is first being mailed to stockholders of Timberline on or about [•], 2024.

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9030 North Hess Street, Suite 161
Hayden, Idaho 83835

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on [•], 2024
To the Stockholders of Timberline Resources Corporation:
We are pleased to invite you to attend the special meeting of stockholders of Timberline Resources Corporation, a Delaware corporation (“Timberline” or the “Company”), which will be held at [•] [a.m.]/[p.m.], Mountain Time, on [•], 2024, at the office of Davis Graham & Stubbs, LLP, 1550 17th Street, Suite 500, Denver, CO 80202, for the following purposes:
to vote on a proposal to adopt the Agreement and Plan of Merger, dated as of April 16, 2024, by and among McEwen Mining Inc., a Colorado corporation (“McEwen”), Lookout Merger Sub, Inc., a direct, wholly owned subsidiary of McEwen (“Merger Sub”), and Timberline (as it may be amended from time to time, the “merger agreement”), which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 30 and 52, respectively, and a copy of which is attached as Annex A to the proxy statement/prospectus of which this notice is a part (the “merger proposal”);
to vote on an advisory (non-binding) proposal to approve the compensation that may be paid or become payable to Timberline’s named executive officers (“NEOs”) that is based on or otherwise related to the merger (the “merger-related compensation proposal”); and
to vote on a proposal to approve the adjournment of the Timberline special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement (the “adjournment proposal”).
Timberline will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof by or at the direction of the Timberline Board of Directors (the “Timberline Board”). Please refer to the proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the special meeting.
Timberline has fixed the close of business on [•], 2024 as the record date for the special meeting. Only Timberline stockholders of record at the record date are entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement thereof. A complete list of stockholders entitled to vote at the special meeting will be available for inspection for a period of at least ten days prior to the special meeting. If your shares of Timberline common stock are not registered in your name, you will need to bring proof of your ownership of those shares of Timberline common stock to the special meeting in order to register to attend and vote. You should ask the broker, bank or other nominee that holds your Timberline common stock to provide you with proper proxy documentation that shows your ownership of Timberline Shares as of the record date and your right to vote such Timberline common stock at the special meeting. Please bring that documentation to the special meeting.
Completion of the merger is conditioned on adoption of the merger agreement by the Timberline stockholders, which requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon.
The Timberline Board has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of the Timberline stockholders, approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and directed that the merger agreement be submitted to the Timberline stockholders for adoption at a meeting of such stockholders and unanimously recommends that Timberline stockholders vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.
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Your vote is very important regardless of the number of shares of Timberline common stock that you own. Whether or not you plan to attend the special meeting, we urge you to submit your vote in advance of the meeting. If your shares are held in the name of a broker, bank or other nominee, please vote by following the instructions on the voting instruction form furnished by the broker, bank or other nominee. If you hold your shares in your own name, submit a proxy to vote your shares as promptly as possible by (i) visiting the internet site listed on the accompanying proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the self-addressed, stamped envelope provided. Submitting a proxy will not prevent you from voting at the meeting, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of Timberline common stock may vote at the special meeting, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the special meeting in the manner described in the proxy statement/prospectus of which this notice is a part.
The proxy statement/prospectus of which this notice is a part provides a detailed description of the merger and the merger agreement and the other matters to be considered at the special meeting. We urge you to carefully read this proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. In particular, we urge you to carefully read the section entitled “Risk Factors” beginning on page 23.
If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies or need help voting your shares of Timberline’s common stock, please contact Cathy Osterberg at (866) 513-4859.
By Order of the Timberline Board of Directors,
Patrick Highsmith
President and Chief Executive Officer

