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MANAGEMENT INFORMATION CIRCULAR
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• | Cdn$14.00 in cash; and |
• | one common share (a “Pilot Gold Share”) of Pilot Gold, a new exploration company. The Pilot Gold Shares will be consolidated on aone-for-four basis pursuant to the Arrangement such that, upon the completion of the Arrangement, every holder of Fronteer Shares will hold one Pilot Gold Share for every four Fronteer Shares previously held. |
• | surrender their Fronteer Options to Fronteer for cancellation in exchange for the aggregate of (i) one Pilot Gold Share for every Fronteer Share the holder would otherwise be entitled to upon the exercise of Fronteer Options and (ii) the amount by which Cdn$14.00 exceeds the aggregate of the exercise price of the Fronteer Option and any amounts Fronteer is required by law to withhold from such payment (provided that if Cdn$14.00 is less than such aggregate amount, the holder has paid the difference to Fronteer prior to the Effective Time); or |
• | exercise their Fronteer Options for Fronteer Shares, with such exercise being conditional on the closing of the Arrangement. |
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1. | to consider pursuant to an interim order of the Ontario Superior Court of Justice dated February 28, 2011 (the “Interim Order”) and, if thought advisable, to pass, with or without amendment, a special resolution (the “Arrangement Resolution”), the full text of which is set forth in Appendix “A” to the accompanying Management Information Circular (the “Circular”), to approve a plan of arrangement (the “Arrangement”) under section 182 of theBusiness Corporations Act (Ontario) (“OBCA”) whereby, among other things, (a) holders of Fronteer Shares will receive, for each Fronteer Share that they hold, Cdn$14.00 in cash and one common share (a “Pilot Gold Share”) of a new exploration company (“Pilot Gold”), (b) Newmont Mining Corporation (“Newmont”) will acquire all of the issued and outstanding Fronteer Shares, and (c) the Pilot Gold Shares will be consolidated on aone-for-four basis such that, upon the completion of the Arrangement, every holder of Fronteer Shares will hold one Pilot Gold Share for every four Fronteer Shares previously held; |
2. | provided that the Arrangement Resolution is approved, to consider and, if deemed advisable, to pass, with or without variation, an ordinary resolution, the full text of which is set out in the Circular, to approve a stock option plan for Pilot Gold (the “Pilot Gold Option Plan”); and |
3. | to transact such further or other business as may properly come before the Meeting or any adjournment of adjournments thereof. |
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ARRANGEMENT RESOLUTION | A-1 | |||||||
PLAN OF ARRANGEMENT | B-1 | |||||||
OPINION OF RBC CAPITAL MARKETS | C-1 | |||||||
NOTICE OF APPLICATION AND INTERIM ORDER | D-1 | |||||||
INFORMATION CONCERNING PILOT GOLD | E-1 | |||||||
PILOT GOLD OPTION PLAN | F-1 | |||||||
COMPARISON OF SHAREHOLDER RIGHTS UNDER THE OBCA AND CBCA | G-1 | |||||||
SECTION 185 OF THE OBCA | H-1 |
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“Acquisition Proposal” | means, other than the transactions contemplated by the Arrangement Agreement, any bona fide offer, proposal, expression of interest, or inquiry from any Person (other than Newmont or any of its affiliates) made after the date of the Arrangement Agreement relating to: | |
(i) any acquisition or sale, direct or indirect, whether in a single transaction or a series of related transactions, of: (a) the assets of Fronteer and/or one or more of its subsidiaries that, individually or in the aggregate, constitute 20% or more of the fair market value of the consolidated assets of Fronteer and its subsidiaries taken as a whole; or (b) 20% or more of any voting or equity securities of Fronteer or any of its subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the fair market value of the consolidated assets of Fronteer and its subsidiaries; | ||
(ii) any take-over bid, tender offer or exchange offer for any class of voting or equity securities of Fronteer; or |
(iii) any plan of arrangement, merger, amalgamation, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving Fronteer or any of its subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the fair market value of the consolidated assets of Fronteer and its subsidiaries. |
“affiliate” | has the meaning ascribed to that term in the Securities Act. | |
“Arrangement” | means an arrangement under section 182 of the OBCA on the terms and subject to the conditions set out in the Arrangement Agreement and the Plan of Arrangement, subject to any amendments or variations thereto in accordance with section 10.1 of the Arrangement Agreement or the Plan of Arrangement or at the direction of the Court in the Final Order. | |
“Arrangement Agreement” | means the Arrangement Agreement dated as of February 3, 2011 between Newmont, Fronteer and Pilot Gold, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. | |
“Arrangement Resolution” | means the special resolution of the Fronteer Securityholders approving the Arrangement to be considered at the Meeting, substantially on the terms and in the form of Appendix “A” hereto. | |
“Business Day” | means any day, other than a Saturday, a Sunday, or a statutory civic holiday in Denver, Colorado or Vancouver, British Columbia. | |
“Canadian Securities Administrators” | means the voluntary umbrella organization of Canada’s provincial and territorial securities regulators. | |
“Cash Call Payments” | means the amount of any payments, up to a maximum of $10,000,000 in the aggregate, made by Fronteer or any of its subsidiaries after February 3, 2011 and prior to the Effective Date in response to a cash call relating to the Fronteer Exploration Properties pursuant to a contract entered into prior to February 3, 2011. | |
“Cash-Out Consideration” | in respect of a Fronteer Option means the aggregate of (i) one Pilot Gold Share and (ii) the amount by which Cdn$14.00 exceeds the aggregate of the strike price of the Fronteer Option and any amounts required to be withheld from such payment under the Tax Act or other applicable statute; provided |
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that if Cdn$14.00 is less than such aggregate amount, the Fronteer Optionholder shall have paid the amount of such difference to Fronteer prior to the Effective Time, and provided further that in respect of a Fronteer Option that is exercisable for a fraction of a Fronteer Share, references to Cdn$14.00 above, and the number of Pilot Gold Shares, shall each be adjusted in proportion to the fraction of a Fronteer Share into which such Fronteer Option is exercisable; and provided further that if the aggregate number of Pilot Gold Shares to which a Fronteer Optionholder would otherwise be entitled would include a fractional Pilot Gold Share, then the number of Pilot Gold Shares that such Fronteer Optionholder is entitled to receive will be rounded down to the next whole number and the Fronteer Optionholder will not be entitled to any compensation in respect of such fractional Pilot Gold Share. | ||
“Cashed-Out Fronteer Option” | means a Fronteer Option which a Fronteer Optionholder has elected in writing to surrender for payment of the Cash-Out Consideration. | |
“CBCA” | means theCanada Business Corporations Act, as amended, including all regulations thereunder. | |
“Circular” | means, collectively, the Notice of Meeting and this Management Information Circular of Fronteer, including all appendices hereto, sent to Fronteer Securityholders in connection with the Meeting. | |
“Code” | means the United States Internal Revenue Code of 1986, as amended. | |
“Confidentiality Agreement” | means the confidentiality agreement made as of the 25th day of March, 2010, between Newmont and Fronteer, as it may be amended. | |
“Consideration” | means the consideration to be received by the Fronteer Shareholders pursuant to the Plan of Arrangement consisting of, for each Fronteer Class A Share, Cdn$14.00 in cash. | |
“Contracts” | means any contract, agreement, license, franchise, lease, arrangement or other right or obligation. | |
“Court” | means the Ontario Superior Court of Justice. | |
“Depositary” | means Equity Financial Trust Company, which has been appointed by Newmont and Fronteer as depositary for the purpose of, among other things, receiving Letters of Transmittal (as defined in the Plan of Arrangement) and distributing certificates representing Pilot Gold Shares and cheques in respect of the Consideration payable to Fronteer Shareholders under the Arrangement. | |
“Directors” | means the directors of Fronteer. | |
“Dissent Notice” | means a written objection to the Arrangement Resolution by a Registered Fronteer Shareholder in accordance with the Dissent Procedures. | |
“Dissent Procedures” | means the dissent procedures and requirements set forth in section 185 of the OBCA and the Interim Order and described in this Circular under the heading “The Arrangement — Dissent Rights”. | |
“Dissent Right” | means the right of a Registered Fronteer Shareholder to dissent in respect of the Arrangement in strict compliance with the Dissent Procedures. | |
“Dissent Shares” | means Fronteer Shares held by a Dissenting Fronteer Shareholder and in respect of which the Dissenting Fronteer Shareholder has duly and validly exercised the Dissent Rights. | |
“Dissenting Fronteer Shareholder” | means a Registered Fronteer Shareholder who duly and validly exercised Dissent Rights. |
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“Effective Date” | means the date upon which the Arrangement becomes effective, as set out in the Plan of Arrangement. | |
“Effective Time” | means the time on the Effective Date that the Arrangement becomes effective, as set out in the Plan of Arrangement. | |
“Eligible Institution” | means a Canadian Schedule I Chartered Bank, a member of the Securities Transfer Agents Medallion Program (STAMP), a member of the Stock Exchanges Medallion Program (SEMP) or a member of the New York Stock Exchange Inc. Medallion Signature Program (MSP). | |
“Exchange Act” | means the United States Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, as the same have been, and hereafter from time to time may be, amended. | |
“Exclusivity Agreement” | means the non-binding proposal and exclusivity letter dated January 14, 2011 between Newmont and Fronteer. | |
“Exercised Fronteer Option” | means a Fronteer Option which a Fronteer Optionholder has elected in writing prior to the Effective Date to exercise in accordance with the terms of the Plan of Arrangement and in respect of which the Fronteer Optionholder has, prior to the Effective Date, paid to Fronteer the aggregate of the strike price of such Fronteer Option and the amount of all withholdings required to be made in connection with the exercise thereof under the Tax Act or other applicable statute. | |
“Exercising Optionholders” | means holders of Fronteer Options who exercise Fronteer Options after the date of the Arrangement Agreement but prior to the Effective Time. | |
“Fairness Opinion” | means the opinion of RBC Capital Markets dated February 2, 2011 delivered to the Fronteer Board in connection with the Arrangement, a copy of which is attached as Appendix “C” to this Circular. | |
“Final Order” | means the final order of the Court pursuant to section 182 of the OBCA, after hearing upon the fairness of the terms and conditions of the Arrangement, approving the Arrangement, as such order may be amended by the Court at any time prior to the Effective Date with the consent of Newmont and Fronteer, each acting reasonably, or, if appealed, then unless such appeal is withdrawn or denied, as affirmed or as amended on appeal with the consent of Newmont and Fronteer, each acting reasonably. | |
“Fronteer” or the “Company” | means Fronteer Gold Inc., a corporation existing under the laws of Ontario. | |
“Fronteer Board” | means the board of directors of Fronteer as the same is constituted from time to time. | |
“Fronteer Class A Shares” | means the Class A voting shares of Fronteer which are to be created in accordance with the Plan of Arrangement and which shall be voting, redeemable and retractable at Cdn$14.00 per share and, if any Fronteer Shares are transferred to Newmont Sub pursuant to section 3(a)(i) or section 3(a)(iii) of the Plan of Arrangement, shall have a liquidation preference equal to Cdn$14.00 per share. | |
“Fronteer Exploration Properties” | means all of the right, title and interest of Fronteer and/or its subsidiaries in the following mineral properties: (i) the Brik Project located in Lincoln County, Nevada, (ii) the North Buckskin Project, located in Douglas County, Nevada, (iii) the Cold Springs Project, located in Churchill County, Nevada, (iv) the Regent Project, located in Mineral County, Nevada, (v) the Anchor Project, located in Eureka County, Nevada, (vi) the Baxter Springs Project, located in Nye County, Nevada, (vii) the New Boston Project, located in Nye County, Nevada, (viii) the Stateline Project, located in Lincoln County, Nevada, (ix) the Viper Project, located in Elko County, Nevada, (x) the |
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Easter Project, located in Nevada, (xi) the Gold Springs 2 Project, located in Nevada, (xii) 40% interest in the Halilaga and TV Tower Projects in Turkey, (xiii) 40% interest in additional Turkish properties held by Truva Bakir Maden Isletmeleri A.S. and Ortu Truva Madencilik Sanayi Ticaret Limited Sirketi (xiv) 100% interest in additional Turkish properties held by Agola Madencilik Limited Sirketi, and (xv) 40% beneficial interest in the Dedegagi Property in Turkey. | ||
“Fronteer Mining Properties” | means all mining claims (whether patented or unpatented), concessions, leases, licences, permits, surface rights, access rights and other rights and interests to explore for, exploit, develop, mine or produce minerals which Fronteer, any of its subsidiaries owns, has an interest in, or has a right or option to acquire or use other than those that relate exclusively to the Fronteer Exploration Properties, together with all joint venture, earn-in and other Contracts and royalties or other similar rights and all exploration information, data reports and studies including all geological, geophysical and geochemical information and data (including all drill, sample and assay results and all maps) and all technical reports, feasibility studies and other similar reports and studies concerning the Fronteer Mining Properties in Fronteer’s possession or control relating to such Fronteer Mining Properties. | |
“Fronteer Options” | means the outstanding options to purchase Fronteer Shares granted under or otherwise subject to the Fronteer Stock Option Plans. | |
“Fronteer Optionholder” | means a holder of Fronteer Options. | |
“Fronteer Securities” | means the outstanding Fronteer Shares and Fronteer Options. | |
“Fronteer Securityholder Approval” | means approval of at least two-thirds of the votes cast on the Arrangement Resolution by Fronteer Shareholders and Fronteer Optionholders, voting together as a single class, present in person or represented by proxy at the Meeting. | |
“Fronteer Securityholders” | means the holders from time to time of Fronteer Shares and Fronteer Options. | |
“Fronteer Shareholders” | means the holders of Fronteer Shares. | |
“Fronteer Shares” | means common shares in the capital of Fronteer, as currently constituted. | |
“Fronteer Stock Option Plans” | means, collectively, (i) the Amended and Restated Stock Option Plan (2010) of Fronteer dated March 25, 2010 and approved by the Fronteer Shareholders on May 27, 2010, as amended, (ii) the acquisition stock option plan approved by the Fronteer Board in August 2007 in connection with Fronteer’s acquisition of NewWest Gold Corporation, and (iii) the stock option plan of Aurora Energy Resources Inc. assumed by Fronteer in connection with Fronteer’s acquisition of Aurora Energy Resources Inc. | |
“Fronteer U.S Securityholders” | means Fronteer Securityholders who are resident in, or citizens of, the United States. | |
“GAAP” | means the Canadian generally accepted accounting principles. | |
“Georgeson” | means Georgeson Shareholder Communications Canada Inc., Fronteer’s proxy solicitation agent for the Meeting. | |
“Governmental Entity” | means any applicable: (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign; (b) subdivision, agent, commission, board or authority of any of the foregoing; (c) quasi-governmental or private body, including any tribunal, commission, regulatory agency or self-regulatory organization, exercising any regulatory, expropriation or taxing authority |
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under or for the account of any of the foregoing; or (d) stock exchange, including the TSX and the NYSE Amex. | ||
“g/t” | means grams per tonne. | |
“Indemnified Liability” | means: | |
(a) a liability or obligation (other than any liability or obligation for Taxes) that, following the Effective Time, Fronteer or any of its subsidiaries is legally obliged to pay but which was incurred or accrued prior to the Effective Time in respect of the Pilot Gold Assets, the Fronteer Exploration Properties (including the operations or activities in connection therewith); and | ||
(b) any liability or obligation for Tax which is payable to any Governmental Entity arising from, or in connection with: |
(i) the transfer of the Pilot Gold Assets and Fronteer Exploration Properties to, or the assumption of the Pilot Gold Liabilities by, Pilot Gold or any subsidiary of Pilot Gold (which for greater certainty includes any step contemplated by Schedule B to the Fronteer Disclosure Letter but does not include any liability for Taxes that arises as a result of a Pre-Acquisition Reorganization); | ||
(ii) any transfer or distribution by any Transferred Subsidiary that is completed in connection with the transactions referred to in (i) above, on or prior to the Effective Date; | ||
(iii) any transfer or distribution of the Pilot Gold Assets and Fronteer Exploration Properties or property substituted therefor that is completed in connection with the transactions referred to in (i) above, by any subsidiary of Fronteer; or | ||
(iv) the transfer or disposition of Pilot Gold Shares to Fronteer Shareholders, Newmont Sub and/or Fronteer Optionholders (excluding source deductions on any transfer to Fronteer Optionholders); or |