[•], 2024
Hayden, Idaho
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REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates by reference important business and financial information about McEwen and Timberline from other documents that are not included in or delivered with this proxy statement/prospectus. For a listing of the documents incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 85.
You can obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge by requesting them in writing or by telephone as follows:
For information related to McEwen:
McEwen Mining, Inc.
150 King Street West, Suite 2800
Toronto, Ontario, Canada M5H 1J9
Attention: Carmen Diges
Telephone: (866) 441-0690
For information related to Timberline:
Timberline Resources Corporation
9030 North Hess Street, Suite 161
Hayden, ID 83835
Attention: Cathy Osterberg
Telephone: (866) 513-4859
To receive timely delivery of the documents in advance of the special meeting of Timberline stockholders, you should make your request no later than [•], 2024, which is five business days before the meeting.
You may also obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge through the Securities and Exchange Commission (the “SEC”) website at www.sec.gov. In addition, you may obtain copies of documents filed by McEwen with the SEC by accessing McEwen website at https://www.mcewenmining.com/investor-relations/reports-and-filings/default.aspx. You may also obtain copies of documents filed by Timberline with the SEC by accessing Timberline’s website at https://timberlineresources.co/regulatory-filings/.
We are not incorporating the contents of the websites of the SEC, McEwen, Timberline or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.
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ABOUT THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by McEwen (File No. 333-[•]), constitutes a prospectus of McEwen under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock, no par value per share, of McEwen (“McEwen common stock”) to be issued to Timberline stockholders pursuant to the merger agreement. This document also constitutes a proxy statement of Timberline under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting, at which Timberline stockholders will be asked to consider and vote on the adoption of the merger agreement and other related proposals.
McEwen has supplied all information contained or incorporated by reference in this proxy statement/prospectus relating to McEwen and Merger Sub, and Timberline has supplied all such information relating to Timberline.
You should rely only on the information contained or incorporated by reference in, this proxy statement/prospectus. McEwen and Timberline have not authorized anyone to provide you with information other than the information that is contained in, or incorporated by reference into, this proxy statement/prospectus. McEwen and Timberline take no responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you. This proxy statement/prospectus is dated [•], 2024, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein. Further, you should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Timberline stockholders nor the issuance by McEwen of shares of McEwen common stock pursuant to the merger agreement will create any implication to the contrary.
This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
The following questions and answers briefly address some commonly asked questions about the merger and the other matters being considered at the special meeting of Timberline stockholders (the “special meeting”). They may not include all of the information that is important to stockholders of Timberline. Timberline stockholders should carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 85 of this proxy statement/prospectus.
Q:
What is the merger?
McEwen, Merger Sub, and Timberline have entered into an Agreement and Plan of Merger, dated as of April 16, 2024 (as it may be amended from time to time, the “merger agreement”). A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. The merger agreement contains the terms and conditions of the proposed acquisition of Timberline by McEwen. Under the merger agreement, subject to satisfaction (or, to the extent permitted by law and in accordance with the merger agreement, waiver) of the conditions to the merger set forth in the merger agreement and described in this proxy statement/prospectus, Merger Sub will merge with and into Timberline, with Timberline continuing as the surviving corporation and a direct, wholly owned subsidiary of McEwen (the “merger” or the “transaction”).
As a result of the merger, Timberline will become a direct, wholly owned subsidiary of McEwen and will no longer be a publicly held company. Following the merger, Timberline common stock will be delisted from the TSX Venture Exchange (the “TSXV”) and removed from quotation on the OTCQB Venture Market (the “OTCQB”), after which Timberline will no longer be required under SEC rules and regulations to file periodic reports with the SEC in respect of Timberline common stock.
Q:
Why am I receiving these materials?
McEwen and Timberline are sending these materials to Timberline stockholders to help them decide how to vote their shares of Timberline common stock with respect to the merger and other matters to be considered at the special meeting. The merger agreement, which governs the terms and conditions of the merger, is attached as Annex A hereto.
The merger cannot be completed unless Timberline stockholders adopt the merger agreement with the affirmative vote of the holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon. Timberline is holding a special meeting of its stockholders to vote on the proposal to adopt the merger agreement and other related proposals. Information about this special meeting, the merger and the other business to be considered by stockholders at the special meeting is contained in this proxy statement/prospectus.
This proxy statement/prospectus constitutes both a proxy statement of Timberline and a prospectus of McEwen. It is a proxy statement because the Timberline Board is soliciting proxies from its stockholders. It is a prospectus because McEwen will issue shares of its common stock in exchange for outstanding shares of Timberline common stock in the merger.
Q:
What will Timberline stockholders receive in the merger?
At the effective time of the merger, by virtue of the merger and without any further action of the parties or any holder of shares thereof, each issued and outstanding share of Timberline common stock (other than excluded shares, which will be automatically canceled and retired and cease to exist) will be converted into the right to receive 0.01 of a fully paid and nonassessable share of McEwen common stock (the “exchange ratio”). The exchange ratio is fixed, which means that it will not change between now and the date of the completion of the merger, regardless of whether the market price of either Timberline common stock or McEwen common stock changes. Therefore, the value of the merger consideration will depend on the market price of McEwen common stock at the completion of the merger. In the event that either McEwen or Timberline changes the number of its shares issued and outstanding prior to the effective time of the merger as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the exchange ratio would be equitably adjusted to reflect such change. McEwen will not issue fractional shares of McEwen common stock in connection with the merger, no dividends or distributions of McEwen will relate to fractional share interests, and fractional share interests will not entitle the owner thereof to vote or to any rights as a McEwen stockholder. Each Timberline stockholder that otherwise would have been entitled to receive a fraction of a share of McEwen common stock pursuant to the merger (after taking
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into account all shares of Timberline common stock held immediately prior to the effective time of the merger by such stockholder) shall have its holdings of McEwen common stock rounded up to the nearest whole share. For a more discussion of the merger consideration, see “The Merger Agreement—Merger Consideration” on page 52.
Q:
What equity stake will Timberline stockholders hold in McEwen immediately following the merger?
Upon the completion of the merger, based on the exchange ratio, the estimated number of shares of McEwen common stock issuable as the merger consideration is approximately [1,899,988] shares, which will result in former Timberline stockholders holding approximately [•]% of the outstanding fully diluted McEwen common stock based on the number of outstanding shares of common stock and outstanding stock-based awards of McEwen and Timberline as of [•], 2024, the most recent practicable date for which such information was available.
For more details on the merger consideration and the treatment of Timberline equity awards, see “The Merger Agreement—Merger Consideration” beginning on page 52 and “The Merger Agreement—Treatment of Timberline Equity Awards” beginning on page 53, respectively.
Q:
When do Timberline and McEwen expect to complete the merger?
McEwen and Timberline are working to complete the merger as soon as practicable and currently expect that the transaction will be completed before the end of the third quarter of 2024. Neither McEwen nor Timberline can predict, however, the actual date on which the transaction will be completed, or if the merger will be completed at all, because completion of the merger is subject to conditions beyond each company’s control. See “The Merger Agreement—Conditions to the Merger” beginning on page 65.
Q:
Is McEwen’s obligation to complete the merger subject to McEwen receiving financing?
No. McEwen’s obligations under the merger agreement are not subject to any condition regarding its ability to finance, or obtain financing for, the merger.
Q:
What happens if the merger is not completed?
If the merger agreement is not adopted by Timberline stockholders or if the merger is not completed for any other reason, Timberline stockholders will not receive any consideration for their shares of Timberline common stock. Instead, Timberline will remain an independent public company, Timberline common stock will continue to be listed and traded on TSXV and quoted on the OTCQB and Timberline will continue to file periodic reports with the SEC. If the merger agreement is terminated under specific circumstances, Timberline may be required to pay McEwen a termination fee of $400,000. See “The Merger Agreement—Termination” beginning on page 66.
Q:
Will the shares of McEwen common stock I acquire in the merger receive a dividend?
After the closing of the merger, as a holder of McEwen common stock, you will receive the same dividends on shares of McEwen common stock that all other holders of shares of McEwen common stock would receive with any dividend record date that occurs after the closing of the merger. McEwen has not paid a dividend to its holders of common stock since 2019 and the provisions of its outstanding secured debt restrict it from paying dividends, even if its operations might warrant such a payment.
Q:
What am I being asked to vote on, and why is this approval necessary?
Timberline stockholders are being asked to vote on the following proposals:
a proposal to adopt the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus, which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 30 and 52, respectively (the “merger proposal”);
an advisory (non-binding) proposal to approve the compensation that may be paid or become payable to Timberline’s named executive officers (“NEOs”) that is based on or otherwise related to the merger (the “merger-related compensation proposal”); and
a proposal to approve the adjournment of the Timberline special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement (the “adjournment proposal”).
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Approval of the merger proposal by the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon is required for completion of the merger (the “Timberline stockholder approval”). The completion of the merger is not conditioned on the approval of the merger-related compensation proposal or the adjournment proposal.
Q:
What vote is required to approve each proposal at the special meeting?
The required votes to approve the proposals at the special meeting are as follows:
The merger proposal: The affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon is required to approve the merger proposal.
The merger-related compensation proposal: The affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon is required to approve the advisory (non-binding) merger-related compensation proposal. Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on either Timberline or McEwen. Accordingly, if the merger agreement is adopted and the merger is completed, the merger-related compensation will be payable to Timberline’s NEOs, subject only to the conditions applicable thereto, regardless of the outcome of the non-binding, advisory vote of Timberline’s stockholders.
The adjournment proposal: The affirmative vote of the holders of a majority of the outstanding shares of Timberline common stock, present in person or represented by proxy at the special meeting and entitled to vote thereon is required to approve the adjournment proposal. If Timberline stockholders approve the adjournment proposal, subject to the terms of the merger agreement, Timberline could adjourn the special meeting and use the additional time to solicit additional proxies, including soliciting proxies from Timberline stockholders who have previously voted. Timberline does not intend to call a vote on the adjournment proposal if the merger proposal is approved at the special meeting.
Q:
Does my vote matter?
Yes, your vote is very important, regardless of the number of shares that you own. The merger cannot be completed unless the merger proposal is approved by Timberline stockholders.
The approval of the merger-related compensation proposal and the adjournment proposal are not required to complete the merger.
Q:
What happens if the non-binding, advisory merger-related compensation proposal is not approved?
Under SEC rules, Timberline is required to seek a non-binding advisory vote of its stockholders relating to the compensation that may be paid or become payable to Timberline’s NEOs that is based on or otherwise relates to the merger.
Because the vote on the merger-related compensation proposal is advisory in nature, it will not be binding on either Timberline or the surviving corporation. Accordingly, if the merger agreement is adopted and the merger is completed, the merger-related compensation will be payable to Timberline’s NEOs, subject only to the conditions applicable thereto, regardless of the outcome of the non-binding, advisory vote of Timberline’s stockholders.
Q:
What constitutes a quorum?
The presence at the special meeting, in person or by proxy, of the holders of one-third of the outstanding shares of Timberline common stock entitled to vote at the special meeting will constitute a quorum for the transaction of business at the special meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the special meeting. Brokers, banks or other nominees that hold shares for beneficial owners do not have discretionary authority to vote the shares as to any matter at the meeting without receiving voting instructions from the beneficial owners. Such shares will be considered to be broker non-votes and will not be counted as present for quorum purposes.
A quorum is the minimum number of shares required to be represented, either through attendance or through representation by proxy, as is necessary to transact business at the special meeting. Timberline’s bylaws provide that if a quorum fails to attend any meeting, the chairman of the meeting or the affirmative vote of a majority of the votes
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actually cast by the stockholders who are present in person or by proxy and entitled to vote at the special meeting may adjourn the meeting from time to time, without notice other than by announcement at the meeting, to another date, place, if any, and time until a quorum is present. If the adjournment is for more than 30 days or if after the adjournment, a new record date is fixed for the adjourned meeting, Timberline will provide a notice of the adjourned meeting to each stockholder of record entitled to vote at the meeting.
Q:
How does the Timberline Board recommend that I vote?
The Timberline Board unanimously recommends that Timberline stockholders vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.
In considering the recommendations of the Timberline Board that Timberline stockholders vote in favor of the proposal to adopt the merger agreement and the merger-related compensation proposal, Timberline stockholders should be aware that the executive officers and the directors of Timberline have certain interests in the merger that are or may be different from, or in addition to, the interests of Timberline’s stockholders generally, including the treatment of Timberline equity awards in the merger, the rights to ongoing indemnification and insurance coverage and, in the case of certain executive officers, executive severance arrangements. For a more complete description of these interests, see the section titled, “The Merger—Interests of Directors and Executive Officers of Timberline in the Merger.”
Q:
What do I need to do now?
After carefully reading and considering the information contained in and incorporated by reference into, this proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at the special meeting. Please follow the instructions set forth on the accompanying proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker, bank or other nominee.
Please do not submit your Timberline stock certificates at this time. If the merger is completed, you will receive instructions for surrendering your Timberline stock certificates in exchange for shares of McEwen common stock from the exchange agent.
Please carefully consider the information contained in, and incorporated by reference into, this proxy statement/prospectus. Whether or not you plan to attend the special meeting, Timberline encourages you to submit your proxy to vote via the internet, by telephone or by mail so that your shares will be voted in accordance with your wishes even if you later decide not to attend the special meeting.
Q:
What is a proxy?
A proxy is a stockholder’s legal designation of another person to vote shares owned by such stockholder on their behalf. If you are a stockholder of record, you can vote by proxy over the internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. If you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee.
Q:
How can I attend the special meeting?
Stockholders as of the close of business on [•], 2024 (the “record date”) may attend, vote and submit questions at the special meeting. If you are not a stockholder, you may still attend the meeting as a guest, but you will not be able to participate.
Q:
How do I vote?
If you are a stockholder of record of Timberline as of the close of business on the record date, you may submit your proxy before the special meeting in one of the following ways:
Telephone: Use the toll-free number shown on your proxy card;
Internet: Visit the website shown on your proxy card to vote via the internet; or
Mail: Complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.
If your shares are held in “street name” through a broker, bank or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. Your vote at the special meeting will revoke any proxy previously submitted on your behalf by your broker, bank or other nominee.
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The meeting will begin promptly at [•] [a.m.]/[p.m.], Mountain Time, on [•], 2024. Timberline encourages its stockholders to access the meeting prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this proxy statement/prospectus.
Even if you plan to attend the special meeting, Timberline recommends that you vote your shares in advance as described above so that your vote will be counted even if you later decide not to or become unable to attend the special meeting.
Q:
When and where is the special meeting of stockholders? What must I bring to attend the special meeting?
The special meeting of Timberline stockholders will be held at the office of Davis Graham & Stubbs, LLP, 1550 17th Street, Suite 500, Denver, CO 80202 at [•] [a.m.]/[p.m.], Mountain Time, on [•], 2024. Entry to the special meeting will begin at [•] [a.m.]/[p.m.], Mountain Time, and Timberline encourages its stockholders to access the meeting prior to the start time. Even if you plan to attend the special meeting, Timberline recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to or become unable to attend the special meeting.
Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares of Timberline common stock are registered directly in your name with the transfer agent of Timberline, Nevada Agency and Transfer Company, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote or to grant a proxy for your vote directly to Timberline or to a third party to vote at the special meeting.
If your shares are held by a broker, bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and your broker, bank or other nominee is considered the stockholder of record with respect to those shares. Your broker, bank or other nominee will send you, as the beneficial owner, voting instruction forms for you to use in directing the broker, bank or other nominee in how to vote your shares. You should follow the instructions provided by them to vote your shares.
Q:
If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?
If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card or voting instruction form directly to Timberline. Your broker, bank or other nominee is obligated to provide you with a voting instruction form for you to use.
Applicable stock exchange rules permit brokers to vote their customers’ stock held in street name on routine matters when the brokers have not received voting instructions from their customers. Those rules do not, however, allow brokers to vote their customers’ stock held in “street name” on non-routine matters unless they have received voting instructions from their customers. In such cases, the uninstructed shares for which the broker is unable to vote are called broker non-votes. The merger proposal, the merger-related compensation proposal and the adjournment proposal are non-routine matters on which brokers are not allowed to vote unless they have received voting instructions from their customers.
If you are a Timberline “street name” stockholder and you do not instruct your broker, bank or other nominee on how to vote your shares:
your broker, bank or other nominee may not vote your shares on the merger proposal, which broker non-votes will have the same effect as votes cast “AGAINST” this proposal;
your broker, bank or other nominee may not vote your shares on the merger-related compensation proposal, which broker non-votes will have no effect on the vote for this proposal (assuming a quorum is present); and
your broker, bank or other nominee may not vote your shares on the adjournment proposal, which broker non-votes will have no effect on the vote for this proposal (assuming a quorum is present).
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Q:
What if I fail to vote or abstain?
For purposes of the special meeting, an abstention occurs when a stockholder attends the special meeting in-person and does not vote or returns a proxy with an “ABSTAIN” instruction.
The merger proposal: An abstention or failure to vote will have the same effect as a vote cast “AGAINST” the merger proposal.
The merger-related compensation proposal: An abstention will have the same effect as a vote cast “AGAINST” the merger-related compensation proposal. If a Timberline stockholder is not present at the special meeting and does not respond by proxy, it will have no effect on the vote for the merger-related compensation proposal (assuming a quorum is present).
The adjournment proposal: An abstention will have the same effect as a vote cast “AGAINST” the adjournment proposal. If a Timberline stockholder is not present in-person at the special meeting and does not respond by proxy, it will have no effect on the vote for the adjournment proposal (assuming a quorum is present).
Q:
What will happen if I return my proxy card or voting instruction form without indicating how to vote?
If you sign and return your proxy card or voting instruction form without indicating how to vote on any particular proposal, the Timberline common stock represented by your proxy will be voted as recommended by the Timberline Board with respect to that proposal: “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.
Q:
May I change or revoke my vote after I have delivered my proxy card or voting instruction form?
Yes. If you are a record holder, you may change or revoke your vote before your proxy is voted at the special meeting as described herein. You may do this in one of four ways:
submitting a proxy at a later time by internet or telephone until [11:59 p.m. Eastern Time] on [•], 2024;
signing and returning a new proxy card with a later date; or
delivering, before [6:00 p.m. Eastern Time] on [•], 2024, to Timberline at 9030 North Hess St., Suite 161, Hayden, ID 83835, written revocation of your most recent proxy.
If you are a “street name” stockholder and you vote by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures.
Q:
What are the material U.S. federal income tax consequences of the merger?
The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and McEwen and Timberline intend to report the merger consistent with such qualification. Assuming the merger so qualifies, a U.S. holder (as defined in “The Merger—Material U.S. Federal Income Tax Consequences” on page 49) of Timberline common stock generally would not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of Timberline common stock for McEwen common stock. Each of McEwen and Timberline are required to use their respective reasonable best efforts to obtain an opinion from tax counsel that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code; however, it is not a condition to the closing of the merger that such opinion be obtained. McEwen and Timberline have not sought, and will not seek, any ruling from the Internal Revenue Service (the “IRS”) regarding any matters related to the transactions, and as a result, there can be no assurance that the IRS would not assert that the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, or that a court would not sustain such a position.
If any requirement for qualification as a “reorganization” within the meaning of Section 368(a) of the Code is not met, then a U.S. holder of Timberline common stock generally would recognize gain or loss in an amount equal to the difference, if any, between the fair market value of the McEwen common stock received in the merger, and such U.S. holder’s aggregate tax basis in the corresponding Timberline common stock surrendered in the merger. All holders of Timberline common stock should consult with a tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the merger to them. See “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 49 for additional information.
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Q:
Am I entitled to exercise appraisal rights in connection with the merger instead of receiving the merger consideration for my shares of Timberline common stock?
Timberline stockholders are not entitled to appraisal rights in connection with the merger. If you are not in favor of the merger, you may vote ‘‘AGAINST” the merger proposal. For additional information, see “The Merger—No Appraisal Rights” beginning on page 53.
Q:
What will happen to Timberline options?
As of immediately prior to the effective time of the merger, each option to acquire shares of Timberline common stock outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be cancelled and deemed to be fully vested and converted into such number of shares Timberline common stock equal to (A) the excess, if any, of (1) the volume-weighted average price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the effective time of the merger over (2) the per share exercise price of such option, multiplied by (B) the total number of shares of Timberline common stock subject to such option immediately prior to the effective time of the merger. Any option to acquire shares of Timberline common stock that has a per share exercise price exceeding the amount set forth in clause (1) above will be canceled for no consideration.
Q:
What will happen to Timberline warrants?
Each warrant to purchase shares of Timberline common stock that is outstanding immediately prior to the effective time of the merger will be converted into a warrant to acquire a number of shares of McEwen common stock, referred to as a rollover warrant, that will be determined by multiplying the number of shares of Timberline common stock subject to such warrant by the exchange ratio and rounding down to the nearest whole number of shares of McEwen common stock, at an adjusted exercise price calculated by dividing the per share exercise price for the shares of Timberline common stock subject to such warrant, as in effect immediately prior to the effective time of the merger, by the exchange ratio and rounding the resulting exercise price up to the nearest whole cent.
Q:
What happens if I sell my shares of Timberline common stock after the record date but before the special meeting?
The record date for the special meeting (the close of business on [•], 2024) is earlier than the date of the special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Timberline common stock after the record date but before the date of the special meeting, you will, unless special arrangements are made, retain your right to vote at the special meeting. However, you will not have the right to receive the merger consideration to be received by Timberline stockholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.
Q:
Are there any risks that I should consider in deciding whether to vote in favor of the merger proposal?
Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 23. You also should read and carefully consider the risk factors of McEwen and Timberline contained in the documents that are incorporated by reference into this proxy statement/prospectus.
Q:
What should I do if I receive more than one set of voting materials?
If you hold shares of Timberline common stock in “street name” and also directly as a record holder or otherwise or if you hold shares of Timberline common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the special meeting. Please complete, sign, date and return each proxy card (or cast your vote by telephone or internet as provided on your proxy card) or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your shares of Timberline common stock are voted. If you hold your shares in “street name” through a broker, bank or other nominee, you should follow the procedures provided by your broker, bank or other nominee to vote your shares.
Q:
Where can I find the voting results of the special meeting?
The preliminary voting results will be announced at the special meeting. In addition, within four business days following certification of the final voting results, Timberline intends to file the final voting results (or, if the final voting results have not yet been certified, the preliminary results) with the SEC on a Current Report on Form 8-K.
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Q:
Whom should I contact if I have any questions about the proxy materials or voting?
If you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact Cathy Osterberg, Office Manager of Timberline, at 9030 North Hess Street, Suite 161, Hayden ID 83835, or by calling (866) 513-4859.
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SUMMARY
This summary highlights selected information contained in this proxy statement/prospectus and does not contain all the information that may be important to you. McEwen and Timberline urge you to carefully read this proxy statement/prospectus in its entirety, including the annexes. Additional important information, which McEwen and Timberline also urge you to read, is contained in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 85. Unless stated otherwise, all references in this proxy statement/prospectus to McEwen are to McEwen Mining Inc., all references to Timberline are to Timberline Resources Corporation and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of April 16, 2024, by and among McEwen, Merger Sub and Timberline, a copy of which is attached as Annex A to this proxy statement/prospectus.
The Parties to the Merger
McEwen Mining Inc.
McEwen is a gold and silver mining production and exploration company with an advanced copper development project, focused on the Americas. McEwen was incorporated under the laws of the state of Colorado in 1979 as US Gold Corp. In September 2011, US Gold Corp. acquired Minera Andes Inc., and was renamed McEwen Mining Inc. McEwen owns 100% of the Froome mine and Stock mill in Ontario, Canada, 100% of the Gold Bar mine in Nevada, 100% of the Fenix Project in Sinaloa, Mexico, 47.7% interest in McEwen Copper Inc., the owner of the Los Azules copper project (“Los Azules”) in San Juan, Argentina, and a 49% interest in MSC, the owner and operator of the San José mine in Santa Cruz, Argentina. In addition to the above, McEwen holds interests in advanced-stage and exploration-stage projects in the United States, Canada, Mexico, and Argentina.
McEwen is incorporated in Colorado. Its principal executive office is located at 150 King Street West, Suite 2800, Toronto, Ontario, Canada M5H 1J9 and its telephone number is (866) 441-0690. McEwen’s website address is https://mcewenmining.com. Information contained on McEwen’s website does not constitute part of this proxy statement/prospectus. McEwen’s common stock is listed on the New York Stock Exchange (“NYSE”) and on the Toronto Stock Exchange (“TSX”) under the symbol “MUX.” Additional information about McEwen is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 85.
Timberline Resources Corporation
Timberline is a Nevada-focused exploration company with its flagship gold-silver property in the Eureka District. The Eureka property includes the historical Lookout Mountain and Windfall mines in a total property position of approximately 27 square miles (70 square kilometers). Near the northern end of the Battle Mountain - Eureka Trend, Timberline also jointly holds the Paiute Project with Nevada Gold Mines and also controls the Seven Troughs Project in northern Nevada.
Timberline is incorporated in Delaware. Its administrative office is at 9030 North Hess St., Suite 161, Hayden, ID 83835 and its telephone number is (866) 513-4859. Timberline’s website address is http://timberlineresources.co. Information contained on Timberline’s website does not constitute part of this proxy statement/prospectus. Timberline’s common stock is listed on TSXV under the symbol “TBR” and quoted on the OTCQB under the symbol “TLRS.” Additional information about Timberline is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 85.
Lookout Merger Sub, Inc.
Merger Sub, a direct, wholly owned subsidiary of McEwen, is a Delaware corporation incorporated on April 15, 2024 for the purpose of effecting the merger. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the merger. The principal executive offices of Merger Sub are located at 150 King Street West, Suite 2800, Toronto, Ontario, Canada M5H 1J9.
The Merger
On April 16, 2024, McEwen, Timberline and Merger Sub entered into the merger agreement, which provides that upon the terms and subject to the conditions set forth therein and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), Merger Sub will merge with and into Timberline, with Timberline continuing as the surviving corporation and a direct, wholly owned subsidiary of McEwen.
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The terms and conditions of the merger are contained in the merger agreement, a copy of which merger agreement is attached as Annex A to this joint proxy statement/prospectus. We encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the merger. For a detailed discussion of the terms and conditions of the merger agreement, see “The Merger Agreement” beginning on page 52.
Merger Consideration
At the effective time of the merger, by virtue of the merger and without any further action of the parties or any holder of shares thereof, each issued and outstanding share of Timberline common stock (other than excluded shares, which will be automatically canceled and retired and cease to exist) will be converted into the right to receive 0.01 of a fully paid and nonassessable share of McEwen common stock (the “exchange ratio”). The exchange ratio is fixed, which means that it will not change between now and the date of the completion of the merger, regardless of whether the market price of either Timberline common stock or McEwen common stock changes. Therefore, the value of the merger consideration will depend on the market price of McEwen common stock at the completion of the merger. In the event that either McEwen or Timberline changes the number of its shares issued and outstanding prior to the effective time of the merger as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the exchange ratio would be equitably adjusted to reflect such change. McEwen will not issue fractional shares of McEwen common stock in connection with the merger, no dividends or distributions of McEwen will relate to fractional share interests, and fractional share interests will not entitle the owner thereof to vote or to any rights as a McEwen stockholder. Each Timberline stockholder that otherwise would have been entitled to receive a fraction of a share of McEwen common stock pursuant to the merger (after taking into account all shares of Timberline common stock held immediately prior to the effective time of the merger by such stockholder) shall have its holdings of McEwen common stock rounded up to the nearest whole share. For a more discussion of the merger consideration, see “The Merger Agreement—Merger Consideration” on page 52.
No Appraisal Rights
In accordance with Section 262 of the DGCL, no appraisal rights will be available to holders of Timberline common stock in connection with the merger. For additional information, see “The Merger Agreement—No Appraisal Rights” beginning on page 53.
Treatment of Timberline Options
As of immediately prior to the effective time of the merger, each option to acquire shares of Timberline common stock outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be cancelled and deemed to be fully vested and converted into such number of shares Timberline common stock equal to (A) the excess, if any, of (1) the volume-weighted average price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the effective time of the merger over (2) the per share exercise price of such option, multiplied by (B) the total number of shares of Timberline common stock subject to such option immediately prior to the effective time of the merger. If any such option has an exercise price that exceeds the amount set forth in clause (1) above, it will be canceled for no consideration.
For additional discussion of the treatment of Timberline options, see “The Merger Agreement—Treatment of Timberline Options” beginning on page 53.
Treatment of Timberline Warrants
As of immediately prior to the effective time of the merger, each warrant to purchase shares of Timberline common stock that is outstanding immediately prior to the effective time of the merger will be converted into a warrant to acquire a number of shares of McEwen common stock, referred to as a rollover warrant, that will be determined by multiplying the number of shares of Timberline common stock subject to such warrant by the exchange ratio and rounding down to the nearest whole number of shares of McEwen common stock, at an adjusted exercise price calculated by dividing the per share exercise price for the shares of Timberline common stock subject to such warrant, as in effect immediately prior to the effective time of the merger, by the exchange ratio and rounding the resulting exercise price up to the nearest whole cent.
For additional discussion of the treatment of Timberline warrants, see “The Merger Agreement—Treatment of Timberline Warrants” beginning on page 53.
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No Solicitation
Except as described below, Timberline has agreed that, from the date of the merger agreement, it will not, and will cause its subsidiaries and instruct its directors, officers, employees, financial advisors, legal counsel, accountants, consultants, agents and other representatives not to, directly or indirectly:
initiate, encourage, seek or solicit, or take any action to knowingly facilitate (including by way of furnishing non-public information), directly or indirectly, any inquiries or the making or submission of any proposal that constitutes an acquisition proposal with respect to itself;
participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to itself or any of its subsidiaries or afford access to the properties, books or records of itself or any of its subsidiaries to any person or group of persons (or any of their affiliates or representatives) that has made an acquisition proposal with respect to it; or
approve or recommend, make any public statement approving or recommending, or enter into any agreement, including any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement, with respect to an acquisition proposal with respect to itself (other than acceptable confidentiality agreements).
For a discussion of what constitutes an acquisition proposal or a superior proposal and the limitations on solicitation of acquisition proposals, see “The Merger Agreement—Covenants and Agreements—No Solicitation” beginning on page 59.
Opinion of Timberline’s Financial Advisor
At the meeting of the Timberline Board on April 15, 2024, Cormark Securities Inc. (which we refer to as “Cormark”), the financial advisor of Timberline in connection with the proposed merger, rendered its oral opinion to the Timberline Board, which was subsequently confirmed by delivery of a written opinion, dated April 15, 2024, to the effect that, as of such date and based upon and subject to the factors, assumptions, qualifications and any limitations set forth in its written opinion, the merger consideration to be paid to the holders of Timberline common stock in the proposed merger (other than McEwen and its Affiliates) was fair, from a financial point of view, to such holders.
The full text of Cormark’s written opinion is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. The full text of the written opinion contains a discussion of, among other things, the assumptions made, matters considered and qualifications and any limitations on the opinion and the review undertaken by Cormark in connection with rendering its opinion. The summary of the opinion of Cormark set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Timberline’s stockholders are urged to read the opinion carefully and in its entirety. Cormark’s opinion was addressed to the Timberline Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the merger consideration to be paid to the holders of Timberline common stock in the proposed merger and did not address any other aspect of the proposed merger or the other transactions contemplated by the merger agreement. The opinion does not constitute a recommendation to any stockholder of Timberline as to how such stockholder should vote with respect to the proposed merger or any other matter.
For a description of the opinion that the Timberline Board received from Cormark, see “The Merger—Opinion of Timberline’s Financial Advisor” beginning on page 37.
Interests of Directors and Executive Officers of Timberline in the Merger
In considering the recommendation of the Timberline Board that Timberline stockholders vote in favor of the proposal to adopt the merger agreement and the merger-related compensation proposal, Timberline stockholders should be aware that the executive officers and directors of Timberline have certain interests in the merger that are or may be different from, or in addition to, the interests of Timberline’s stockholders generally, including the treatment of Timberline equity awards in the merger, and rights to ongoing indemnification and insurance coverage and, in the case of certain executive officers, executive severance arrangements. The Timberline Board was aware of these interests and considered them, among other matters, in evaluating and approving the merger agreement, and in making its recommendation that Timberline stockholders adopt the merger agreement and the merger-related compensation proposal. For additional information, see “The Merger—Interests of Directors and Executive Officers of Timberline in the Merger” beginning on page 42.
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Voting and Support Agreements
Contemporaneously with the execution of the merger agreement, each of the directors and officers of the Company, as well as two other significant stockholders of the Company, entered into a voting and support agreement (collectively, the “voting agreements”), pursuant to which, among other things, such stockholders agreed to vote in favor of the merger, not to transfer its shares (or any securities convertible into shares) other than in support of the merger, and not to solicit or negotiate any alternative acquisition proposal. The voting agreements does not preclude a director, in his or her capacity as such, from exercising his or her fiduciary duties and electing to terminate the merger agreement in the circumstances permitted in the merger agreement. The voting agreements terminate at the earlier of (i) the termination of the merger agreement in accordance with its terms, and (ii) the effective time of the merger.
Executive Severance Arrangements
Contemporaneously with the execution of the merger agreement, the Company entered into amendments to the existing employment letter agreements between the Company and each of Patrick Highsmith, Chief Executive Officer of the Company, and Dr. Steven Osterberg, Vice President - Exploration of the Company. Each amendment amends the “change of control,” “termination without cause” and “incentives: restricted share units RSUs” provisions of the existing employment letter agreements. The amendments will become effective upon the consummation of the merger, or any transaction contemplated by an acquisition proposal providing for a superior proposal, if applicable. If the merger or any such alternative transaction is not consummated for any reason, the amendments will be null and void and of no force or effect.
For addition discussion of the interests of the Timberline directors and executive officers in the merger, see “The Merger—Interests of Directors and Executive Officers of Timberline in the Merger” beginning on page 42.
Bridge Financing
In connection with the merger agreement, on April 16, 2024, the Company and McEwen entered into a promissory note whereby McEwen will provide the Company with loans as the Company may request from time to time up to approximately $500,000 (the “Note”). The Note contains customary terms, including events of default, which, if uncured, entitle McEwen to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the note. For additional information, see “The Merger—Bridge Financing” beginning on page 47.
Accounting Treatment of the Merger
The merger will be accounted for as an acquisition of Timberline by McEwen using the cost accumulation and allocation model in accordance with accounting principles generally accepted in the United States (“GAAP”). For additional information, see “The Merger—Accounting Treatment of the Merger” beginning on page 48.
Litigation Relating to the Merger
Pursuant to the merger agreement, until the earlier of the closing of the merger or the termination of the merger agreement in accordance with its terms, McEwen and Timberline are obligated to give prompt written notice to each other of any claim, demand, notice, action, suit, arbitration, proceeding, audit or investigation commenced or, to the applicable party’s knowledge, threatened against such party that relates to the merger agreement, the voting and support agreements, or the transactions contemplated thereby. For additional information, see “The Merger—Litigation Relating to the Merger” beginning on page 48.
Certain Beneficial Owners of Timberline Common Stock
At the close of business on [•], 2024, the record date for the special meeting, Timberline directors and executive officers and their affiliates, as a group, owned and were entitled to vote [27,866,021] of the shares of Timberline common stock, or approximately [14.7]% of the total outstanding shares of Timberline common stock. Timberline currently expects that all Timberline directors and executive officers will vote their shares “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal. For additional information, see “The Merger—Share Ownership of Directors, Executive Officers and Certain Beneficial Owners of Timberline” beginning on page 45.
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Regulatory Approvals Required for the Merger
McEwen and Timberline are not currently aware of any other material governmental approvals, consents, registrations, permits, expirations or terminations of waiting periods, authorizations or other confirmations that are required prior to the parties’ completion of the transaction other than those described below. For additional information, see “The Merger—Regulatory Approvals Required for the Merger” beginning on page 48.
Canadian Securities Law Matters
Timberline is a reporting issuer in the provinces of British Columbia and Alberta and the shares of Timberline common stock are listed and posted for trading on the TSXV. As a result, it must comply with the requirements of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions of the Canadian Securities Administrators (“MI 61-101”), subject to any exception for TSXV listed issuers. Among other transactions, MI 61-101 regulates “business combinations” to ensure protection and fair treatment of minority shareholders, generally by requiring enhanced disclosure, approval by a majority of shareholders, excluding interested parties or related parties and their respective joint actors, and in certain instances, independent valuations.
As previously described in this proxy statement/prospectus, all of the issued and outstanding shares of Timberline common stock will be exchanged for shares of McEwen common stock under the terms of the merger. Unless certain exceptions apply, the merger is a “business combination” (as such term is defined in MI 61-101) in respect of Timberline since the interest of a holder of a share of Timberline common stock may be terminated without the holder’s consent. If the merger is a “business combination” under MI 61-101, “minority approval” would be required (as such term is defined in MI 61-101).
If “minority approval” is required, pursuant to MI 61-101, then, in addition to the approval of the merger proposal by the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon, the merger proposal would also require the approval of the votes cast by holders of a majority of the outstanding shares of Timberline common stock, excluding votes cast in respect of shares of Timberline common stock held by “interested parties” or “related parties of an interested party” (as such terms are defined in MI 61-101) as a consequence of the transaction.
The merger is a “business combination” under MI 61-101 if a “related party” (as such term is defined in MI 61-101) of Timberline (a “related party”) (i) would, as a consequence of such merger, directly or indirectly acquire Timberline or the business of Timberline, or combine with Timberline (through an amalgamation, arrangement or otherwise), whether alone or with joint actors, (ii) is entitled to receive, directly or indirectly, as a consequence of the transaction, consideration per equity security that is not identical in amount and form to the entitlement of the general body of holders in Canada of securities of the same class, or (iii) is entitled to receive, directly or indirectly, as a consequence of the transaction, a “collateral benefit” (as defined in MI 61-101) in connection with the merger.
As clauses (i) and (ii) above are not applicable. the Timberline Board has determined that, unless a related party receives a “collateral benefit” in connection with the merger, the merger is not a “business combination” under MI 61-101.
A “collateral benefit” includes any benefit that a related party (which includes the directors and senior officers of Timberline) is entitled to receive, directly or indirectly, as a consequence of the merger, including, without limitation, an increase in salary, a lump sum payment, a payment for surrendering securities, or other enhancement in benefits related to past or future services as an employee, director or consultant of Timberline.
MI 61-101 excludes from the meaning of “collateral benefit” certain benefits to a related party that are received solely in connection with the related party’s service as an employee, director or consultant of the issuer, of an affiliated entity of the issuer or of a successor to the business of the issuer where: (a) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for securities relinquished under the transactions; (b) the benefit is not, by its terms, conditional on the related party supporting the transaction in any manner; (c) full particulars of the benefit are disclosed in the disclosure document for the transaction; and (d) either (i) the related party and his or her associated entities beneficially owns, or exercises control or direction over, less than 1% of each class of the outstanding securities of the issuer (the “1% Test”), or (ii) the related party discloses to an independent committee of the issuer the amount of the consideration that he or she expects to be beneficially entitled to receive, under the terms of the transaction, in exchange for the equity securities he or she beneficially owns and the independent committee acting in good faith determines that the value of the
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benefit, net of any offsetting costs to the related party, is less than 5% of the value of the consideration the related party will receive pursuant to the terms of the transaction for the equity securities it beneficially owns, and the independent committee’s determination is disclosed in the disclosure document for the transaction (the “5% Test”).
Following disclosure by each director and senior officer of Timberline of the number of securities held by them and the total value of the benefit that they expect to receive, directly or indirectly, pursuant to the merger, Timberline has considered whether any of these matters may constitute a “collateral benefit” for purposes of MI 61-101 such that the merger would therefore constitute a “business combination” under MI 61-101.
Timberline has determined that, in respect of the directors and senior officers, these benefits fall within an exception to the definition of “collateral benefit” for the purposes of MI 61-101, since (a) the benefits are received solely in connection with such related parties’ services as employees, directors or consultants of Timberline or an affiliated entity of Timberline or a successor to the business of Timberline (as applicable), (b) the benefits are not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to such related parties for their Common Shares, (c) the benefits are not conditional on such related parties supporting the merger in any manner, (d) full particulars of the benefits are disclosed in this proxy statement/prospectus, and (e) each of such related parties and their associated entities entitled to receive the benefits (with the exception of Donald McDowell and William Matlack) beneficially owns or exercises control or direction over less than 1% of the outstanding shares of Timberline Common Stock (calculated as set forth in MI 61-101).
Timberline has determined that Donald McDowell, a director and the Former VP – Corporate Development of Timberline, and William Matlack, a director of Timberline, have surpassed the threshold under the 1% Test by virtue of the amount of shares of Timberline common stock held by each of them. As of the date of this proxy statement/prospectus:
Mr. McDowell beneficially owned, directly or indirectly, 9,487,000 shares of Timberline common stock and 656,522 options as set out under “The Merger – Share Ownership of Directors, Executive Officers and Certain Beneficial Owners of Timberline”. Mr. McDowell’s holdings represent approximately 5.0% of the outstanding shares of Timberline common stock on a non-diluted basis.
Mr. Matlack beneficially owned, directly or indirectly, 17,204,961 shares of Timberline common stock, 3,562,500 warrants and 604,348 options as set out under “Interests of Directors and Executive Officers of Timberline in the Merger – Share Ownership of Directors, Executive Officers and Certain Beneficial Owners of Timberline”. Mr. McDowell’s holdings represent approximately 9.1% of the outstanding shares of Timberline common stock on a non-diluted basis.
In connection with the merger, Timberline’s outstanding stock-based compensation awards will be treated as set forth under “The Merger - Interests of Directors and Executive Officers of Timberline in the Merger – Treatment of Timberline Options” in this proxy statement/prospectus (beginning at page 10 and Timberline has considered whether any of these matters may constitute a “collateral benefit” for purposes of MI 61-101 such that the merger would therefore constitute a “business combination” under MI 61-101.
The Timberline Board has determined that the value of such benefits to be received by Messrs. McDowell and Matlack is less than 5% of the value of the consideration each of them will receive pursuant to the terms of the merger for the equity securities each of them beneficially owns and have not surpassed the threshold set forth in the 5% Test.
Accordingly, the merger is not a “business combination” in respect of Timberline, and as a result, no “minority approval” is required for the merger proposal. In addition, in the circumstances of the merger proposal, MI 61-101 does not require a formal valuation of Timberline is required for the merger under MI 61-101.
Material U.S. Federal Income Tax Consequences of the Merger
The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and McEwen and Timberline intend to report the merger consistent with such qualification. Assuming the merger so qualifies, a U.S. holder (as defined in “The Merger—Material U.S. Federal Income Tax Consequences”) of Timberline common stock generally would not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of Timberline common stock for McEwen common stock. Each of McEwen and Timberline are required to use their respective reasonable best efforts to obtain an opinion from tax counsel that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, however, it is not a condition to the closing of the merger that such opinion be obtained. However, it is not a condition to Timberline’s obligation or
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McEwen’s obligation to complete the transactions that the merger be treated as a “reorganization” or that McEwen or Timberline receive an opinion from counsel to that effect. McEwen and Timberline have not sought, and will not seek, any ruling from the IRS regarding any matters relating to the transactions, and as a result, there can be no assurance that the IRS would not assert that the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, or that a court would not sustain such a position.
If any requirement for qualification as a “reorganization” within the meaning of Section 368(a) of the Code is not met, then a U.S. holder of Timberline common stock generally would recognize gain or loss in an amount equal to the difference, if any, between the fair market value of the McEwen common stock received in the merger, and such U.S. holder’s aggregate tax basis in the corresponding Timberline common stock surrendered in the merger. All holders of Timberline common stock should consult with a tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the merger to them. See “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 49 for additional information.
Conditions to the Merger
The obligations of each of McEwen and Timberline to effect the merger are subject to the satisfaction or waiver, in whole or in part (to the extent permitted by law) of the following conditions:
the approval by Timberline stockholders of the Timberline merger proposal;
the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, becoming effective under the Securities Act, and no stop order or any claim, demand, notice, action, suit, arbitration, proceeding, audit or investigation by the SEC seeking a stop order having been issued;
the absence of any order entered into by a governmental body of competent jurisdiction or any applicable law enjoining or otherwise prohibiting the consummation of the merger;
McEwen having filed with the NYSE and TSX the application for listing of additional shares with respect to the shares of McEwen common stock issued or issuable as merger consideration and such shares having been approved and authorized for listing on the NYSE and TSX;
The accuracy of the representations and warranties of McEwen or Timberline, as applicable, made in the merger agreement (subject to the materiality standards set forth in the merger agreement);
McEwen or Timberline, as applicable, having performed in all material respects all of the covenants and agreements under the merger agreement required to be performed by or complied with it at or prior to the closing date of the merger;
the absence of the occurrence of a material adverse effect of Timberline since the date of the merger agreement; and
the receipt of an officer’s certificate executed by an executive officer of the other party certifying that the conditions described in the three preceding bullet points have been satisfied.
The parties expect to complete the merger after all of the conditions to the merger in the merger agreement are satisfied or waived, including after the merger agreement has been adopted by the stockholders of Timberline. However, it is possible that factors outside of each party’s control could require them to complete the transaction at a later time or not to complete it at all. Neither McEwen nor Timberline can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see “The Merger Agreement — Conditions to the Merger” on page 65.
Termination; Expenses and Termination Fees
Termination
The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger (notwithstanding the obtaining of Timberline stockholder approval), under the following circumstances:
by mutual written consent of Timberline and McEwen, duly authorized by each of the Timberline Board and the McEwen board of directors (the “McEwen Board”); or
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by either Timberline or McEwen:
if the consummation of the merger does not occur on or before October 13, 2024, referred to as the outside date, except that if the effective time of the merger has not occurred by October 13, 2024 due to the fact the McEwen registration statement on Form S-4 is not yet effective but all other conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied), the outside date will automatically be extended to November 12, 2024; except that this right to terminate the merger agreement will not be available to any party whose breach of its representations and warranties or the failure to perform any obligation under the merger agreement has principally caused or resulted in the failure of the merger to be consummated on or before that date;
if the merger has been made illegal or permanently enjoined from occurring;
if the Timberline stockholder approval is not obtained following a vote thereon at the Timberline stockholders’ meeting;
upon the other party’s uncured breach of the merger agreement;
by McEwen, if the Timberline Board effects a company adverse change recommendation prior to obtaining the Timberline stockholder approval; or
by Timberline, in order to enter into a definitive agreement with respect to a superior proposal prior to obtaining the Timberline stockholder approval.
If the merger agreement is terminated, the agreement will have no further force or effect, except in the case of an intentional and material breach of the merger agreement or fraud. The mutual non-disclosure and confidentiality agreement and provisions of the merger agreement relating to confidential information, effects of termination, termination fee, non-survival of representations and warranties, expenses, amendments, waiver, entire agreement, governing law, jurisdiction, waiver of jury trial, assignment, no third-party beneficiaries, notices, severability, specific performance and counterparts will continue in effect notwithstanding termination of the merger agreement.
Termination Fee
Each party is required to pay all fees and expenses incurred by it (and its subsidiaries) in connection with the negotiation of the merger agreement, the performance of its obligations thereunder and the consummation of the transactions contemplated by the merger agreement (whether consummated or not). However, Timberline will be required to pay McEwen a termination fee of $400,000, referred to as the company termination fee, if:
McEwen terminates the merger agreement after the Timberline Board effects a company adverse change recommendation prior to obtaining the Timberline stockholder approval;
Timberline terminates the merger agreement in order to enter into a definitive agreement with respect to a superior proposal prior to obtaining the Timberline stockholder approval; or
The merger agreement is terminated by Timberline or McEwen after Timberline stockholder approval is not obtained following a vote thereon at the Timberline stockholders’ meeting and (A) at any time after the date of the merger agreement and prior to such termination, an acquisition proposal is publicly announced or publicly made known to the Timberline Board or Timberline stockholders and not withdrawn prior to such termination and (B) within 12 months of such termination, Timberline either consummates an acquisition proposal or enters into a definitive agreement to consummate an acquisition proposal and Timberline thereafter consummates such acquisition proposal (whether or not within such 12-month period), where all references in the definition of acquisition proposal in the merger agreement to “twenty percent (20%)” are deemed to be references to “fifty percent (50%).”
The merger agreement also provides that in the event that the company termination fee is paid in accordance with the foregoing, such payment will be the sole and exclusive remedy for any and all losses or damages suffered or incurred by McEwan, Merger Sub, any of their respective affiliates or any other person in connection with the merger agreement (and the termination hereof), the transactions contemplated thereby (and the abandonment thereof) or any matter forming the basis for such termination.
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For a more detailed discussion of each party’s termination rights and the related termination fee obligations, see “The Merger Agreement—Termination” and “The Merger Agreement—Termination Fee” beginning on pages 66 and 66, respectively.
Special Meeting
Date, Time, Place and Purpose of the Timberline Special Meeting
The Timberline special meeting will be held at [•] [a.m.]/[p.m.], Mountain Time, on [•], 2024, at the office of Davis Graham & Stubbs, LLP, 1550 17th Street, Suite 500, Denver, CO 80202. The purpose of the Timberline special meeting is to consider and vote on the Timberline merger proposal and other related proposals. Adoption and approval of the merger proposal by Timberline stockholders is a condition to the obligation of Timberline and McEwen to complete the merger.
Recommendations of the Timberline Board
The Timberline Board unanimously recommends that you vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal. For the factors considered by the Timberline Board in reaching this decision and additional information on the recommendation of the Timberline Board, see the section entitled “The Merger—Timberline Board’s Recommendation and Its Reasons for the Transaction” beginning on page 35.
Record Date; Stockholders Entitled to Vote
Only stockholders of record of issued and outstanding shares of Timberline common stock as of the close of business on the record date of [•], 2024 are entitled to notice of, and to vote at, the Timberline special meeting or any subsequent reconvening of the Timberline special meeting following any adjournments and postponements of the Timberline special meeting.
As of the close of business on the record date, there were [189,998,710] shares of Timberline common stock issued and outstanding and entitled to vote at the Timberline special meeting. You may cast one vote for each share of Timberline common stock that you held as of the close of business on the record date.
A complete list of Timberline stockholders entitled to vote at the Timberline special meeting will be available for inspection at the office of Davis Graham & Stubbs LLP, 1550 17th Street, Suite 500, Denver, CO 80202 during regular business hours for a period of no less than ten days before the Timberline special meeting and during the Timberline special meeting.
Quorum; Adjournment
A quorum of Timberline stockholders is necessary for Timberline to hold a valid meeting. The presence at the Timberline special meeting, in person or by proxy, of the holders of a one-third of the outstanding shares of Timberline common stock entitled to vote at the Timberline special meeting constitutes a quorum.
The special meeting may be adjourned or postponed, in the absence of a quorum, by the chairman of the meeting or the affirmative vote of a majority of the votes actually cast by the stockholders who are present in person or by proxy and entitled to vote at the special meeting. Even if a quorum is present, the special meeting may also be adjourned in order to provide more time to solicit additional proxies in favor of adoption of the merger agreement by the chairman of the meeting or if sufficient votes are cast in favor of the adjournment proposal. If a sufficient number of shares of Timberline common stock is present in person or represented by proxy and votes in favor of the merger proposal at the special meeting such that the merger proposal is approved, Timberline does not anticipate that it will adjourn or postpone the special meeting.
If you submit a properly executed proxy card, even if you do not vote for the proposal or vote to “ABSTAIN” in respect of the proposal, your shares of Timberline common stock will be counted for purposes of determining whether a quorum is present for the transaction of business at the Timberline special meeting. Broker non-votes will not be considered present and entitled to vote at the Timberline special meeting for the purpose of determining the presence of a quorum.
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Required Vote; Broker Non-Votes and Abstentions
Each share of Timberline common stock outstanding on the record date is entitled to one vote on each of the merger proposal, the merger-related compensation proposal and the adjournment proposal. The required votes to approve the proposals at the special meeting are as follows:
The merger proposal: The merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon. Failures to vote, broker non-votes and abstentions will have the same effect as votes cast “AGAINST” this proposal.
The merger-related compensation proposal: The merger-related compensation proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Failures to be present in-person or by proxy, including broker non-votes, will have no effect on the vote for this proposal (assuming a quorum is present). Abstentions will have the same effect as votes cast “AGAINST” this proposal. Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on Timberline. Accordingly, if the merger proposal is approved and the merger is completed, the merger-related compensation will be payable to Timberline’s NEOs, subject only to the conditions applicable thereto, regardless of the outcome of the approval of the merger-related compensation proposal.
The adjournment proposal: The adjournment proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Failures to be present in-person or by proxy, including broker non-votes, will have no effect on the vote for this proposal (assuming a quorum is present). Abstentions will have the same effect as votes cast “AGAINST” this proposal. The approval of the adjournment proposal is not a condition precedent to the approval of the merger proposal or the closing of the merger.
Executed but unvoted proxies will be voted in accordance with the recommendation of the Timberline Board. The merger proposal, merger-related compensation proposal, and the adjournment proposal are described in the section entitled “Timberline Proposals” beginning on page 73.
Voting by Timberline Directors and Executive Officers
As of the record date, Timberline directors and executive officers, and their affiliates, as a group, owned and were entitled to vote [27,866,021] shares of Timberline common stock, or approximately [14.7]% of the total outstanding shares of Timberline common stock as of the Timberline record date.
Each of the Timberline directors and executive officers have executed a voting agreement agreeing to vote in favor of the merger proposal, merger-related compensation proposal and the adjournment proposal. Timberline currently expects that all of its directors and executive officers will vote their shares “FOR” the merger proposal, merger-related compensation proposal and adjournment proposal.
Voting by Significant Stockholders of Timberline
Concurrent with Timberline’s execution of the merger agreement, two significant stockholders of Timberline each executed a voting agreement agreeing to vote in favor of the merger proposal, the merger-related compensation proposal and the adjournment proposal. The two stockholders together owned and were entitled to vote [52.389.284] shares of Timberline common stock, or approximately [27.6]% of the total outstanding shares of Timberline common stock as of the Timberline record date. Timberline currently expects that each of the two stockholders will vote their shares “FOR” the merger proposal, merger-related compensation proposal and adjournment proposal.
Adjournment
If a quorum is not present or if there are not sufficient votes for the approval of the merger proposal and the merger-related compensation proposal, the special meeting may be adjourned by the chair of the special meeting to solicit additional proxies. At any subsequent reconvening of the special meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.
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Risk Factors
You should consider all the information contained in, and incorporated by reference into, this proxy statement/prospectus in deciding how to vote for the proposals presented in the proxy statement/prospectus. In particular, you should consider the factors described under “Risk Factors” beginning on page 23.
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Market Prices
McEwen common stock is listed on the NYSE and on the TSX under the symbol “MUX.” Timberline common stock is listed on the TSXV under the symbol “TBR” and quoted on the OTCQB under the symbol “TLRS.”
The following table sets forth the closing sale price per share of McEwen and Timberline common stock reported on the NYSE and OTCQB, respectively, as of (1) April 15, 2024, the trading day before the public announcement of the execution of the merger agreement and (2) [•], 2024, the latest practicable trading date before the date of this proxy statement/prospectus. The table also shows the estimated implied value of the per share merger consideration for each share of Timberline common stock as of the same two days. This implied per share value was calculated by multiplying the closing prices per share of McEwen common stock on those dates by an exchange ratio of 0.01.
 
McEwen
Common Stock
Timberline
Common Stock
Implied Per Share
Value of Merger
Consideration
April 15, 2024
$11.26
$0.04
$0.11
[•], 2024
$ 
$ 
The market prices of McEwen common stock and Timberline common stock have fluctuated since the date of the announcement of the merger and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the special meeting and the date the merger is completed and thereafter. The value of the merger consideration to be received in exchange for each share of Timberline common stock will fluctuate with changes in the market value of McEwen common stock until the last trading day before the merger is complete.
The value of the merger consideration to be received in exchange for each share of Timberline common stock when received by Timberline stockholders after the merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, Timberline stockholders are advised to obtain current market quotations for McEwen common stock and Timberline common stock in determining whether to vote in favor of the merger proposal.
Dividends
Timberline has never declared nor paid any cash dividends on Timberline common stock. Under the terms of the merger agreement, Timberline is not permitted to declare, accrue, set aside, establish a record date for or pay any dividend or other distribution during the pre-closing period without the prior written consent of McEwen.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements with respect to the merger between McEwen and Timberline, including any statements regarding the expected timetable for completing the merger, the ability to complete the merger, the expected benefits of the merger, and projected synergies, future opportunities, and any other statements regarding McEwen’s and Timberline’s future expectations, beliefs, plans, objectives, results of operations, financial condition and cash flows, or future events or performance. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “advances,” “commits,” “drives,” “aims,” “forecasts,” “projects,” “believes,” “approaches,” “seeks,” “schedules,” “estimates,” “positions,” “pursues,” “progress,” “may,” “can,” “could,” “should,” “will,” “budgets,” “outlook,” “trends,” “guidance,” “focus,” “on track,” “goals,” “objectives,” “strategies,” “opportunities,” “poised,” “potential,” “ambitions,” “aspires” and similar expressions. All such forward-looking statements are based on current expectations of McEwen’s and Timberline’s management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Key factors that could cause actual results to differ materially from those projected in the forward-looking statements include, but are not limited to:
the risk that Timberline stockholders may not approve the merger agreement;
uncertainties as to the timing to consummate the merger;
the uncertainty of the value of the merger consideration due to the fixed exchange ratio and potential fluctuation in the market price of McEwen common stock;
the occurrence of events that may give rise to a right of one or both of the parties to terminate the merger agreement, including under circumstances that might require Timberline to pay or cause to be paid a termination fee of $400,000 to McEwen;
the possibility that the merger is delayed or does not occur;
the risk that a condition to closing the merger may not be satisfied in a timely manner or at all;
the effects of disruption to McEwen’s or Timberline’s respective businesses;
negative effects of announcement of McEwen’s proposal to acquire Timberline or the announcement of the completion of the merger on the market price of McEwen’s and/or Timberline’s common stock, their financial performance and their respective ability to maintain business relationships;
the risks related to Timberline being restricted in the operation of its business while the merger agreement is in effect;
changing economic, regulatory (federal and state) and political environments in the U.S.;
significant transaction and other costs in connection with the merger in excess of those anticipated by McEwen or Timberline;
litigation relating to the merger and other unknown liabilities;
McEwen’s ability to achieve the benefits and projected synergies from the merger;
McEwen’s ability to promptly, efficiently and effectively integrate acquired operations into its own operations;
the ability of Timberline to retain and hire key personnel;
the diversion of management time on transaction-related issues;
commodity price fluctuations;
public health crises, such as pandemics (including COVID-19) and epidemics, and any related government policies and actions;
disruptions in McEwen’s global supply chain, including supply chain constraints and escalation of the cost of goods and services;
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general domestic and international economic and political conditions and the global response to such conflict;
actions of competitors or regulators;
timing of exploration expenses;
the potential liability resulting from pending or future litigation;
McEwen’s future acquisitions or dispositions of assets or shares or the delay or failure of such transactions to close based on required closing conditions;
the potential for gains and losses from asset dispositions or impairments;
higher inflation and related impacts;
material reductions in corporate liquidity and access to debt markets;
the effects of changed accounting rules under GAAP;
McEwen’s ability to identify and mitigate the risks and hazards inherent in operating in the global mining industry; and
other risk factors as detailed from time to time in McEwen’s and Timberline’s reports filed with the SEC, including McEwen’s and Timberline’s respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and other documents filed with the SEC, including the risks and uncertainties set forth in or incorporated by reference into this proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 23. See the section entitled “Where You Can Find More Information” beginning on page 85 of this proxy statement/prospectus.
These forward-looking statements reflect McEwen’s and Timberline’s current views with respect to future events and are based on numerous assumptions and assessments made by McEwen and Timberline in light of their experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors they believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this document could cause McEwen’s and Timberline’s plans with respect to the merger, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this document are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this proxy statement/prospectus or, in the case of a document incorporated by reference, as of the date of that document. Neither McEwen nor Timberline assumes any obligation to update the information contained in this document (whether as a result of new information, future events or otherwise), except as required by applicable law.
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RISK FACTORS
In addition to the other information included in and incorporated by reference into this proxy statement/prospectus, including, among others, the matters addressed in “Cautionary Note Regarding Forward-Looking Statements” beginning on page 21, Timberline stockholders should carefully consider the following risk factors before deciding whether to vote for the proposal to adopt the merger agreement. In addition, you should read and consider the risks associated with each of the businesses of Timberline and McEwen because these risks will relate to McEwen following the completion of the merger. Descriptions of some of these risks can be found in McEwen’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Timberline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this document. See “Where You Can Find More Information” beginning on page 85.
Risks Related to the Merger
The merger is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the merger in a timely manner or at all could have adverse effects on Timberline.
The completion of the merger is subject to a number of conditions, including, among others, the approval by Timberline stockholders of the adoption of the merger agreement, which make the completion and timing of the completion of the merger uncertain. For a more detailed discussion regarding conditions to the merger, see “The Merger Agreement—Conditions of the Merger,” beginning on page 65. Also, either McEwen or Timberline may terminate the merger agreement if the merger has not been consummated by the outside date of October 13, 2024 (or November 12, 2024, if the outside date is extended pursuant to the merger agreement), except that this right to terminate the merger agreement will not be available to any party whose breach of its representations and warranties or the failure to perform any obligation under the merger agreement has principally caused or resulted in the failure of the merger to be consummated on or before that date.
If the merger is not completed, Timberline’s ongoing business, financial condition, financial results and stock price may be materially adversely affected. Without realizing any of the benefits of having completed the merger, McEwen and Timberline will be subject to a number of risks, including the following:
the market price of McEwen common stock and/or Timberline common stock could decline to the extent that the current market price reflects a market assumption that the transaction will be completed;
Timberline could owe a termination fee of $400,000 to McEwen under certain circumstances;
Amounts borrowed from McEwen under the concurrent bridge financing will become due;
if the merger agreement is terminated and the Timberline Board seeks another business combination, Timberline stockholders cannot be certain that Timberline will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that the other party has agreed to in the merger agreement;
time and resources committed by McEwen’s and Timberline’s respective management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities for their respective companies;
McEwen and/or Timberline may experience negative reactions from the financial markets or from their respective customers, suppliers or employees; and
McEwen and Timberline will be required to pay their respective costs relating to the merger, such as legal, accounting, financial advisory and printing fees, whether or not the merger is completed.
In addition, if the merger is not completed, McEwen and/or Timberline could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against McEwen or Timberline to perform their respective obligations under the merger agreement. The materialization of any of these
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risks could adversely impact McEwen’s and Timberline’s respective ongoing businesses, financial condition, financial results and stock price. Similarly, delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the merger.
If the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the Timberline stockholders may be required to pay substantial U.S. federal income taxes.
The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and McEwen and Timberline intend to report the merger consistent with such qualification. However, it is not a condition to Timberline’s obligation or McEwen’s obligation to complete the transactions that the merger be treated as a “reorganization” or that McEwen or Timberline receive an opinion from counsel to that effect. McEwen and Timberline have not sought, and will not seek, any ruling from the IRS regarding any matters relating to the transactions, and as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to the treatment of the merger as a “reorganization” within the meaning of Section 368(a) of the Code. If the IRS or a court determines that the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a holder of Timberline common stock would generally recognize taxable gain or loss upon the exchange of Timberline common stock for McEwen common stock pursuant to the merger. See “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 49.
The merger agreement contains provisions that limit Timberline’s ability to pursue alternatives to the merger, could discourage a potential competing acquiror of Timberline from making a favorable alternative transaction proposal and, in specified circumstances, could require Timberline to pay a termination fee to McEwen.
The merger agreement contains certain provisions that restrict Timberline’s ability to initiate, encourage, seek or solicit, knowingly facilitate or, subject to certain exceptions, engage in discussions or negotiations with respect to, or approve or recommend, any third-party proposal for an alternative transaction. Further, even if the Timberline Board withdraws or qualifies its recommendation with respect to the adoption of the merger agreement, unless the merger agreement has been terminated in accordance with its terms, Timberline will still be required to submit each of its merger-related proposals to a vote at the special meeting. In addition, McEwen generally has an opportunity to offer to modify the terms of the transactions contemplated by the merger agreement in response to any third-party alternative transaction proposal before the Timberline Board may withdraw or qualify its recommendation with respect to the merger-related proposal or otherwise terminate the merger agreement.
In some circumstances, upon termination of the merger agreement, Timberline will be required to pay a termination fee of $400,000 to McEwen. See the sections titled “The Merger Agreement—Termination” and “The Merger Agreement—Termination Fees” beginning on pages 66 and 66, respectively.
These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of Timberline or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the per share cash or market value proposed to be received or realized in the merger. In particular, the termination fee, if applicable, could result in a potential third-party acquiror or merger partner proposing to pay a lower per share price to the Timberline stockholders than it might otherwise have proposed to pay absent such a fee.
The principal amount of the Note must be repaid within a short period of time if the merger is not consummated and this obligation could discourage a potential competing acquiror of Timberline from making a favorable alternative transaction proposal.
The Note permits Timberline to borrow from McEwen an aggregate amount up to $500,000 in order to fund working capital for the period until closing. As of [•], 2024, Timberline has borrowed [•] under the Note, and it expects to borrow substantially all of the remaining available balance if the merger has not closed prior to the end of July, 2024. The Note matures on October 15, 2024, however, if the merger agreement is terminated by the Company in order to enter into an alternative acquisition agreement providing for a superior proposal, then the outstanding Principal must be repaid within five business days following the effective date of such termination. This accelerated repayment provision could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of Timberline or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash
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or market value than the per share cash or market value proposed to be received or realized in the merger. This repayment obligation could result in a potential third-party acquiror or merger partner proposing to pay a lower price to the Timberline stockholders than it might otherwise have proposed to pay absent such a fee.
The exchange ratio is fixed and will not be adjusted in the event of any change in either McEwen’s or Timberline’s stock price.
Upon completion of the merger, each share of Timberline common stock will be converted into the right to receive 0.01 of a validly issued, fully paid and non-assessable share of McEwen common stock. This exchange ratio was fixed in the merger agreement and will not be adjusted for changes in the market price of either McEwen common stock or Timberline common stock between the date the merger agreement was signed and completion of the merger. Due to the fixed exchange ratio, fluctuations in the price of McEwen common stock will drive corresponding changes in the value of the merger consideration payable to each Timberline stockholder. As a result, changes in the price of McEwen common stock prior to the completion of the merger will affect the market value that Timberline stockholders will become entitled to receive on the date of the closing. Stock price changes may result from a variety of factors (many of which are beyond McEwen’s or Timberline’s control), such as changes in McEwen’s or Timberline’s respective business, operations and prospects; market assessments of the likelihood that the merger will be completed; and general market and economic conditions, including fluctuations in gold, silver, copper or other metals and other factors affecting the price of McEwen common stock and Timberline common stock generally.
The price of McEwen common stock has fluctuated during the period between the date the merger agreement was executed and the date of this proxy statement/prospectus, and may continue to change through the date of the special meeting and the date the merger is completed. For example, based on the range of closing prices of McEwen common stock during the period from April 15, 2024, the last full trading day before the public announcement of the merger, through [•], 2024, the latest practicable trading date before the date of this proxy statement/prospectus, the exchange ratio represented the market value of the merger consideration ranging from a high of $[•] to a low of $[•] for each share of Timberline common stock. The actual market value of the McEwen common stock received by holders of Timberline common stock upon completion of the merger may be outside this range.
These variations could result from changes in the business, operations or prospects of McEwen or Timberline prior to or following the completion of the merger, general market and economic conditions and other factors both within and beyond the control of McEwen or Timberline. At the time of the special meeting, Timberline stockholders will not know with certainty the value of the shares of McEwen common stock that they will receive upon completion of the merger.
Members of the Timberline Board and management have interests in the merger that are different from, or in addition to, those of other stockholders.
In considering whether to adopt the merger agreement and approve the transactions contemplated thereby, Timberline stockholders should recognize that members of management and the Timberline Board have interests in the merger that differ from, or are in addition to, their interests as stockholders of Timberline.
The executive officers of Timberline have arrangements with Timberline that provide for certain severance payments, accelerated vesting of certain equity-based awards and other rights and other payments or benefits upon completion of the merger and/or if their employment or service is terminated under certain circumstances following the completion of the merger. In addition, the executive officers and directors of Timberline also have rights to indemnification, advancement of expenses and directors’ and officers’ liability insurance that will survive the completion of the merger. The Timberline Board was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendation that the Timberline stockholders vote “FOR” the merger proposal and “FOR” the merger-related compensation proposal.
These interests are further described in “The Merger—Interests of Directors and Executive Officers of Timberline in the Merger” beginning on page 42.
Timberline is subject to business uncertainties and contractual restrictions while the proposed merger is pending, which could adversely affect each party’s business and operations.
In connection with the pendency of the merger, it is possible that some customers, suppliers and other persons with whom Timberline has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Timberline as a result of the merger. Under the terms
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of the merger agreement, Timberline is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect Timberline’s ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could adversely affect Timberline’s businesses and operations prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements—Conduct of Business” beginning on page 57.
Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger.
The opinion of Timberline’s financial advisor will not reflect changes in circumstances between the signing of the merger agreement and the completion of the merger.
Timberline has received an opinion from its financial advisor in connection with the signing of the merger agreement, but has not obtained any updated opinion from its financial advisor as of the date of this proxy statement/prospectus. Changes in the operations and prospects of McEwen or Timberline, general market and economic conditions and other factors that may be beyond the control of McEwen or Timberline, and on which Timberline’s financial advisor’s opinion was based, may significantly alter the value of McEwen or Timberline or the prices of the shares of McEwen common stock or Timberline common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because Timberline does not currently anticipate asking its financial advisor to update its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the merger is completed. The Timberline Board’s recommendation that Timberline stockholders vote “FOR” approval of the merger proposal, “FOR” the non-binding merger-related compensation proposal and “FOR” the adjournment proposal, however, is made as of the date of this proxy statement/prospectus.
For a description of the opinion that Timberline received from its financial advisor, see the section entitled “The Merger—Opinion of Timberline’s Financial Advisor” beginning on page 37. A copy of the opinion of Cormark, Timberline’s financial advisor, is attached as Annex B to this proxy statement/prospectus.
Timberline may be unable to retain key employees during the pendency of the merger.
In connection with the pending merger, Timberline’s current and prospective employees may experience uncertainty about their future roles with McEwen following the merger, which may materially adversely affect its ability to attract and retain key personnel during the pendency of the merger. Key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with McEwen following the merger. Accordingly, no assurance can be given that Timberline will be able to retain key employees to the same extent that Timberline has been able to in the past.
Potential litigation against McEwen and Timberline could result in substantial costs, an injunction preventing the completion of the merger and/or a judgment resulting in the payment of damages.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if such a lawsuit is unsuccessful, defending against these claims can result in substantial costs. An adverse judgment could result in monetary damages, which could have a negative impact on McEwen’s and Timberline’s respective liquidity and financial condition. Stockholders of Timberline may file lawsuits against McEwen, Timberline and/or the directors and officers of either company in connection with the merger. These lawsuits could prevent or delay the completion of the merger and result in significant costs to Timberline and/or McEwen, including any costs associated with the indemnification of directors and officers. There can be no assurance that any of the defendants will be successful in the outcome of any potential lawsuits.
Completion of the merger may trigger change in control or other provisions in certain agreements to which Timberline is a party, which may have an adverse impact on McEwen’s business and results of operations after the merger.
The completion of the merger may trigger change in control and other provisions in certain agreements to which Timberline is a party. If McEwen and Timberline are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if McEwen and Timberline are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Timberline or McEwen following the transaction.
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Timberline stockholders are not entitled to appraisal rights in connection with the merger.
Appraisal rights are statutory rights that enable stockholders to dissent from certain extraordinary transactions, such as certain mergers, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the applicable transaction. Under the DGCL, holders of shares of Timberline common stock will not have rights to an appraisal of the fair value of their shares in connection with the merger. See “The Merger—No Appraisal Rights” beginning on page 53 for additional information.
The shares of McEwen common stock to be received by Timberline stockholders upon completion of the merger will have different rights from shares of Timberline common stock.
Upon completion of the merger, Timberline stockholders will no longer be stockholders of Timberline but will instead become stockholders of McEwen, and their rights as McEwen stockholders will be governed by the terms of McEwen’s articles of incorporation, as amended (“McEwen’s articles of incorporation”), and McEwen’s bylaws, as amended (“McEwen’s bylaws”). The terms of McEwen’s articles of incorporation and McEwen’s bylaws are in some respects materially different than the terms of Timberline’s certificate of incorporation, as amended (“Timberline’s certificate of incorporation”), and Timberline’s bylaws, as amended (“Timberline’s bylaws”), which currently govern the rights of Timberline stockholders. See “Comparison of Rights of Stockholders of McEwen and Timberline” beginning on page 76 for a discussion of the different rights associated with shares of Timberline common stock and shares of McEwen common stock.
Timberline stockholders will have a significantly reduced ownership and voting interest after the merger and will exercise less influence over the policies of McEwen following the transaction than they now have on the policies of Timberline.
McEwen stockholders currently have the right to vote in the election of the McEwen Board and on other matters affecting McEwen. Timberline stockholders currently have the right to vote in the election of the Timberline Board and on other matters affecting Timberline. Immediately after the merger is completed, it is expected that current McEwen stockholders will own approximately [•]% of the shares of outstanding common stock of McEwen following the transaction, and current Timberline stockholders will own approximately [•]% of the common stock outstanding of McEwen following the transaction. As a result, current Timberline stockholders will have significantly less influence on the policies of McEwen than they now have on the policies of Timberline.
Risks Relating to McEwen After Completion of the Merger
McEwen may not achieve the intended benefits and the merger may disrupt its current plans or operations.
There can be no assurance that McEwen will be able to successfully integrate Timberline’s assets or otherwise realize the expected benefits of the potential transaction. Difficulties in integrating Timberline into McEwen may result in McEwen performing differently than expected, in operational challenges or in the failure to realize anticipated synergies in the expected timeframe or at all, in which case the merger may not be accretive to McEwen. The integration of the two companies may result in material challenges, including the diversion of management’s attention from ongoing business concerns; retaining key management and other employees; retaining or attracting business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; consolidating corporate and administrative infrastructures and eliminating duplicative operations; coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; as well as potential unknown liabilities, unforeseen expenses relating to integration, or delays associated with the acquisition.
Some of Timberline’s material properties are subject to a lease that ends in 2028 unless minerals are is being produced from the leased properties.
There can be no assurance that McEwen will be successful in developing mineral production from any of Timberline’s properties, including the leased properties that expire in June 2028, and the lessor may not agree to extend or amend the leases.
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Timberline’s properties do not have any defined reserves according to subpart 1300 of Regulation S-K (“S-K 1300”).
Mineral resources are not mineral reserves and have not been demonstrated to have economic viability and may never be economically viable. McEwen may not be successful at establishing, converting, or discovering mineral reserves on Timberline’s properties.
The market price of McEwen’s common stock after the merger may be affected by factors different from those affecting the price of McEwen or Timberline common stock before the merger.
Upon completion of the merger, holders of McEwen common stock and Timberline common stock will be holders of McEwen common stock. As the businesses of McEwen and Timberline are different, the results of operations as well as the price of McEwen’s common stock may in the future be affected by factors different from those factors affecting McEwen and Timberline as independent stand-alone companies. McEwen following the transaction will face additional risks and uncertainties that McEwen or Timberline may currently not be exposed to as independent companies.
The market price of McEwen’s common stock may decline as a result of the merger.
The market price of McEwen common stock may decline as a result of the merger if, among other things, it is unable to achieve the expected benefits and synergies of the potential transaction, if the merger is not completed within the anticipated timeframe or if the transaction costs related to the merger are greater than expected. The market price also may decline if McEwen does not achieve the perceived benefits and expected synergies of the transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on McEwen’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.
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THE PARTIES TO THE MERGER
McEwen Mining Inc.
McEwen is a gold and silver mining production and exploration company with an advanced copper development project, focused on the Americas. McEwen was incorporated under the laws of the state of Colorado in 1979 as US Gold Corp. In September 2011, US Gold Corp. acquired Minera Andes Inc., and was renamed McEwen Mining Inc. McEwen owns 100% of the Froome mine and Stock mill in Ontario, Canada, 100% of the Gold Bar mine in Nevada, 100% of the Fenix Project in Sinaloa, Mexico, 47.7% interest in McEwen Copper Inc., the owner of Los Azules in San Juan, Argentina, and a 49% interest in MSC, the owner and operator of the San José mine in Santa Cruz, Argentina. In addition to the above, McEwen holds interests in advanced-stage and exploration-stage projects in the United States, Canada, Mexico, and Argentina.
McEwen is incorporated in Colorado. Its principal executive office is located at 150 King Street West, Suite 2800, Toronto, Ontario, Canada M5H 1J9 and its telephone number is (866) 441-0690. McEwen’s website address is https://mcewenmining.com. Information contained on McEwen’s website does not constitute part of this proxy statement/prospectus. McEwen’s common stock is listed on the NYSE and on the TSX under the symbol “MUX.” Additional information about McEwen is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 85.
Timberline Resources Corporation
Timberline is a Nevada-focused exploration company with its flagship gold-silver property in the Eureka District. The Eureka property includes the historical Lookout Mountain and Windfall mines in a total property position of approximately 27 square miles (70 square kilometers). Near the northern end of the Battle Mountain - Eureka Trend, the Company also jointly holds the Paiute Project with Nevada Gold Mines and also controls the Seven Troughs Project in northern Nevada.
Timberline is incorporated in Delaware. Its administrative office at 9030 North Hess St., Suite 161, Hayden, ID 83835 and its telephone number is (866) 513-4859 (toll free) or (208) 664-4859. Timberline’s website address is http://timberlineresources.co. Information contained on Timberline’s website does not constitute part of this proxy statement/prospectus. Timberline’s common stock is listed on TSXV under the symbol “TBR” and quoted on the OTCQB under the symbol “TLRS.” Additional information about Timberline is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 85.
Lookout Merger Sub, Inc.
Merger Sub, a direct, wholly owned subsidiary of McEwen, is a Delaware corporation incorporated on April 15, 2024 for the purpose of effecting the merger. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the merger. The principal executive offices of Merger Sub are located at 150 King Street West, Suite 2800, Toronto, Ontario, Canada M5H 1J9.
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THE MERGER
The following is a discussion of the transaction and the material terms of the merger agreement between McEwen and Timberline. You are urged to read the merger agreement carefully and in its entirety. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. This section is not intended to provide you with any factual information about McEwen or Timberline. Such information can be found elsewhere in this proxy statement/prospectus and in the public filings McEwen and Timberline make with the SEC that are incorporated by reference into this document, as described in “Where You Can Find More Information” beginning on page 85.
Background of the Merger
The merger agreement is the result of arm’s length negotiations between representatives of McEwen and Timberline and their respective advisors. The following is a summary description of the background, including meetings and deliberations, leading up to the announcement of the Transaction.
The Timberline Board regularly reviews and considers various strategic alternatives available to Timberline, including, from time to time, whether the continued execution of Timberline’s strategy as a stand-alone company or the possible sale of Timberline to, or a combination of Timberline with, a third party would offer the best avenue to maximize stockholder value.
Like many small mining exploration companies, Timberline has limited financial resources. For example, at the end of its most recent fiscal quarter ended December 31, 2023, Timberline reported working capital (current assets less current liabilities) of only approximately $280,000. The Company’s limited financial resources has at times impacted its ability to advance the exploration of its properties. Because of its limited financial resources and lack of revenue from operations, Timberline frequently engages in capital raising activities to provide funds to advance exploration on its properties and obtain sufficient capital to satisfy the Company’s general and administrative expenses. For example, Timberline closed non-brokered private placements of common stock and warrants in December 2023, August 2023 and May 2022 resulting in gross proceeds of approximately $630,000, $729,000, and $4.7 million, respectively.
Timberline has historically engaged in conversations with other participants in the mining industry regarding potential strategic transactions involving the Company or particular properties. For example, in March 2022, Timberline entered into a mutual non-disclosure and confidentiality agreement with a mid-tier junior development company with nearby property holdings (“Company A”). Under that agreement, the parties had occasional conversations and shared information regarding their respective property holdings throughout 2022. In the spring of 2023, the parties had preliminary discussions about a potential investment in Timberline or other strategic transaction, however, these discussions did not advance to any concrete proposals. After July 2023, Timberline and Company A have had only sporadic contact with no apparent renewal of interest from Company A in a strategic transaction involving the Company.
Similarly, in April 2023, Timberline initiated a relationship with a junior development company with assets in the region (“Company B”). Timberline and Company B had several high-level meetings and collaborated on certain projects of interest during 2023, and during those discussions the idea of a potential investment or strategic transaction was surfaced by Timberline. When the Company suggested that Company B sign a confidentiality and non-disclosure agreement and engage in substantive discussions regarding a potential strategic transaction, the management team for Company B declined to proceed. Although occasional conversations have occurred between Timberline and Company B since that time, there has been no interest from Company B in engaging on a broader strategic transaction.
Timberline’s relationship with McEwen initially began in August 2018 when Timberline acquired ownership interests in mineral properties in the Battle Mountain mining district in Nevada. The acquisition included the right to earn into an existing joint venture agreement with McEwen. In January 2022, McEwen contacted Timberline and expressed interest in reviewing information related to Timberline’s Eureka Project. The parties had preliminary conversations regarding entering into a mutual confidentiality and non-disclosure agreement but did not ultimately come to terms or execute an agreement. In March 2023, Patrick Highsmith, the Company’s chief executive officer, met with Rob McEwen, the Chief Executive Officer of McEwen and other McEwen executives at an industry conference in Toronto, Canada. At that meeting, McEwen again expressed interest in evaluating Timberline’s Eureka Property. On March 24, 2023, the parties executed a mutual non-disclosure and confidentiality agreement
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(the “Mutual NDA”). The Mutual NDA included a mutual standstill provision which prohibited both parties from acquiring a material amount of securities in the other without the written request of that party.
During the spring and summer of 2023, Timberline provided McEwen with further information regarding its properties, and occasional conversations were held between the technical teams and executives of both companies. In August 2023, McEwen sent Timberline a proposal for potentially entering into a joint venture arrangement for a substantial portion of the Eureka Project. In September 2023, Mr. Highsmith met with Mr. McEwen and Stefan Spears, the Vice President – Corporate Development of McEwen to discuss the proposed arrangement. Further conversations between the parties from that point forward were limited, however, and negotiation on the proposed arrangement had stalled by the end of 2023.
On December 18, 2023, Mr. Spears contacted Mr. Highsmith and indicated McEwen’s interest in exploring a potential strategic transaction involving the Company. At the time of that discussion, the Company was pursuing an equity financing and the Timberline Board declined to engage in substantive conversations regarding any strategic transaction until after the financing was complete. No terms of a potential transaction were discussed. Timberline invited McEwen to participate in the December 2023 financing and McEwen invested $250,000 in exchange for 6,250,000 shares of the Company’s common stock and warrants to acquire an additional 6,250,000 common shares. McEwen participated in the financing on the same terms as all other investors. The financing closed on December 28, 2023.
On January 9, 2024, Mr. Spears spoke to Mr. Highsmith and indicated McEwen’s interest in exploring a transaction that would result in the acquisition of all of the outstanding Timberline shares in exchange for stock of McEwen. Further discussion was held on the call regarding, among other matters, the respective share prices of the two parties, the parties’ respective properties and Timberline’s shareholder base and capital structure. A potential exchange ratio was not discussed.
During the week following the January 9th call, Mr. Highsmith held discussions with members of the Timberline Board regarding his preliminary conversations with McEwen.
In early January, Timberline was contacted by another party (“Company C”) who expressed an interest in evaluating the Company’s properties in connection with a potential investment or other strategic transaction. On January 12, 2024, the Company entered into a mutual non-disclosure and confidentiality agreement with Company C. After a brief evaluation, Company C informed the Company that they were no longer interested in proceeding with their evaluation.
On January 15, 2024, Mr. Highsmith and Mr. Spears met at McEwen’s offices in Toronto, Canada. The parties discussed potential terms and conditions of a transaction, transaction structure and various diligence matters. A specific exchange ratio was not discussed.