(c) any liability or obligation for Tax which is payable but not yet paid or reflected in the reserves in (i) Fronteer’s audited financial statements as at and for the fiscal years ended December 31, 2009 and 2008 (including the notes thereto) and related management’s discussion and analysis, and (ii) Fronteer’s consolidated financial statements as at and for the nine months ended September 30, 2010, to any Governmental Entity and is imposed on, or is in respect of, the Pilot Gold Assets, the Pilot Gold Liabilities, any Transferred Subsidiary and/or the Fronteer Exploration Properties for or in respect of any taxable period (or portion thereof) ending on or prior to the Effective Date, | ||
in each case, whether such action actually occurs or is deemed to occur for Tax purposes and only to the extent that such Tax is payable after Fronteer and any of its subsidiaries have claimed the maximum amount of all credits, deductions, and other amounts available to it (including any loss carryforwards) for its respective taxation year that includes the transfer of Pilot Gold Assets or Fronteer Exploration Properties to Pilot Gold or the disposition of Pilot Gold Shares, as the case may be. |
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“Interim Order” | means the interim order of the Court made in connection with the Arrangement and providing for, among other things, the calling and holding of the Meeting, as the same may be amended, supplemented, or varied by the Court with Newmont and Fronteer, each acting reasonably. | |
“IRS” | means the Internal Revenue Service of the United States. | |
“Key Regulatory Approvals” | means those sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of Governmental Entities set out in Schedule C to the Arrangement Agreement. | |
“Law�� or “Laws” | means all laws (including common law), by-laws, statutes, rules, regulations, principles of law and equity, orders, rulings, ordinances, judgements, injunctions, determinations, awards, decrees or other requirements, whether domestic or foreign, and the terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity, and the term “applicable” with respect to such Laws and in a context that refers to one or more Parties, means such Laws as are applicable to such Party or its business, undertaking, assets, property or securities and emanate from a Person having jurisdiction over the Party or Parties or its or their business, undertaking, assets, property or securities. | |
“Letter of Transmittal” | means the letter of transmittal(s) delivered by Fronteer to Fronteer Shareholders together with this Circular, providing for the delivery of the Fronteer Shares to the Depositary. | |
“Lien” | means any hypothec, mortgage, pledge, assignment, lien, charge, security interest, encumbrance or adverse right or claim, other third Person interest or encumbrance of any kind, whether contingent or absolute, and any agreement, option, right or privilege (whether by law, contract or otherwise) capable of becoming any of the foregoing. | |
“Lock-up Agreements” | means the lock-up agreements dated February 3, 2011 between Fronteer and the Supporting Shareholders, pursuant to which the Supporting Shareholders have agreed, among other things, to vote the Fronteer Shares held by them in favour of the Arrangement Resolution. | |
“Long Canyon Property” | means the approximately 49 square kilometres of unpatented mining claims and private mineral lands commonly known as the “Long Canyon property”, located in Elko County, Nevada as depicted on Schedule I of the Arrangement Agreement. | |
“Material Adverse Effect” | means, in respect of any Person, any change, effect, event, circumstance, fact or occurrence that individually or in the aggregate with other such changes, effects, events, circumstances, facts or occurrences, is or would reasonably be expected to be, material and adverse to the business, condition (financial or otherwise), properties, assets (tangible or intangible), liabilities (including any contingent liabilities), operations or results of operations of that Person and its subsidiaries, taken as a whole, except any change, effect, event, circumstance, fact or occurrence resulting from or relating to: (i) the announcement of the execution of the Arrangement Agreement or the transactions contemplated hereby; (ii) general political, economic or financial conditions, including in Canada or the United States (provided that such conditions do not have a materially disproportionate effect on Fronteer relative to comparable exploration and/or mining companies); (iii) the state of securities or commodity markets in general (provided that |
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it does not have a materially disproportionate effect on that Person relative to comparable exploration and/or mining companies); (iv) changes affecting the mining industry generally (provided that such changes do not have a materially disproportionate effect on that Person relative to comparable exploration and/or mining companies); (v) any change in the price of gold; (vi) the commencement or continuation of any war, armed hostilities or acts of terrorism (provided that it does not have a materially disproportionate effect on that Person relative to comparable exploration and/or mining companies); (vii) any decrease in the trading price or any decline in the trading volume of that Person’s common shares (it being understood that the causes underlying such change in trading price or trading volume (other than those in items (i) to (vi) above) may be taken into account in determining whether a Material Adverse Effect has occurred). | ||
“Material Subsidiaries” | means, in the case of Fronteer, AuEx Ventures Inc., AuEx, Inc., Pittston Nevada Gold Corp., NewWest Gold Corporation, Fronteer Development (USA) Inc., Fronteer Development LLC, Fronteer Royalty LLC and Nevada Eagle Resources LLC. | |
“MD&A” | means management’s discussion and analysis. | |
“Meeting” | means the special meeting of Fronteer Securityholders, including any adjournment or postponement thereof, to be held for the purpose of, among other things, obtaining the Fronteer Securityholder Approval. | |
“MI61-101” | meansMultilateral Instrument61-101 — Protection of Minority Security Holders in Special Transactions. | |
“Newmont” | means Newmont Mining Corporation, a corporation existing under the laws of the State of Delaware. | |
“Newmont Sub” | means an unlimited liability company formed pursuant to the laws of British Columbia as an indirect, wholly-owned subsidiary of Newmont. | |
“NI43-101” | meansNational Instrument43-101“Standards of Disclosure for Mineral Projects” of the Canadian Securities Administrators. | |
“Non-Registered Holder” | means a Fronteer Shareholder who is not a Registered Fronteer Shareholder. | |
“Northumberland Property” | means the approximately 45,467 acres, including 2,230 unpatented lode claims, 9 patented mining claims, 63 patented mill site claims and fee lands commonly known as the “Northumberland property”, located in Nye County, Nevada as depicted on Schedule J to the Arrangement Agreement. | |
“Notice of Dissent” | means a written objection to the Arrangement by a Fronteer Shareholder in accordance with the Dissent Procedures. | |
“Notice of Meeting” | means the notice to the Fronteer Shareholders which accompanies this Circular. | |
“NYSE Amex” | means the NYSE Amex Equities stock exchange. | |
“OBCA” | means theBusiness Corporations Act (Ontario), as amended, including all regulations thereunder. | |
“Outside Date” | means June 30, 2011, or such later date as may be agreed to in writing by Newmont and Fronteer. | |
“paid up capital” | has the meaning ascribed to such term for the purposes of the Tax Act. | |
“Parties” | means Fronteer, Newmont and Pilot Gold; and “Party” means any one of them. |
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“Person” | includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative, government (including any Governmental Entity) or any other entity, whether or not having legal status. | |
“Pilot Gold” | means Pilot Gold Inc., a corporation existing under the laws of Canada. | |
“Pilot Gold Assets” | means (i) all mining claims (whether patented or unpatented), concessions, leases, licenses, surface rights or other mineral rights in respect of the Fronteer Exploration Properties, (ii) the office leases of Fronteer and/or its subsidiaries relating to Fronteer’s existing offices located at Suite 1650, 1055 West Hastings, Vancouver, British Columbia and Fronteer’s office in Elko County, Nevada and Turkey, (iii) office furniture, office equipment or office supplies located at the office locations referred to in clause (ii) above, (iv) all fixed assets of Fronteer and/or its subsidiaries relating exclusively to the Fronteer Exploration Properties or located within the boundaries of the Fronteer Exploration Properties or at the office locations referred to above in paragraph (ii) above, (v) Fronteer’s 40% beneficial interest in the Dededagi Property located in Turkey, (vi) the shares of Fronteer Investments Inc., and its subsidiaries Truva Bakir Maden Isletmeleri A.S. (40%), Ortu Truva Madencilik Sanayi Ticaret Limited Sirketi (40%) and Agola Madencilik Limited Sirketi (100%), which together hold the Fronteer Exploration Properties located in Turkey (other than the Dededagi Property), (vii) the shares and warrants of Rae Wallace Mining Company, which holds certain exploration properties in Peru together with the Option Agreement with Rae Wallace Mining Company, (viii) all joint venture, earn-in, other Contracts entered into by Fronteer and/or its subsidiaries, and royalties or other similar rights that relate exclusively to the Fronteer Exploration Properties; (ix) all exploration information, data reports and studies including all geological, geophysical and geochemical information and data (including all drill, sample and assay results and all maps) and all technical reports, feasibility studies and other similar reports and studies concerning the Fronteer Exploration Properties in Fronteer’s possession or control relating to the Fronteer Exploration Properties, and (x) an amount of cash that results in Pilot Gold and its subsidiaries having in the aggregate, as of the Effective Time, the Pilot Gold Cash Amount. | |
“Pilot Gold Cash Amount” | means Cdn$10 million in cash less any payments, up to a maximum of Cdn$10 million in aggregate, made by Fronteer or any of its subsidiaries on or prior to the Effective Date in response to a cash call relating to the Fronteer Exploration Properties pursuant to an existing Contract. | |
“Pilot Gold Liabilities” | means all of the liabilities of Fronteer or any of its subsidiaries, contingent or otherwise, which pertain to, or arose in connection with the operation of, the Fronteer Exploration Properties, including, without limitation, all Indemnified Liabilities and any benefit plans relating to employees of Fronteer and its subsidiaries. | |
“Pilot Gold Option Plan” | means the stock option plan of Pilot Gold to be approved by Fronteer Shareholders at the Meeting. | |
“Pilot Gold Share” | means a common share in the capital of Pilot Gold. | |
“Pilot Gold Share Consideration” | means the undertaking of Newmont Sub to deliver one Pilot Gold Share (subject to adjustment for the consolidation provided for in section 3(a)(v) of the Plan of Arrangement) in part payment of the purchase price of a Fronteer Share within three Business Days of the Effective Date. |
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“Plan of Arrangement” | means the plan of arrangement substantially in the form and on the terms set out in Appendix “B” hereto, and any amendments or variations thereto made in accordance with section 10.1 of the Arrangement Agreement or section 6 of the Plan of Arrangement. | |
“RBC Capital Markets” | means RBC Dominion Securities Inc., a member company of RBC Capital Markets, financial advisor to Fronteer. | |
“Record Date” | means February 28, 2011. | |
“Registered Fronteer Securityholder” | means a registered holder of Fronteer Shares or Fronteer Options. | |
“Registered Fronteer Shareholder” | means a registered holder of Fronteer Shares. | |
“Regulation S” | means Regulation S under the U.S. Securities Act. | |
“Representatives” | means collectively, in respect of a Person, (a) its directors, officers, employees, agents, representatives and any financial advisor, law firm, accounting firm or other professional firm retained to assist the Person in connection with the transactions contemplated in the Arrangement Agreement, and (b) the Person’s affiliates and subsidiaries and the directors, officers, employees, agents and representatives and advisors thereof. | |
“Rule 144” | means Rule 144 under the U.S. Securities Act. | |
“Sandman Property” | means the property consisting of approximately 624 unpatented lode mining claims and approximately 6,720 acres of fee lands commonly known as the “Sandman property”, located in Humboldt County, Nevada as depicted on Schedule K to the Arrangement Agreement. | |
“SEC” | means the United States Securities and Exchange Commission. | |
“Securities Act” | means theSecurities Act (Ontario) and the rules, regulations, and published policies made thereunder, as now in effect and as they may be promulgated or amended from time to time. | |
“Securities Authority” | means the securities commissions or other securities regulatory authorities in British Columbia and each of the other provinces and territories of Canada and the SEC, collectively. | |
“SEDAR” | means the System for Electronic Document Analysis and Retrieval as outlined in NI13-101, which can be accessed online at www.sedar.com. | |
“Subco Note” | means the demand, non-interest bearing note, if any, to be issued by a subsidiary of Pilot Gold to a subsidiary of Fronteer if the purchase price for the shares of FII (as defined in Appendix “E” of this Circular) exceeds the amount of cash received by such Pilot Gold subsidiary from Pilot Gold. | |
“subsidiary” | means, in respect of a Party, any body corporate of which more than 50% of the outstanding shares ordinarily entitled to elect a majority of the board of directors thereof (whether or not shares of any other class or classes shall or might be entitled to vote upon the happening of any event of contingency) are at the time owned directly or indirectly by such Party and shall include any body corporate, partnership, joint venture, or other entity over which such Party exercises direction or control or which is in a like relation to a subsidiary. | |
“Superior Proposal” | means a bona fide unsolicited, written Acquisition Proposal made after the date of the Arrangement Agreement that: | |
(i) did not result from a breach of section 7.1 or section 7.2 of the Arrangement Agreement by Fronteer or its Representatives; |
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(ii) relates to the acquisition of 100% of the outstanding Fronteer Shares (other than Fronteer Shares owned by the Person making the Acquisition Proposal together with its affiliates) or all or substantially all of the consolidated assets of Fronteer and its subsidiaries; | ||
(iii) is reasonably capable of being completed without undue delay, taking into account all financial, legal, regulatory and other aspects of such Acquisition Proposal and the Person making such Acquisition Proposal; | ||
(iv) is not subject, either by the terms of such Acquisition Proposal or by virtue of any applicable Law, rule or regulation of any stock exchange to any requirement that the approval of the shareholders of the Person making the Acquisition Proposal be obtained; | ||
(v) if it relates to the acquisition of outstanding Fronteer Shares, is made available to all Fronteer Shareholders on the same terms and conditions; | ||
(vi) is not subject to a due diligence condition; | ||
(vii) is not subject to any financing condition and in respect of which the Fronteer Board has concluded, in good faith and after receiving the advice of its outside legal and financial advisors, there is a reasonable likelihood that any required financing has been obtained or will be obtained without undue delays; and | ||
(viii) in respect of which the Fronteer Board determines, in its good faith judgment, after receiving the advice of its outside legal and financial advisors, that |
(A) failure to recommend such Acquisition Proposal to the holders of Fronteer Shares would be inconsistent with its fiduciary duties under applicable Law; and | ||
(B) having regard to all of its terms and conditions, such Acquisition Proposal, would, if consummated in accordance with its terms (but not assuming away any risk of non-completion), result in a transaction more favourable to the holders of Fronteer Shares from a financial point of view than the Arrangement (after taking into account any change to the Arrangement proposed by Fronteer pursuant to section 7.3(b) of the Arrangement Agreement). |
“Supporting Shareholders” | means each of the officers and the directors of Fronteer and an additional shareholder of Fronteer that executed aLock-Up Agreement on February 3, 2011. | |
“Tax” or “Taxes” | means: | |
(i) any and all taxes, imposts, levies, withholdings, duties, fees, premiums, assessments and other charges of any kind, however denominated and instalments in respect thereof, including any interest, penalties, fines or other additions that have been, are or will become payable in respect thereof, imposed by any Governmental Entity, including for greater certainty all income or profits, taxes (including Canadian and United States federal, provincial, state and territorial income taxes), payroll and employee withholding taxes, employment taxes, unemployment insurance, disability taxes, social insurance taxes, sales and use taxes, ad valorem taxes, excise taxes, goods and services taxes, harmonized sales taxes, franchise taxes, |
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gross receipts taxes, capital taxes, business license taxes, mining royalties, alternative minimum taxes, estimated taxes, abandoned or unclaimed (escheat) taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, severance taxes, workers’ compensation, United States, Canada, British Columbia, Ontario and other government pension plan premiums or contributions and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which such Party or any of its subsidiaries is required to pay, withhold or collect, together with any interest, penalties or other additions to tax that may become payable in respect of such taxes, and any interest in respect of such interest, penalties and additions whether disputed or not; and |