Throughout January 2024, McEwen engaged in a due diligence review of the Company and its properties. On February 2, 2024, Mr. Spears spoke with Mr. Highsmith and again confirmed their interest in making a written proposal for a strategic transaction. The terms of any such proposal were not discussed.
On February 7, 2024, the Timberline Board, together with a representative from Davis Graham & Stubbs, LLP, the Company’s U.S. legal counsel (“Davis Graham”), met to discuss the potential of considering a proposal from McEwen. Davis Graham advised the Timberline Board of its fiduciary duties with regard to the consideration of any potential strategic transaction. The Timberline Board encouraged management to continue discussions with McEwen, while noting that various factors would need to be evaluated in connection with any potential transaction. The Timberline Board also discussed the retention of an independent financial advisor, with Mr. Highsmith presenting information on several firms with whom he had held conversations regarding the role.
On February 8, 2024, Mr. Highsmith spoke to Mr. Spears who again confirmed that McEwen intended to send an initial indication of interest regarding a potential strategic transaction.
On February 9, 2024, the Timberline Board convened to discuss potential firms to serve as a financial advisor to the Company. Mr. Highsmith described the qualifications, potential fees, and other matters regarding several firms. No decision was made at that meeting.
On February 12, 2024, Mr. Spears delivered to Mr. Highsmith by email a non-binding indication of interest regarding a potential acquisition by McEwen of 100% of the outstanding common stock of the Company in an all-stock transaction (the “February 12 Offer”). The proposed share exchange ratio in the February 12 Offer was 0.01 McEwen shares of common stock for each one share of Timberline common stock, which represented a premium
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of 67% to Timberline’s closing prices on February 9, 2024. The February 12 Offer was non-binding and included various conditions, including (i) that Timberline would obtain, prior to closing, an extension of the term of one of its mining leases, and (ii) that all directors, executive officers, and certain other significant stockholders of Timberline would execute voting agreements agreeing to vote in favor of the proposed transaction. The February 12 Offer also proposed that Timberline would pay a termination fee of $500,000 in the event the definitive merger agreement was terminated by Timberline to accept a superior offer.
The Timberline Board met on February 12, 2024, to discuss the February 12 Offer. The Timberline Board discussed the proposed exchange ratio and the other proposed terms and conditions. In particular, the Timberline Board expressed concern about the difficulty of obtaining an extension of the mining lease agreement within a reasonable timeframe. The Timberline Board also discussed the Company’s cash position and the opportunities and challenges facing Timberline if it were to continue as a stand-alone company. At that meeting, the Timberline Board also discussed the retention of a financial advisor. After discussion, the Timberline Board selected Cormark to serve as the Company’s financial advisor, subject to finalization of Cormark’s customary engagement letter. Cormark was selected based on its industry experience, as well as its long-standing relationships with various other participants in the mining industry in general and the junior exploration sector in particular. The Timberline Board confirmed that Cormark did not have any conflict of interest that would prevent it from serving as the Company’s financial advisor.
On February 14, 2024, following review and negotiation of the Cormark engagement letter, the Timberline Board acted by written consent to authorize the execution of an engagement letter with Cormark. On the same day, Timberline formally retained Cormark.
On February 21, 2024, Mr. Highsmith spoke to Mr. Spears regarding the February 12 Offer. Among other matters, they discussed the proposed exchange ratio and Mr. Highsmith requested that the exchange ratio be increased. The parties also discussed the difficulty in obtaining an extension of the mining lease agreement on a reasonable timeframe.
On February 22, 2024, Mr. Spears delivered to Mr. Highsmith by email a revised non-binding indication of interest regarding a potential acquisition by McEwen of 100% of the outstanding common stock of the Company in an all-stock transaction (the “February 22 Offer”). The February 22 Offer was substantially the same as the February 12 Offer, including with respect to the proposed exchange ratio of 0.01 shares of McEwen common stock for each one share of Timberline common stock and the termination fee of $500,000 in the event the definitive merger agreement was terminated by Timberline to accept a superior offer. The February 22 Offer, however, removed the extension of the term of the mining lease agreement as a condition to the consummation of the transaction.
On February 23, 2024, the Timberline Board met to discuss the February 22 Offer. Representatives of Davis Graham and Cormark also participated in the meeting. Discussion was held regarding, among other things, the proposed exchange ratio, the risks, and opportunities associated with McEwen’s assets and operations, and the potential of soliciting other bidders. The Timberline Board also discussed the feasibility and cost of obtaining additional equity financing to allow Timberline to continue as a stand-alone company. In light of the Company’s cash position, the Timberline Board recognized the need to undertake a further equity financing in the very near term. In the absence of such financing, Timberline would be unable to conduct exploration activities and would soon have insufficient funds to satisfy its general and administrative expenses. Considering Timberline’s share price, the Timberline Board understood that any such equity financing would be heavily dilutive to existing stockholders. After discussion of various possible courses of action, the Timberline Board directed management to continue discussions with McEwen and to seek an improvement to the proposed exchange ratio.
On March 3, 2024, Mr. Highsmith met with Mr. McEwen at an industry conference in Toronto, Canada. The parties briefly discussed the continued advancement of discussions with regard to a strategic transaction. Dr. Steven Osterberg, the Company’s Vice President – Exploration, also met with Mr. William Shaver, McEwen’s Chief Operating Officer, the same day to discuss technical information on Timberline’s Eureka Property.
On March 7, 2024, Mr. Highsmith spoke again with Mr. Spears to discuss the specifics of the February 22 Offer. Mr. Highsmith again requested an increase to the proposed exchange ratio and Mr. Spears declined to modify the proposed exchange ratio, noting the increase in the price of McEwen common stock since the parties initially began their discussions earlier in February. The parties however, agreed to revisit the exchange ratio in light of market conditions as discussions progressed. Discussion was also held regarding the proposed termination fee, with Mr. Highsmith proposing a lower fee.
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On March 8, 2024, the Timberline Board met to further discuss the possibility of a business combination with McEwen. A representative from Cormark also participated in the meeting. Mr. Highsmith summarized the discussions he had held during the preceding two weeks, noting that McEwen had been unwilling to increase the proposed exchange ratio. The Timberline Board discussed the challenges of continuing to pursue the strategy of remaining a stand-alone company and the need for near-term equity financing. They also discussed the possibility of identifying an alternative bidder, noting that continued negotiations with McEwen did not preclude the Company from seeking other potential suitors. Following discussion, the Timberline Board authorized Mr. Highsmith to continue negotiations with McEwen.
On March 12, 2024, Mr. Highsmith delivered to Mr. Spears a non-binding summary of indicative terms, which outlined the basis on which Timberline was willing to continue negotiations with McEwen (the “Indicative Terms Summary”). The Indicative Terms Summary outlined:
An exchange ratio of 0.01 shares of McEwen common stock for every one share of Timberline common stock, subject to continued evaluation in light of market conditions and other factors;
The negotiation of a merger agreement with customary terms and conditions, with a proposed termination fee payable by Timberline in the amount of $400,000 in the event Timberline terminates the merger agreement to accept a superior proposal;
The execution of voting and support agreements by all directors, executive officers and stockholders that collectively represent approximately 40% of Timberline’s outstanding common stock.
The Indicative Terms Summary was executed by Mr. Highsmith and Mr. Spears on the same day. The Indicative Terms Summary was non-binding and did not obligate either party to continue negotiations regarding a potential transaction, nor did it preclude Timberline from having conversations with other parties regarding a strategic transaction.
On March 18, 2024, Hogan Lovells US LLP, U.S. legal counsel to McEwen (“Hogan Lovells”), sent a draft of the merger agreement and of the form of the voting agreement to Davis Graham.
On March 26, 2024, Davis Graham provided a revised draft of the merger agreement to Hogan Lovells. This draft of the merger agreement reflected a number of proposed changes, including certain carveouts from the definition of the term “Company Material Adverse Effect”; the introduction of a “Parent Material Adverse Effect” condition that would allow Timberline to avoid closing the Merger if certain significant adverse events or circumstances affecting McEwen were to occur prior to closing; the limitation of certain representations and warranties of Timberline and the expansion of representations and warranties made by McEwen; a narrowing of the no-shop provision; and the removal of a requirement that Timberline reimburse McEwen expenses in the event of a termination of the Merger Agreement. Davis Graham also proposed that McEwen provide interim financing to Timberline for the period between signing and closing of the Merger Agreement.
On March 26, 2024, the Timberline Board met to further consider the potential transaction with McEwen. Representatives from Davis Graham and Cormark also participated in the meeting. A representative from Davis Graham provided an overview of the terms of the merger agreement, noting the changes made in the draft returned to Hogan Lovells on March 26, 2024 and the voting agreements. With the participation of Davis Graham and Cormark, the Timberline Board also discussed a potential outreach to one or more third parties. The Timberline Board noted that (i) due to the recent positive movement in the McEwen share price, the exchange ratio proposed by McEwen represented a significant premium to the Company’s trading price, (ii) there are risks associated with a broad solicitation of interest as it may increase the risk that news of the potential transaction would leak and jeopardize the proposed transaction with McEwen, and (iii) the terms of the proposed merger agreement with McEwen, assuming one was entered into, would not prevent a third party from making an offer for Timberline after the merger agreement was signed and announced. After discussion, the Timberline Board tentatively agreed to have Cormark reach out to Company A at a future date but to defer discussion of contact with other third parties. The Timberline Board also discussed the internal due diligence review that was conducted by the Timberline Board and management regarding McEwen, noting that no significant red flags were identified in the course of their review. Discussion was also held regarding the process and timing for reaching out to two significant stockholders of the Company in order to assess their level of support for the potential transaction: Crescat Portfolio Management LLC (“Crescat”) and Jupiter Investment Management Limited (“Jupiter”), who at the time owned 13.9% and 13.6%,
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respectively, of the outstanding shares of Timberline common stock. The Timberline Board further discussed an ambiguity in the existing employment agreements with Mr. Highsmith and Dr. Osterberg with regard to the payments that may become due in connection with a change of control transaction.
On March 26, 2024, Mr. Highsmith contacted Jupiter. After completing customary wall-crossing procedures and receiving assurances of confidentiality, on April 4, 2024, Mr. Highsmith spoke with a portfolio manager at Jupiter to discuss the potential transaction. Further conversations were held between Mr. Highsmith and a representative of Jupiter over subsequent days. Mr. Highsmith sent a draft of the voting agreement to a representative of Jupiter on April 8, 2024. On April 12, 2024, a representative of Jupiter expressed support for the transaction and a willingness to execute a voting agreement.
On April 1, 2024, Davis Graham circulated a revised draft of the form of voting agreement to Hogan Lovells.
On April 2, 2024, Mr. Highsmith contacted a representative from Crescat. After completing customary wall-crossing procedures and receiving assurances of confidentiality, Mr. Highsmith discussed the terms of the potential transaction. On April 3, 2024, Crescat expressed support for the transaction and a willingness to execute a voting agreement. Mr. Highsmith sent a draft of the voting agreement to a representative of Crescat on April 8, 2024.
On April 5, 2024, Hogan Lovells circulated a revised draft of the merger agreement to Davis Graham.
On April 9, 2024, the Timberline Board met to further consider the potential transaction with McEwen. Representatives from Davis Graham and Cormark also participated in the meeting. A representative of Davis Graham provided a summary of the terms of the merger agreement and highlighted certain legal and drafting issues that remained unresolved. Discussion was also held regarding proposed amendments to the employment letter agreements with Mr. Highsmith and Dr. Osterberg that would: (i) revise the change of control payment to a more customary “double-trigger” provision, that would require payment following a change of control only if the executive is terminated, (ii) reduce the change of control payment to Mr. Highsmith to one times the executive’s salary, and (iii) change the proposed equity issuance upon a change of control into a cash payment corresponding to the value of the securities that would otherwise have been issued. Further discussion was also held regarding the proposed terms of the bridge financing, which provides for monthly draws in an aggregate amount of up to $500,000 to fund Timberline’s budgeted expenses through the end of July 2024. The Timberline Board noted the need to ensure sufficient time to repay the borrowed amounts if the transaction failed to close for any reason. With the participation of Davis Graham and Cormark, the Timberline Board and management also renewed its conversation regarding a potential outreach to one or more third parties. The Timberline Board determined that a broad outreach at this time would create risks, particularly in terms of confidentiality, that would likely outweigh any potential benefits. It authorized Cormark to reach out to Company A, but to not conduct a broader process to reach out to other third parties.
On April 9, 2024, Davis Graham sent a revised draft of the merger agreement to Hogan Lovells.
From April 9 through April 15, 2024, McEwen completed its due diligence review and the parties’ legal advisors finalized the terms of the promissory note for the bridge financing and various ancillary documents and disclosure schedules to be attached to the merger agreement.
On April 9, 2024, a representative of Cormark spoke with a representative of Company A, which informed Cormark that Company A was not interested in pursuing discussions regarding a potential strategic transaction.
On April 15, 2024, Hogan Lovells sent a revised draft of the merger agreement to Davis Graham.
The merger agreement, disclosure letter and ancillary documents were all in substantially final form by the afternoon of April 15, 2024, when the Timberline Board met to consider approval of the merger. A representative of Davis Graham discussed the Timberline Board’s fiduciary duties in the context of the merger and the merger agreement and summarized the terms of the merger agreement as well as the voting agreements, bridge financing, and employment agreement amendments. Representatives of Cormark then reviewed with the Timberline Board its financial analyses of the proposed transaction at the exchange ratio of 0.01 shares of McEwen common stock for every one share of Timberline common stock. Following discussion, Cormark rendered its oral opinion to the Timberline Board, which was subsequently confirmed by delivery of a written opinion, dated April 15, 2024, to the effect that, as of such date and based upon and subject to the factors, assumptions, qualifications and any limitations
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set forth in its written opinion, the merger consideration to be paid to the holders of Timberline common stock (other than McEwen) in the proposed merger was fair, from a financial point of view, to such holders. See the section entitled “Opinion of Timberline’s Financial Advisor” for more information.
After considering the proposed terms of the transaction with McEwen, and taking into consideration the matters discussed during that meeting and prior meetings of the Timberline Board, including the factors described above and under the section entitled “Timberline Board’s Recommendations and Reasons for the Merger,” the Timberline Board unanimously (1) declared that the merger agreement and the transactions contemplated thereby (including the merger), are fair to, and in the best interests of, Timberline’s stockholders, (2) approved and declared advisable the merger agreement and the transactions contemplated thereby (including the merger), (3) directed that the adoption of the merger agreement be submitted to a vote at a meeting of the Timberline stockholders and (4) resolved (subject to certain exceptions set forth in the merger agreement) to recommend the approval and adoption of the merger agreement and the transactions contemplated thereby (including the merger) by the Timberline stockholders. The Timberline Board also approved the execution of the promissory note with respect to the bridge financing and the amendments to the employment agreements for Mr. Highsmith and Dr. Osterberg.
During the morning of April 16, 2024, McEwen’s board of directors approved the merger agreement in an action by written consent. Immediately thereafter, Timberline and McEwen executed the merger agreement. At the same time, each director and officer of Timberline, as well as Jupiter and Crescat, delivered executed voting agreements to McEwen.
After notifying the TSXV and halting trading in Timberline common stock, Timberline and McEwen each issued press releases on April 16, 2024, announcing entry into the merger agreement.
McEwen’s Rationale for the Transaction
McEwen believes that the merger with Timberline presents McEwen with the opportunity to:
strengthen McEwen’s core portfolio of projects in Nevada, a very favorable mining jurisdiction where Timberline has operated successfully since its inception, and where McEwen has one producing gold mine and several exploration assets;
acquire gold mineral resources, as defined by S-K 1300, at a low per-ounce cost relative to similar transactions, and with potential to contribute to McEwen’s gold production growth within five years;
grow McEwen’s portfolio of prospective exploration targets that may contribute to additional growth, including deep sulfide gold targets and poly-metallic base metal targets, that are speculative at this stage but merit thorough evaluation;
realize synergies between Timberline’s projects and McEwen’s Gold Bar mine, including personnel, procurement, shared mine infrastructure, synergies in recruiting and human resources in the region around Eureka, Nevada; and
achieve additional returns for McEwen’s shareholders from cost and tax efficiencies, increased production scale, an enhanced ability to work cooperatively with relevant governmental authorities, all of which are anticipated to be accretive over time to earnings per share.
Timberline Board’s Recommendations and Reasons for the Transaction
By unanimous vote, the Timberline Board, at a meeting held on April 15, 2024, (a) declared that the merger agreement and the transactions contemplated thereby (including the merger), are fair to, and in the best interests of, Timberline’s stockholders, (b) approved and declared advisable the merger agreement and the transactions contemplated thereby (including the merger), (c) directed that the adoption of the merger agreement be submitted to a vote at a meeting of the Timberline stockholders and (d) resolved (subject to certain exceptions set forth in the merger agreement) to recommend the approval and adoption of the merger agreement and the transactions contemplated thereby (including the merger) by the Timberline stockholders. The Timberline Board unanimously recommends that Timberline stockholders vote “FOR” the merger proposal, “FOR” the non-binding merger-related compensation proposal and “FOR” the adjournment proposal.
In reaching its determinations and recommendations, the Timberline Board consulted with company management and financial and legal advisors and considered a range of factors and scenarios, as discussed below. Factors that weighed in favor of the merger include:
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Greater Stockholder Value and Return Potential. The merger consideration to be paid to holders of Timberline common stock represented a premium of 162% over the closing trading price of Timberline common stock of $0.04 on April 15, 2024, the last trading day prior to public announcement of the merger, and 132% based on the 20-day average closing price for the period ended April 15, 2024.
Ownership of Diversified Portfolio. The merger will enable Timberline stockholders to participate in the ownership of an Americas-focused gold-silver-copper producer, with three operating mines forecast to produce 130,000 to 145,000 gold-equivalent ounces in 2024 on an attributable basis. McEwen also owns 47.7% of McEwen Copper, which owns a 100% interest in the PEA-stage Los Azules project, the world’s 8th largest undeveloped copper project, located in San Juan, Argentina.
Potential Accelerated Development of the Eureka Project. The greater financial and management capabilities of the combined company may permit the potential accelerated development of Timberline’s Eureka project by consolidation with McEwen’s operating Gold Bar mine located in Eureka County, central Nevada.
Proven Management Team and Board of Directors for McEwen. McEwen has a management team and a board of directors with demonstrated experience in financing, acquiring, building and operating mines.
Enhanced Capital Markets Profile. As a larger and more diversified company, McEwen appeals to a broader institutional shareholder base, increased research coverage, and improved share trading liquidity.
Risks Associated with Operating as a Stand-alone Business. The Timberline Board determined that entering into the merger agreement with McEwen provided the best alternative to create stockholder value from the Timberline assets on a short-, intermediate- and long-term basis, as compared to continued operations on a stand-alone basis in light of the compelling value proposition of the McEwen transaction. In particular, the Timberline Board considered Timberline’s need for additional equity capital, the cost and feasibility of obtaining that capital, and the likely attendant dilution to stockholders that would result.
Receipt of Expert Advice and Fairness Opinion. The Timberline Board retained and received advice from experienced and qualified financial and legal advisors to assist in evaluating, negotiating and recommending the terms of the merger and the merger agreement. In addition, the Timberline Board considered the oral opinion of Cormark rendered to the Timberline Board on April 15, 2024, which opinion was subsequently confirmed by delivery to the Timberline Board of a written opinion dated as of the same date, to the effect that, as of such date and based upon and subject to the factors, assumptions, qualifications and any limitations set forth in Cormark’s written opinion, the merger consideration to be paid to the holders of Timberline common stock in the proposed merger (other than McEwen and its Affiliates) was fair, from a financial point of view, to such holders, as more fully described below under the heading “—Opinion of Timberline’s Financial Advisor” beginning on page 37.
Terms of the Merger Agreement. The Timberline Board reviewed and considered the terms of the merger agreement, taken as a whole, including the parties’ representations, warranties and covenants, and the circumstances under which the merger agreement may be terminated, and concluded that such terms are reasonable and fair to Timberline. The Timberline Board also reviewed and considered the conditions to the completion of the merger. The Timberline Board noted in particular that the completion of the merger is not subject to any financing condition or any condition based upon McEwen stockholder approval, which enhances the likelihood that the merger will be completed.
In the course of its deliberations, the Timberline Board also considered a variety of risks and other potentially negative factors, including the following:
Fixed Exchange Ratio. The Timberline Board considered that because the merger consideration is based on a fixed exchange ratio rather than a fixed value, Timberline stockholders will bear the risk of a decrease in the trading price of McEwen common stock during the pendency of the merger and the merger agreement does not provide Timberline with a collar or a value-based termination right.
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Risks Associated with the Pendency of the Merger. The risks and contingencies relating to the announcement and pendency of the merger, including the potential for diversion of management and employee attention and the potential effect of the combination on the businesses of both companies and the restrictions on the conduct of Timberline’s business during the period between the execution of the merger agreement and the completion of the merger.
Possible Failure to Achieve Synergies. The potential challenges and difficulties in integrating the operations of Timberline and McEwen and the risk that anticipated cost savings and operational efficiencies between the two companies, or other anticipated benefits of the merger, might not be realized or might take longer to realize than expected. Moreover, the potential future development of Timberline’s Eureka project may not occur on a reasonable timeframe or at all.
Termination Fee and Repayment of Note. The Timberline Board considered that Timberline would be required to pay to McEwen a termination fee of $400,000 in the event Timberline were to terminate the merger agreement in order for Timberline to enter into a superior proposal, should one be made, or if the merger agreement were to be terminated by McEwen in connection with a change in the Timberline Board’s recommendation to its stockholders with respect to adoption of the merger agreement. Moreover, if the Timberline Board were to terminate the merger agreement in order to enter into an acquisition agreement for a superior proposal, the amounts borrowed from McEwen under the bridge financing would become payable within five days.
Restrictions on Third-Party Discussions. The Timberline Board considered that the merger agreement required Timberline to terminate all discussions with potential alternative transaction counterparties while noting that Timberline would only have the right to respond to alternative proposals that might be made by such parties pursuant to and in accordance with the applicable terms of the merger agreement.
Small Pro Forma Ownership. The Timberline Board considered that, based on the implied value of the merger consideration as of April 15, 2024, Timberline stockholders would only own approximately 4% of McEwen on a fully-diluted, in-the-money basis after the merger.
Other Risks. The Timberline Board considered risks of the type and nature described under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 21 and 23, respectively.
The Timberline Board believed that, overall, the potential benefits of the merger to Timberline stockholders outweighed the potential risks and uncertainties of the merger.
In addition, the Timberline Board was aware of and considered that Timberline’s directors and executive officers may have interests in the merger that may be different from, or in addition to, their interests as stockholders of Timberline generally, as described below under the heading “—Interests of Directors and Executive Officers of Timberline in the Merger” beginning on page 42.
The foregoing discussion of factors considered by the Timberline Board is not intended to be exhaustive, but it includes material factors considered by the Timberline Board. In light of the variety of factors considered in connection with its evaluation of the merger, the Timberline Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the Timberline Board applied his or her own personal business judgment to the process and may have given different weight to different factors. The Timberline Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Timberline Board based its recommendation on the entirety of the information presented.
Opinion of Timberline’s Financial Advisor
Pursuant to an engagement letter dated February 14, 2024, Timberline retained Cormark as its financial advisor in connection with a potential transaction (including the proposed merger). At the meeting of the Timberline Board on April 15, 2024, Cormark rendered its oral opinion to the Timberline Board, which was subsequently confirmed by delivery of a written opinion, dated April 15, 2024, to the effect that, as of such date and based upon and subject to the factors, assumptions, qualifications and any limitations set forth in its written opinion, the merger consideration to be paid to the holders of Timberline common stock in the proposed merger (other than McEwen and its Affiliates) was fair, from a financial point of view, to such holders.
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The full text of the written opinion of Cormark dated April 15, 2024, which sets forth, among other things, the assumptions made, matters considered and qualifications and any limitations on the opinion and the review undertaken by Cormark in connection with rendering its opinion, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of Cormark set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Timberline’s stockholders are urged to read the opinion carefully and in its entirety. Cormark’s opinion was addressed to the Timberline Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the merger consideration to be paid to the holders of Timberline common stock in the proposed merger and did not address any other aspect of the proposed merger or the other transactions contemplated by the merger agreement. Cormark was not asked to prepare and did not prepare a formal valuation of the Company pursuant to MI 61-101 or otherwise or any of its respective securities or assets, and the opinion should not be construed as such. The issuance of Cormark’s opinion was approved by a fairness committee of Cormark.
In arriving at its opinion, Cormark, reviewed, relied upon or carried out, among other things, the following:
a draft of the merger agreement;
drafts of the voting agreements;
drafts of the Note;
the non-binding summary of indicative terms, dated as of March 12, 2024;
Annual Reports on Form 10-K of the Company for the fiscal years ended September 30, 2023, 2022, and 2021;
Quarterly Reports on Form 10-Q of the Company for the quarters ended December 31, 2023, June 30, 2023, March 31, 2023, December 31, 2022, June 30, 2022, March 31, 2022, December 31, 2021, June 30, 2021, and March 31, 2021;
the proxy statement for the Company dated May 16, 2023;
Annual Reports on Form 10-K of McEwen for the fiscal years ended December 31, 2023, 2022, and 2021;
Quarterly Reports on Form 10-Q of McEwen for the quarters ended September 30, 2023, June 30, 2023, March 31, 2023, September 30, 2022, June 30, 2022, March 31, 2022, September 30, 2021, June 30, 2021, and March 31, 2021;
the NI 43-101 Technical Report on the mineral resource estimations of the Lookout Mountain Project in Eureka County, Nevada effective September 1, 2023, prepared by RESPEC Company LLC;
other certain publicly available information relating to the business, operations, financial condition and trading history of Timberline and McEwen;
certain internal financial, operational, corporate and other information with respect to the Company, as well as internal operating and financial projections prepared by the Company consisting of an internal estimate of its cash balance;
public information with respect to selected precedent transactions Cormark considered relevant;
other publicly available information relating to selected public companies considered by Cormark to be relevant, including published reports by equity research analysts and industry reports;
a certificate as to certain factual matters and the completeness and accuracy of certain information upon which the opinion is based, provided by senior officers of the Company; and
such other information, investigations, analyses and discussions as Cormark considered necessary or appropriate for the purposes of its opinion.
In addition, Cormark held discussions with certain members of the management of Timberline with respect to certain aspects of the proposed merger, and the past and current business operations of Timberline, the financial condition and future prospects and operations of Timberline, and certain other matters Cormark believed necessary or appropriate to its inquiry.
In giving its opinion, Cormark relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with Cormark by Timberline and McEwen or otherwise
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reviewed by or for Cormark. Cormark did not independently verify any such information or its accuracy or completeness and, pursuant to Cormark’s engagement letter with Timberline, Cormark did not assume any obligation to undertake any such independent verification. In its analyses and in preparing the fairness opinion, Cormark made numerous assumptions with respect to expected industry performance, general business and economic conditions and other matters, many of which are beyond the control of Cormark or any party involved in the merger. Cormark also assumed that (i) the executed merger agreement, documents in respect to the Note and voting agreements would not differ in any material respect from the drafts that it reviewed, (ii) the representations and warranties contained in the merger agreement are true and correct, (iii) the merger will be consummated in accordance with the terms and conditions thereof, substantially within the time frames specified in the merger agreement without any waiver or material amendment of any material term or condition thereof, (iv) the merger was negotiated at arm’s length, (v) the formal valuation requirement under MI 61-101 does not apply in respect of the merger, (vi) the merger is not a “related party transaction” as defined under MI 61-101, (vii) any governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect, (viii) the disclosure provided or incorporated by reference in this proxy statement/prospectus and any other documents in connection with the merger prepared by a party to the merger agreement will be accurate in all material respects and will comply with the requirements of all applicable laws, (ix) all of the conditions required to implement the merger will be met, (x) the procedures being followed to implement the merger are valid and effective, and (xi) this proxy statement/prospectus will be distributed to Timberline shareholders in accordance with applicable laws. Cormark is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Timberline with respect to such issues.
Cormark’s opinion was necessarily based on securities markets, economic and general business and financial conditions prevailing as of the date of such opinion. Cormark’s opinion is limited to the fairness, from a financial point of view, of the merger consideration to be paid by McEwen in connection with the merger and not the strategic or legal merits of the merger. Cormark’s fairness opinion does not provide assurance that the best possible price or transaction was obtained and does not constitute a recommendation to any stockholder of Timberline as to how such stockholder should vote with respect to the proposed merger or any other matter. Furthermore, Cormark expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed merger, or any class of such persons relative to the merger consideration to be paid to the holders of Timberline common stock in the proposed merger or with respect to the fairness of any such compensation. Cormark expressed no opinion as to the price at which Timberline common stock or McEwen common stock will trade at any future time.
The terms of the merger agreement, including the merger consideration, were determined through arm’s length negotiations between Timberline and McEwen, and the decision to enter into the merger agreement was solely that of the Timberline Board. Cormark’s opinion and financial analyses were only one of the many factors considered by the Timberline Board in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Timberline Board or management with respect to the proposed merger or the merger consideration.
In accordance with customary investment banking practice, Cormark employed generally accepted valuation methodologies in rendering its opinion to the Timberline Board on April 15, 2024 and in the financial analyses presented to the Timberline Board on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses utilized by Cormark in connection with rendering its opinion to the Timberline Board and contained in the presentation delivered to the Timberline Board on such date in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data presented by Cormark. Certain of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Cormark, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Cormark’s analyses.
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In support of the fairness opinion, Cormark has performed certain value analyses on Timberline based on the methodologies and assumptions that Cormark considered appropriate in the circumstances for the purposes of providing its fairness opinion. In the context of the fairness opinion, Cormark has considered the following principal methodologies (as each term is defined below):
(i)
Precedent Transactions Analysis; and
(ii)
Comparable Public Companies Analysis.
Precedent Transactions Analysis
Cormark reviewed the purchase prices and transaction multiples paid in selected precedent transactions that Cormark Securities, based on its experience in the mining industry, considered relevant.
Cormark analyzed the multiple of enterprise value to total mineral resources (“EV/oz”) and adjusted the multiple for current spot gold prices (“Adjusted EV/oz”). Adjusted EV/oz is calculated as EV/oz multiplied by the current spot gold price divided by spot gold price at deal announcement. Cormark analyzed these multiples for select transactions since 2018 in which the target companies were development stage precious metals companies with an implied transaction value lower than $100 million. The announcement dates and target companies—acquirors in the selected transactions used in the analysis included:
26-Feb-24 Contact Gold Corp. – Orla Mining Ltd.
15-Jan-24 Orford Mining Corporation – Alamos Gold Inc.
5-Dec-23 Vanstar Mining Resources Inc. – IAMGOLD Corporation
6-Apr-23 ATAC Resources Ltd. – Hecla Mining Company
28-Feb-23 Manitou Gold Inc. – Alamos Gold Inc.
27-Apr-22 Genesis Metals Corp. – Northern Superior Resources Inc.
11-Mar-22 Gatling Exploration – MAG Silver
21-Jan-21 QMX Gold Corporation – Eldorado Gold Corporation
2-Mar-20 Balmoral Resources Ltd. – Wallbridge Mining Company Ltd.
14-May-19 Alexandria Minerals Corporation – O3 Mining Inc.
2-Aug-18 Northern Empire Resources Corp. – Coeur Mining Inc.
To calculate the implied per share equity value ranges for Timberline under the Precedent Transaction Analysis, Cormark applied the following metrics:
(i)
EV/oz in respect of Timberline’s total mineral resources. The results of the selected precedent transactions analysis are summarized below:
 
Adjusted
EV / oz
Mean
$59
Median
$24
Minimum
$9
Maximum
$191
(ii)
Cormark applied multiple ranges based on the 1st and 3rd quartiles of the selected metric and determined the implied equity price per share of Timberline common stock and then compared those implied equity values per share to the consideration of $0.113 per share. The results of this analysis implied a range of equity prices per share of $0.034 to $0.138.
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Comparable Public Companies Analysis
Cormark reviewed public market trading statistics for nine select publicly listed development stage, Western USA focused, precious metals companies, with an equity value lower than $75 million that it deemed relevant, including:
Augusta Gold Corp.
Western Exploration Inc.
NevGold Corp.
Getchell Gold Corp.
Gold Springs Resource Corp.
Allegiant Gold Ltd.
CopAur Minerals Inc.
Gold Basin Resources Corporation
Lahontan Gold Corp.
Using these trading statistics, Cormark then determined ranges of multiples that would be applied to financial metrics of Timberline for the purpose of this analysis.
To calculate the implied per share equity value ranges for Timberline under the Comparable Public Companies Analysis, Cormark Securities applied the following metrics:
(i)
EV/oz in respect of Timberline’s total mineral resources. The results of the selected public companies’ analysis are summarized below:
 
EV / oz
Mean
$21
Median
$26
Minimum
$4
Maximum
$48
(ii)
Cormark applied multiple ranges based on the 1st and 3rd Quartiles of the selected metric and determined the implied equity price per share of Timberline common stock and then compared those implied equity values per share to the consideration of $0.113 per share. The results of this analysis implied a range of equity prices per share of $0.029 to $0.062.
Value of Merger Consideration
Cormark has reviewed the following with respect to McEwen Shares in order to conclude that the securities are liquid and a liquid market exists:
daily trading activity, volumes and price history;
the relative number of shares to be offered versus the number of shares of McEwen outstanding and in the public float of McEwen;
at 0.010 exchange ratio, approximately 1.8 MM shares of McEwen would be issued (approximately 4% of the pro forma entity), representing approximately 4 days of trading of McEwen based on 100% of the volume traded on the TSX and NYSE calculated using last 12 months average daily volume; and
additional information that Cormark deemed necessary.
In light of the fact that a liquid market exists for the common shares of McEwen, Cormark used the closing price of the McEwen Shares on the NYSE on April 15, 2024 to establish the value of the consideration payable by McEwen for the Timberline common shares.
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Other Factors Considered
Although not forming part of its financial analysis, Cormark considered a number of other factors, including, but not limited to, the following:
(i)
Historical trading prices of Timberline on the OTCQB during the 52-week period ending April 15, 2024;
(ii)
The premiums implied by the merger consideration relative to the closing price and 20-day volume-weighted average trading price of Timberline Shares on the OTCQB based on the closing price and 20-day volume-weighted average price of McEwen shares as at April 15, 2024; and
(iii)
Other factors or analyses, which Cormark has judged, based on its experience in rendering such opinions, to be relevant in the context of the transactions contemplated by the merger agreement, including certain risks relating to the transaction and other strategic alternatives, including the maintenance of the status quo.
Disclosure of Fee and Prior Relationship
Neither Cormark, nor any of its affiliates or associates, is an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario), as amended) or an associate or affiliate (as those terms are defined in the Securities Act) of Timberline, McKewen, or any of their respective associates or affiliates (collectively, the “Interested Parties”). Cormark has not been engaged to provide financial advisory services to any such parties nor has it participated in any financing involving any such parties within the past 24-month period other than acting as financial advisor to Timberline in connection with the transactions described herein.
The terms of the engagement letter between Timberline and Cormark provide that Cormark shall be paid a fixed fee upon delivery of the fairness opinion in the amount of C$300,000 (the “fairness opinion fee”) payable concurrent with the closing of the merger, or, if the transaction is terminated for any reason, within thirty days following such termination. The fairness opinion fee is not contingent in whole or in part on the success or completion of the merger or on the conclusions reached in the fairness opinion. In addition, Cormark will be owed an additional fee equal to C$100,000 contingent upon the successful completion of the merger. Furthermore, Cormark is to be reimbursed for its reasonable and documented out-of-pocket expenses and is to be indemnified by Timberline, in certain circumstances, against certain expenses, losses, claims, actions, damages and liabilities incurred in connection with the provision of its services pursuant to the engagement letter. The fees paid to Cormark in connection with the engagement letter are not financially material to Cormark. The terms of the fee arrangement with Cormack were negotiated at arm’s length between Timberline and Cormark, and the Timberline Board was aware of the arrangement, including the fact that a significant portion of the fee payable to Cormark is contingent upon the consummation of the merger.
Interests of Directors and Executive Officers of Timberline in the Merger
In considering the recommendation of the Timberline Board that Timberline stockholders approve the transaction and vote in favor of the merger proposal and the merger-related compensation proposal, Timberline stockholders should be aware that the executive officers and directors of Timberline have certain interests in the merger that are or may be different from, or in addition to, the interests of Timberline’s stockholders generally. The Timberline Board was aware of these interests and considered them, among other matters, in evaluating and approving the merger agreement, and in making its recommendation that Timberline stockholders adopt the merger agreement.
These interests are described in more detail below. The merger will be a “change in control” for purposes of the Timberline executive compensation plans and agreements described below.
For purposes of this disclosure, Timberline’s NEOs are Patrick Highsmith, President and Chief Executive Officer, Dr. Steven Osterberg, Vice President – Exploration, and Ted Sharp, Chief Financial Officer.
Certain Assumptions
Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits to Mr. Highsmith and Dr. Osterberg described in this section, the following assumptions were used:
The relevant price per share of Timberline common stock is $0.10, which is the average closing price per share of Timberline common stock as reported on the OTCQB over the first five business days following the first public announcement of the transaction on April 16, 2024;
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The effective time of the merger as referenced in this section occurs on [•], 2024, which is the assumed date of the effective time solely for purposes of the disclosure in this section;
The employment of each NEO of Timberline was terminated by Timberline without “cause” upon a “change of control” (as such terms are defined in the relevant plans and agreements) immediately following the effective time of the merger; and
Each NEO has properly executed and not revoked any required release agreement described in the section below entitled “-Executive Severance Arrangements—Release of Claims” necessary to receive the payments and benefits described below.
The amounts indicated below are estimates based on multiple assumptions (including the assumptions described above) that may or may not actually occur or be accurate on the relevant date, and do not reflect certain compensation actions that may occur before completion of the transaction. Accordingly, the actual amounts received may differ from the estimates set forth below.
Treatment of Timberline Options
As of immediately prior to the effective time of the merger, each option to acquire shares of Timberline common stock outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be cancelled and deemed to be fully vested and converted into such number of shares Timberline common stock equal to (A) the excess, if any, of (1) the volume-weighted average price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the effective time of the merger over (2) the per share exercise price of such option, multiplied by (B) the total number of shares of Timberline common stock subject to such option immediately prior to the effective time of the merger. If any such option has an exercise price that exceeds the amount set forth in clause (1) above, it will be canceled for no consideration.
Treatment of Timberline Warrants
As of immediately prior to the effective time of the merger, each warrant to purchase shares of Timberline common stock that is outstanding immediately prior to the effective time of the merger will be converted into a warrant to acquire a number of shares of McEwen common stock, referred to as a rollover warrant, that will be determined by multiplying the number of shares of Timberline common stock subject to such warrant by the exchange ratio and rounding down to the nearest whole number of shares of McEwen common stock, at an adjusted exercise price calculated by dividing the per share exercise price for the shares of Timberline common stock subject to such warrant, as in effect immediately prior to the effective time of the merger, by the exchange ratio and rounding the resulting exercise price up to the nearest whole cent.
Voting and Support Agreements
Contemporaneously with the execution of the merger agreement, each of the directors and officers of the Company entered into the voting agreements, pursuant to which, among other things, such stockholders agreed to vote in favor of the merger, not to transfer its shares (or any securities convertible into shares) other than in support of the merger, and not to solicit or negotiate any alternative acquisition proposal. The voting agreements does not preclude a director, in his or her capacity as such, from exercising his or her fiduciary duties and electing to terminate the merger agreement in the circumstances permitted in the merger agreement.
Executive Severance Arrangements
Amendment to Patrick Highsmith’s Employment Letter Agreement
Contemporaneously with the execution of the merger agreement, the Company entered into an amendment (the “Highsmith Amendment”) to the existing employment letter agreement, dated October 3, 2020, between the Company and Mr. Highsmith (the “Highsmith Employment Letter Agreement”). The Highsmith Amendment amends the “change of control” and “termination without cause” provisions of the Highsmith Employment Letter Agreement to provide that in the event that Timberline terminates Mr. Highsmith’s employment without cause (as defined in the Highsmith Amendment) upon a change of control (as defined in the Highsmith Amendment) or within 12 months after a change of control, Mr. Highsmith shall be entitled to (i) an amount equal to 12 months of his base salary as in effect at the time of the change of control and (ii) accrued benefits (as defined in the Highsmith Amendment). The Highsmith Amendment also amends the “incentives: restricted share units RSUs” provision of the Highsmith
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Employment Letter Agreement to provide that Mr. Highsmith shall receive a cash transaction bonus equal to (i) 750,000 multiplied by (ii) the volume-weighted average trading price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the date of the change of control, less applicable withholdings. The Highsmith Amendment will become effective upon the consummation of the merger, or any transaction contemplated by an acquisition proposal (as defined in the merger agreement) providing for a superior proposal (as defined in the merger agreement), if applicable. If the merger or any such alternative transaction is not consummated for any reason, the Highsmith Amendment will be null and void and of no force or effect.
Amendment to Steven Osterberg’s Employment Letter Agreement
Contemporaneously with the execution of the Merger Agreement, Timberline entered into an amendment (the “Osterberg Amendment”) to the existing employment letter agreement, dated October 9, 2020, between the Company and Dr. Osterberg (the “Osterberg Employment Letter Agreement”). The Osterberg Amendment amends the “change of control” and “termination without cause” provisions of the Osterberg Employment Letter Agreement to provide that in the event that Timberline terminates Dr. Osterberg’s employment without cause (as defined in the Osterberg Amendment) upon a change of control (as defined in the Osterberg Amendment) or within 12 months after a change of control, Dr. Osterberg shall be entitled to (i) an amount equal to 12 months of his base salary as in effect at the time of the change of control, (ii) accrued benefits (as defined in the Osterberg Amendment) and (iii) continued participation in Timberline’s group health plan for three months following his termination of employment. The Osterberg Amendment also amends the “incentives: restricted share units RSUs” provision of the Osterberg Employment Letter Agreement to provide that Dr. Osterberg shall receive a transaction bonus equal to (i) 250,000 multiplied by (ii) the volume-weighted average trading price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the date of the change of control, less applicable withholdings. The Osterberg Amendment will become effective upon the consummation of the merger, or any transaction contemplated by an acquisition proposal (as defined in the merger agreement) providing for a superior proposal (as defined in the merger agreement), if applicable. If the merger or any such alternative transaction is not consummated for any reason, the Osterberg Amendment will be null and void and of no force or effect.
Release of Claims and Restrictive Covenants
The foregoing payments to the executive officers are contingent on the executive officer executing and not revoking a release of claims agreement with Timberline.
Quantification
See the section entitled “Quantification of Payments and Benefits to Timberline’s Named Executive Officers” below for the estimated severance and transaction bonus amounts for each NEO. Based on the assumptions described above under “—Certain Assumptions,” the estimated aggregate cash severance and transaction bonuses that would be payable to each of Messrs. Highsmith and Osterberg are $243,000 and $175,000, respectively.
Indemnification and Insurance
The merger agreement provides that the executive officers and non-employee directors of Timberline and its subsidiaries will have the right to indemnification and continued coverage under directors’ and officers’ liability insurance policies for at least six years following the effective time of the merger. This indemnification and insurance coverage is further described in the section entitled “The Merger Agreement—Indemnification, Exculpation and Insurance” on page 52.
New Compensation Arrangements with McEwen
Any Timberline executive officers and directors who become officers, directors or employees of McEwen or who otherwise are retained by McEwen to provide services may enter into new individualized compensation arrangements effective as of the effective time of the merger and may participate following the effective time of the merger in cash or equity incentive or other benefit plans maintained by McEwen, any of its affiliates or Timberline. As of the date of this proxy statement/prospectus, no compensation arrangements between such persons and McEwen and/or its affiliates have been established or discussed.
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Quantification of Payments and Benefits to Timberline’s Named Executive Officers
The information set forth below regarding the compensation of each of Timberline’s NEOs that is based on or otherwise relates to the merger is provided in accordance with Item 402(t) of Regulation S-K.
The amounts indicated below are estimates based on multiple assumptions (including the assumptions described above) that may or may not actually occur or be accurate on the relevant date, and do not reflect certain compensation actions that may occur before completion of the transaction. Accordingly, the actual amounts received by our NEOs may differ from the estimates set forth below. The amounts shown do not reflect any taxes payable by the NEOs.
Named Executive Officer
Cash
($)(1)
Equity
Awards
($)(2)
Benefits
($)
Total
($)
Patrick Highsmith
243,000
$243,000
Steven Osterberg
175,000
9,130
9,758
$193,888
Ted Sharp
3,043
$[3,043]
(1)
Amounts shown include cash severance payments under the Highsmith Amendment and the Osterberg Amendment, as applicable, equal to 12 months of the NEO’s base salary as in effect as of the change of control. The cash severance payments are considered to be “double trigger,” which means that both a change of control, such as the merger, and another event (i.e., a qualifying termination on or within 12 months of the merger) must occur prior to such benefits being provided to the NEO. Also included is an estimated transaction bonus payment for Mr. Highsmith and Dr. Osterberg equal to the product of 750,000 and 250,000, respectively, multiplied by the relevant $0.10 price per share noted above (see “—Certain Assumptions” above); the actual amount of such payment will be calculated based on the volume-weighted average trading price per share of the common stock of Timberline (as reported by Bloomberg L.P. or, if not reported therein, in another authoritative source selected by the Company) on each of the five consecutive days on which the Company’s shares of common stock are traded on the OTCQB ending on (and including) the trading day that is three trading days prior to the change of control (see “—Executive Severance Arrangements” above). The transaction bonus payment is “single trigger,” which means that solely the effective time of the merger must occur prior to such payment being provided to the NEO (see “—Executive Severance Arrangements” above). The estimated amount of each such payment is set forth in the table below:
Named Executive Officer
Cash Severance
(Double Trigger)
Transaction Bonus
(Single Trigger)
Patrick Highsmith
168,000
75,000
Steven Osterberg
150,000
25,000
Ted Sharp
(2)
The amount shown reflect the value of “in-the-money” vested stock options (i.e. stock options with an exercise price expected to be less than the volume weighted average price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the effective time of the merger) that are automatically converted into shares of Timberline common stock pursuant to the merger agreement, The amounts in this column are equal to the excess of the average closing market price of the Company’s common stock over the first five business days following the first public announcement of the transaction (equal to $0.10) over the applicable option exercise price, multiplied by the applicable number of “in-the-money” options converted. The “in-the-money” stock options reflected in this column are as follows: Dr. Osterberg - 456,522 options with an exercise price of $0.08; and Mr. Sharp - 152,173 options with an exercise price of $0.08. The following stock options held by our NEOs are expected to be “out-of-the-money” (i.e. the exercise price is expected to be greater than the volume weighted average price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the effective time of the merger) and are therefore not included in the table above as they are expected to be cancelled for no consideration pursuant to the merger agreement: Mr. Highsmith - 750,000 options with an exercise price of $0.27 and 500,000 options with an exercise price of $0.25; Dr. Osterberg - 250,000 options with an exercise price of $0.27 and 200,000 options with an exercise price of $0.25; and Mr. Sharp 150,000 options with an exercise price of $0.25.
(3)
The amounts shown reflect the value of continued participation in the Company’s group health plan for the period of three months to which Dr. Osterberg would be entitled upon a qualifying termination of employment under the Osterberg Amendment. This benefit is considered to be “double trigger,” which means that both a change of control, such as the merger, and another event (i.e., a qualifying termination on or within 12 months of the merger) must occur prior to such benefits being provided to Dr. Osterberg.
Share Ownership of Directors, Executive Officers and Certain Beneficial Owners of Timberline
Timberline’s Directors and Executive Officers
The following tables sets forth, as of [•], 2024, the most recent practicable date for which such information was available, (i) the number of shares and percentage of Timberline common stock beneficially owned by each of Timberline’s directors, NEOs and all of its executive officers and directors as a group and (ii) certain information regarding the beneficial ownership of Timberline common stock by each person who is known by Timberline to beneficially own more than five percent of the outstanding Timberline common stock. Except as otherwise indicated, the address for each of Timberline’s directors, NEOs and all of its executive officers and directors is c/o Timberline Resources Corporation, 9030 North Hess St., Suite 161, Hayden, ID 83835. None of the securities beneficially owned as set forth below are pledged as security.
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Timberline
Common Stock Beneficially Owned
Name
Number of Shares of
Common Stock
Common Stock Underlying
Derivative Securities
Total
Percent
of
Class**
Leigh Freeman(a)(1)
Chairman of the Board, Director
65,066
605,217
670,283
*
Steven Osterberg(c)(2)
VP - Exploration
1,108,994
906,522
2,015,516
1.06
Donald McDowell(a)(3)
Former VP - Corporate Development, Director
9,487,000
656,522
10,143,522
5.34
William Matlack(a)(4)
Director
17,204,961
4,166,848
21,371,809
11.25
Patrick Highsmith(b)(5)
Chief Executive Officer, Director
1,250,000
1,250,000
*
Pamela Saxton(a)(6)
Director
200,000
200,000
*
Ted R. Sharp(c)(7)
Chief Financial Officer
302,173
302,173
*
All directors and executive officers as a group (7 persons)
27,866,021
8,087,282
35,953,303
18.92%
Certain Beneficial Owners of Timberline Common Stock
 