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(a) | Each Fronteer Share held by a Dissenting Fronteer Shareholder shall be deemed to be transferred by the holder thereof, without any further act or formality on its part, free and clear of all Liens, to Newmont Sub and thereupon each Dissenting Fronteer Shareholder shall have the right to be paid the fair value of his or her Dissent Shares in accordance with section 5 of the Plan of Arrangement; |
(b) | Notwithstanding any vesting or exercise provisions to which a Fronteer Option might otherwise be subject (whether by contract, the conditions of a grant, applicable Law or the terms of the Fronteer Stock Option Plans), each Fronteer Option issued and outstanding at the Effective Time will, without any further action by or on behalf of any holder of such Fronteer Option, be deemed to be fully vested and: |
(A) | each Cashed-Out Fronteer Option shall be, and shall be deemed to be, transferred to Fronteer, free and clear of all Liens, and each such Fronteer Option shall be cancelled in exchange for the payment by Fronteer of the Cash-Out Consideration to the holder thereof; | |
(B) | each Exercised Fronteer Option shall be, and shall be deemed to be, exercised by the holder thereof and Fronteer shall issue one Fronteer Share to the holder thereof; | |
(C) | with respect to each Fronteer Option, the holder thereof will cease to be the holder of such Fronteer Option, will cease to have any rights as a holder in respect of such Fronteer Option or under the Fronteer |
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Stock Option Plans, such holder’s name will be removed from the register of Fronteer Options, and all option agreements, grants and similar instruments relating thereto will be cancelled; and |
(D) | the Fronteer Stock Option Plans will be terminated and all outstanding Fronteer Options shall be cancelled for no consideration; |
(c) | Each outstanding Fronteer Share acquired on the exercise of a Fronteer Option in the immediately preceding step (but, for greater certainty, not any other Fronteer Share held by a person acquiring a Fronteer Share in such step) will be transferred to, and acquired by Newmont Sub, free and clear of all Liens, in exchange for (A) the sum of Cdn$14.00 in cash and (B) the Pilot Gold Share Consideration. |
(d) | The authorized share capital of Fronteer will be reorganized as follows: |
(A) | a new class of shares consisting of an unlimited number of Fronteer Class A Shares shall be created, and the articles of Fronteer shall be deemed to be amended accordingly; | |
(B) | each Fronteer Share not held by Newmont Sub will be exchanged with Fronteer (without any action on the part of the holder of the Fronteer Share) for one Fronteer Class A Share and one (1) Pilot Gold Share, and such Fronteer Shares shall thereupon be cancelled; | |
(C) | each Fronteer Shareholder (other than Dissenting Fronteer Shareholders with respect to Dissent Shares) shall cease to be the holder of such Fronteer Shares so exchanged and such holder’s name shall be removed from the central securities register of Fronteer in respect of such shares at such time; | |
(D) | each Fronteer Shareholder (other than Dissenting Fronteer Shareholders with respect to Dissent Shares) shall be deemed to be the holder of the Fronteer Class A Shares and Pilot Gold Shares (in each case, free and clear of any Lien) exchanged for the Fronteer Shares and shall be entered in the central securities register of Fronteer or Pilot Gold, as the case may be, as the holder thereof at such time; and | |
(E) | the amount added to the stated capital account of Fronteer in respect of the Fronteer Class A Shares will be an amount equal to thepaid-up capital of the Fronteer Shares exchanged in paragraph (B) above, less the aggregate fair market value of the Pilot Gold Shares distributed on such exchange; |
(e) | The Pilot Gold Shares shall be consolidated on aone-for-four basis; |
(f) | Each outstanding Fronteer Class A Share will be transferred to, and acquired by Newmont Sub, free and clear of all Liens, in exchange for Cdn$14.00 in cash; and |
(g) | The number of directors of Fronteer shall be set at two, and the incumbent directors of Fronteer shall be deemed to have resigned and shall be replaced by two nominees of Newmont. |
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(a) | Significant Premium. The Arrangement values Fronteer at Cdn$14.00 per Fronteer Share (excluding the value of the Pilot Gold Shares that will also be distributed to the Fronteer Securityholders), representing a premium of approximately 37% to the closing price of the Fronteer Shares on the TSX on February 2, 2011, the last trading day prior to the announcement of the Arrangement. Fronteer Securityholders will also receive one Pilot Gold Share for every Fronteer Share held or to which the Fronteer Securityholder would otherwise be entitled upon the surrender or exercise of Fronteer Options, which delivers additional value beyond the 37% premium represented by the Cdn$14.00 of cash consideration. The Arrangement values Fronteer favourably: (i) on a price to net asset value basis; (ii) on an enterprise value per ounce basis; and (iii) relative to comparable recent precedent transactions. | |
(b) | Certainty of Value. Cdn$14.00 of the consideration to be received by Fronteer Securityholders is payable in cash, which provides certainty of value at the significant premium described above. | |
(c) | Continued Participation by Fronteer Securityholders in Fronteer’s Exploration Properties Through Pilot Gold. Fronteer Securityholders, through their ownership of Pilot Gold Shares, will continue to participate in the opportunities associated with Fronteer Exploration Properties being transferred to Pilot Gold. The former Fronteer Securityholders will hold approximately 80.1% of the issued Pilot Gold Shares upon completion of the Arrangement and Pilot Gold will have approximately Cdn$9.64 million (representing $10 million less anticipated Cash Call Payments) in cash to pursue the exploration business formerly run by Fronteer. Mark O’Dea, the President and Chief Executive Officer of Fronteer, will become Chairman of the board of directors of Pilot Gold and Matthew Lennox-King, Fronteer’s senior geologist, will be the President and Chief |
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Executive Officer of Pilot Gold. In addition, several other key officers and employees of Fronteer will serve as members of Pilot Gold’s senior management and on Pilot Gold’s board of directors. |
(d) | Fairness Opinion. Fronteer’s financial advisor, RBC Capital Markets, provided its opinion to the Fronteer Board to the effect that, as of February 2, 2011, and subject to the assumptions, limitations and qualifications set out in the Fairness Opinion, the consideration to be received under the Arrangement is fair, from a financial point of view, to Fronteer Shareholders. See “The Arrangement — Fairness Opinion”. | |
(e) | Alternatives to the Arrangement. Prior to entering into the Arrangement Agreement, Fronteer regularly evaluated business and strategic opportunities with the objective of maximizing shareholder value in a manner consistent with the best interests of the corporation. The Fronteer Board, with the assistance of legal and financial advisors, assessed the alternatives reasonably available to Fronteer and determined that the Arrangement represents the best current prospect for maximizing shareholder value. | |
(f) | Superior Proposals. Prior to the Fronteer Securityholder Approval, the Arrangement Agreement allows the Fronteer Board, subject to compliance with the Arrangement Agreement, to furnish information and take certain other actions in respect of an unsolicited Acquisition Proposal that could reasonably be a Superior Proposal. This option and the ability to terminate the Arrangement Agreement in specified circumstances to accept a Superior Proposal on payment of the Termination Fee provided further assurance to the Fronteer Board that it would have a reasonable opportunity to consider a potential alternative transaction, if one were subsequently proposed. The Fronteer Board received advice from its financial and legal advisors that the terms of the Arrangement Agreement, including the Termination Fee and the circumstances for its payment, are within the ranges typical in the market for similar transactions and should not be a significant deterrent to a party that otherwise determined to pursue a Superior Proposal. See “The Arrangement — The Arrangement Agreement”. | |
(g) | Approval Thresholds. The Fronteer Board considered the fact that the Arrangement Resolution must be approved by no less than two-thirds of the votes cast by Fronteer Securityholders, voting together as a single class, in person or by proxy at the Meeting to be protective of the rights of Fronteer Securityholders. The Fronteer Board also considered the fact that the Arrangement must also be approved by the Court, which will consider the fairness of the Arrangement to all Fronteer Securityholders. | |
(h) | Likelihood of the Arrangement Being Completed. The likelihood of the Arrangement being completed is considered by the Fronteer Board to be high, in light of the experience, reputation and financial capability of Newmont and the absence of significant closing conditions outside the control of Fronteer, other than the Fronteer Securityholder Approval, the approval by the Court of the Arrangement, and the exercise by holders of no more than 10% of the Fronteer Shares of their Dissent Rights. In addition, the Key Regulatory Approvals condition has been satisfied. | |
(i) | Dissent Rights. Any registered Fronteer Shareholder who opposes the Arrangement may, on strict compliance with certain conditions, exercise its Dissent Rights and receive the fair value of the Dissent Shares in accordance with the Arrangement. | |
(j) | Lock-up Agreements. The Directors and officers of Fronteer and an additional Fronteer Shareholder, who in aggregate held approximately 3.9% of the outstanding Fronteer Shares and 68.2% of the outstanding Fronteer Options as at February 3, 2011 (the date on which the Arrangement was announced), each entered intoLock-up Agreements pursuant to which they agreed, among other things, to vote in favour of the Arrangement. See “The Arrangement —Lock-Up Agreements”. |
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• | the Fronteer Securityholder Approval having been obtained; |
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• | the Final Order having been granted by the Court on terms consistent with the Arrangement Agreement and such Final Order not having been set aside or modified in a manner unacceptable to Fronteer and Newmont; | |
• | the Key Regulatory Approvals having been obtained; | |
• | the Arrangement Agreement not having been terminated; | |
• | holders of no more than ten percent (10%) of the Fronteer Shares having exercised their Dissent Rights (and not withdrawn such exercise); and | |
• | the accuracy of representations and warranties made in the Arrangement Agreement and compliance by the Parties with the covenants set forth in the Arrangement Agreement. |
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(a) | the share certificates representing their Fronteer Shares; | |
(b) | a Letter of Transmittal in the form provided with this Circular, properly completed and duly executed as required by the instructions set out in the Letter of Transmittal; and | |
(c) | any other documentation required by the instructions set out in the Letter of Transmittal. |
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(a) | Each Fronteer Share held by a Dissenting Fronteer Shareholder shall be deemed to be transferred by the holder thereof, without any further act or formality on its part, free and clear of all Liens, to Newmont Sub and thereupon each Dissenting Fronteer Shareholder shall have the right to be paid the fair value of his or her Dissent Shares in accordance with section 5 of the Plan of Arrangement; |
(b) | Notwithstanding any vesting or exercise provisions to which a Fronteer Option might otherwise be subject (whether by contract, the conditions of a grant, applicable Law or the terms of the Fronteer Stock Option Plans), each Fronteer Option issued and outstanding at the Effective Time will, without any further action by or on behalf of any holder of such Fronteer Option, be deemed to be fully vested and: |
(A) | each Cashed-Out Fronteer Option shall be, and shall be deemed to be, transferred to Fronteer, free and clear of all Liens, and each such Fronteer Option shall be cancelled in exchange for the payment by Fronteer of the Cash-Out Consideration to the holder thereof; | |
(B) | each Exercised Fronteer Option shall be, and shall be deemed to be, exercised by the holder thereof and Fronteer shall issue one Fronteer Share to the holder thereof; | |
(C) | with respect to each Fronteer Option, the holder thereof will cease to be the holder of such Fronteer Option, will cease to have any rights as a holder in respect of such Fronteer Option or under the Fronteer Stock Option Plans, such holder’s name will be removed from the register of Fronteer Options, and all option agreements, grants and similar instruments relating thereto will be cancelled; and | |
(D) | the Fronteer Stock Option Plans will be terminated and all outstanding Fronteer Options shall be cancelled for no consideration; |
(c) | Each outstanding Fronteer Share acquired on the exercise of a Fronteer Option in the immediately preceding step (but, for greater certainty, not any other Fronteer Share held by a person acquiring a Fronteer Share in such step) will be transferred to, and acquired by Newmont Sub, free and clear of all Liens, in exchange for (A) the sum of Cdn$14.00 in cash and (B) the Pilot Gold Share Consideration. |
(d) | The authorized share capital of Fronteer will be reorganized as follows: |
(A) | a new class of shares consisting of an unlimited number of Fronteer Class A Shares shall be created, and the articles of Fronteer shall be deemed to be amended accordingly; | |
(B) | each Fronteer Share not held by Newmont Sub will be exchanged with Fronteer (without any action on the part of the holder of the Fronteer Share) for one Fronteer Class A Share and one (1) Pilot Gold Share, and such Fronteer Shares shall thereupon be cancelled; | |
(C) | each Fronteer Shareholder (other than Dissenting Fronteer Shareholders with respect to Dissent Shares) shall cease to be the holder of such Fronteer Shares so exchanged and such holder’s name shall be removed from the central securities register of Fronteer in respect of such shares at such time; | |
(D) | each Fronteer Shareholder (other than Dissenting Fronteer Shareholders with respect to Dissent Shares) shall be deemed to be the holder of the Fronteer Class A Shares and Pilot Gold Shares (in each case, free and clear of any Lien) exchanged for the Fronteer Shares and shall be entered in the central securities register of Fronteer or Pilot Gold, as the case may be, as the holder thereof at such time; and | |
(E) | the amount added to the stated capital account of Fronteer in respect of the Fronteer Class A Shares will be an amount equal to thepaid-up capital of the Fronteer Shares exchanged in paragraph (B) above, less the aggregate fair market value of the Pilot Gold Shares distributed on such exchange; |
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(e) | The Pilot Gold Shares shall be consolidated on aone-for-four basis; |
(f) | Each outstanding Fronteer Class A Share will be transferred to, and acquired by Newmont Sub, free and clear of all Liens, in exchange for Cdn$14.00 in cash; and |
(g) | The number of directors of Fronteer shall be set at two, and the incumbent directors of Fronteer shall be deemed to have resigned and shall be replaced by two nominees of Newmont. |
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(a) | Significant Premium. The Arrangement values Fronteer at Cdn$14.00 per Fronteer Share (excluding the value of the Pilot Gold Shares that will also be distributed to the Fronteer Securityholders), representing a premium of approximately 37% to the closing price of the Fronteer Shares on the TSX on February 2, 2011, the last trading day prior to the announcement of the Arrangement. Fronteer Securityholders will also receive one Pilot Gold Share for every Fronteer Share held or to which the Fronteer Securityholder would otherwise be entitled upon the surrender or exercise of Fronteer Options, which delivers additional value beyond the 37% premium represented by the Cdn$14.00 of cash consideration. The Arrangement also values Fronteer favourably: (i) on a price to net asset value basis; (ii) on an enterprise value per ounce basis; and (iii) relative to comparable recent precedent transactions. | |
(b) | Certainty of Value. Cdn$14.00 of the consideration to be received by Fronteer Securityholders is payable in cash, which provides certainty of value at the significant premium described above. | |
(c) | Continued Participation by Fronteer Securityholders in Fronteer’s Exploration Properties Through Pilot Gold. Fronteer Securityholders, through their ownership of Pilot Gold Shares, will continue to participate in the opportunities associated with Fronteer Exploration Properties being transferred to Pilot Gold. The former Fronteer Securityholders will hold approximately 80.1% of the issued Pilot Gold Shares upon completion of the Arrangement and Pilot Gold will have approximately Cdn$9.64 million in cash (representing Cdn$10 million less anticipated Cash Call Payments) to pursue the exploration business formerly run by Fronteer. Mark O’Dea, the President and Chief Executive Officer of Fronteer, will become Chairman of the board of directors of Pilot Gold and Matthew Lennox-King, Fronteer’s senior geologist, will be the President and Chief Executive Officer of Pilot Gold. In addition, several other key officers and employees of Fronteer will serve as members of Pilot Gold’s senior management and on Pilot Gold’s board of directors. | |
(d) | Fairness Opinion. Fronteer’s financial advisor, RBC Capital Markets, provided its opinion to the Fronteer Board to the effect that, as of February 2, 2011, and subject to the assumptions, limitations and qualifications set out in the Fairness Opinion, the consideration to be received under the Arrangement is fair, from a financial point of view, to the Fronteer Shareholders. See “The Arrangement — Fairness Opinion”. | |