Timberline
Common Stock Beneficially Owned
Name
Number of Shares of
Common Stock
Common Stock Underlying
Derivative Securities
Total
Percent
of
Class**
Americas Gold Exploration, Inc.(a)(3)
Donald McDowell
2131 Stone Hill Circle
Reno, NV 89519
9,487,000
656,552
10,143,552
5.34
Crescat Global Macro Master Fund LTD
Crescat Long/Short Fund LLP
Crescat Precious Metals Master Fund LTD
Kevin and Linda Smith Living Trust(8)
Kevin Smith,
44 Cook Street, Suite 100
Denver, CO 80206
26,455,579
4,499,998
30,955,577
16.29
Jupiter Investment Management(9)
Zig Zag Building
70 Victoria Street
London, United Kingdom
SW1E 6SQ
25,933,705
5,000,000
30,933,705
16.28
*
less than 1%.
**
The percentages listed for each shareholder are based on [189,998,710] shares outstanding as of [•], 2024 and assume the exercise by that shareholder only of their entire option or warrant, exercisable within 60 days of [•], 2024.
(a)
Director only.
(b)
Officer and director.
(c)
Officer only.
(1)
A vested option to purchase 365,217 shares was granted to Mr. Freeman on October 29, 2019 with an exercise price of $0.08 per share and an expiration date of October 29, 2024. A vested option to purchase 240,000 shares was granted to Mr. Freeman on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026.
(2)
A vested option to purchase 456,522 shares was granted to Dr. Osterberg on October 29, 2019 with an exercise price of $0.08 per share and an expiration date of October 29, 2024. A vested option to purchase 250,000 shares was granted to Dr. Osterberg on October 8, 2020 with
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an exercise price of $0.27 and an expiration date of October 8, 2025. A vested option to purchase 200,000 shares was granted to Dr. Osterberg on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026. Total options include 151,087 owned by Mr. Osterberg’s spouse.
(3)
Mr. McDowell, a director of the Company, is the principal holder of shares of Americas Gold Exploration, Inc., owning approximately 75% of the voting securities of that company. A vested option to purchase 456,522 shares was granted to Mr. McDowell on October 29, 2019 with an exercise price of $0.08 per share and an expiration date of October 29, 2024, a vested option to purchase 200,000 shares was granted to Mr. McDowell on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026, each held personally by Mr. McDowell. Includes 9,487,000 shares owned by Americas Gold Exploration, Inc.
(4)
A vested option to purchase 304,348 shares was granted to Mr. Matlack on October 29, 2019 with an exercise price of $0.08 per share and an expiration date of October 29, 2024. A vested option to purchase 200,000 shares was granted to Mr. Matlack on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026. Mr. Matlack acquired units on October 19, 2019 which included 7,125,000 share of common stock and 3,562,500 warrants exercisable at a price of $0.12 per share that expire on October 15, 2024. Mr. Matlack’s warrants include a voluntary provision in which he is prohibited from exercising those warrants if doing so would result in ownership exceeding 20.0%, therefore, the beneficial ownership percentage for Mr. Matlack is limited to the maximum allowed by that provision.
(5)
An option to purchase 750,000 shares was granted to Mr. Highsmith on October 8, 2020 with an exercise price of $0.27 per share and an expiration date of October 8, 2025, of which all 750,000 are vested as of October 8, 2023. A vested option to purchase 500,000 shares was granted to Mr. Highsmith on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026.
(6)
A vested option to purchase 200,000 shares was granted to Ms. Saxton on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026.
(7)
A vested option to purchase 152,173 shares was granted to Mr. Sharp on October 29, 2019 with an exercise price of $0.08 per share and an expiration date of October 29, 2024. A vested option to purchase 150,000 shares was granted to Mr. Sharp on May 6, 2021 with an exercise price of $0.25 per share and an expiration date of May 6, 2026.
(8)
This group of affiliated stockholders (the “Crescat Group”) acquired units on August 13, 2020 which included 16,363,636 shares of common. This stockholder acquired units on June 29, 2021 which included 1,250,000 shares of common stock. This stockholder acquired 2,000,000 shares of common stock in a private placement on April 22, 2022. The Crescat Group acquired units on August 31, 2023, which included 4,000,000 common shares and 2,000,000 warrants exercisable at a price of $0.08 per share that expire on August 31, 2026. The Crescat Group acquired units on December 28 2023, which included 2,500,000 common shares and 2,500,000 warrants exercisable at a price of $0.06 per share that expire on December 28, 2027. Includes 150,000 common shares purchased on the open market.
(9)
Jupiter Investment Management (“Jupiter”) acquired 15,933,705 shares of common stock in April of 2022. Jupiter acquired units on August 24, 2023, which included 10,000,000 common shares and 5,000,000 warrants exercisable at a price of $0.08 per share that expire on August 31, 2026.
We believe that all persons named have full voting and investment power with respect to the shares indicated, unless otherwise noted in the table and the footnotes thereto. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security.
Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.
Timberline is not, to the best of its knowledge, directly or indirectly owned or controlled by another corporation or foreign government.
Director and Officer Indemnification
Under the merger agreement, certain indemnification and insurance rights exist in favor of Timberline and its subsidiaries’ current and former directors and officers. For more information about these rights, see “The Merger—Interests of Directors and Executive Officers of Timberline in the Merger—Indemnification and Insurance” beginning on page 42.
Bridge Financing
In connection with the merger agreement, on April 16, 2024, Timberline and McEwen entered into the Note, whereby McEwen will provide Timberline with loans as Timberline may request from time to time. For each calendar month, McEwen is not obligated to make any loan that would cause the aggregate amount of loans for such calendar month to exceed the lesser of (i) the monthly budget for each calendar month provided by Timberline to McEwen in advance of such applicable month from time to time or (ii) Timberline’s monthly budget as a provided on a schedule to the Note. The Note bears interest at a per annum rate of 15%, accruing monthly, and matures on October 15, 2024; provided, however, that the if the merger agreement is terminated by Timberline pursuant to Section 7.01(d)(ii) of the merger agreement, then the maturity date shall be five business days following the effective
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date of such termination; provided further, however, that if the merger agreement is terminated by McEwen pursuant to Section 7.01(c)(i) or Section 7.01(c)(ii) of the merger agreement, then the maturity date shall be 20 calendar days following the effective date of such termination. Timberline has the right to prepay the Note, in whole or in part, at any time without penalty.
The Note contains customary terms, including events of default, which, if uncured, entitle McEwen to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Note.
Accounting Treatment of the Merger
In accordance with current accounting guidance, the merger will be accounted for using the cost accumulation and allocation model. As a result, the recorded assets and liabilities of McEwen will be carried forward at their recorded amounts, the historical operating results will be unchanged for the prior periods being reported on and the assets and liabilities of Timberline will be measured at their cost, which will be allocated to the assets on a relative fair value basis. In addition, all identified intangible assets will be recognized if they meet recognition criteria under current accounting guidance. Any excess of the purchase price, consisting of the number of shares of McEwen common stock to be issued to former Timberline stockholders, option holders and warrant holders, as applicable, at fair value, over the fair value of the net assets acquired, including identified intangible assets of Timberline, on the closing date of the merger will be allocated on a relative fair value basis only to certain non-financial assets acquired. Identified finite life intangible assets will be amortized over their estimated lives. Further, the acquired assets and liabilities will be accounted for under appropriate GAAP.
Litigation Relating to the Merger
Pursuant to the merger agreement, until the earlier of the closing of the merger or the termination of the merger agreement in accordance with its terms, McEwen and Timberline are obligated to give prompt written notice to each other of any claim, demand, notice, action, suit, arbitration, proceeding, audit or investigation commenced or, to the applicable party’s knowledge, threatened against such party that relates to the merger agreement, the voting agreements, or the transactions contemplated thereby. Prior to the effective time of the merger, subject to applicable laws, each party is required to give the other party the opportunity to participate, at such other party’s sole cost and expense, in the defense and settlement of any litigation by any stockholders of either party against either party or its directors relating to the merger agreement or the transactions contemplated thereby, and no such settlement shall be agreed to without such other party’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).
Regulatory Approvals Required for the Merger
McEwen and Timberline are not currently aware of any material governmental approvals, consents, registrations, permits, expirations or terminations of waiting periods, authorizations or other confirmations that are required prior to the parties’ completion of the transaction other than approval for the listing on the NYSE and TSX of the shares of McEwen common stock to be issued in the merger. If additional approvals, consents, registrations, permits, expirations or terminations of waiting periods, authorizations and other confirmations are required to complete the transaction, McEwen and Timberline intend to seek such approvals, consents, registrations, permits, expirations or terminations of waiting periods, authorizations and other confirmations.
NYSE and TSX Listing of McEwen Common Stock; Delisting, De-quotation and Deregistration of Timberline Common Stock
McEwen is obligated, in accordance with the requirements of the NYSE and TSX, to file with the NYSE and TSX an application for listing additional shares covering the shares of McEwen common stock to be issued in the merger and to use commercially reasonable efforts to cause such shares to be listed on the NYSE and TSX, subject to official notice of issuance. Each of Timberline and McEwen will cooperate in taking all actions necessary to delist Timberline common stock from the TSXV, to cause Timberline common stock to cease to be quoted on the OTCQB, for Timberline common stock to be deregistered under the Exchange Act and for Timberline to cease to be a reporting issuer under Canadian securities laws in each Canadian jurisdiction in which it is a reporting issuer, in each case as promptly as practicable following the effective time of the merger.
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Material U.S. Federal Income Tax Consequences
The following is a general discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of Timberline common stock that exchange their Timberline common stock for McEwen common stock in the merger.
This discussion is based upon the Code, its legislative history, U.S. Treasury regulations promulgated under the Code and judicial and administrative rulings and decisions, all as in effect on the date of this proxy statement/prospectus. These authorities may change, possibly retroactively, or be subject to differing interpretations, and any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion.
This discussion addresses only those U.S. holders (as defined below) of Timberline common stock that hold their Timberline common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion is not a complete description of all of the U.S. federal income tax consequences of the merger and, in particular, does not address any tax consequences arising under the Medicare contribution tax on net investment income or the Foreign Account Tax Compliance Act of 2010 (including the U.S. Treasury regulations promulgated thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith), nor does it address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax (such as estate or gift tax laws). Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your individual circumstances or that may be applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:
a bank, thrift, mutual fund, or other financial institution;
a tax-exempt organization or government organization;
a real estate investment trust or real estate mortgage investment conduit;
a partnership, S corporation or other pass-through entity (or an investor in a partnership, S corporation or other pass-through entity);
an insurance company;
a regulated investment company;
a dealer or broker in stocks and securities, commodities or currencies;
a trader in securities that elects mark-to-market treatment;
a holder of shares of Timberline common stock subject to the alternative minimum tax provisions of the Code;
individual retirement or other tax deferred accounts;
a holder of shares of Timberline common stock that received Timberline common stock through the exercise of an employee stock option, as a restricted stock award, through a tax qualified retirement plan or otherwise as compensation;
a holder of shares of Timberline common stock that has a functional currency other than the U.S. dollar;
a holder of shares of Timberline common stock that is required to accelerate the recognition of any item of gross income with respect to Timberline common stock as a result of such income being recognized on an applicable financial statement;
a holder of shares of Timberline common stock that holds Timberline common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;
certain former citizens or long-term residents of the United States.; or
holders who directly, indirectly or constructively own (or at any time during the five-year period ending on the date of the merger owned) 5% or more Timberline common stock.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of shares of Timberline common stock that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the
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United States, (2) a corporation created or organized in or under the laws of the United States or any state thereof or the District of Columbia, (3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes, or (4) an estate the income of which is subject to U.S. federal income taxation regardless of its source. Beneficial owners of Timberline common stock that are not U.S. holders should consult their own tax advisors as to U.S. federal income tax consequences of the merger.
If an entity or an arrangement treated as a partnership for U.S. federal income tax purposes holds shares of Timberline common stock, the U.S. federal income tax consequences to a partner in such partnership (or owner of such entity) generally will depend on the status of the partner (or member) and the activities of the partnership (or entity). Any entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds shares of Timberline common stock, and any persons that, for U.S. federal income tax purposes, are treated as partners in such partnership, should consult their own tax advisors with respect to the tax consequences of the merger in their specific circumstances.
This discussion is not tax advice and does not purport to be a complete analysis or discussion of all U.S. federal income tax considerations relating to the merger. The tax consequences of the merger may be complex and will depend on your specific situation and factors not within McEwen’s or Timberline’s control. You should consult your own tax advisor as to the tax consequences of the merger in your particular circumstances, including the applicability and effect of the alternative minimum tax and any U.S. federal, U.S. state or local, non-U.S. or other tax laws and of changes in such laws.
In General
The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and McEwen and Timberline intend to report the merger consistent with such qualification. In the merger agreement, Timberline represents that it has not taken and does not plan to take any action, and has no knowledge of the existence of any fact or circumstance, that could reasonably be expected to prevent or impede the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, McEwen and Timberline agree not to (and not to permit their subsidiaries to) take any action that would prevent or impede, or could reasonably be expected to prevent or impede, the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the effectiveness of the registration statement of which this proxy statement/prospectus is a part, Davis Graham & Stubbs, LLP, counsel to Timberline, delivered a legal opinion to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. This opinion is based on currently applicable United States federal income tax laws, officer’s certificates provided by McEwen and Timberline as of the date of the opinion and customary assumptions as to the facts as of the effective time of the merger. In the event of a change in applicable laws, or if any of the facts, representations, covenants or assumptions on which the opinion of counsel is based are, or become, inaccurate or incomplete in any respect, the opinion may no longer be valid. Because the opinion is being delivered in connection with the effectiveness of the registration statement, there can be no assurance that it will continue to remain valid at the effective time of the merger, and the closing of the transaction is not conditioned on the continuing validity of this opinion or on the receipt of any other opinion of counsel as to the qualification of the merger as a “reorganization” within the meaning of Section 368(a) of the Code. Moreover, an opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or any court. Timberline and McEwen have not sought, and will not seek, any ruling from the IRS regarding any matters relating to the merger. As a result, there can be no assurance that the IRS would not assert that the merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, or that a court would not sustain such a position.
U.S. Federal Income Tax Consequences if the Merger Qualifies as a “Reorganization” as Described in Section 368(a) of the Code
If the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the material U.S. federal income tax consequences of the merger to U.S. holders generally will be as follows:
A U.S. holder will not recognize any gain or loss, and no amount will be includible in the income of such U.S. holder, as a result of the exchange of Timberline common stock for McEwen common stock in the merger.
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The aggregate tax basis of the McEwen common stock received in exchange for Timberline common stock by a U.S. holder in the merger will equal the aggregate adjusted tax basis of such U.S. holder’s Timberline common stock exchanged therefor.
A U.S. holder’s holding period in the McEwen common stock received in exchange for Timberline common stock in the merger will include the holding period in such U.S. holder’s Timberline common stock exchanged therefor.
If a U.S. holder of Timberline common stock acquired different blocks of Timberline common stock at different times or at different prices, such U.S. holder’s basis and holding period in its shares of McEwen common stock may be determined separately with reference to each block of Timberline common stock. Any such U.S. holder should consult its tax advisor regarding the determination of the tax basis and/or holding periods of the particular shares of McEwen common stock received in the merger.
Tax Consequences if the Merger Does Not Qualify as a “Reorganization” Described in Section 368(a) of the Code
If the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes, then a U.S. holder of shares of Timberline common stock that exchanges such shares of Timberline common stock for McEwen common stock generally will recognize gain or loss equal to the difference, if any, between (i) the fair market value of the shares of McEwen common stock actually received by such U.S. holder and (ii) such U.S. holder’s adjusted tax basis in the Timberline common stock exchanged therefor. Gain or loss must be calculated separately for each block of Timberline common stock exchanged by such U.S. holder if such blocks were acquired at different times or for different prices. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder’s holding period in a particular block of Timberline common stock exceeds one year at the effective time of the merger. A U.S. holder’s aggregate tax basis in the McEwen common stock received in the merger will equal the fair market value of such shares of McEwen common stock as of the effective time of the merger, and the holding period of such McEwen common stock will begin on the date after the merger.
The preceding discussion is intended only as a summary of the material U.S. federal income tax consequences of the merger and is not tax advice. It is not a complete analysis or discussion of all potential tax considerations that may be important to a holder of Timberline common stock. Holders of Timberline common stock should consult their own tax advisors with respect to the tax consequences of the merger in their particular circumstances, including the applicability and effect of the alternative minimum tax and any U.S. federal, U.S. state or local, non-U.S. or other tax laws and of changes in such laws.
Restrictions on Sales of Shares of McEwen Common Stock Received in the Merger
All shares of McEwen common stock received by Timberline stockholders in the merger will be freely tradable for purposes of the Securities Act and the Exchange Act except for shares of McEwen common stock received by any Timberline stockholder who becomes an “affiliate” of McEwen after completion of the merger. This proxy statement/prospectus does not cover resales of shares of McEwen common stock received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.
The shares of McEwen common stock to be received by Timberline stockholders in connection with the transaction will not be legended and may be resold in Canada provided that (i) the trade is not a “control distribution” as defined in National Instrument 45-102 - Resale of Securities of the Canadian Securities Administrators, (ii) no unusual effort is made to prepare the market or to create a demand for the shares of McEwen common stock that is the subject of the trade, (iii) no extraordinary commission or consideration is paid to a person or company in respect of such trade, and (iv) if the selling security holder is an insider or officer of McEwen, the selling security holder has no reasonable grounds to believe that McEwen is in default of applicable securities legislation.
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THE MERGER AGREEMENT
This section describes the material terms of the merger agreement. The descriptions of the merger agreement in this section and elsewhere in this proxy statement/prospectus are qualified in their entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. You are encouraged to carefully read the entire merger agreement.
Explanatory Note Regarding the Merger Agreement
The merger agreement and the summary of its terms in this proxy statement/prospectus have been included to provide you with information regarding the terms and conditions of the merger agreement. Neither the merger agreement nor the summary of its material terms included in this section is intended to provide any factual information about McEwen or Timberline. Factual disclosures about McEwen and Timberline contained in this proxy statement/prospectus and/or in the public reports of McEwen and Timberline filed with the SEC (as described in the section entitled “Where You Can Find More Information” on page 85) may supplement, update or modify the disclosures about McEwen and Timberline contained in the merger agreement. The merger agreement contains representations and warranties and covenants of the parties customary for a merger of this nature. The representations and warranties contained in the merger agreement were made only for purposes of the merger agreement as of the specific dates therein; were made solely for the benefit of the parties to the merger agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the merger agreement except for the limited purposes expressly set forth therein and should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in McEwen’s or Timberline’s public disclosures. Accordingly, the representations and warranties in the merger agreement should not be relied on by any persons as characterizations of the actual state of facts about McEwen or Timberline at the time they were made or otherwise.
Structure of the Merger
The merger agreement provides that, upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the DGCL, at the effective time of the merger, Merger Sub will merge with and into Timberline, and the separate corporate existence of Merger Sub will cease. Timberline will continue as the surviving corporation and a wholly owned subsidiary of McEwen.
At the effective time of the merger, the certificate of incorporation of Timberline will be amended and restated in its entirety to be in the form of Exhibit B to the merger agreement (subject to the continuing direct and officer indemnification requirements set forth in the merger agreement) and the bylaws of Timberline will be amended and restated in its entirety to be bylaws of Merger Sub, as in effect immediately prior to the effective time of the merger (except that (1) the name of the surviving corporation will be “Timberline Resources Corporation”), until amended in accordance with applicable law and such certificate of incorporation and bylaws, as applicable.
Merger Consideration
At the effective time of the merger, by virtue of the merger and without any further action of the parties or any holder of shares thereof, each issued and outstanding share of Timberline common stock (other than excluded shares, which will be automatically canceled and retired and cease to exist) will be converted into the right to receive 0.01 of a fully paid and nonassessable share of McEwen common stock.
The 0.01 of a share of McEwen common stock into which each share of Timberline common stock (other than excluded shares) will be converted is referred to as the exchange ratio. Based on the closing price of McEwen common stock on the NYSE of $11.26 on April 15, 2024, the last trading day before public announcement of the merger, the merger consideration represented approximately $0.11 in value for each share of Timberline common stock. The closing price of Timberline common stock on the OTCQB on April 15, 2024 was $0.04.
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In the event that either McEwen or Timberline changes the number of its shares issued and outstanding prior to the effective time of the merger as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the exchange ratio would be equitably adjusted to reflect such change.
The exchange ratio is fixed, which means that it will not change between now and the date of the completion of the merger, regardless of whether the market price of either Timberline common stock or McEwen common stock changes. Therefore, the value of the merger consideration will depend on the market price of McEwen common stock at the completion of the merger.
The market price of McEwen common stock has fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Timberline stockholders’ meeting, the date the merger is completed and thereafter. The market value of the McEwen common stock to be issued in exchange for Timberline common stock upon the completion of the merger will not be known at the time of the Timberline stockholders’ meeting. Therefore, current and historical market prices of McEwen common stock are not reflective of the value that Timberline stockholders will receive in the merger, and the current stock price quotations for Timberline common stock and McEwen common stock may not provide meaningful information to Timberline stockholders in determining whether to approve the merger proposal. McEwen’s common stock is listed on each of the NYSE and TSX under the symbol “MUX.” Timberline’s common stock is quoted on OTCQB and is listed on the TSXV under the symbols “TLRS” and “TBR,” respectively. Timberline stockholders are encouraged to review carefully the other information contained in this proxy statement/prospectus or incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.”
McEwen will not issue fractional shares of McEwen common stock in connection with the merger, no dividends or distributions of McEwen will relate to fractional share interests, and fractional share interests will not entitle the owner thereof to vote or to any rights as a McEwen stockholder. Each Timberline stockholder that otherwise would have been entitled to receive a fraction of a share of McEwen common stock pursuant to the merger (after taking into account all shares of Timberline common stock held immediately prior to the effective time of the merger by such stockholder) shall have its holdings of McEwen common stock rounded up to the nearest whole share.
No Appraisal Rights
In accordance with Section 262 of the DGCL, no appraisal rights will be available to holders of Timberline common stock in connection with the merger.
Treatment of Timberline Options
As of immediately prior to the effective time of the merger, each option to acquire shares of Timberline common stock outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be cancelled and deemed to be fully vested and converted into such number of shares Timberline common stock equal to (A) the excess, if any, of (1) the volume-weighted average price of a share of Timberline common stock for the five trading days ending on, and including, the third trading day immediately preceding the effective time of the merger, over (2) the per share exercise price of such option, multiplied by (B) the total number of shares of Timberline common stock subject to such option immediately prior to the effective time of the merger. If any such option has an exercise price that exceeds the amount set forth in clause (1) above, it will be canceled for no consideration.
Treatment of Timberline Warrants
As of immediately prior to the effective time of the merger, each warrant to purchase shares of Timberline common stock that is outstanding immediately prior to the effective time of the merger will be converted into a warrant to acquire a number of shares of McEwen common stock, referred to as a rollover warrant, that will be determined by multiplying the number of shares of Timberline common stock subject to such warrant by the exchange ratio and rounding down to the nearest whole number of shares of McEwen common stock, at an adjusted exercise price calculated by dividing the per share exercise price for the shares of Timberline common stock subject to such warrant, as in effect immediately prior to the effective time of the merger, by the exchange ratio and rounding the resulting exercise price up to the nearest whole cent.
Closing and Effectiveness of the Merger
The completion of the merger, referred to as the closing, will occur at a date and time to be specified by McEwen and Timberline, which shall be no later than the third business day after the satisfaction or, to the extent permitted
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by applicable law, waiver of all of the closing conditions set forth in the merger agreement (other than those conditions that by their terms are to be fulfilled at the closing, subject to the satisfaction or waiver of those conditions), unless another date is mutually agreed in writing by McEwen and Timberline.
The merger will become effective at such time when the certificate of merger has been duly filed with the Secretary of State of the State of Delaware or such later time as may be mutually agreed in writing by McEwen and Timberline and specified in the certificate of merger.
Conversion of Shares; Exchange of Certificates
Prior to the closing date, McEwen will select a bank or trust company, which may be the transfer agent for the McEwen common stock, to act as exchange agent in the merger.
As promptly as reasonably practicable after the effective time of the merger, but in any event within five business days after such time, McEwen will cause the exchange agent to mail to each holder of record of a certificate that immediately prior to the effective time of the merger represented outstanding shares of Timberline common stock: (i) a notice advising such holder of the effectiveness of the merger, (ii) a letter of transmittal in customary form and containing such provisions as McEwen and Timberline may reasonably specify (including a provision confirming that delivery of certificates representing shares of Timberline common stock will be effected, and risk of loss and title to the shares of Timberline common stock will pass, only upon delivery of such certificates to the exchange agent), and (iii) instructions for use in effecting the surrender of the certificates representing shares of Timberline common stock in exchange for shares of McEwen common stock.
After the effective time of the merger, shares of Timberline common stock will no longer be outstanding, will be automatically canceled, and will cease to exist, and each certificate, if any, that previously represented shares of Timberline common stock will represent only the right to receive the merger consideration as described above, and any dividends or other distributions to which the holders of the certificates become entitled to as an McEwen stockholder upon surrender of such certificates. With respect to such shares of McEwen common stock deliverable upon the surrender of certificates representing shares of Timberline common stock, until holders of such certificates have surrendered such certificates to the exchange agent for exchange, those holders will not receive dividends or distributions with respect to such shares of McEwen common stock with a record date after the effective time of the merger.
Each of Timberline, McEwen, Merger Sub, the surviving corporation and the exchange agent will be entitled to deduct and withhold from any amounts otherwise payable pursuant to the merger agreement to any person such amounts as it determines, in its sole discretion, are necessary to cover all of the required withholdings with respect to the making of such payment under the Code or any provision of applicable tax law. Any amounts so withheld will be treated for all purposes of the merger agreement as having been paid to the person in respect of which such deduction and withholding was made.
Any portion of the consideration deposited with the exchange agent that has not been distributed to former holders of certificates representing shares of Timberline common stock as of the date one year after the closing date will be delivered to McEwen upon demand, and any holders of certificates representing shares of Timberline common stock who have not yet surrendered their certificates, as well as any holders of book-entry shares of Timberline common stock who have not yet cashed any check payable to them, will thereafter look only to McEwen for satisfaction of their claims for shares of McEwen common stock and any dividends or distributions with respect to shares of McEwen common stock, subject to applicable abandoned property law, escheat law, or similar law.
Neither McEwen nor the surviving corporation will be liable to any current or former Timberline stockholder or to any other person with respect to any shares of McEwen common stock (or dividends or distributions with respect thereto), or for any cash amounts, properly delivered to any public official in compliance with any applicable abandoned property law, escheat law, or similar law. If any certificate representing shares of Timberline common stock has not been surrendered prior to five years after the closing date (or immediately prior to such earlier date on which any shares of McEwen common stock or any dividends or other distributions payable to the holder of such certificate would otherwise escheat to or become the property of any governmental body), any shares of McEwen common stock issuable upon the surrender of, or any dividends or other distributions in respect of, such certificate will, to the extent permitted by applicable law, become the property of McEwen, free and clear of all claims or interest of any person previously entitled thereto.
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No interest will be paid or accrued on any amount payable upon surrender of certificates or book-entry shares representing shares of Timberline common stock.
Representations and Warranties; Material Adverse Effect
The merger agreement contains representations and warranties made by Timberline to McEwen and by McEwen to Timberline. Certain of the representations and warranties in the merger agreement are subject to materiality or “material adverse effect” qualifications (that is, they will not be deemed to be inaccurate or incorrect unless their failure to be true or correct is material or would result in a “material adverse effect” (as defined below) on the company making such representation or warranty). In addition, certain of the representations and warranties in the merger agreement are subject to knowledge qualifications, which means that those representations and warranties would not be deemed untrue, inaccurate or incorrect as a result of matters of which certain officers of the party making the representation or warranty did not have knowledge. Furthermore, each of the representations and warranties is subject to the qualifications set forth in the disclosure letter delivered to McEwen by Timberline, in the case of representations and warranties made by Timberline, or the disclosure letter delivered to Timberline by McEwen, in the case of representations and warranties made by McEwen (with each letter referred to as that party’s disclosure letter), as well as the reports of Timberline or McEwen, as applicable, furnished or filed during the period from January 1, 2023 or January 1, 2021, as applicable, through the third business day prior to the date of the merger agreement (excluding any disclosures set forth in any risk factor section or otherwise relating to forward-looking statements to the extent that they are predictive or forward-looking in nature).
The representations and warranties made by Timberline to McEwen, and by McEwen to Timberline, under the merger agreement relate to, among other things:
due organization, valid existence, good standing and qualification to do business;
corporate authorization of the merger agreement and the transactions contemplated by the merger agreement and the valid and binding nature of the merger agreement;
capitalization;
the absence of any conflicts or violations of organizational documents and other agreements or laws;
required consents and approvals from governmental entities;
documents filed with the SEC, financial statements, and applicable securities exchange regulations;
the absence of certain developments;
the absence of a material adverse effect;
the absence of certain legal proceedings;
brokers and transaction-related fees; and
accuracy of information supplied or to be supplied in connection with this proxy statement/prospectus.
The merger agreement contains additional representations and warranties by Timberline to McEwen, relating to, among other things:
board of director approval of the transactions contemplated by the merger agreement and stockholder voting requirements in connection with such transactions;
the ownership of subsidiaries;
internal controls and disclosure controls and procedures relating to financial reporting;
documents filed on SEDAR+;
the absence of certain undisclosed liabilities;
the conduct of businesses in the ordinary course;
real property;
tax matters and the intended tax treatment of various transactions;
material contracts;
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intellectual property;
information technology and data protection;
insurance coverage;
employee benefit plans;
possession of, and compliance with, permits necessary for the conduct of the business and compliance with applicable laws;
compliance with certain domestic and foreign corruption laws;
environmental matters;
mineral resources;
operations;
labor and employment matters;
anti-takeover laws; and
receipt of opinion from financial advisor.
The merger agreement contains additional representations and warranties by McEwen to Timberline, relating to, among other things, the organization of Merger Sub.
The representations and warranties of each of Timberline and McEwen will expire upon the completion of the merger.
Certain of the representations and warranties made by Timberline and McEwen are qualified as to “knowledge,” “materiality” or “material adverse effect.” For purposes of the merger agreement, “company material adverse effect,” which is used in reference to Timberline, means any change, effect, event, circumstance, occurrence, state of facts or development that, individually or in the aggregate with all other changes, effects, events, circumstances, occurrences, states of facts or developments, (i) would prevent or materially interfere with the ability of the Timberline and its subsidiaries to consummate the transactions contemplated by the merger agreement on or prior to the outside date under the merger agreement or (ii) has or would reasonably be expected to have a material adverse effect on the business, results of operations or financial condition of Timberline and its subsidiaries, taken as a whole, other than (with respect to clause (ii) only) any effect, change or event arising out of, or resulting from, the following:
changes, effects, events, circumstances, occurrences, state of facts or developments generally affecting the mineral exploration or extraction industry in the geographic regions in which Timberline and its subsidiaries operate;
general economic or regulatory, legislative or political conditions or securities, credit, financial or other capital markets conditions in any jurisdiction;
failure, in and of itself, by Timberline to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period;
geopolitical conditions, the outbreak or escalation of hostilities, any acts of war (whether or not declared) (including with respect to the Russian Federation and Ukraine or any matter arising therefrom), sabotage, terrorism (including cyber-terrorism), man-made disaster, epidemics, pandemics or disease outbreaks (including COVID-19) or any escalation or worsening of any of the foregoing;
any volcano, tsunami, hurricane, tornado, windstorm, flood, earthquake, wildfire or other natural disaster or any conditions resulting from such natural disasters;
any change or announcement of a potential change, in and of itself, in Timberline’s or any of its subsidiaries’ credit, financial strength or claims paying ratings or the ratings of any of Timberline’s or its subsidiaries’ businesses;
any change, in and of itself, in the market price, ratings or trading volume of Timberline’s or any of its subsidiaries’ securities;
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any change in applicable laws (including COVID-19 measures) or GAAP (or interpretation or enforcement thereof), including accounting and financial reporting pronouncements by the SEC and the Financial Accounting Standards Board, or FASB;
the announcement, pendency or consummation of the transactions contemplated by the merger agreement, including the impact thereof on relationships, contractual or otherwise, of Timberline its subsidiaries with employees, suppliers, governmental authorities, or any third person, except that this exception does not apply with respect to any representation or warranty that is intended to address the consequences of the execution, delivery and performance of the merger agreement; or
any action taken by Timberline, or that Timberline caused one or more of its subsidiaries to take, or any failure of Timberline or any of its subsidiaries to take an action, pursuant to the merger agreement or at the written direction or with the written consent of McEwen;
provided that any effect, change or event referred to in the first, second and eighth bullet points may be taken into account in determining whether or not there has been a “company material adverse effect” to the extent such effect, change or events has a disproportionate adverse effect on Timberline and its subsidiaries, taken as a whole, relative to other similarly sized participants engaged primarily in the resource extraction industries in the geographic regions in which Timberline and its subsidiaries operate.
For purposes of the merger agreement, “parent material adverse effect,” which is used in reference to McEwen, means any change, effect, event, circumstance, occurrence, state of facts or development that would, individually or in the aggregate would prevent or materially delay, interfere with, hinder or impair the ability of McEwen or Merger Sub to consummate the transactions contemplated by the merger agreement.
Covenants and Agreements
Conduct of Business
Timberline has agreed to certain covenants in the merger agreement regarding the conduct its businesses between the date of the merger agreement and the earlier of the effective time of the merger or the date the merger agreement is terminated. Between the date of the merger agreement and the earlier of the effective time of the merger or the date the merger agreement is terminated, except (i) as set forth in Timberline’s disclosure letter, (ii) as required by applicable law, (iii) as expressly permitted or required by the merger agreement, (iv) as consented to by McEwen in writing (which consent will not be unreasonably withheld, conditioned or delayed) or (v) as reasonably taken in accordance with good mining practice to safeguard life or property, Timberline (a) will conduct the business and operations of Timberline and its subsidiaries and in all material respects in the ordinary course of business consistent with past practice and except for (i)-(v) above or for the taking of any COVID-19 Response (b) will not and will not permit any of its subsidiaries to:
declare, set aside or pay any dividends on or make any other distributions in respect of any of its capital stock or redeem, repurchase or otherwise acquire any shares of its capital stock or options to purchase Timberline common stock (except for (1) dividends or distributions by Timberline’s direct or indirect subsidiaries solely to its parent or (2) intercompany purchases of capital stock among Timberline and its subsidiaries);
issue, sell, pledge, dispose of or encumber or authorize the issuance, sale, pledge, disposition or encumbrance of (1) any shares of beneficial interests, capital stock or other ownership interest in Timberline or any of its subsidiaries, (2) any securities convertible into or exchangeable or exercisable for any such shares or ownership interest or (3) any rights, warrants or options to acquire any such ownership interests or convertible securities, or take any action to cause to be exercisable any otherwise unexercisable option under any existing share option plan or take any action to cause to be exercisable any otherwise unexercisable option under any existing share option plan (except for issuances of shares of Timberline common stock in respect of any exercise of outstanding options or warrants or transactions solely between or among Timberline and its wholly owned subsidiaries);
except as required by Timberline’s existing employee benefits plans or compensation arrangements, ordinary course welfare benefit plan changes at the end of a plan year, or as otherwise required by applicable law: (1) increase the compensation or other benefits payable or provided to any of Timberline’s or any of its subsidiaries’ officers, directors, independent contractors, leased personnel or employees (except for such increases for Timberline’s employees in the ordinary course of business consistent with
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past practice including as a result of promotions), (2) enter into, materially amend or terminate any employment termination, change of control, severance, retention or other contract with any current or former employee, independent contractor or leased personnel of Timberline any of its subsidiaries (except for agreements consistent with past practice entered into with newly hired or replacements or promoted employees and employment agreements terminable on less than 30 days’ notice without payment or penalty), (3) establish, adopt, enter into, materially amend or terminate any existing employee benefit plan or compensation arrangements for the benefit of any current or former officers, employees, independent contractors or leased personnel of Timberline or any of their beneficiaries (except for agreements consistent with past practice entered into with newly hired or replacements or promoted employees and employment agreements terminable on less than 30 days’ notice without payment or penalty) or (4) enter into or amend any collective bargaining agreement or other agreement with a union or labor organization;
amend or propose to amend or permit the adoption of (1) any amendment to the organizational documents of Timberline or (2) any non-ministerial amendment to the organizational documents of Timberline’s subsidiaries;
effect a recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
adopt a plan of complete or partial liquidation, dissolution, consolidation, restructuring or recapitalization of Timberline or any of its significant subsidiaries;
make any capital expenditures;
acquire or agree to acquire any equity interest in or acquire a portion of the material assets or business of any person (or any division or line of business thereof), including in each case by merging or consolidating;
(1) incur any indebtedness or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities, guarantee any debt securities of another person, renew or extend any existing credit or loan arrangements, enter into any “keep well” or other agreement to maintain any financial condition of another person (except for (x) intercompany transactions or arrangements among Timberline and its subsidiaries, (y) agreements or arrangements or borrowings incurred under Timberline’s or any of its subsidiaries’ existing credit facilities and (z) short-term indebtedness incurred in the ordinary course of business consistent with past practice), (2) make any loans or advances to any other person (other than intercompany transactions or arrangements among one or more of Timberline and its subsidiaries) or (3) make any capital contributions to, or investments in, any other person (except for intercompany transactions or arrangements among one or more of Timberline and its subsidiaries);
enter into any contract that would, after the effective time of the merger, materially restrict McEwen and its subsidiaries (including the surviving corporation and its subsidiaries) from engaging or competing in any line of business or in any geographic area;
except in the ordinary course of business consistent with past practice, sell, transfer, assign, mortgage, encumber or otherwise dispose of assets with a fair market value in excess of $50,000 in the aggregate;
commence, pay, discharge, settle, compromise or satisfy any pending or threatened litigation, arbitration or similar proceedings except for monetary settlements entered in the ordinary course of business consistent with past practice in an amount less than $50,000 in any single instance or $50,000 in the aggregate;
change any of its financial or tax accounting methods or practices in any respect, except as required by GAAP or applicable law;
(1) make, change or revoke any tax election with respect to Timberline and its subsidiaries, (2) file any amended tax return or claim for refund of taxes with respect to Timberline and its subsidiaries, (3) enter into any “closing agreement” affecting any tax liability or refund of taxes with respect to Timberline and its subsidiaries, (4) extend or waive the application of any statute of limitations regarding the assessment or collection of any tax with respect to Timberline and its subsidiaries, (5) settle or compromise any material tax liability or refund of material taxes with respect to Timberline and its subsidiaries, or (6) take any action prior to the effective time of the merger that would reasonably be expected to prevent or impede the merger from qualifying as a “reorganization” within the meaning of Section 368 of the Code;
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waive, release or assign any rights or claims under or renew (other than automatic renewals), modify or terminate (other than termination by natural expiration) certain specified material contracts, in any material respect in a manner which taken as a whole is adverse to Timberline and its subsidiaries, or which could prevent or materially delay the consummation of the merger or the other transactions contemplated by the merger agreement past the outside date (or any extension thereof) under the merger agreement;
cease to maintain certain specified insurance policies and, prior the expiration of any such policy, renew such policy on substantially similar terms to the extent such insurance is available on commercially reasonable terms; or
agree or commit to take, any of the foregoing actions.
Access to Information and Confidentiality
Timberline shall allow McEwen and its representatives reasonable access during normal business hours, prior to the closing of the merger, to Timberline’s and its subsidiaries’ personnel, facilities and properties, contracts, commitments, books and records and any reports, schedules or other documents filed or received by it pursuant to the requirements of applicable law and with such additional data and information that McEwen reasonably requests in order to facilitate the completion of the transactions contemplated by the merger agreement. Notwithstanding the foregoing, neither Timberline nor its subsidiaries shall be required to provide such access or information if it would (i) unreasonably disrupt the operations of Timberline or its subsidiaries, (ii) cause a risk of a loss of privilege to Timberline or any of its subsidiaries, or (iii) constitute a violation of any applicable law.
All information provided to Timberline, McEwen or their respective representatives in connection with the merger agreement and the consummation of the transactions contemplated by the merger agreement will be subject to the mutual non-disclosure and confidentiality agreement in place between Timberline and McEwen.
No Solicitation
Except as described below, Timberline has agreed that, from the date of the merger agreement, it will not, and will cause its subsidiaries and their respective directors, officers, employees, financial advisors, legal counsel, accountants, consultants, agents and other representatives not to, directly or indirectly:
initiate, encourage, seek or solicit, or take any action to knowingly facilitate (including by way of furnishing non-public information), directly or indirectly, any inquiries or the making or submission of any proposal that constitutes an acquisition proposal with respect to itself;
participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to itself or any of its subsidiaries or afford access to the properties, books or records of itself or any of its subsidiaries to any person or group of persons (or any of their affiliates or representatives) that has made an acquisition proposal with respect to it; or
approve or recommend, make any public statement approving or recommending, or enter into any agreement, including any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement, with respect to an acquisition proposal with respect to itself (other than acceptable confidentiality agreements).
For purposes of the merger agreement, “acquisition proposal” means any bona fide proposal, offer or inquiry, whether or not in writing, for any transaction or series of transactions (other than the transactions contemplated by the merger agreement) involving the (i) direct or indirect acquisition, exclusive license or purchase of a business or assets that constitutes 20% or more of the consolidated net revenues, net income or assets (based on the fair market value thereof) of Timberline and its subsidiaries, taken as a whole, by any person or group of persons (other than parties to the merger agreement and their affiliates); (ii) direct or indirect acquisition or purchase of 20% or more of any class of equity securities or capital stock of Timberline or any of its subsidiaries whose business constitutes 20% or more of the consolidated net revenues, net income or assets of such party and its subsidiaries, taken as a whole, by any person or group of persons; or (iii) merger, consolidation, restructuring, transfer of assets or other business combination, sale of shares of capital stock, tender offer, share exchange, exchange offer, recapitalization, stock repurchase program or other similar transaction that, if consummated, would result in any person or group of persons beneficially owning 20% or more of any class of equity securities of Timberline or any of its subsidiaries whose business constitutes 20% or more of the consolidated net revenues, net income or assets of Timberline and its subsidiaries, taken as a whole.
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Prior to obtaining the approval of its stockholders, Timberline may participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to itself or any of its subsidiaries or afford access to the properties, books or records of itself or any of its subsidiaries to, any person that has made an acquisition proposal with respect to it if (i) it receives a bona fide written acquisition proposal with respect to itself from such third party (and such acquisition proposal was not initiated, sought, solicited, knowingly encouraged or facilitated in violation of the merger agreement) and (ii) after consultation Timberline’s financial advisors and outside legal counsel, the Timberline Board determines in good faith that such proposal is or could reasonably be expected to lead to, a superior proposal with respect to Timberline. Timberline may deliver non-public information to such third party only pursuant to a confidentiality agreement containing terms no less favorable to Timberline with respect to confidentiality than the terms of the mutual non-disclosure and confidentiality agreement between McEwen and Timberline, dated March 23, 2023, and only if Timberline sends to McEwen a copy of such agreement and any information with respect to Timberline and its subsidiaries that is provided to such third party to the extent such information was not previously provided to McEwen.
From and after the date of the merger agreement, each of McEwen and Timberline will, as promptly as practicable after receipt thereof (and in any event, within one business day), advise the other party to the merger agreement in writing of any request for information or any acquisition proposal with respect to itself received from any person, or any inquiry, discussions, or negotiations with respect to any acquisition proposal with respect to itself, and the terms and conditions of such request, acquisition proposal, inquiry, discussions or negotiations, and it will promptly (and in any event, within one business day) provide to the other party copies of any written materials received by it in connection with any of the foregoing and the identity of the person or group of persons making any such request, acquisition proposal, or inquiry or with whom any discussions or negotiations are taking place. Each of McEwen and Timberline agreed that it will simultaneously provide to the other any non-public information concerning itself or its subsidiaries provided to any other person or group in connection with any acquisition proposal that was not previously provided to the other. Each of McEwen and Timberline will keep the other reasonably informed of the status of any acquisition proposals (including the identity of the parties and price involved and any changes to any material terms and conditions thereof). Each of McEwen and Timberline agreed not to release, or permit any of its affiliates to release, any person from, or waive any provisions of, any confidentiality or standstill agreement to which it is a party or fail to enforce, to the fullest extent permitted under applicable law, any such standstill or similar agreement to which it is a party; provided, however, that if its board of directors determines in good faith after consultation with its outside legal counsel, that the failure to waive (or amend or modify) a particular standstill provision, or other provision with similar effect, could reasonably be expected to be a breach of its directors’ fiduciary duties under applicable law, McEwen or Timberline, as the case may be, may, with prior written notice to the other party, waive (or amend or modify) such standstill provision, or other provision with similar effect, solely to the extent necessary to permit the applicable person (if it has not been solicited in violation of the merger agreement) to make an acquisition proposal.
For purposes of the merger agreement, “superior proposal” means any unsolicited bona fide written acquisition proposal made by a third party to acquire, directly or indirectly, pursuant to a tender offer, exchange offer, merger, share exchange, consolidation or other business combination (i) 50% or more of the assets of Timberline and its subsidiaries, taken as a whole, or (ii) 50% or more of the equity securities of Timberline, in each case, on terms that a majority of the Timberline Board determines in good faith (after consultation with Timberline’s financial advisors and outside legal counsel and taking into account all relevant financial, legal and regulatory aspects of such acquisition proposal and the merger agreement, including any alternative transaction (including any modifications to the terms of the merger agreement) proposed by McEwen in response to such superior proposal, including any conditions to and expected timing of consummation, and any risks of non-consummation, of such acquisition proposal) to be more favorable from a financial point of view (taking into account the payment of the company termination fee) to Timberline and its stockholders (in their capacity as stockholders) as compared to the transactions contemplated by the merger agreement and to any alternative transaction (including any modifications to the terms of the merger agreement) proposed by McEwen to the merger agreement.
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Board Recommendation
Except as described below under “—Changes in Board Recommendation,” Timberline also agreed that, prior to the closing, neither its board of directors nor any committee thereof will, directly or indirectly:
withdraw (or amend, qualify or modify in a manner adverse to McEwen or Merger Sub), or publicly propose to withdraw (or amend, qualify or modify in a manner adverse to McEwen or Merger Sub), the approval, recommendation or declaration of advisability by its board of directors, or any of its committees, of the transactions contemplated by the merger agreement;
propose publicly to recommend, adopt or approve any acquisition proposal with respect to itself;
fail to publicly reaffirm or re-publish its recommendation within 10 business days of being requested by McEwen to do so (or if earlier, at least two days business days prior to the meeting of its stockholders);
fail to send to its stockholders, within ten business days after the commencement of a tender or exchange offer relating to its shares of common stock (or if earlier, at least two business days prior to the meeting of its stockholders), a statement disclosing that it recommends rejection of such tender or exchange offer and reaffirming its recommendation; or
authorize, cause or permit Timberline or any of its subsidiaries to execute or enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, amalgamation agreement or other similar agreement related to any acquisition proposal, other than any acceptable confidentiality agreements.
Any of the actions described in the immediately preceding paragraph, as well as a change of a recommendation to “neutral,” is deemed a company adverse recommendation change under the merger agreement.
Timberline is not prohibited (nor is its board of directors prohibited) from (1) taking and disclosing to its stockholders a position with respect to an acquisition proposal with respect to itself pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any similar disclosure, if after consultation with outside legal counsel to the Timberline Board, it subsequently determines in good faith that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties to its stockholders or (2) directing any person (or the representatives of that person) who makes an acquisition proposal regarding Timberline to the relevant provisions of the merger agreement.
Changes in Board Recommendation
The Timberline Board, at any time prior to obtaining the approval of Timberline stockholders, in response to a superior proposal with respect to Timberline that has not been withdrawn and did not result from a breach of the provisions described under “—No Solicitation” may make a company adverse recommendation change. Unless, however, Timberline’s stockholders’ meeting is scheduled to occur within the next ten business days, the Timberline Board will not be entitled to make a company adverse recommendation change in response to a superior proposal with respect to Timberline:
until four business days after Timberline provides written notice to McEwen advising it that the Timberline Board has received a superior proposal, specifying the material terms and conditions of such superior proposal, identifying the person or group of persons making such superior proposal, and including copies of all material documents pertaining to such superior proposal;
if, during such four business day period, McEwen (it being understood that any change to the financial or other material terms and conditions of a superior proposal will require an additional notice to McEwen of two business days running from the date of such notice) irrevocably proposes any alternative transaction (including any modifications to the terms of the merger agreement), unless the Timberline Board determines in good faith, after good faith negotiations between the parties (if such negotiations are requested by McEwen) during such four business day period (after and taking into account all financial, legal and regulatory terms and conditions of such alternative transaction proposal and expected timing of consummation and the relative risks of non-consummation of the alternative transaction proposal and the superior proposal) that such alternative transaction proposal is not at least as favorable to Timberline and its stockholders as the superior proposal; and
unless the Timberline Board determines in good faith, after consultation with Timberline’s financial advisors and outside legal counsel, that the failure to make a company adverse recommendation change would be reasonably likely to be inconsistent with its fiduciary duties to Timberline stockholders.
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At any time prior to obtaining the approval of the Timberline stockholders, in connection with any intervening event, as described in the following paragraph, the Timberline Board may make a company adverse recommendation change, after the Timberline Board (i) determines in good faith, after consultation with Timberline’s outside legal counsel, that the failure to make such a company adverse recommendation change would be reasonably likely to be inconsistent with its fiduciary duties to the Timberline stockholders under applicable laws, (ii) determines in good faith that the reasons for making such company adverse recommendation change are independent of and unrelated to any pending acquisition proposal with respect to Timberline, and (iii) provides written notice to McEwen, advising it that the Timberline Board is contemplating making a company adverse recommendation change and specifying the material facts and information constituting the basis for such contemplated determination. However, unless the Timberline stockholders’ meeting is scheduled to occur within the next four business days, (i) the Timberline Board may not make such company adverse recommendation change until the fourth business day after receipt by McEwen of a notice of change from the Timberline Board, and (ii) during such four business day period, at the request of McEwen, Timberline will negotiate in good faith with respect to any changes or modifications to the merger agreement that would allow the Timberline Board not to make such company adverse recommendation change, consistent with its fiduciary duties.
For purposes of the merger agreement, “intervening event” means any material event or development or material change in circumstances occurring, arising or coming to the attention of the Timberline Board after the date of the merger agreement to the extent that such event, development or change in circumstances (i) was neither known by the Timberline Board, nor reasonably foreseeable by the Timberline Board as of or prior to the date of the merger agreement and (ii) does not relate to an acquisition proposal or a superior proposal or any inquiry or communications relating thereto, except that in no event will the changes in the market price or trading volume of the shares of common stock of a party or the fact that a party fails to meet, meets or exceeds internal or published projections, forecasts or revenue or earnings or other financial performance or results of operations predictions for any period be an intervening event (however, the underlying causes of such change or fact will not be excluded).
Timberline Stockholders’ Meeting
Timberline has agreed to hold a meeting of Timberline stockholders as promptly as practicable after the effectiveness of the registration statement of which this proxy statement/prospectus is a part for the purpose of obtaining the Timberline stockholder approval, and the SEC confirms that is has no further comments on this proxy statement/prospectus, subject to Timberline’s right to terminate the merger agreement and pay the company termination fee. Timberline may only postpone or adjourn the Timberline stockholders’ meeting (1) to solicit additional proxies for the purpose of obtaining the Timberline stockholder approval, (2) for the absence of a quorum and (3) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure that Timberline has determined after consultation with outside legal counsel is reasonably likely to be required under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by Timberline stockholders prior to the Timberline stockholders’ meeting; provided that without McEwen’s prior written consent (not to be unreasonably withheld, conditioned or delayed), no single such adjournment or postponement will be for more than ten business days except as may be required by law and in no event will all such adjournments and postponements cause the Timberline stockholders’ meeting to be less than five business days prior to the outside date under the merger agreement; and provided further that Timberline may and must postpone or adjourn the Timberline stockholders’ meeting up to two times for up to ten business days each time upon the reasonable request of McEwen. Subject to the ability of the Timberline Board to effect a company adverse recommendation change, Timberline is required, through the Timberline Board, to recommend to the Timberline stockholders the Timberline merger proposal and use reasonable best efforts to solicit from the Timberline stockholders proxies in favor of the adoption of the merger agreement and to take all other actions necessary or advisable to secure Timberline stockholder approval. Timberline shall use reasonable efforts to, on a daily basis during the ten business days prior to the date of the Timberline stockholders’ meeting, advise McEwen as to the aggregate number of Timberline shares entitled to vote at such Timberline stockholders’ meeting for which proxies have been received by Timberline with respect to the Timberline stockholder approval and the number of such proxies authorizing the holder thereof to vote in favor of the Timberline stockholder approval. The Timberline Board has approved the merger agreement and the merger by a unanimous vote of its directors and adopted resolutions directing that the Timberline merger proposal be submitted to the Timberline stockholders for their consideration.
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Efforts to Complete the Merger
Each of the parties agreed to use reasonable best efforts (subject to, and in accordance with, applicable law) to take promptly, or cause to be taken promptly, all actions, and to do promptly, or cause to be done, and to assist and cooperate with the other parties to the merger agreement in doing, all things necessary, proper, or advisable under applicable laws to carry out the intent and purposes of the merger agreement and to consummate the transactions contemplated by the merger agreement. However, McEwen, by itself or on behalf of any of its subsidiaries or affiliates is not required to divest, sell, dispose of, or license or offer or agree to divest, sell, dispose of, or license any assets, businesses, rights or operations, whether of McEwen (and any of its subsidiaries or affiliates) or of Timberline (and any of its subsidiaries or affiliates).
Indemnification, Exculpation and Insurance
McEwen has agreed that all rights, existing at the time of the merger agreement, to indemnification and exculpation from liabilities (including advancement of expenses) for acts or omissions occurring at or prior to the effective time of the merger, in favor of the current or former directors or officers of Timberline as provided in Timberline’s certificate of incorporation or Timberline’s bylaws or in any indemnification contract between such directors or officers and Timberline will survive the merger and will continue in full force and effect.
For a period of six years after the effective time of the merger, the surviving corporation will, and McEwen will cause the surviving corporation to, maintain in effect the exculpation, indemnification and advancement of expenses equivalent to the provisions of Timberline’s certificate of incorporation or Timberline’s bylaws as in effect immediately prior to the effective time of the merger with respect to acts or omissions occurring prior to the effective time of the merger and will not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any of the current or former directors or officers of Timberline; provided that all rights to indemnification in respect of any claim made for indemnification within such six-year period will continue until the disposition of such action or resolution of such claim.
Prior to the effective time of the merger, Timberline will purchase a six-year prepaid “tail” policy, with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under Timberline’s existing policies of directors’ and officers’ liability insurance and fiduciary liability insurance, with respect to matters arising on or before the effective time of the merger (including in connection with the merger agreement and the transactions or actions contemplated by the merger agreement), and McEwen will cause such policy to be maintained in full force and effect, for its full term, and cause all obligations thereunder to be honored by the surviving corporation; provided that Timberline will not pay or agree to pay, and the surviving corporation will not be required to pay, in excess of 300% of the last annual premium paid by Timberline prior to the date of the merger agreement in respect of such “tail” policy. If Timberline is unable to purchase a six-year tail policy for fiduciary liability, Timberline will purchase the longest tail period available.
If McEwen or the surviving corporation or any of their respective successors or assigns (i) consolidates with or merges into any other corporation or entity and such that McEwen or the surviving corporation, as applicable, is not the surviving entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any individual, corporation or other entity, then, and in each such case, McEwen or the surviving corporation will make proper provisions so that the successors and assigns of McEwen or the surviving corporation will assume all of the obligations set forth in this section entitled “Indemnification, Exculpation and Insurance.”
Employee and Labor Matters
The parties agreed that from and after the effective time of the merger, McEwen will, or will cause the surviving corporation to, assume, honor and continue until the one-year anniversary of the effective time of the merger or later if necessary to satisfy all obligations thereunder outstanding at the effective time of the merger, all of the employment, severance, retention, termination and change-in-control plans, policies, programs, agreements and arrangements maintained by Timberline or any of its subsidiaries, in each case as in effect at the effective time of the merger, including with respect to any payments, benefits or rights arising as a result of the transactions contemplated by the merger agreement (either alone or in combination with any other event), without any amendment or modification, other than any amendment or modification required to comply with applicable laws or consented to in writing by all affected employees.
With respect to all employee benefit plans of the surviving corporation and its subsidiaries and affiliates, each Timberline employee’s service with Timberline or any of its subsidiaries (as well as service with any predecessor
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employer of Timberline or any such subsidiary, to the extent service with the predecessor employer was recognized by Timberline or such subsidiary) will be treated as service with the surviving corporation or any of its subsidiaries (or in the case of a transfer of all or substantially all the assets and business of the surviving corporation, its successors and assigns), except that such service need not be recognized to the extent that such recognition would result in any duplication of benefits for the same period of service.
In addition, McEwen is required, or is required to cause the surviving corporation to take commercially reasonable measures to, waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any welfare benefit plan maintained by the surviving corporation or any of its subsidiaries or affiliates in which Timberline employees (and their eligible dependents) will be eligible to participate from and after the effective time of the merger, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Timberline plan immediately prior to the effective time of the merger. McEwen is required, or is required to cause the surviving corporation to, recognize the dollar amount of all co-payments, deductibles, out of pocket maximums and similar expenses incurred by each Timberline employee (and his or her eligible dependents) during the plan year in which the effective time of the merger occurs for purposes of satisfying such plan year’s deductible, co-payment out of pocket and other similar limitations under the relevant welfare benefit plans in which they will be eligible to participate from and after the effective time of the merger.
If requested by McEwen in writing delivered to Timberline not less than five days prior to the effective time of the merger, Timberline is required to cause its board of directors (or equivalent governing body, or the appropriate committee thereof) of the applicable member that sponsors any Timberline plans that includes a “qualified cash or deferred arrangement” as defined in Section 401(k)(2) of the Code (the “Timberline 401(k) plan”) to adopt resolutions and take such corporate action as is reasonably necessary to terminate Timberline 401(k) plan, effective as of the day immediately preceding the effective time of the merger and contingent upon the occurrence of the closing of the merger. In the event that McEwen requests that the Timberline 401(k) plan be terminated, Timberline is required to provide McEwen with evidence that such Timberline 401(k) plan has been terminated contingent upon the occurrence of the closing of the merger (the form and substance of which approval shall be subject to review and approval by McEwen, which shall not be unreasonably withheld, conditioned or delayed) not later than the business day immediately preceding the closing date of the merger.
Other Covenants and Agreements
The merger agreement contains certain other covenants and agreements, including covenants relating to:
obligations of McEwen to take all actions necessary to cause Merger Sub to perform its obligations under the merger agreement and to consummate the merger on the terms and conditions set forth in the merger agreement;
the preparation by Timberline (with the reasonable assistance and cooperation of McEwen) of this proxy statement/prospectus;
the preparation by McEwen (with the reasonable assistance and cooperation of Timberline) of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part;
the cooperation between Timberline and McEwen in connection with public announcements;
the cooperation between Timberline and McEwen in connection with any claim, demand, notice, action, suit, arbitration, proceeding, audit or investigation commenced or, to such party’s knowledge, threatened against such party that relates to the merger agreement, the voting and support agreements, or the transactions contemplated thereby;
the filing by McEwen with the NYSE and TSX of an application for listing additional shares covering the McEwen shares to be issued or issuable in connection with the merger;
the delisting of Timberline common stock from the TSXV, the ceasing of Timberline common stock to be quoted on the OTCQB, the deregistration of Timberline common stock under the Exchange Act, and the ceasing of Timberline as a reporting issuer under Canadian securities laws;
taking actions to complete the merger and eliminate the effects of any antitakeover or similar statute or regulation that is or becomes applicable to the transactions contemplated by the merger agreement;
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the refraining from taking any actions which would or would reasonably be expected to prevent or impede the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;
the cooperation between Timberline and McEwen and use of reasonable best efforts to obtain opinions of tax counsel that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code; and
the obligations of Timberline, on the one hand, and McEwen and Merger Sub, on the other hand, to notify the other party or parties promptly upon learning of any change, occurrence, effect, condition, fact, event or circumstance that causes or is reasonably likely to cause or constitute a material breach of its representations, warranties, or covenants contained in the merger agreement or the failure of any of the conditions of the merger agreement to be satisfied.
Conditions to the Merger
The obligations of each of McEwen and Timberline to effect the merger are subject to the satisfaction or waiver, in whole or in part (to the extent permitted by law) of the following conditions:
the approval by Timberline stockholders of the Timberline merger proposal;
the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, becoming effective under the Securities Act, and no stop order or any claim, demand, notice, action, suit, arbitration, proceeding, audit or investigation by the SEC seeking a stop order having been issued;
the absence of any order entered into by a governmental body of competent jurisdiction or any applicable law enacted or promulgated, in each case, that (whether temporary or permanent) is then in effect and has the effect of enjoining or otherwise prohibiting the consummation of the merger;
McEwen having filed with the NYSE and TSX the application for listing of additional shares with respect to the shares of McEwen common stock issued or issuable pursuant to the merger agreement (including the shares of McEwen common stock issuable upon exercise of Timberline warrants) and such shares shall have been approved and authorized for listing on the NYSE and TSX;
certain representations and warranties of McEwen or Timberline, as applicable, made in the merger agreement relating to organization, good standing, corporate power, corporate authority, board of director approval, stockholder voting requirements, brokers, and/or anti-takeover laws being true and correct in all respects or all material respects as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the merger agreement, in which case such representations and warranties must be true and correct in all material respects as of such date);
certain representations and warranties of McEwen or Timberline, as applicable, made in the merger agreement relating to its capital structure being true and correct in all respects as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or as of the date of the merger agreement, in which case such representations and warranties must be true and correct in all material respects as of such date) except for any de minimis inaccuracies;
the representation and warranty of Timberline relating to the absence of a material adverse effect since December 31, 2023, being true and correct as of the closing date of the merger as though made on the closing date;
each other representation and warranty of McEwen or Timberline, as applicable, made in the merger agreement (without giving effect to any limitation as to materiality, material adverse effect or any similar limitation set forth therein) being true and correct as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties relate to a specific date or as of the date of the merger agreement, in which case such representations and warranties must be true and correct as of such date), except where the failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on such party;
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McEwen or Timberline, as applicable, having performed in all material respects all of the covenants and agreements under the merger agreement required to be performed by or complied with it at or prior to the closing date of the merger;
the absence of the occurrence of a material adverse effect of McEwen or Timberline since the date of the merger agreement; and
the receipt of an officer’s certificate executed by an executive officer of the other party certifying that the conditions described in the six preceding bullet points have been satisfied.
The parties expect to complete the merger after all of the conditions to the merger in the merger agreement are satisfied or waived, including after the Timberline stockholder approval is received.
Termination
The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger (notwithstanding the obtaining of Timberline stockholder approval), under the following circumstances:
by mutual written consent of Timberline and McEwen, duly authorized by each of the Timberline Board and the McEwen Board; or
by either Timberline or McEwen:
if the consummation of the merger does not occur on or before October 13, 2024, referred to as the outside date, except that if the effective time of the merger has not occurred by October 13, 2024 due to the fact the McEwen registration statement on Form S-4 is not yet effective but all other conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied), the outside date will automatically be extended to November 12, 2024, except that this right to terminate the merger agreement will not be available to any party whose breach of its representations and warranties or the failure to perform any obligation under the merger agreement has principally caused or resulted in the failure of the merger to be consummated on or before that date;
if the merger has been made illegal or permanently enjoined from occurring;
if the Timberline stockholder approval is not obtained following a vote thereon at the Timberline stockholders’ meeting; or
upon the other party’s uncured breach of the merger agreement;
by McEwen if the Timberline Board effects a company adverse change recommendation prior to obtaining the Timberline stockholder approval; or
by Timberline in order to enter into a definitive agreement with respect to a superior proposal prior to obtaining the Timberline stockholder approval.
If the merger agreement is terminated, the agreement will have no further force or effect, except in the case of an intentional and material breach of the merger agreement or fraud. The mutual non-disclosure and confidentiality agreement and provisions of the merger agreement relating to confidential information, effects of termination, termination fee, non-survival of representations and warranties, expenses, amendments, waiver, entire agreement, governing law, jurisdiction, waiver of jury trial, assignment, no third-party beneficiaries, notices, severability, specific performance and counterparts will continue in effect notwithstanding termination of the merger agreement.
Expenses and Termination Fees
Each party is required to pay all fees and expenses incurred by it (and its subsidiaries) in connection with the negotiation of the merger agreement, the performance of its obligations thereunder and the consummation of the transactions contemplated by the merger agreement (whether consummated or not). However, Timberline will be required to pay McEwen a termination fee of $400,000, referred to as the company termination fee, if:
McEwen terminates the merger agreement after the Timberline Board effects a company adverse change recommendation prior to obtaining the Timberline stockholder approval;
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Timberline terminates the merger agreement in order to enter into a definitive agreement with respect to a superior proposal prior to obtaining the Timberline stockholder approval; or
the merger agreement is terminated by Timberline or McEwen after Timberline stockholder approval is not obtained following a vote thereon at the Timberline stockholders’ meeting and (A) at any time after the date of the merger agreement and prior to such termination, an acquisition proposal is publicly announced or publicly made known to the Timberline Board or Timberline stockholders and not withdrawn prior to such termination and (B) within 12 months of such termination, Timberline either consummates an acquisition proposal or enters into a definitive agreement to consummate an acquisition proposal and Timberline thereafter consummates such acquisition proposal (whether or not within such 12-month period), where all references in the definition of acquisition proposal in the merger agreement to “twenty percent (20%)” are deemed to be references to “fifty percent (50%).”
The merger agreement also provides that in the event that the company termination fee is paid in accordance with the foregoing, such payment will be the sole and exclusive remedy for any and all losses or damages suffered or incurred by McEwan, Merger Sub, any of their respective affiliates or any other person in connection with the merger agreement (and the termination hereof), the transactions contemplated thereby (and the abandonment thereof) or any matter forming the basis for such termination.
Amendment and Waiver
Amendment
At any time prior to the effective time of the merger, the merger agreement may be amended by mutual agreement of the parties in writing at any time before or after receipt of Timberline stockholder approval; provided that no amendment of the merger agreement will be made after receipt of Timberline stockholder approval if the amendment requires further approval by the stockholders of Timberline or McEwen under applicable laws or the rules of the NYSE, TSX or TSXV.
Waiver
No failure on the part of any party to exercise any power, right, privilege or remedy under merger agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under the merger agreement, will operate as a waiver of such power, right, privilege or remedy, and no single or partial exercise of any such power, right, privilege or remedy will preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No party will be deemed to have waived any claim arising out of the merger agreement, or any power, right, privilege or remedy under the merger agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party, and any such waiver will not be applicable or have any effect except in the specific instance in which it is given.
Third-Party Beneficiaries
The merger agreement is not intended to and will not confer upon any person other than the parties thereto any rights or remedies, except for the right of the holders of shares of Timberline common stock to receive the merger consideration, the right of the holders of warrants to purchase shares of Timberline common stock to receive the rollover warrants, and the provisions of the merger agreement relating to indemnification and exculpation from liability for the current or former directors and officers of Timberline.
Governing Law; Waiver of Jury Trial
Governing Law
The merger agreement and all claims, demands, notices, actions, suits, arbitrations, proceedings, audits or investigations (whether arising based on contract, tort or statute) arising out of, relating to, or in connection with the merger agreement or the actions of any of the parties thereto in the negotiation, administration, performance or enforcement thereof are governed by and will be construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under any applicable principles of conflicts of laws thereof.
Waiver of Jury Trial
The parties have agreed to waive all rights to trial by jury in any legal proceeding arising out of or relating to the merger agreement.
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Enforcement
The parties have agreed in the merger agreement that irreparable damage would occur in the event that any of the provisions of the merger agreement are not performed in accordance with their specific terms or are otherwise breached. The parties have agreed that they will be entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the performance of its terms and provisions, without proof of actual damages, in addition to any other remedy to which they are entitled at law or in equity, without posting any bond or other undertaking, provided however, McEwen and Merger Sub will not be entitled to specific performance or other equitable remedy if the merger agreement is validly terminated by Timberline and Timberline pays McEwen a termination fee of $400,000.
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THE SPECIAL MEETING
This proxy statement/prospectus is being provided to the Timberline stockholders as part of a solicitation of proxies by the Timberline Board for use at the special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This proxy statement/prospectus provides Timberline stockholders with information they need to know to be able to vote or instruct their vote to be cast at the special meeting.
Date, Time, Place and Purpose of the Timberline Special Meeting
The Timberline special meeting will be held at [•] [a.m.]/[p.m.], Mountain Time, on [•], 2024, at the offices of Davis Graham & Stubbs, LLP, 1550 17th Street, Suite 500, Denver, CO 80202. The purpose of the Timberline special meeting is to consider and vote on the following:
The merger proposal: to vote on a proposal to adopt the merger agreement, which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 30 and 52, respectively, and a copy of which is attached as Annex A to the proxy statement/prospectus of which this notice is a part (the “merger proposal”);
The merger-related compensation proposal: to vote on an advisory (non-binding) proposal to approve the compensation that may be paid or become payable to Timberline’s NEOs that is based on or otherwise related to the merger; and
The adjournment proposal: to vote on a proposal to approve the adjournment of the Timberline special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement.
Adoption and approval of the merger proposal by Timberline stockholders is a condition to the obligation of Timberline and McEwen to complete the merger.
Recommendation of the Timberline Board
At a special meeting held on April 15, 2024, the Timberline Board unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of the Timberline stockholders, approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and directed that the merger agreement be submitted to the Timberline stockholders for adoption at a meeting of such stockholders. The Timberline Board unanimously recommends that Timberline stockholders vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.
Timberline stockholders should carefully read this proxy statement/prospectus, including any documents incorporated by reference, and the annexes in their entirety for more detailed information concerning the merger and the transactions contemplated by the merger agreement.
Record Date; Stockholders Entitled to Vote
Only stockholders of record of issued and outstanding shares of Timberline common stock as of the close of business on the record date of [•], 2024 are entitled to notice of, and to vote at, the Timberline special meeting or any subsequent reconvening of the Timberline special meeting following any adjournments and postponements of the Timberline special meeting.
As of the close of business on the record date, there were [189,998,710] shares of Timberline common stock issued and outstanding and entitled to vote at the Timberline special meeting. You may cast one vote for each share of Timberline common stock that you held as of the close of business on the record date.
A complete list of Timberline stockholders entitled to vote at the Timberline special meeting will be available for inspection at the office of Davis Graham & Stubbs LLP, 1550 17th Street, Suite 500, Denver, CO 80202 during regular business hours for a period of no less than ten days before the Timberline special meeting and during the Timberline special meeting.
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Quorum; Adjournment
A quorum of Timberline stockholders is necessary for Timberline to hold a valid meeting. The presence at the Timberline special meeting, in person or by proxy, of the holders of one-third of the outstanding shares of Timberline common stock entitled to vote at the Timberline special meeting constitutes a quorum.
The special meeting may be adjourned or postponed, in the absence of a quorum, by the chairman of the meeting or the affirmative vote of a majority of the votes actually cast by the stockholders who are present in person or by proxy and entitled to vote at the special meeting. Even if a quorum is present, the special meeting may also be adjourned in order to provide more time to solicit additional proxies in favor of adoption of the merger agreement by the chairman of the meeting or if sufficient votes are cast in favor of the adjournment proposal. If a sufficient number of shares of Timberline common stock is present in person or represented by proxy and votes in favor of the merger proposal at the special meeting such that the merger proposal is approved, Timberline does not anticipate that it will adjourn or postpone the special meeting.
Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless:
the adjournment is for more than 30 days, in which case a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting; or
a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, in which case a notice of the adjourned meeting must be given to each stockholder of record entitled to vote at the meeting.
At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting. Any adjournment or postponement of the special meeting will allow Timberline stockholders who have already submitted their proxies to revoke them at any time before their use at the special meeting that was adjourned or postponed.
Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the special meeting. Broker non-votes will not be counted as present for the purpose of determining the presence of a quorum.
Required Vote; Broker Non-Votes and Abstentions
Each share of Timberline common stock outstanding on the record date is entitled to one vote on each of the merger proposal, the merger-related compensation proposal and the adjournment proposal. The required votes to approve the proposals at the special meeting are as follows:
The merger proposal: The merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon. Failures to vote, broker non-votes and abstentions will have the same effect as votes cast “AGAINST” this proposal.
The merger-related compensation proposal: The merger-related compensation proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Failures to be present in-person or by proxy, including broker non-votes, will have no effect on the vote for this proposal (assuming a quorum is present). Abstentions will have the same effect as votes cast “AGAINST” this proposal. Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on Timberline. Accordingly, if the merger proposal is approved and the merger is completed, the merger-related compensation will be payable to Timberline’s NEOs, subject only to the conditions applicable thereto, regardless of the outcome of the approval of the merger-related compensation proposal.
The adjournment proposal: The adjournment proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Failures to be present in-person or by proxy, including broker non-votes, will have no effect on the vote for this proposal (assuming a quorum is present). Abstentions will have the same effect as votes cast “AGAINST” this proposal. The approval of the adjournment proposal is not a condition precedent to the approval of the merger proposal or the closing of the merger.
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Executed but unvoted proxies will be voted in accordance with the recommendation of the Timberline Board. The merger proposal, merger-related compensation proposal, and the adjournment proposal are described in the section entitled “Timberline Proposals” beginning on page 73.
Voting by Timberline’s Directors and Executive Officers
As of the record date, Timberline directors and executive officers, and their affiliates, as a group, owned and were entitled to vote [27,866,021] shares of Timberline common stock, or approximately [14.7]% of the total outstanding shares of Timberline common stock as of the Timberline record date.
Each of the Timberline directors and executive officers have executed a voting agreement agreeing to vote in favor of the merger proposal, merger-related compensation proposal and the adjournment proposal. Timberline currently expects that all of its directors and executive officers will vote their shares “FOR” the merger proposal, merger-related compensation proposal and adjournment proposal.
Voting by Significant Stockholders of Timberline
Concurrent with Timberline’s execution of the merger agreement, two significant stockholders of Timberline each executed a voting agreement agreeing to vote in favor of the merger proposal, the merger-related compensation proposal and the adjournment proposal. The two stockholders together owned and were entitled to vote [52,389,284] shares of Timberline common stock, or approximately [27.6]% of the total outstanding shares of Timberline common stock as of the Timberline record date. Timberline currently expects that each of the two stockholders will vote their shares “FOR” the merger proposal, merger-related compensation proposal and adjournment proposal.
Voting of Proxies by Holders of Record
If you are a stockholder of record of Timberline as of the close of business on the record date, you may submit your proxy before the special meeting in one of the following ways:
Telephone: To submit your proxy by telephone, call [•]. Have your proxy card in hand when you call and then follow the instructions to vote your shares. If you vote by telephone, you must do so no later than [11:59 p.m. Eastern Time] on [•], 2024;
Internet: To submit your proxy via the internet, go to www.proxyvote.com. Have your proxy card in hand when you access the website and follow the instructions to vote your shares. If you vote via the internet, you must do so no later than [11:59 p.m. Eastern Time] on [•], 2023; or
Mail: To submit your proxy by mail, simply mark your proxy card, date and sign it and return it in the postage-paid envelope. If you do not have the postage-paid envelope, please mail your completed proxy card to the following address: [•]. If you vote by mail, your proxy card must be received no later than [6:00 p.m. Eastern Time] on [•], 2024.
Please be aware that any costs related to voting via the internet, such as internet access charges, will be your responsibility.
All properly signed proxies that are timely received and that are not revoked will be voted at the special meeting according to the instructions indicated on the proxies or, if no direction is indicated, they will be voted as recommended by the Timberline Board. The proxy holders may use their discretion to vote on other matters that properly come before the special meeting.
Voting of Proxies by “Street Name” Holders
If your shares are held in “street name” through a broker, bank or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. Your vote at the special meeting will revoke any proxy previously submitted on your behalf by your broker, bank or other nominee.
The meeting will begin promptly at [•] [a.m.]/[p.m.], Mountain Time, on [•], 2024. Timberline encourages its stockholders to access the meeting prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this proxy statement/prospectus.
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Even if you plan to attend the special meeting, Timberline recommends that you vote your shares in advance as described below so that your vote will be counted even if you later decide not to or become unable to attend the special meeting.
Revocability of Proxies
Any stockholder giving a proxy has the power to revoke it at any time before the proxy is voted at the special meeting. If you are a record holder, you may change or revoke your vote before your proxy is voted at the special meeting as described herein. You may do this in one of four ways:
submitting a proxy at a later time by internet or telephone until [11:59 p.m. Eastern Time] on [•], 2024;
signing and returning a new proxy card with a later date;
delivering, before [6:00 p.m. Eastern Time] on [•], 2024, to Timberline at 9030 North Hess St., Suite 161, Hayden, ID 83835, written revocation of your most recent proxy.
If you are a “street name” stockholder and you vote by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures.
Solicitation
The Timberline Board is soliciting proxies for the special meeting from its stockholders. Timberline will bear the entire cost of the solicitation of proxies, including preparation, assembly and delivery, as applicable, of this proxy statement/prospectus, the proxy card and any additional materials furnished to stockholders. Proxies may be solicited by directors, officers and a small number of Timberline’s regular employees personally or by mail, telephone or facsimile, but such persons will not be specially compensated for such service. As appropriate, copies of solicitation material will be furnished to brokerage houses, fiduciaries and custodians that hold shares of Timberline common stock of record for beneficial owners for forwarding to such beneficial owners. Timberline may also reimburse persons representing beneficial owners for their costs of forwarding the solicitation material to such owners.
Assistance
If you need assistance with voting via the internet, voting by telephone or completing your proxy card, or have questions regarding the special meeting, please contact Cathy Osterberg at the following address and telephone number:
Timberline Resources Corporation
9030 North Hess Street, Suite 161
Hayden, ID 83835
Attention: Cathy Osterberg
Telephone: (866) 513-4859
Your vote is very important regardless of the number of shares of Timberline common stock that you own. Please submit a proxy to vote your shares via the internet, vote by telephone or sign, date and return a proxy card promptly so your shares can be represented, even if you plan to attend the special meeting.
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TIMBERLINE PROPOSALS
Item 1.
The Merger Proposal
(Item 1 on Timberline Proxy Card)
In the merger proposal, Timberline is asking its stockholders to adopt the merger agreement. Approval of the merger proposal by Timberline stockholders is required for completion of the merger. The merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock entitled to vote thereon. Each share of Timberline common stock outstanding on the record date of the special meeting is entitled to one vote on this proposal. Failures to vote, broker non-votes and abstentions will have the same effect as votes cast “AGAINST” this proposal.
The Timberline Board unanimously recommends a vote “FOR” the merger proposal (Item 1).
Item 2.
The Merger-Related Compensation Proposal
(Item 2 on Timberline Proxy Card)
In the merger-related compensation proposal, Timberline is asking its stockholders to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Timberline’s NEOs that is based on or otherwise relates to the merger. The merger-related compensation proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Failures to be present in-person or by proxy, including broker non-votes, will have no effect on the vote for this proposal (assuming a quorum is present). Abstentions will have the same effect as votes cast “AGAINST” this proposal.
Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on either Timberline or McEwen. Accordingly, if the merger proposal is approved and the merger is completed, the merger-related compensation will be payable to Timberline’s NEOs, subject only to the conditions applicable thereto, regardless of the outcome of the approval of the merger-related compensation proposal.
The Timberline Board unanimously recommends a vote “FOR” the merger-related compensation proposal (Item 2).
Item 3.
The Adjournment Proposal
(Item 3 on Timberline Proxy Card)
In the adjournment proposal, Timberline is asking its stockholders to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement. If Timberline stockholders approve the adjournment proposal, subject to the terms of the merger agreement, Timberline could adjourn the special meeting and use the additional time to solicit additional proxies, including soliciting proxies from Timberline stockholders who have previously voted. Timberline does not intend to call a vote on the adjournment proposal if the merger proposal is approved at the special meeting.
The adjournment proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Failures to be present in-person or by proxy, including broker non-votes, will have no effect on the vote for this proposal (assuming a quorum is present). Abstentions will have the same effect as votes cast “AGAINST” this proposal.
The Timberline Board unanimously recommends a vote “FOR” the adjournment proposal (Item 3).
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NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR TIMBERLINE’S NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act and Rule 14a-21(c) promulgated under the Exchange Act require that Timberline seek a non-binding, advisory vote from its stockholders to approve the merger-related compensation described in this proxy statement/prospectus under “The Merger—Interests of Directors and Executive Officers of Timberline in the Merger” beginning on page 42. The approval, on a non-binding, advisory basis, of the merger-related compensation proposal requires the affirmative vote of holders of a majority of the outstanding shares of Timberline common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Each share of Timberline common stock outstanding on the record date is entitled to one vote on this proposal. Failures to vote and broker non-votes will have no effect on the vote for this proposal (assuming a quorum is present); abstentions will have the same effect as a vote cast “AGAINST” this proposal. Accordingly, Timberline is asking its stockholders to vote in favor of the following resolution, on a non-binding, advisory basis:
“RESOLVED, that the compensation that may be paid or become payable to Timberline’s named executive officers that is based on or otherwise relates to the merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in ‘The Merger—Interests of Directors and Executive Officers of Timberline in the Merger’ are hereby APPROVED.”
The Timberline Board recommends that its stockholders approve, on a non-binding, advisory basis, the merger-related compensation described in this proxy statement/prospectus by voting “FOR” the above proposal.
Approval of this proposal is not a condition to completion of the merger, and the vote with respect to this proposal is advisory only and will not be binding on Timberline or McEwen. If the merger proposal is adopted by the Timberline stockholders and the merger is completed, the merger-related compensation will be payable to Timberline’s NEOs, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the merger-related compensation proposal.
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DESCRIPTION OF MCEWEN CAPITAL STOCK
The following describes the material terms of the capital stock of McEwen. This description is qualified in its entirety by reference to the articles of incorporation and bylaws of McEwen which are incorporated by reference into this proxy statement/prospectus. For more information about the documents incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” on page 85.
McEwen’s authorized capital consists of 200,000,000 shares of common stock, no par value, and 10,000,000 shares of preferred stock, no par value. As of [•], 2024, there were a total of [49,440,096] shares of McEwen common stock issued and outstanding, and no shares of preferred stock issued and outstanding.
McEwen Common Stock
The holders of McEwen common stock are entitled to one vote for each share held of record and the holders of any fractional share are entitled to a corresponding fractional vote on all matters submitted to a vote of McEwen’s shareholders, including the election of directors. Cumulative voting for directors is not permitted. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of McEwen common stock are entitled to receive ratably those dividends, if any, as may be declared by the McEwen Board out of legally available funds. Upon McEwen’s liquidation, dissolution or winding up, the holders of McEwen common stock will be entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all of debt and other liabilities of McEwen, subject to the prior rights of any preferred stock then outstanding. Holders of McEwen common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking funds provisions applicable to McEwen common stock. There are no restrictions on the alienability of McEwen common stock and there are no provisions discriminating against any existing or prospective holder of McEwen common stock as a result of such holder owning a substantial amount of its securities. All outstanding shares of McEwen common stock are fully paid and non-assessable.
McEwen Preferred Stock
Under the terms of McEwen’s articles of incorporation, the McEwen Board is authorized to direct McEwen to issue shares of preferred stock in one or more series without shareholder approval. The McEwen Board has the discretion to determine the designation and number of shares of any series of preferred stock, the voting powers, if any, of the shares of such series of preferred stock, and the relative, participating, optional or other rights and preferences of the shares of any series of preferred stock, including, without limitation, dividend rights, dividend rates, terms of redemption, redemption prices, conversion rights, and liquidation preferences. The powers, preferences and relative, participating, optional and other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.
The ability of the McEwen Board, without action from McEwen shareholders, to issue undesignated preferred stock with voting or other rights could impede the success of any attempt to effect a change in control of McEwen. These provisions may also have the effect of deferring hostile takeovers or delaying changes in control or management of McEwen. The McEwen Board has determined to consider the adoption of a shareholder rights, or “poison pill,” plan because it believes that such a plan may be in the best interests of McEwen and its shareholders. At this time, the McEwen Board has not approved the adoption of any plan but is in the exploratory stage. If the McEwen Board determines to adopt such a plan, the availability of preferred stock would be useful to the implementation of such a plan. The McEwen Board’s determination to consider the adoption of such a plan is not in response to or in anticipation of any pending or threatened take-over bid, nor a desire to deter any particular take-over bid. The McEwen Board is not currently aware of any hostile takeover attempts directed at McEwen. The McEwen Board is considering such a plan to ensure that McEwen’s shareholders are treated fairly in the event any such bid to acquire control of McEwen is made. A rights plan may also be useful in preserving the net operating losses that McEwen currently has available to offset any future income.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF MCEWEN AND TIMBERLINE
McEwen is incorporated under the laws of the state of Colorado. Timberline is incorporated under the laws of the State of Delaware, accordingly, the rights of its stockholders of are governed by the DGCL. McEwen will continue to be a Colorado corporation following completion of the merger and will be governed by the Colorado Business Corporation Act and the Colorado Corporations and Associations Act (collectively, the “Colorado Act”).
Upon completion of the merger, the Timberline stockholders immediately prior to the effective time of the merger will become McEwen common stockholders. The rights of the former Timberline stockholders and the McEwen stockholders will thereafter be governed by the Colorado Act and by McEwen’s articles of incorporation and bylaws.
The following description summarizes certain of the material terms and differences between the rights of the stockholders of McEwen and Timberline but is not a complete statement of all such terms or differences, or a complete description of the specific provisions referred to in this summary. Stockholders should carefully read the relevant provisions of the DGCL, the Colorado Act, and the articles of incorporation and bylaws of McEwen and the certificate of incorporation and bylaws Timberline. For more information on how to obtain the documents that are not attached to this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 85.
 