(e) | Alternatives to the Arrangement. Prior to entering into the Arrangement Agreement. Fronteer regularly evaluated business and strategic opportunities with the objective of maximizing shareholder value in a manner consistent with the best interests of the corporation. The Fronteer Board, with the assistance of legal and financial advisors, assessed the alternatives reasonably available to Fronteer and determined that the Arrangement represents the best current prospect for maximizing shareholder value. | |
(f) | Superior Proposals. Prior to the Fronteer Securityholder Approval, the Arrangement Agreement allows the Fronteer Board, subject to compliance with the Arrangement Agreement, to furnish information and take certain other actions in respect of an unsolicited Acquisition Proposal that could reasonably be a Superior Proposal. This option and the ability to terminate the Arrangement Agreement in specified circumstances to accept a Superior Proposal on payment of the Termination Fee provided further assurance to the Fronteer Board that it would have a reasonable opportunity to consider a potential alternative transaction, if one were subsequently proposed. The Fronteer Board received advice from its financial and legal advisors that the terms of the Arrangement Agreement, including the Termination Fee and the circumstances for its payment, are within the ranges typical in the market for similar transactions and should not be a significant deterrent to a |
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party that otherwise determined to pursue a Superior Proposal. See “The Arrangement — The Arrangement Agreement”. |
(g) | Approval Thresholds. The Fronteer Board considered the fact that the Arrangement Resolution must be approved by no less than two-thirds of the votes cast by Fronteer Securityholders, voting together as a single class, in person or by proxy at the Meeting to be protective of the rights of Fronteer Securityholders. The Fronteer Board also considered the fact that the Arrangement must also be approved by the Court, which will consider the fairness of the Arrangement to all Fronteer Securityholders. | |
(h) | Likelihood of the Arrangement Being Completed. The likelihood of the Arrangement being completed is considered by the Fronteer Board to be high, in light of the experience, reputation and financial capability of Newmont and the absence of significant closing conditions outside the control of Fronteer, other than the Fronteer Securityholder Approval, the approval by the Court of the Arrangement, and the exercise by holders of no more than 10% of the Fronteer Shares of their Dissent Rights. In addition, the Key Regulatory Approvals condition has been satisfied. | |
(i) | Dissent Rights. Any registered Fronteer Shareholder who opposes the Arrangement may, on strict compliance with certain conditions, exercise its Dissent Rights and receive the fair value of the Dissent Shares in accordance with the Arrangement. | |
(j) | Lock-up Agreements. The Directors and officers of Fronteer and an additional Fronteer Shareholder, who in aggregate held approximately 3.9% of the outstanding Fronteer Shares and 68.2% of the outstanding Fronteer Options as at February 3, 2011 (the date on which the Arrangement was announced), each entered intoLock-up Agreements pursuant to which they agreed, among other things, to vote in favour of the Arrangement. See “The Arrangement —Lock-Up Agreements”. |
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(a) | the certificates representing their Fronteer Shares; | |
(b) | a Letter of Transmittal in the form accompanying this Circular, or a manually executed photocopy thereof, properly completed and duly executed as required by the instructions set out in the Letter of Transmittal; and | |
(c) | any other relevant documents required by the instructions set out in the Letter of Transmittal. |
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Fronteer | Fronteer | |||||||||
Name | Position | Shares | Options | |||||||
Mark O’Dea | Director, President and Chief Executive Officer | 470,661 | 1,912,500 | |||||||
Sean Tetzlaff | Chief Financial Officer, Vice President, Finance and Corporate Secretary | 331,362 | 732,375 | |||||||
Troy Fierro | Chief Operating Officer | 20,000 | 350,000 | |||||||
John Dorward | Vice President, Business Development | 1,000 | 250,000 | |||||||
Ian Cunningham-Dunlop | Vice President, Exploration | 45,375 | 607,375 | |||||||
Christopher Lee | Chief Geoscientist | 2,172 | 568,750 | |||||||
Jim Lincoln | Vice President, Operations | 12,250 | 556,000 |
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(a) | the Arrangement Resolution shall have been approved and adopted by the Fronteer Securityholders at the Meeting in accordance with the Interim Order; | |
(b) | the Interim Order and the Final Order shall each have been obtained on terms consistent with the Arrangement Agreement, and shall not have been set aside or modified in a manner unacceptable to Fronteer and Newmont, acting reasonably, on appeal or otherwise; | |
(c) | there shall not exist any prohibition at law, including a cease trade order, injunction or other prohibition or order at law or under applicable legislation, and there shall not have been any action taken under any law or by any Governmental Entity or other regulatory entity that makes it illegal or otherwise, directly or indirectly, restrains, enjoins, prevents or prohibits the consummation of the Arrangement; | |
(d) | the Pilot Gold Shares to be issued to Fronteer Shareholders and Fronteer Optionholders pursuant to the Arrangement shall be exempt from the registration requirements under Section 3(a)(10) of the U.S. Securities Act; | |
(e) | the Key Regulatory Approvals shall have been obtained; | |
(f) | the Arrangement Agreement shall not have been terminated in accordance with its terms; | |
(g) | the distribution of the Pilot Gold Shares pursuant to the Arrangement shall be exempt from the prospectus and registration requirements of applicable Canadian and provincial securities laws; and | |
(h) | (i) Pilot Gold shall be validly existing under the laws of Canada and all of the issued and outstanding shares of capital stock and other ownership interests in Pilot Gold shall be legally and beneficially owned, directly or indirectly, by Fronteer free and clear of all Liens, (ii) Fronteer shall, directly or indirectly, hold a number of whole Pilot Gold Shares such that, after giving effect to the distribution of Pilot Gold Shares contemplated in the Plan of Arrangement, Fronteer would hold approximately 19.9% of the outstanding Pilot Gold Shares, and (iii) Pilot Gold and its subsidiaries shall have the Pilot Gold Cash Amount in cash on a consolidated basis. |
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�� | (a) | all covenants of Fronteer under the Arrangement Agreement to be performed on or before the Effective Time which have not been waived by Newmont shall have been duly performed by Fronteer in all material respects, and Newmont shall have received a certificate of Fronteer addressed to Newmont and dated the Effective Date, signed on behalf of Fronteer by a senior executive officer of Fronteer (on Fronteer’s behalf and without personal liability), confirming the same as at the Effective Time; |
(b) | all representations and warranties of Fronteer (i) set forth in section 3.1(e) of the Arrangement Agreement shall be true and correct in all respects as of the Effective Time as though made at and as of the Effective Time (except for those representations and warranties in section 3.1(e) made as of a specified date, the accuracy of which shall be determined as of that specified date), and (ii) otherwise set forth in the Agreement shall be true and correct in all respects as of the Effective Time as though made on and as of the Effective Time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), except, in the case of clause (ii), where any failure or failures of any such representations and warranties to be so true and correct in all respects would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Fronteer, and Newmont shall have received a certificate of Fronteer addressed to Newmont and dated the Effective Date, signed on behalf of Fronteer by a senior executive officer of Fronteer (on Fronteer’s behalf and without personal liability), confirming the same as at the Effective Time; | |
(c) | since the date of the Arrangement Agreement, there shall not have occurred, or have been disclosed to the public (if previously undisclosed to the public) any Material Adverse Effect in respect of Fronteer, and Fronteer shall have provided to Newmont a certificate of a senior executive officer of Fronteer certifying the same as at the Effective Time; and | |
(d) | holders of no more than 10% of the Fronteer Shares shall have exercised Dissent Rights (and not withdrawn such exercise) and Newmont shall have received a certificate of a senior executive officer of Fronteer confirming the same as at the Effective Time. |
(a) | all covenants of Newmont under the Arrangement Agreement to be performed on or before the Effective Time shall have been duly performed by Newmont in all material respects, and Fronteer shall have received a certificate of Newmont addressed to Fronteer and dated the Effective Date, signed on behalf of Newmont by a senior executive officer of Newmont (on Newmont’s behalf and without personal liability), confirming the same as at the Effective Time; | |
(b) | all representations and warranties of Newmont set forth in the Arrangement Agreement shall be true and correct in all respects as of the Effective Time as though made at and as of the Effective Time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), except where the failure or failures of all such representations and warranties to be so true and correct in all respects would not, individually or in the aggregate, reasonably be expected to materially and adversely affect Newmont’s ability to complete the Arrangement and the other transactions contemplated by the Arrangement Agreement, and Fronteer shall have received a certificate of Newmont addressed to Fronteer |
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and dated the Effective Date, signed on behalf of Newmont by a senior executive officer of Newmont (on Newmont’s behalf and without personal liability), confirming the same as at the Effective Time; and |
(c) | Newmont shall have delivered to the Depositary in escrow pending the Effective Time sufficient cash to pay the aggregate Consideration to be paid to Fronteer Shareholders (other than Dissenting Fronteer Shareholders) under the Arrangement, together with sufficient cash advanced to the Depositary in respect of a Canadian dollar denominated, demand, interest bearing loan to be made on or prior to the Effective Time from Newmont Sub to Fronteer in the amount by which (i) Fronteer’s cash payment obligations (including source deductions) in connection with the Cash-Out Consideration to be paid to Fronteer Optionholders under the Plan of Arrangement, plus the amount of the Subco Note exceeds (ii) the estimated cash in Fronteer on the Effective Date after deducting transaction costs and reasonable working capital requirements. |
(a) | using commercially reasonable efforts to assist Newmont in obtaining the Key Regulatory Approvals and using commercially reasonable efforts to obtain any other required approvals from Governmental Entities relating to Fronteer or any of its subsidiaries which are typically applied for by a target company; | |
(b) | using commercially reasonable efforts to obtain as soon as practicable all third party consents, approvals and notices required under material third party contracts; and | |
(c) | at the request of Newmont, taking all commercially reasonable steps to ensure that, on or prior to the Effective Date, the Fronteer Exploration Properties and the Pilot Gold Assets have been duly transferred to Pilot Gold and Pilot Gold has assumed all of the Pilot Gold Liabilities in a manner satisfactory to Newmont, acting reasonably. |
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(a) | surrender their Fronteer Options to Fronteer for cancellation pursuant to the Plan of Arrangement in exchange for payment of the Cash-Out Consideration; or | |
(b) | exercise their Fronteer Options for Fronteer Shares, with such exercise being conditional on the closing of the Arrangement. |
(a) | solicit, initiate, encourage or facilitate (including by way of furnishing information or entering into any form of agreement, arrangement or understanding) any inquiries or proposals whatsoever which would constitute an Acquisition Proposal; | |
(b) | participate in any discussions or negotiations with any Person (other than Newmont, any of its affiliates or its or their Representatives) regarding an Acquisition Proposal; | |
(c) | approve, accept, endorse or recommend any Acquisition Proposal, or publicly propose to do so; | |
(d) | accept or enter into any agreement, understanding or arrangement or other contract in respect of an Acquisition Proposal, or publicly propose to do so; or | |
(e) | withdraw, amend or modify the recommendation of the Fronteer Board to Fronteer Shareholders in respect of the Arrangement, or fail to reaffirm the Fronteer Board’s recommendation of the Arrangement within five Business Days after being requested by Newmont to do so, unless (A) it does not relate to an Acquisition Proposal and (B) in the opinion of the Fronteer Board, acting in good faith and after receiving advice from its outside financial advisors and outside legal counsel, the Fronteer Board is required to make such withdrawal, amendment or modification or to fail to make such reaffirmation in order to comply with the fiduciary duties of such Directors under applicable Law. |
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(a) | if it believes, acting in good faith, that the Acquisition Proposal could reasonably be a Superior Proposal, contact the Person(s) making such Acquisition Proposal solely for the purpose of clarifying such Acquisition Proposal and any material terms thereof so as to determine whether such proposal is, or is reasonably likely to be, a Superior Proposal; and | |
(b) | if, in the opinion of the Fronteer Board, acting in good faith and after receiving advice from its outside financial advisors and outside legal counsel, the Acquisition Proposal constitutes or, if consummated in accordance with its terms, would be a Superior Proposal, then Fronteer may (i) furnish information with respect to Fronteer and its subsidiaries to the Person making such Acquisition Proposal for a period of not more than 21 days, (ii) participate in discussions or negotiations with the Person making such Acquisition Proposal, and/or (iii) waive any standstill provision or agreement that would otherwise prohibit such Person from making an Acquisition Proposal; provided that Fronteer shall not disclose any non-public information with respect to Fronteer (i) if such non-public information has not been previously provided to, or is not concurrently provided to, Newmont; (ii) without entering into a confidentiality and standstill agreement; and (iii) without providing a copy of such confidentiality agreement to Newmont. |
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(a) | at the time of its disclosure is generally available in the public domain; | |
(b) | enters the public domain and becomes generally available at any time after disclosure other than through a breach of the terms of this covenant; or | |
(c) | consists of general geological, geophysical, geochemical, metallurgical or operational concepts, models or principles. |
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(a) | apply for and use commercially reasonable efforts to obtain all the Key Regulatory Approvals (including payment of any filing fees) and use commercially reasonable efforts to obtain any other required approvals from Governmental Entities relating to Newmont or any of its subsidiaries which are typically applied for by an acquiror; and | |
(b) | subject to the terms and conditions of the Arrangement Agreement and applicable Laws, paying the aggregate Consideration to be paid pursuant to the Arrangement. |
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1. | Either Fronteer or Newmont is entitled to terminate the Arrangement Agreement in the following circumstances, among others: |
(a) | by mutual written agreement; | |
(b) | if the Effective Date has not occurred on or before the Outside Date (except that a party shall not be entitled to terminate the Arrangement Agreement if its failure to fulfil its obligations or breach of its representations and warranties is the cause of, or resulted in, the failure of the Effective Date to occur by the Outside Date); | |
(c) | any law is enacted or any injunction or court order exists that makes consummation of the Arrangement illegal or otherwise prohibits or enjoins consummation of the Arrangement and that has become final and non-appealable; or | |
(d) | Fronteer Securityholder Approval is not obtained at the Meeting. |
2. | Fronteer is also entitled to terminate the Arrangement Agreement in the following circumstances, among others: |
(a) | if Fronteer proposes to enter into a transaction with respect to a Superior Proposal and pays the Termination Fee; | |
(b) | if any of the conditions to Fronteer’s obligation to complete the Arrangement has not been satisfied or waived by the Outside Date or such condition is incapable of being satisfied by the Outside Date (provided that Fronteer is not then in breach of the Arrangement Agreement so as to have caused any of the conditions to the Parties’ obligations to complete the Arrangement not to be satisfied); or | |
(c) | if Newmont breaches any of its representations or warranties set out in the Arrangement Agreement (and has not cured such breach within 10 Business Days of Fronteer giving notice of its intention to terminate), which breach would, individually or in the aggregate, be reasonably expected to cause a specific condition to Fronteer’s obligations to complete the Arrangement not to be satisfied, or Newmont breaches any of its covenants or material obligations in the Arrangement Agreement, in each case in any material respect (provided that Fronteer is not then in breach of the Arrangement Agreement so as to have caused any of the conditions to Newmont’s obligations to complete the Arrangement not to be satisfied). |
3. | Newmont is also entitled to terminate the Arrangement Agreement in the following circumstances, among others: |
(a) | prior to obtaining Fronteer Securityholder Approval, the Fronteer Board withdraws, amends or modifies, in a manner adverse to Newmont, or fails to reaffirm its recommendation of the Arrangement within five Business Days (and in any case prior to the Meeting) after having been requested in writing by Newmont to do so; | |
(b) | any of the conditions to Newmont’s obligation to complete the Arrangement has not been satisfied or waived by the Outside Date or such condition is incapable of being satisfied by the Outside Date (provided that Newmont is not then in breach of the Arrangement Agreement so as to have caused any of the conditions to the Parties’ obligations to complete the Arrangement not to be satisfied); | |
(c) | if Fronteer breaches any of its representations or warranties set out in the Arrangement Agreement (and has not cured such breach within 10 Business Days of Newmont giving notice of its intention to terminate), which breach would, individually or in the aggregate, be reasonably expected to cause a specific condition to Newmont’s obligations to complete the Arrangement not to be satisfied, or Fronteer breaches any of its covenants or material obligations in the Arrangement Agreement, in each case in any material respect (provided that Newmont is not then in breach of the Arrangement Agreement so as to have caused any of the conditions to Fronteer’s obligations to complete the Arrangement not to be satisfied); |
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(d) | if Fronteer is in breach of any of its non-solicitation obligations, obligations with respect to notifying Fronteer of Acquisition Proposals or obligations with respect to Fronteer’s right to match any Superior Proposal; | |
(e) | if the Meeting has not occurred on or before May 6, 2011 (unless such failure to hold the Meeting is a result of Newmont’s failure to fulfil any of its obligations under the Arrangement Agreement); | |
(f) | if Fronteer provides Newmont with notice of a Superior Proposal; or | |
(g) | if, after February 3, 2011, there is a change, effect, event, circumstance or fact that constitutes a Material Adverse Effect in respect of Fronteer and its subsidiaries, taken as a whole. |
(a) | termination by Newmont pursuant to paragraphs 3(a), (d) and (f) above, in which case the Termination Fee shall be paid on the first Business Day following such termination; | |
(b) | termination by Fronteer pursuant to paragraph 2(a) above, in which case the Termination Fee shall be paid concurrent with such termination; or | |
(c) | termination by Newmont pursuant to paragraphs 2(c) or 2(e) above, or by either party in the circumstances referred to in paragraph 1(b) or 1(d) above or by Fronteer pursuant to paragraph 2(b) above (in circumstances where Newmont would also be entitled to terminate the Arrangement Agreement pursuant to paragraphs 3(c), 3(e) or 1(d) above), but only if, prior to the earlier of the termination of the Arrangement Agreement or the holding of the Meeting, an Acquisition Proposal is made or announced by any Person (other than Newmont or any of its affiliates) and, within 12 months following such termination, (i) an Acquisition Proposal is consummated by Fronteer or (ii) Fronteer and/or one or more of its subsidiaries enters into a definitive agreement in respect of, or the Fronteer Board approves or recommends, an Acquisition Proposal and at any time thereafter (whether or not within 12 months of such termination), such Acquisition Proposal is consummated, in which case an amount equal to the Termination Fee, less any termination expenses actually paid to Newmont, shall be payable within two Business Days following the closing of the applicable transaction. |
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(a) | are ultimately entitled to be paid fair value for their Fronteer Shares by Newmont Sub in respect of which they have exercised Dissent Rights will be deemed to have irrevocably transferred such Fronteer Shares to Newmont Sub pursuant to the Plan of Arrangement in consideration of such fair value; or | |
(b) | are ultimately not entitled, for any reason, to be paid fair value for the Fronteer Shares by Newmont Sub in respect of which they have exercised Dissent Rights will be deemed to have participated in the Arrangement on the same basis as a Fronteer Shareholder that has not exercised Dissent Rights, as at and from the time specified in the Plan of Arrangement for the consideration set forth therein. |
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• | a citizen or individual resident of the United States for U.S. federal income tax purposes; | |
• | a corporation (or other entity properly classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state within the United States, or the District of Columbia; | |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust, if (i) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust, or (ii) in the case of a trust that was in existence on August 20, 1996 and was validly treated as a domestic trust, a valid election is in place under applicable U.S. Treasury Regulations to treat such trust as a domestic trust. |
• | banks, financial institutions and insurance companies; | |
• | real estate investment trusts, regulated investment companies or grantor trusts; | |
• | tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; | |
• | brokers, dealers and traders in securities; | |
• | persons who do not own Fronteer Shares or Pilot Gold Shares as capital assets (generally, property held for investment) within the meaning of section 1221 of the Code; | |
• | dealers in securities or currencies or traders in securities that elect to use amark-to-market method of accounting for their securities holdings; | |
• | persons that hold Fronteer Shares as a part of a hedging, integrated or conversion transaction or a straddle, or as part of any other risk reduction transaction; | |
• | persons who own, or are deemed to own 10% or more, by voting power or value, of Fronteer. |
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1. | Effective on the Effective Date (as defined in the management information circular (the “Circular”) of Fronteer Gold Inc. dated March 2, 2011), the stock option plan substantially as appended as Appendix “F” to the Circular (the “Stock Option Plan”), be and is hereby approved and adopted as the Stock Option Plan of Pilot Gold Inc. with such modifications, if any, as may be required by any stock exchange upon which the shares of Pilot Gold Inc. may be listed or may trade from time to time. | |
2. | Any officer or director of Pilot Gold Inc. is hereby authorized to do all such acts and execute and file all instruments and documents necessary or desirable to carry out this resolution, including making appropriate filings with regulatory authorities including any applicable stock exchange.” |
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President, CEO and Director
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1. | the arrangement (“Arrangement”) under section 182 of theBusiness Corporations Act (Ontario), all as more particularly described and set forth in the plan of arrangement (as may be modified or amended, the “Plan of Arrangement”) attached as Appendix “A” to the management information circular of Fronteer Gold Inc. (the “Company”) dated March 2, 2011 (the “Circular”), and all transactions contemplated thereby, be and are hereby authorized, approved and adopted; | |
2. | the Plan of Arrangement be and is hereby authorized, approved and adopted; | |
3. | the arrangement agreement dated February 3, 2011 between the Company and Newmont Mining Corporation, as may be amended from time to time (the “Arrangement Agreement”), and all transactions contemplated therein, and the actions of the directors of the Company in approving the Arrangement and the Arrangement Agreement and the actions of the directors and officers of the Company in executing and delivering the Arrangement Agreement and causing the performance by the Company of its obligations thereunder, be and are hereby confirmed, ratified, authorized and approved; | |
4. | notwithstanding that this resolution has been duly passed (and the Arrangement approved and agreed) by the shareholders of the Company or that the Arrangement has been approved by the Ontario Superior Court of Justice, the directors of the Company be and are hereby authorized and empowered, without further notice to, or approval of, the shareholders of the Company (i) to amend the Arrangement Agreement or the Plan of Arrangement to the extent permitted by the Arrangement Agreement or the Plan of Arrangement, and (ii) subject to the terms of the Arrangement Agreement, not to proceed with the Arrangement and to revoke this resolution at any time prior to the Effective Time (as defined in the Arrangement Agreement); and | |
5. | any director or officer of the Company is hereby authorized, for and on behalf of the Company, to execute, with or without the corporate seal and, if appropriate, deliver any and all other agreements, applications, forms, waivers, notices, certificates, confirmations and other documents and instruments and to do, or cause to be done, any and all such other acts and things as in the opinion of such director or officer may be necessary, desirable or useful for the purpose of giving effect to these resolutions, the Arrangement Agreement, the completion of the Arrangement and related transactions in accordance with the Arrangement Agreement and the matters authorized hereby, including, without limitation, (i) all actions required to be taken by or on behalf of the Company, and all necessary filings and obtaining the necessary approvals, consents and acceptances of appropriate regulatory authorities and (ii) the signing of the certificates, consents and other documents or declarations required under the Arrangement Agreement or otherwise to be entered into by the Company, such determination to be conclusively evidenced by the execution and delivery of any such document, agreement or instrument, and the taking or doing of any such action.” |
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PLAN OF ARRANGEMENT
PLAN OF ARRANGEMENT
UNDER SECTION 182 OF THE
BUSINESS CORPORATIONS ACT (ONTARIO)
1. | INTERPRETATION |
(a) | Definitions: In this Plan of Arrangement, unless the context otherwise requires, the following words and terms shall have the meaning hereinafter set out: |
(i) | “Acquiror” means Newmont Mining Corporation, a corporation existing under the laws of the State of Delaware; | |
(ii) | “Acquiror Sub” means an unlimited liability company formed pursuant to the laws of British Columbia as an indirect, wholly-owned subsidiary of Acquiror; | |
(iii) | “affiliate” has the meaning given to such term in the Arrangement Agreement; | |
(iv) | “Arrangement” means the arrangement under the provisions of section 182 of the OBCA on the terms and subject to the conditions set out in this Plan of Arrangement, as may be amended, varied or supplemented from time to time in accordance with section 10.1 of the Arrangement Agreement and the provisions hereof; | |
(v) | “Arrangement Agreement” means the Arrangement Agreement dated February 3, 2011 to which this Plan of Arrangement is attached as Schedule A, as the same may be amended, varied or supplemented from time to time; | |
(vi) | “Arrangement Resolution” means the special resolution of Target Shareholders approving the Arrangement; | |
(vii) | “Business Day” means any day, other than a Saturday, Sunday or a statutory or civic holiday in Denver, Colorado, or Vancouver, British Columbia; | |
(viii) | “Cash-Out Consideration” in respect of a Target Option means the aggregate of (i) one Spinco Share and (ii) the amount by which $14.00 exceeds the aggregate of the strike price of the Target Option and any amounts required to be withheld from such payment under the Tax Act or other applicable statute; provided that if $14.00 is less than such aggregate amount, the Target Optionholder shall have paid the amount of such difference to Target prior to the Effective Time in order for such Target Option to be a Cashed-Out Option, and provided further that in respect of a Target Option that is exercisable for a fraction of a Target Share, references to $14.00 above, and the number of Spinco Shares, shall each be adjusted in proportion to the fraction of a Target Share into which such Target Option is exercisable; and provided further that if the aggregate number of Spinco Shares to which a Target Optionholder would otherwise be entitled would include a fractional Spinco Share, then the number of Spinco Shares that such Target Optionholder is entitled to receive will be rounded down to the next whole number and the Target Optionholder will not be entitled to any compensation in respect of such fractional Spinco Share; | |
(ix) | “Cashed-Out Option” means a Target Option which a Target Optionholder has elected in writing to surrender for payment of the Cash-Out Consideration; | |
(x) | “Court” means the Ontario Superior Court of Justice; | |
(xi) | “Class A Shares” means the Class A voting shares of Target which are to be created in accordance with this Plan of Arrangement and which shall be voting, redeemable and retractable at $14.00 per share and, if any Target Shares are transferred to Acquiror Sub pursuant to Section 3(a)(i) or Section 3(a)(iii) hereof, shall have a liquidation preference equal to $14.00 per share; |
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(xii) | “Depositary” means any trust company, bank or financial institution agreed to in writing between Acquiror and Target for the purpose of, among other things, receiving Letters of Transmittal and distributing certificates representing Spinco Shares in connection with the Arrangement; | |
(xiii) | “Dissenting Target Shareholder” means a registered Target Shareholder who has duly exercised a Dissent Right; | |
(xiv) | “Dissent Rights” shall have the meaning set out in Section 5(a) hereof; | |
(xv) | “Dissent Shares” means the Target Shares held by a Dissenting Shareholder and in respect of which the Dissenting Shareholder has validly exercised Dissent Rights; | |
(xvi) | “Effective Date” means the date following the date upon which all of the conditions to completion of the Arrangement as set out in Sections 6.1, 6.2 and 6.3 of the Arrangement Agreement have been satisfied or waived in accordance with the Arrangement Agreement, all documents agreed to be delivered thereunder have been delivered to the satisfaction of the recipient, acting reasonably, and the filings required under Section 182 of the OBCA have been filed with the registrar of companies; | |
(xvii) | “Effective Time” means 12:01 a.m. (Vancouver time) on the Effective Date or such other time on the Effective Date as may be specified in writing by Acquiror Sub; | |
(xviii) | “Exercised Option” means a Target Option which a Target Optionholder has elected in writing prior to the Effective Date to exercise in accordance with the terms of the Plan and in respect of which the Target Optionholder has prior to the Effective Date paid to Target the aggregate of the strike price of such Target Option and the amount of all withholdings required to be made in connection with the exercise thereof, under the Tax Act or other applicable statute; | |
(xix) | “Final Order” means the final order of the Court pursuant to Section 182 of the OBCA, after a hearing upon the fairness of the terms and conditions of the Arrangement, approving the Arrangement, as such order may be amended by the Court at any time prior to the Effective Date or, if appealed, then unless such appeal is withdrawn or denied, as affirmed or as amended on appeal; | |
(xx) | “Former Target Shareholder” means a Person who is a registered holder of Target Shares as shown on the share register of Target Shares immediately prior to the Effective Time; | |
(xxi) | “Governmental Entity” has the meaning given to such term in the Arrangement Agreement; | |
(xxii) | “Interim Order” means the interim order of the Court providing for, among other things, the calling and holding of the Target Meeting, as such order may be amended, supplement or varied by the Court; | |
(xxiii) | “Letter of Transmittal” means the letter of transmittal(s) to be delivered by Target to the Target Shareholders providing for the delivery of the Target Shares to the Depositary; | |
(xxiv) | “Lien” means any hypothec, mortgage, pledge, assignment, lien, charge, security interest, encumbrance or adverse right or claim, other third Person interest or encumbrance of any kind, whether contingent or absolute, and any agreement, option, right or privilege (whether by law, contract or otherwise) capable of becoming any of the foregoing; | |
(xxv) | “OBCA” means theBusiness Corporations Act (Ontario) and the regulations made thereunder, as now in effect and as they may be promulgated or amended from time to time; | |
(xxvi) | “paid-up capital” has the meaning ascribed to such term for purposes of the Tax Act; | |
(xxvii) | “Person” means an individual, general partnership, limited partnership, corporation, company, limited liability company, unincorporated association, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator or other legal representative; | |
(xxviii) | “Spinco” means Pilot Gold Inc., a corporation existing under the laws of Canada; |
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(xxix) | “Spinco Share Consideration” means the undertaking of Acquiror Sub to deliver one Spinco Share (subject to adjustment for the consolidation provided for in Section 3(a)(v) hereof) in part payment of the purchase price of a Target Share within 3 business days of the Effective Date; | |
(xxx) | “Spinco Shares” means the common shares of Spinco; | |
(xxxi) | “Target” means Fronteer Gold Inc., a corporation existing under the laws of Ontario; | |
(xxxii) | “Target Meeting” means the special meeting of Target Shareholders, including any adjournment or postponement thereof, to be held for the purpose of, among other things, obtaining approval by Target Shareholders of the Arrangement Resolution; | |
(xxxiii) | “Target Options” means the outstanding options to purchase Target Shares granted under or otherwise subject to the Target Stock Option Plans; | |
(xxxiv) | “Target Optionholders” means the holders of Target Options; | |
(xxxv) | “Target Shareholders” means the holders of Target Shares; | |
(xxxvi) | “Target Shares” means common shares in the capital of Target, as currently constituted; | |