Rights of McEwen Stockholders
Rights of Timberline Stockholders
Authorized Capital Stock
The authorized capital stock of McEwen consists of 200,000,000 shares of common stock, no par value per share, and 10,000,000 shares of preferred stock, no par value per share.
The authorized capital stock of Timberline consists of 500,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share.
 
 
 
Special Meetings of Stockholders; Action by Written Consent
Under the Colorado Act and McEwen’s bylaws, a special meeting of shareholders may be called by the president, the chairman of the board of directors or holders of at least 10% of the voting stock.
Under the DGCL, a special meeting of stockholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or by-laws.
 
 
 
 
The Colorado Act and McEwen’s bylaws further provide that any action required or permitted to be taken at a meeting of the shareholders of McEwen may be taken without a meeting if a consent in writing, setting forth the action so taken is signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
Timberline’s bylaws provide that special meetings of Timberline stockholders may be called by a majority of the Timberline Board, chief executive officer or president or by one or more stockholders holding shares in aggregate entitled to cast not less than 33% of the shares eligible to vote at that special meeting.

Unlike the DGCL, Timberline’s bylaws provide that, any action required or permitted to be taken at a stockholders meeting may be taken only upon the vote of stockholders at an annual or special meeting duly noticed and called in accordance with the DGCL and Timberline’s bylaws and may not be taken by written consent without a meeting.
 
 
 
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Rights of McEwen Stockholders
Rights of Timberline Stockholders
Stockholder Proposals and Nominations of Candidates for Election to the Board of Directors
McEwen’s articles of incorporation generally allow shareholders voting power for the election of directors.

McEwen’s bylaws provide that nominations of candidates for election as directors at any annual meeting of shareholders at which directors will be elected may be made (i) by the board of directors, or (ii) by any shareholder entitled to vote in accordance with the procedures established in the bylaws further described below.

The nominations of a candidate to the board of directors at an annual or special meeting of the shareholders may be made only (a) pursuant to the McEwen’s notice of meeting (or any supplement thereto), (b) by or at the direction of the board of directors, or (c) by any shareholder of McEwen (i) who was a shareholder of record (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed or such nomination or nominations are made, only if such beneficial owner was the beneficial owner of shares of McEwen) both at the time of giving of notice and on the record date for the determination of shareholders entitled to vote at the meeting, (ii) who is entitled to vote at the meeting upon such election of directors or such business, as the case may be, and (iii) who complies with the notice procedures.

For nominations of a candidate to the board of directors before an annual or special meeting by a shareholder, other than a special meeting called by such shareholder, the shareholder (1) must have given timely notice thereof in writing and in proper form to the secretary of McEwen at the principal executive offices of McEwen, and (2) must provide any updates or supplements to such notice at such times and in the forms required by the bylaws.
Timberline’s certificate of incorporation generally allows stockholders voting power for the election of directors and all other purposes subject to such limitations as may be imposed by law. The holders of common stock, who are record holders at the time the notice described below is given, are entitled to vote at such annual meeting to nominate candidates for election to the Timberline Board and propose other business to be brought before an annual meeting.

Timberline’s bylaws provide that if a stockholder calls a special meeting, the request must (i) be in writing, (ii) specify the time of such meeting and the general nature of the business proposed to be transacted, and (iii) be delivered personally, via registered mail, or by facsimile transmission to the chair of the Board, the chief executive officer, the president, or the secretary of the company.

Stockholder meetings require advance notice of such meeting not less than ten or more than 60 days before the date of the meeting to each stockholder of record entitled to vote. Each stockholder entitled to vote at a meeting of the stockholders may authorize another person or persons to act for such stockholder by proxy authorized in writing.
 
 
 
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Rights of McEwen Stockholders
Rights of Timberline Stockholders
Number of Directors
The Colorado Act provides that the number of directors constituting the board of directors is to be stated in or fixed in accordance with the bylaws of a corporation.

McEwen’s bylaws provide that the McEwen board of directors shall fix the size of the board from time to time, but such number to be not less than three nor more than nine. McEwen currently has nine directors.

Any directorship to be filled by reason of an increase in the number of directors must be filled by the affirmative vote of a majority of the directors then in office or by an election at an annual meeting, or at a special meeting of shareholders called for that purpose.

If the number of directors to be elected at an annual meeting is increased and there is no public announcement by McEwen specifying the size of the increased Board at least one hundred days before the first anniversary of the preceding year’s annual meeting, a shareholder’s notice required will be considered timely, but only with respect to nominees for any new positions created by such increase, if received by the secretary at the principal executive offices of McEwen not more than ten calendar days following the day on which such public announcement is first made by McEwen.
The DGCL provides that the board of directors of a Delaware corporation must consist of one or more directors, with the number of directors fixed by or in the manner provided in the corporation’s by-laws unless the certificate of incorporation fixes the number of directors.

Timberline’s certificate of incorporation provides that the number of directors on the Timberline Board will be fixed from time to time by the Timberline Board but shall in no event be fewer than one nor more than fifteen directors. Timberline currently has five directors. Timberline’s bylaws require changes to the number of Directors be adopted by resolution of an affirmative vote of a majority of the total number of Directors then in office.
 
 
 
Election of Directors
Under the Colorado Act, the board of directors are elected at each annual shareholders’ meeting unless the articles of incorporation specify that the directors’ terms are staggered. Unlike the Colorado Act, cumulative voting is not allowed in the election of directors of McEwen under its articles of incorporation.
The DGCL provides that, unless the certificate of incorporation or by-laws provide otherwise, directors will be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
 
 
 
 
McEwen’s bylaws provide that an annual meeting of shareholders is to be held for the election of directors and for the transaction of other business within the six months following fiscal year-end
Timberline’s bylaws provide that directors shall be elected by a plurality of votes validly cast and entitled to vote on the election of Directors.

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Rights of McEwen Stockholders
Rights of Timberline Stockholders
 
or on other date and time as may be determined from time to time by the board of directors.

The bylaws further provide that each shareholder entitled to vote have the right to vote the number of shares owned for as many persons as there are directors to be elected in the election of directors. Those candidates receiving the highest number of votes cast in their favor (equal to the number of directors to be elected) are elected to the board of directors.
Holders of Timberline common stock do not have cumulative voting rights in the election of directors or otherwise.

Timberline does not have a classified board. Timberline’s bylaws provides that directors shall be elected and hold office until their successor is duly elected and qualified. There is no set term but a director may resign at any time.
 
 
 
Removal of Directors; Vacancies
The Colorado Act and McEwen’s bylaws provide that the shareholders may remove one or more directors with or without cause. Such removal must occur at a meeting called for the express purpose of removing directors by a majority vote of the shares entitled to vote.

The Colorado Act and McEwen’s bylaws also provide that vacancies on the McEwen’s board may be filled by the shareholders or by the remaining directors, even if less than a quorum.
Timberline stockholders may remove directors with or without cause by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors.

All vacancies on the Timberline Board, including vacancies resulting from newly created directorships due to an increase in the number of directors, may be filled by a majority vote of the directors then in office, even if less than a quorum, or by the sole remaining director, or such vacancies may be filled by the stockholders.
 
 
 
Limitation on Liability of Directors and Officers
Under the Colorado Act, the articles of incorporation may, but need not, include provisions limiting a director’s liability to the corporation or the shareholders for money damages for taking or failing to take an action, except liability for (i) the amount of a financial benefit received by a director to which the director is not entitled; (ii) an intentional infliction of harm on the corporation or shareholders; (iii) a violation of the Colorado Act regarding unlawful distributions; or (iv) an intentional violation of criminal law.

McEwen’s articles of incorporation provides that to the fullest extent permitted by the Colorado Act, a director of McEwen shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director.
In August 2022, the DGCL was amended to permit Delaware corporations to exculpate officers from monetary damages for breach of fiduciary duty in certain circumstances, if so provided in the corporation’s certificate of incorporation. As of the date hereof, Timberline’s certificate of incorporation does not contain a provision exculpating officers from such liability.


Timberline’s certificate of incorporation provides that no director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director, except to the extent provided for by applicable law (1) for any breach of the directors duty of loyalty to the corporation or its
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Rights of McEwen Stockholders
Rights of Timberline Stockholders
 
 
stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (3) pursuant to section 174 of the DGCL, or (4) for any transaction from which such director derived an improper personal benefit.

Additionally, a director of Timberline shall not be liable to the fullest extent permitted by any amendment to the DGCL hereafter enacted that further limits the liability of a director.
 
 
 
Indemnification of Directors and Officers; Expenses
Under the Colorado Act, a corporation may generally indemnify a person made a party to a proceeding because the person is or was a director or officer of the corporation against any obligation incurred with respect to the proceeding to pay a judgment, settlement, penalty, fine or reasonable expenses incurred in the proceeding if the director or officer acted in good faith and certain other conditions are satisfied. The Colorado Act also authorizes a Colorado corporation to pay for or reimburse the reasonable expenses incurred by a director or officer in defending a proceeding in advance of the final disposition of the proceeding if certain requirements are satisfied.

McEwen’s articles of incorporation provides that McEwen may indemnify each director, officer and any employee or agent of the corporation, his heirs, executors and administrators, against expenses reasonably incurred or any amounts paid by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer, employee or agent of the corporation to the full extent permitted by the Colorado Act as now existing or as hereafter amended.
Under the DGCL, a Delaware corporation must indemnify its present and former directors and officers against expenses (including attorneys’ fees) actually and reasonably incurred to the extent that the officer or director has been successful on the merits or otherwise in defense of any action, suit or proceeding brought against him or her by reason of the fact that he or she is or was a director or officer of the corporation.

Delaware law provides that a corporation may indemnify its present and former directors, officers, employees and agents, as well as any individual serving with another corporation in that capacity at the corporation’s request against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement of actions taken, if the individual acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation and, in the case of a criminal proceeding, the individual had no reasonable cause to believe the individual’s conduct was unlawful; except that no indemnification may be paid for judgments, fines and amounts paid in settlement in actions by or in the right of the corporation to procure a judgment in its favor.

A corporation may not indemnify a current or former director or officer of the corporation against expenses to the
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Rights of McEwen Stockholders
Rights of Timberline Stockholders
 
 
extent the person is adjudged to be liable to the corporation unless a court approves the indemnity.

Timberline’s certificate of incorporation provides that it will indemnify its directors and officers to the fullest extent permitted by the DGCL. In addition, Timberline has obtained policies of directors’ and officers’ liability insurance.