(xxxvii) | “Target Stock Option Plans” means, collectively, (i) the Amended and Restated Stock Option Plan (2010) of Target dated March 25, 2010 and approved by the Target Shareholders on May 27, 2010, as amended, (ii) the acquisition stock option plan approved by the Target Board in August 2007 in connection with Target’s acquisition of NewWest Gold Corporation, and (iii) the stock option plan of Aurora Energy Resources Inc. assumed by Target in connection with Target’s acquisition of Aurora Energy Resources Inc.; and | |
(xxxviii) | “Tax Act” means theIncome Tax Act (Canada) and the regulations thereunder, as amended from time to time. |
(b) | Interpretation Not Affected by Headings. The headings contained in this Plan of Arrangement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Plan of Arrangement. The terms “this Plan of Arrangement”, “hereof’, “herein”, “hereto”, “hereunder” and similar expressions refer to this Plan of Arrangement and not to any particular article, section, subsection, paragraph, subparagraph, clause orsub-clause hereof and include any agreement or instrument supplementary or ancillary hereto. | |
(c) | Date for any Action. If the date on which any action is required to be taken hereunder is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. | |
(d) | Number and Gender. In this Plan of Arrangement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders and neuter. | |
(e) | Reference to Persons. A reference to a Person includes any successor to that Person. A reference to any statute includes all regulations made pursuant to such statute and the provisions of any statute or regulation which amends, supplements or supersedes any such statute or regulation. | |
(f) | Currency. Unless otherwise stated in this Plan of Arrangement, all references herein to amounts of money are expressed in lawful money of Canada. |
2. | EFFECT OF THE ARRANGEMENT |
(a) | This Plan of Arrangement is made pursuant to and subject to the provisions of the Arrangement Agreement. | |
(b) | At the Effective Time, the Arrangement shall without any further authorization, act or formality on the part of the Court be binding upon Acquiror, Acquiror Sub, Target, Spinco, the Target Shareholders and the Target Optionholders. |
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3. | THE ARRANGEMENT |
(a) | The Arrangement. Commencing at the Effective Time, the following shall occur and shall be deemed to occur in the following order (at five minute intervals) without any further act or formality: |
(i) | Each Target Share held by a Dissenting Target Shareholder shall be deemed to be transferred by the holder thereof, without any further act or formality on its part, free and clear of all Liens, to Acquiror Sub and thereupon each Dissenting Target Shareholder shall have the rights set out in Section 5; | |
(ii) | Notwithstanding any vesting or exercise provisions to which a Target Option might otherwise be subject (whether by contract, the conditions of a grant, applicable law or the terms of the Target Option Plans) each Target Option issued and outstanding at the Effective Time will, without any further action by or on behalf of any holder of such Target Option, be deemed to be fully vested and: |
(A) | each Cashed-Out Option shall be, and shall be deemed to be, transferred to Target, free and clear of all Liens, and each such Target Option shall be cancelled in exchange for the payment by Target of the Cash-Out Consideration (subject to applicable withholding) to the holder thereof; | |
(B) | each Exercised Option shall be, and shall be deemed to be, exercised by the holder thereof and Target shall issue one Target Share to the holder thereof; | |
(C) | with respect to each Target Option, the holder thereof will cease to be the holder of such Target Option, will cease to have any rights as a holder in respect of such Target Option or under the Target Option Plans, such holder’s name will be removed from the register of Target Options, and all option agreements, grants and similar instruments relating thereto will be cancelled; and | |
(D) | the Target Option Plans will be terminated and all outstanding Target Options shall be cancelled for no consideration; |
(iii) | Each outstanding Target Share acquired on the exercise of a Target Option in the immediately preceding step (but, for greater certainty, not any other Target Share held by a person acquiring a Target Share in such step) will be transferred to, and acquired by Acquiror Sub, free and clear of all Liens, in exchange for (i) the sum of $14.00 in cash and (ii) the Spinco Share Consideration and, in respect to each Target Share: |
(A) | each exercising Target Optionholder shall cease to be the holder of such Target Share so exchanged concurrently with the exchanges referred to in this Section 3(a)(iii) and such holder’s name shall be removed from the central securities register of Target in respect of such share at such time; and | |
(B) | Acquiror Sub shall be deemed to be the holder of such Target Share (free and clear of any Lien) on the Effective Date and shall be entered in the central securities register of Target as the holder thereof; |
(iv) | The authorized share capital of Target will be reorganized as follows: |
(A) | a new class of shares consisting of an unlimited number of Class A Shares shall be created, and the articles of Target shall be deemed to be amended accordingly; | |
(B) | each Target Share not held by Acquiror Sub will be exchanged with Target (without any action on the part of the holder of the Target Share) for one Class A Share and one (1) Spinco Share, and such Target Shares shall thereupon be cancelled; | |
(C) | each Former Target Shareholder (other than Dissenting Target Shareholders with respect to Dissent Shares) shall cease to be the holder of such Target Shares so exchanged and such holder’s name shall be removed from the central securities register of Target in respect of such shares at such time; | |
(D) | each Former Target Shareholder (other than Dissenting Target Shareholders with respect to Dissent Shares) shall be deemed to be the holder of the Class A Shares and Spinco Shares (in each case, free and clear of any Lien) exchanged for the Target Shares on the Effective Date and shall be entered in the central securities register of Target or Spinco, as the case may be, as the holder thereof; and |
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(E) | the amount added to the stated capital account of Target in respect of the Class A Shares will be an amount equal to thepaid-up capital of the Target Shares exchanged in Section 3(a)(iv)(B), less the aggregate fair market value of the Spinco Shares distributed on such exchange; |
(v) | The Spinco Shares shall be consolidated on a four for one basis; | |
(vi) | Each outstanding Class A Share will be transferred to, and acquired by Acquiror Sub, free and clear of all Liens, in exchange for the sum of $14.00 in cash and, in respect to each Class A Share: |
(A) | each Former Target Shareholder shall cease to be the holder of such Class A Share so exchanged concurrently with the exchanges referred to in this Section 3(a)(vi) and such holder’s name shall be removed from the central securities register of Target in respect of such share at such time; and | |
(B) | Acquiror Sub shall be deemed to be the holder of such Class A Share (free and clear of any Lien) on the Effective Date and shall be entered in the central securities register of Target as the holder thereof; and |
(vii) | The number of directors of Target shall be set at two (2) and the incumbent directors of Target shall be deemed to have resigned and shall be replaced by Brian Iverson and Stephen Gottesfeld; |
1.1.2 | Value of Spinco Shares. As soon as practical after the Effective Time, the directors of Spinco, acting reasonably, will determine the fair market value of a Spinco Share as at the Effective Time, and thereafter the fair market value as so determined shall be used for the purpose of determining the stated capital of the outstanding Class A Shares as contemplated in Section 3(a)(iv)(E) above. | |
1.1.3 | No fractional Spinco Shares. Following the Effective Time, if the aggregate number of Spinco Shares to which an Target Shareholder or Target Optionholder would otherwise be entitled would include a fractional share, then the number of Spinco Shares that such Target Shareholder or Target Optionholder is entitled to receive shall be rounded down to the next whole number and no Target Shareholder or Target Optionholder will be entitled to any compensation in respect of such fractional Spinco Share. |
4. | DELIVERY OF SPINCO SHARES AND CASH CONSIDERATION |
(a) | Entitlement to Spinco Certificates and Cash Consideration. |
(i) | At or prior to the Effective Date, Acquiror Sub shall deposit with the Depositary in accordance with the Arrangement Agreement, cash in an amount sufficient to pay the aggregate cash consideration to which the Former Target Shareholder are entitled to receive in accordance with Section 3 hereof. | |
(ii) | Until such time as a Former Target Shareholder deposits with the Depositary a duly completed Letter of Transmittal, documents, certificates and instruments contemplated by the Letter of Transmittal and such other documents and instruments as the Depository or Acquiror Sub reasonably requires, the cash payment to which such Target Shareholder is entitled shall, subject to Section 4(a)(iii), in each case be delivered or paid to the Depositary to be held in trust for such Former Target Shareholder for delivery to the Former Target Shareholder, without interest and net of all applicable withholding and other taxes, if any, upon delivery of the Letter of Transmittal, documents, certificates and instruments contemplated by the Letter of Transmittal and such other documents and instruments as the Depository or Acquiror Sub reasonably requires. | |
(iii) | Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented one or more Target Shares other than certificates representing Dissent Shares, if applicable, a completed Letter of Transmittal and such additional documents and instruments as the Depositary may reasonably require, the holder of such surrendered certificate or the deliverer of such Letter of Transmittal, as applicable, shall be entitled to receive in exchange therefor, and the Depositary shall deliver to such Former Target Shareholder following the Effective Time, certificates representing the Spinco Shares and a cheque for the cash consideration to which such Former Target Shareholder is entitled to receive in accordance with Section 3 hereof. |
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(iv) | After the Effective Time and until surrender for cancellation as contemplated by Section 4(a)(iii) hereof, each certificate which immediately prior to the Effective Time represented one or more Target Shares shall be deemed at all times to represent only the right to receive in exchange therefor certificates representing the Spinco Shares and a cheque for any cash consideration to which the holder of such certificate is entitled to receive in accordance with Section 4(a)(iii) hereof. |
(b) | Lost Certificates. In the event that any certificate which immediately prior to the Effective Time represented one or more Target Shares which were exchanged for Spinco Shares and any cash consideration in accordance with Section 3 hereof shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder claiming such certificate to be lost, stolen or destroyed, the Depositary shall deliver in exchange for such lost, stolen or destroyed certificate, certificates representing the Spinco Shares and the cheque for the cash consideration which such Former Target Shareholder is entitled to receive in accordance with Section 3 hereof. When authorizing such delivery of certificates representing the Spinco Shares and the cheque for the cash consideration which such Former Target Shareholder is entitled to receive in exchange for such lost, stolen or destroyed certificate, the Former Target Shareholder to whom certificates representing such Spinco Shares and the cheque for the cash consideration are to be delivered shall, as a condition precedent to the delivery of such Spinco Shares and cash consideration, give a bond satisfactory to Acquiror Sub, Spinco and the Depositary in such amount as Acquiror Sub, Spinco and the Depositary may direct, or otherwise indemnify Acquiror Sub, Spinco and the Depositary in a manner satisfactory to Acquiror Sub, Spinco and the Depositary, against any claim that may be made against Acquiror Sub, Spinco or the Depositary with respect to the certificate alleged to have been lost, stolen or destroyed and shall otherwise take such actions as may be required by the by-laws of Target. | |
(c) | Termination of Rights. Any certificate formerly representing Target Shares that is not deposited with all other documents as provided in this Section 4 on or before the sixth anniversary of the Effective Date, shall cease to represent any claim or interest of any kind or nature against Acquiror, Acquiror Sub, Target, Spinco or the Depositary or any of their successors and shall be deemed to have been donated, surrendered and forfeited to Acquiror Sub for no consideration. | |
(d) | Dividends or other Distributions. Subject to applicable Law and to Section 4 hereof, at the time of such compliance, there shall, in addition to the delivery of a certificate representing the Spinco Shares to which such holder is thereby entitled, be delivered to such holder, without interest, the amount of the dividend or other distribution with a record date after the Effective Time theretofore paid with respect to such Spinco Shares. | |
(e) | Withholding Rights. Acquiror, Acquiror Sub, Target, Spinco and the Depositary shall be entitled to deduct and withhold from all dividends, distributions, other payments or other consideration otherwise payable to any person such amounts as Acquiror, Acquiror Sub, Target, Spinco and the Depositary is required or permitted to deduct and withhold with respect to such payment under the Tax Act, the United States Revenue Code of 1986 or any provision of any applicable federal, provincial, state, local or foreign tax law, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the person in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. |
5. | DISSENT RIGHTS |
(a) | Each registered Target Shareholder may exercise rights of dissent (“Dissent Rights”) with respect to the Target Shares held by it pursuant to and in the manner set forth in the Interim Order. Dissenting Target Shareholders who: |
(i) | are ultimately entitled to be paid by Acquiror Sub fair value for their Dissent Shares shall be deemed to have transferred such Dissent Shares (free and clear of any Liens) to Acquiror Sub in accordance with Section 3(a)(i); and | |
(ii) | are ultimately not entitled, for any reason, to be paid by Acquiror Sub fair value for their Target Shares in respect of which they dissent, shall be deemed to have participated in the Arrangement in respect of those Target Shares on the same basis as a non-dissenting Target Shareholder and shall be entitled to receive only the Spinco Shares and cash consideration that such non-dissenting Target Shareholders are |
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entitled to receive, on the basis set forth in Section 3(a)(iv)(B) and 3(a)(vi) and, for greater certainty, will be considered to have exchanged such Target Shares for Class A Shares and Spinco Shares pursuant to, and at the same time as Target Shares were exchanged pursuant to Section 3(a)(iv)(B) and to have subsequently transferred such Class A Shares in exchange for cash pursuant to, and at the same time as Target Shares were transferred by Former Target Shareholders to Acquiror Sub pursuant to, Section 3(a)(vi). |
(b) | In no event shall Acquiror Sub, Target or Spinco or any other person be required to recognize a Dissenting Target Shareholder as a registered or beneficial owner of Target Shares or any interest therein (other than the rights set out in this Section 5) at or after the Effective Time, and at the Effective Time the names of such Dissenting Target Shareholders shall be deleted from the central securities register of Target as at the Effective Time. | |
(c) | For greater certainty, in addition to any other restrictions in the Interim Order, no person shall be entitled to exercise Dissent Rights with respect to Target Shares in respect of which a person has voted in favour of the Arrangement. |
6. | AMENDMENT |
(a) | Acquiror, Target and Spinco reserve the right to amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Date, provided that any amendment, modification or supplement must be contained in a written document which is filed with the Court and, if made following the Target Meeting, then: (i) approved by the Court, and (ii) if the Court directs, approved by the Target Shareholders and in any event communicated to them, and in either case in the manner required by the Court. | |
(b) | Any amendment, modification or supplement to this Plan of Arrangement, if agreed to by Target and Acquiror, may be made at any time prior to or at the Target Meeting, with or without any other prior notice or communication and, if so proposed and accepted by the Persons voting at the Target Meeting (other than as may be required under the Interim Order) shall become part of this Plan of Arrangement for all purposes. | |
(c) | Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following the Target Meeting will be effective only if it is consented to by Target and Acquiror and, if required by the Court, by the Target Shareholders. | |
(d) | Any amendment, modification or supplement to this Plan of Arrangement may be made by Target and Acquiror without approval of the Target Shareholders provided that it concerns a matter which, in the reasonable opinion of Target and Acquiror is of an administrative or ministerial nature required to better give effect to the implementation of this Plan of Arrangement and is not materially adverse to the financial or economic interests of any of the Target Shareholders. | |
(e) | Notwithstanding the foregoing provisions of this Section 6, no amendment, modification or supplement of this Plan of Arrangement may be made prior to the Effective Time except in accordance with the terms of the Arrangement Agreement. |
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![]() | RBC Dominion Securities Inc. P.O. Box 50 Royal Bank Plaza Toronto, Ontario M5J 2W7 Telephone: (416) 842-2000 |
Fronteer Gold Inc.
Suite 1650, 1055 West Hastings St.
Vancouver, BC
V6E 2E9
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1. | the most recent draft, dated February 2, 2011, of the Arrangement Agreement; | ||
2. | the most recent drafts, dated February 2, 2011, of the Lock-Up Agreements; | ||
3. | audited financial statements of the Company for each of the five years ended December 31, 2005, 2006, 2007, 2008 and 2009; | ||
4. | the unaudited interim reports of the Company for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010; | ||
5. | the annual report of the Company for the year ended December 31, 2008; |
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6. | the Notices of Annual Meeting of Shareholders and Management Information Circulars of the Company for each of the two years ended December 31, 2008 and 2009; | ||
7. | annual information forms of the Company for each of the two years ended December 31, 2008 and 2009; | ||
8. | the Notice of Meeting and Management Information Circular relating to the annual and special meeting of AuEx Ventures Inc. dated September 28, 2010, which was prepared in connection with the Company s acquisition of AuEx Ventures Inc.; | ||
9. | the internal management budget of the Company on a consolidated basis and segmented by country for the years ending December 31, 2010 and 2011; | ||
10. | the updated technical report on the Company s Long Canyon Project dated June 28, 2010 prepared by Mine Development Associates; | ||
11. | the updated technical report on the preliminary economic assessment of the Long Canyon Project dated December 11, 2009 prepared by Mine Development Associates; | ||
12. | the updated technical report on the Company s Sandman Project dated November 1, 2007 prepared by Mine Development Associates; | ||
13. | the technical report on the Company s Northumberland Project dated July 28, 2008 prepared by the Company; | ||
14. | the technical report on the Company s Halila3a Exploration Property dated March 30, 2009 prepared by Geology and Resource Solutions Limited; | ||
15. | the updated technical report on the Company s Zaca Project dated November 1, 2007 prepared by Mine Development Associates; | ||
16. | unaudited financial projections for the life-of-mine for the Long Canyon Project and the Sandman Project, respectively, prepared by the management of the Company; | ||
17. | discussions with senior management of the Company; | ||
18. | discussions with the Company s legal counsel; | ||
19. | publicly available information relating to the business, operations, financial performance and stock trading history of the Company and other selected public companies considered by us to be relevant; | ||
20. | publicly available information with respect to other transactions of a comparable nature considered by us to be relevant; | ||
21. | publicly available information regarding the gold and copper mining industries; | ||
22. | representations contained in a certificate addressed to us, dated as of the date hereof, from senior officers of the Company as to the completeness and accuracy of the information upon which the Fairness Opinion is based; and | ||
23. | such other corporate, industry and financial market information, investigations and analyses as RBC considered necessary or appropriate in the circumstances. |
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Announcement | Enterprise | Ent. Value / | Gold | |||||||||||||
Date | Acquiror | Target | Value(1,2) | Resources(3) | Price(4) | |||||||||||
US $M | US $/oz | US $/oz | ||||||||||||||
October 2010 | Argonaut Gold Inc. | Pediment Gold Corp. | $ | 116 | $ | 44 | $ | 1,368 | ||||||||
September 2010 | Goldcorp Inc. | Andean Resources Ltd | $ | 3,158 | $ | 895 | $ | 1,251 | ||||||||
August 2010 | Fronteer Gold Inc. | AuEx Ventures, Inc. | $ | 259 | $ | 344 | $ | 1,238 | ||||||||
May 2010 | Eldorado Gold Corp. | Brazauro Resources Corp. | $ | 124 | $ | 54 | $ | 1,233 | ||||||||
April 2010 | Agnico-Eagle Mines Ltd | Comaplex Minerals Corp. | $ | 655 | $ | 130 | $ | 1,113 | ||||||||
March 2010 | Osisko Mining Corp. | Brett Resources Inc. | $ | 278 | $ | 41 | $ | 1,107 | ||||||||
March 2010 | Kinross Gold Corp. | Underworld Resources Inc. | $ | 116 | $ | 73 | $ | 1,108 | ||||||||
December 2009 | Goldcorp Inc. | Canplats Resources Corp. | $ | 285 | $ | 41 | $ | 1,107 | ||||||||
March 2009 | New Gold Inc. | Western Goldfields Inc. | $ | 308 | $ | 72 | $ | 916 | ||||||||
Mean | $ | 589 | $ | 188 | ||||||||||||
Median | $ | 278 | $ | 72 | ||||||||||||
Notes: | ||
(1) | Enterprise value represents acquisition equity value plus debt and minority interest, less equity investments, cash and option proceeds | |
(2) | All non-US dollar denominated figures are converted into US dollars at the prevailing spot exchange rate on the announcement date | |
(3) | Non-gold resources are converted into the gold equivalent at assumed long-term commodity prices of US$17.50/oz silver, US$1,000/oz gold, US$1.75/lb copper, US$0.55/lb lead and US$0.90/lb zinc | |
(4) | Gold spot price one day prior to announcement. The gold price on February 1, 2011 was US$1,338/oz |
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APPENDIX “D” NOTICE OF APPLICATION AND INTERIM ORDER Court File No. CV-11-^j j^-OOCZ- ONTARIO SUPERIOR COURT OF JUSTICE (Commercial List) IN THE MATTER OF an Application under section 182 of the Business Corporations Act, R.S.0.1990, c. B.16, as amended; AND IN THE MATTER OF Rules 14.05(2) and 14.05(3) of the Rules of Civil Procedure AND IN THE MATTER OF a proposed arrangement of Fronteer Gold Inc. i ? r>, FRONTEER GOLD INC. S&< ‘ <>X /f -,;- — .—, *j\ f;f I® | <s\ Applicant “^SSr* $’ NOTICE OF APPLICATION ;-|^?Q ,,^*^ TO THE RESPONDENTS: ^if A LEGAL PROCEEDING HAS BEEN COMMENCED by the applicant. The claim made by the applicant appears on the following page. THIS APPLICATION will come on for a hearing before a Judge presiding over the Commercial List on April 1, 2011 at 10:00 a.m., or as soon after that time as & . fi.. the application may be heard at 330 University Avenue, Toronto, Ontario. , / , ( 7~X_e_ -(-Trs 4r 6*- f P” ‘VvTrvvc-’AJ^ o^ r M fc>e «v. 1 -3<3^..s- . icL^e.ofij/’’^—^ o^/7»/K7We.-Ot » /\ r* o. 2<^) 2.0 n . IF YOU WISH TO OPPOSE THIS APPLICATION, to receive notice of any step in the application or to be served with any documents in the application, you or an Ontario lawyer acting for you must forthwith prepare a notice of appearance in Form 38A prescribed by the Rules of Civil Procedure, serve it on the applicant’s lawyer or, where the applicant does not have a lawyer, serve it on the applicant, and file it, with proof of service, in this court office, and you or your lawyer must appear at the hearing. IF YOU WISH TO PRESENT AFFIDAVIT OR OTHER DOCUMENTARY EVIDENCE TO THE COURT OR TO EXAMINE OR CROSS-EXAMINE WITNESSES ON THE APPLICATION, you or your lawyer must, in addition to serving your notice of appearance, serve a copy of the evidence on the applicant’s lawyer or, where the applicant does not have a lawyer, serve it on the applicant, and file it, with proof of service, in the court office where the application is to be heard as soon as possible, but at least four days before the hearing. IF YOU FAIL TO APPEAR AT THE HEARING, JUDGMENT MAY BE GIVEN IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. IF YOU |
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WISH TO OPPOSE THIS APPLICATION BUT ARE UNABLE TO PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU BY CONTACTING A LOCAL LEGAL AID OFFICE. Date February 24,2011 Issued by y^fgaSa^p / ylrocal registrar Address of 330 University Avenue court office Toronto, ON M5G 1R7 TO: ALL HOLDERS OF COMMON SHARES OF FRONTEER GOLD INC. AND TO: ALL HOLDERS OF OPTIONS TO ACQUIRE COMMON SHARES OF FRONTEER GOLD INC. AND TO: THE DIRECTORS OF FRONTEER GOLD INC. AND TO: PRICEWATERHOUSECOOPERS LLP Chartered Accountants 250 Howe Street, Suite 700 Vancouver, British Columbia V6C 3S7 Auditors of Fronteer Gold inc. AND TO: GOODMANS LLP Bay Adelaide Centre Suite 3400, 333 Bay Street Toronto, ON M5H 2S7 Attention: Tom Friedland Tel: 416.597.4218 Fax: 416.979.1234 Lawyers for Newmont Mining Corporation |
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APPLICATION 1. THE APPLICANT, FRONTEER GOLD INC. (“Fronteer”), MAKES APPLICATION FOR: an order abridging the time for service of this Application, if necessary; an interim order for advice and directions under subsection 182(5) of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended (the “OBCA”), in connection with the proposed plan of arrangement (the “Arrangement”) of Fronteer and the special meeting to be held to consider the Arrangement; an order approving the Arrangement pursuant to subsections 182(3) and 182(5) of the OBCA; and such further and relief as this Honourable Court may deem just. 2. THE GROUNDS FOR THE APPLICATION ARE: Fronteer is a corporation existing under the laws of Ontario and governed by the OBCA. Fronteer’s Common Shares are listed on the TSX and NYSE-Amex; the Arrangement is an “arrangement” as defined in subsection 182(1) of the OBCA; all statutory procedures under the OBCA have been met or will be met by the date of the return of this Application; |
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the Arrangement is put forward in good faith; the Arrangement is procedurally and substantively fair and reasonable; the directions set out, and shareholder approvals required pursuant to, any interim order that this Court may grant have been followed and obtained, or will be followed and obtained, by the date of the return of this Application; certain of the holders of shares of Fronteer are resident outside of Ontario, are necessary or proper parties to this Application, and will be served at their addresses as they appear on the books and records of Fronteer pursuant to rules 17.02(n) and 17.02(o) of the Rules of Civil Procedure and the terms of any interim order for advice and directions granted by the Honourable Court; (h) Rules 14.05(2), 14.05(3), and 38 of the Rules of Civil Procedure; (i) section 182 of the OBCA; G) National Instrument No. 54-101 of the Canadian Securities Administrators; and (k) such further and other grounds as counsel may advise and this Honourable Court may permit. |
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3. THE FOLLOWING DOCUMENTARY EVIDENCE WILL BE USED AT THE HEARING OF THE APPLICATION: this Notice of Application; such Interim Order as may be granted by this Honourable Court; Affidavit of Oliver Lennox-King, to be sworn on behalf of Fronteer, with exhibits thereto, outlining the basis for an interim order for advice and directions; further Affidavit(s), to be sworn on behalf of Fronteer, with exhibits thereto, including an Affidavit outlining the basis for a final order approving the Arrangement, and reporting on compliance with any interim order and the results of any meeting conducted pursuant to such Interim Order; and such further and other material as counsel may advise and this Honourable Court may permit. February 24, 2011 Davies Ward Phillips & Vineberg llp 44th Floor, 1 First Canadian Place Toronto, ON M5X1B1 James Doris (LSUC #33236P) Tel: 416.367.6919 Fax: 416.863.0871 Lawyers for the Applicant, Fronteer Gold Inc. |
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“IN THE MATTER OF an Application under section 182 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended; AND IN THE MATTER OF Rules 14.05(2) and 14.05(3) of the Rules of Civil Procedure AND IN THE MATTER OF a proposed arrangement of Fronteer Gold Inc.Court File No. ONTARIO SUPERIOR COURT OF JUSTICE Proceeding commenced at Toronto NOTICE OF APPLICATION Davies Ward Phillips & Vineberg LLP 44th Floor, 1 First Canadian Place Toronto, ON M5X1B1 James Doris (LSUC #33236P) Tel: 416.367.6919 Fax: 416.863.0871 Lawyers for the Applicant |
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Court File No. CV-11 -9116-00CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) THE HONOURABLE ) MONDAY, THE 28TH DAY ) MADAM JUSTICE MESBUR ) OF FEBRUARY, 2011. IN THE MATTER OF an application under section 182 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended; AND IN THE MATTER OF Rules 14.05(2) and 14.05(3) of the Rules of Civil Procedure AND IN THE MATTER OF a proposed arrangement of Fronteer Gold Inc. FRONTEER GOLD INC. Applicant INTERIM ORDER THIS MOTION made by the Applicant, Fronteer Gold Inc. (“Fronteer”), for an interim order for advice and directions pursuant to section 182 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended, (the “OBCA”) was heard this day at 330 University Avenue, Toronto, Ontario. ON READING the Notice of Motion, the Notice of Application issued on February 24, 2011, and the Affidavit of Oliver Lennox-King sworn February 24, 2011 (the “Lennox-King Affidavit”), including the Plan of Arrangement, which is attached as Appendix “B” to the draft management information circular of Fronteer (the “Circular”), |
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which is attached as Exhibit “A” to the Lennox-King Affidavit, and on hearing the submissions of counsel for Fronteer and Newmont Mining Corporation (“Newmont”). Definitions THIS COURT ORDERS that all definitions used in this Interim Order shall have the meaning ascribed thereto in the Circular or otherwise as specifically defined herein. The Meeting THIS COURT ORDERS that Fronteer is permitted to call, hold and conduct a special meeting (the “Meeting”) of the holders of common shares of Fronteer (the “Shareholders”) and holders of Fronteer Options (the “Optionholders”, and together with the Shareholders, the “Securityholders”) to be held at the offices of Davies Ward Phillips & Vineberg LLP, Suite 4400,1 First Canadian Place, Toronto, Ontario, M5X 1B1 on March 30, 2011, 2011 at 10:00 a.m. (Toronto time) in order for the Securityholders to consider and, if determined advisable, pass the special resolution authorizing, adopting and approving, with or without variation, the Arrangement and the Plan of Arrangement (collectively, the “Arrangement Resolution”). THIS COURT ORDERS that the Meeting shall be called, held and conducted in accordance with the OBCA, the notice of meeting of Securityholders, which accompanies the Circular (the “Notice of Meeting”) and the articles and by-laws of Fronteer, subject to what may be provided hereafter and subject to further order of this court. |
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4. THIS COURT ORDERSthat the record date (the “Record Date”) for determination of the Shareholders entitled to notice of, and to vote at, the Meeting shall be February 28, 2011.5.THIS COURT ORDERSthat the only persons entitled to attend or speak at the Meeting shall be: (a) Securityholders or their respective proxyholders; (b) the officers, directors, auditors and advisors of Fronteer; (c) representatives and advisors of Newmont; and (d) other persons who may receive the permission of the Chair of the Meeting. 6.THIS COURT ORDERSthat Fronteer may transact such other business at the Meeting as is contemplated in the Circular, or as may otherwise be properly before the Meeting.Quorum 7. THIS COURT ORDERSthat the Chair of the Meeting shall be determined by Fronteer and that the quorum at the Meeting shall be not less than two persons present in person at the opening of the Meeting who are entitled to vote at the Meeting either as Shareholders or proxyholders.Amendments to the Arrangement and Plan of Arrangement 8. THIS COURT ORDERSthat Fronteer is authorized to make, subject to the terms of the Arrangement Agreement, and paragraph 9 below, such amendments, |
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modifications or supplements to the Arrangement and the Plan of Arrangement as it may determine without any additional notice to the Securityholders, or others entitled to receive notice under paragraph 12 hereof and the Arrangement and Plan of Arrangement, as so amended, modified or supplemented shall be the Arrangement and Plan of Arrangement to be submitted to the Securityholders at the Meeting and shall be the subject of the Arrangement Resolution. Amendments, modifications or supplements may be made following the Meeting, but shall be subject to review and, if appropriate, further direction by this Honourable Court at the hearing for the final approval of the Arrangement. 9.THIS COURT ORDERSthat, if any amendments, modifications or supplements to the Arrangement or Plan of Arrangement as referred to in paragraph 8 above, would, if disclosed, reasonably be expected to affect a Securityholder’s decision to vote for or against the Arrangement Resolution, notice of such amendment, modification or supplement shall be distributed, subject to further order of this Honourable Court, by press release, newspaper advertisement, prepaid ordinary mail, or by the method most reasonably practicable in the circumstances, as Fronteer may determine.Amendments to the Circular 10. THIS COURT ORDERSthat Fronteer is authorized to make such amendments, revisions and/or supplements to the draft Circular as it may determine and the Circular, as so amended, revised and/or supplemented, shall be the Circular to be distributed in accordance with paragraph 12. |
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Adjournments and Postponements 11. THIS COURT ORDERSthat Fronteer, if it deems advisable and subject to the terms of the Arrangement Agreement, is specifically authorized to adjourn or postpone the Meeting on one or more occasions, without the necessity of first convening the Meeting or first obtaining any vote of the Shareholders respecting the adjournment or postponement, and notice of any such adjournment or postponement shall be given by such method as Fronteer may determine is appropriate in the circumstances. This provision shall not limit the authority of the Chair of the Meeting in respect of adjournments and postponements.Notice of Meeting 12. THIS COURT ORDERSthat, in order to effect notice of the Meeting, Fronteer shall send the Circular (including the Notice of Application and this Interim Order), the Notice of Meeting, the form of proxy and the letter of transmittal, along with such amendments or additional documents as Fronteer may determine are necessary or desirable and are not inconsistent with the terms of this Interim Order (collectively, the “Meeting Materials”), to the following: (a) the registered Shareholders at the close of business on the Record Date and Optionholders, at least twenty-one (21) days prior to the date of the Meeting, excluding the date of sending and the date of the Meeting, by one or more of the following methods: (i) by pre-paid ordinary or first class mail at the addresses of the Shareholders or Optionholders as they appear on the books and records of Fronteer, or its registrar and transfer agent, at the close of business on the Record Date and if no address is shown therein, |
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then the last address of the person known to the Corporate Secretary of Fronteer; (ii) by delivery, in person or by recognized courier service or interoffice mail, to the address specified in (i) above; or (iii) by facsimile or electronic transmission to any Shareholder or Optionholder, who is identified to the satisfaction of Fronteer, who requests such transmission in writing and, if required by Fronteer, who is prepared to pay the charges for such transmission; (b) non-registered Shareholders by providing sufficient copies of the Meeting Materials to intermediaries and registered nominees in a timely manner, in accordance with National Instrument 54-101 of the Canadian Securities Administrators; and (c) the respective directors and auditors of Fronteer by delivery in person, by recognized courier service, by pre-paid ordinary or first class mail or, with the consent of the person, by facsimile or electronic transmission, at least twenty-one (21) days prior to the date of the Meeting, excluding the date of sending and the date of the Meeting; and that compliance with this paragraph shall constitute sufficient notice of the Meeting. 13.THIS COURT ORDERSthat accidental failure or omission by Fronteer to give notice of the meeting or to distribute the Meeting Materials to any person entitled by this Interim Order to receive notice, or any failure or omission to give such notice as a result of events beyond the reasonable control of Fronteer, or the non-receipt of such notice shall, subject to further order of this Honourable Court, not constitute a breach of this Interim Order nor shall it invalidate any resolution passed or proceedings taken at the Meeting. If any such failure or omission is brought to the attention of Fronteer, it |
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shall use its best efforts to rectify it by the method and in the time most reasonably practicable in the circumstances, 14.THIS COURT ORDERSthat Fronteer is hereby authorized to make such amendments, revisions or supplements to the Meeting Materials, as Fronteer may determine in accordance with the terms of the Arrangement Agreement (“Additional Information”), and that notice of such Additional Information may, subject to paragraph 9 above, be distributed by press release, newspaper advertisement, pre-paid ordinary mail, or by the method most reasonably practicable in the circumstances, as Fronteer may determine. 15.THIS COURT ORDERSthat distribution of the Meeting Materials pursuant to paragraph 12 of this Interim Order shall constitute notice of the Meeting and good and sufficient service of the within Application upon the persons described in paragraph 12 and that those persons are bound by any orders made on the within Application. Further, no other form of service of the Meeting Materials or any portion thereof need be made, or notice given or other material served in respect of these proceedings and/or the Meeting to such persons or to any other persons, except to the extent required by paragraph 9 above.Solicitation and Revocation of Proxies 16. THIS COURT ORDERSthat Fronteer is authorized to use the letter of transmittal and proxies substantially in the form of the drafts accompanying the Circular, with such amendments and additional information as Fronteer may determine are necessary or desirable, subject to the terms of the Arrangement Agreement. Fronteer is |
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authorized to solicit proxies, directly or through its officers, directors or employees, and through such agents or representatives as they may retain for that purpose, and by mail or such other forms of personal or electronic communication as it may determine. Fronteer may waive generally, in its discretion, the time limits set out in the Circular for the deposit or revocation of proxies by Shareholders, if Fronteer deems it advisable to do so. 17. THIS COURT ORDERS that Shareholders shall be entitled to revoke their proxies in accordance with section 110(4) of the OBCA (except as the procedures of that section are varied by this paragraph) provided that any instruments in writing delivered pursuant to s. 110(4) of the OBCA: (a) may be deposited at the registered office of Fronteer or with the transfer agent of Fronteer as set out in Circular; and (b) any such instruments must be received by Fronteer or its transfer agent not later than 4:00 p.m. (Vancouver time) on the business day immediately preceding the Meeting (or any adjournment or postponement thereof). Voting 18. THIS COURT ORDERS that the only persons entitled to vote in person or by proxy on the Arrangement Resolution, or such other business as may be properly brought before the Meeting, shall be Shareholders who hold Fronteer Shares as of the close of business on the Record Date, and Optionholders. Illegible votes, spoiled votes, defective votes and abstentions shall be deemed to be votes not cast. Proxies that are properly signed and dated but which do not contain voting instructions shall be voted in favour of the Arrangement Resolution. |
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THIS COURT ORDERS that votes shall be taken at the Meeting on the basis of one vote per Fronteer Share and one vote per Fronteer Option and that in order for the Plan of Arrangement to be implemented, subject to further Order of this Honourable Court, the Arrangement Resolution must be passed, with or without variation, at the Meeting by an affirmative vote of at least two-thirds (66-2/3%) of the votes cast in respect of the Arrangement Resolution at the Meeting in person or by proxy by the Shareholders and Optionholders voting together as a single class. Such votes shall be sufficient to authorize Fronteer to do all such acts and things as may be necessary or desirable to give effect to the Arrangement and the Plan of Arrangement on a basis consistent with what is provided for in the Circular without the necessity of any further approval by the Shareholders or Optionholders, subject only to final approval of the Arrangement by this Honourable Court. THIS COURT ORDERS that in respect of matters properly brought before the Meeting pertaining to items of business affecting Fronteer (other than in respect of the Arrangement Resolution), each Shareholder is entitled to one vote for each Fronteer Share held. Optionholders will not be entitled to vote on any matter other than the Arrangement Resolution. Dissent Rights 21. THIS COURT ORDERS that each registered Shareholder shall be entitled to exercise Dissent Rights in connection with the Arrangement Resolution in accordance with section 185 of the OBCA (except as the procedures of that section are varied by this Interim Order and the Plan of Arrangement) provided that, |
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notwithstanding subsection 185(6) of the OBCA, any Shareholder who wishes to dissent must, as a condition precedent thereto, provide written objection to the Arrangement Resolution to Fronteer in the form required by section 185 of the OBCA and the Arrangement Agreement, which written objection must be received by Fronteer not later than 4:00 p.m. (Vancouver time) on March 28, 2011, or two Business Days prior to any adjournment or postponement of the Meeting, and must otherwise strictly comply with the requirements of the OBCA. For purposes of these proceedings, the “court” referred to in section 185 of the OBCA means this Honourable Court. THIS COURT ORDERS that, notwithstanding subsection 185(4) of the OBCA, Newmont Sub, not Fronteer, shall be required to offer to pay fair value, as of the day prior to approval of the Arrangement Resolution, for Fronteer Shares held by Shareholders who duly exercise Dissent Rights, and to pay the amount to which such Shareholders may be entitled pursuant to the terms of the Plan of Arrangement. In accordance with the Plan of Arrangement and the Circular, all references to the “corporation” in subsections 185(4) and 185(14) to 185(30), inclusive, of the OBCA (except for the second reference to the “corporation” in subsection 185(15)) shall be deemed to refer to Newmont Sub in place of the “corporation”, and Newmont Sub shall have all of the rights, duties and obligations of the “corporation” under subsections 185(14) to 185(30), inclusive, of the OBCA. THIS COURT ORDERS that any Shareholder who duly exercises such Dissent Rights set out in paragraph 21 above and who: |
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is ultimately determined by this Honourable Court to be entitled to be paid fair value for his, her or its Fronteer Shares, shall be deemed to have transferred those Fronteer Shares as of the Effective Time, without any further act or formality and free and clear of all liens, claims, encumbrances, charges, adverse interests or security interests to Newmont Sub for cancellation in consideration for a payment of cash from Newmont Sub equal to such fair value; or is for any reason ultimately determined by this Honourable Court not to be entitled to be paid fair value for his, her or its Shares pursuant to the exercise of the Dissent Right, shall be deemed to have participated in the Arrangement on the same basis and at the same time as any non- dissenting Shareholder; but in no case shall Fronteer, Newmont, Newmont Sub, Pilot Gold or any other person be required to recognize such Shareholders as holders of Fronteer Shares at or after the date upon which the Arrangement becomes effective and the names of such Shareholders shall be deleted from Fronteer register of holders of Fronteer Shares at that time. Hearing of Application for Approval of the Arrangement THIS COURT ORDERS that upon approval by the Securityholders of the Plan of Arrangement in the manner set forth in this Interim Order, |
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Fronteer may apply to this Honourable Court for final approval of the Arrangement. THIS COURT ORDERS that distribution of the Notice of Application and the Interim Order in the Circular, when sent in accordance with paragraph 12 shall constitute good and sufficient service of the Notice of Application and this Interim Order and no other form of service need be effected and no other material need be served unless a Notice of Appearance is served in accordance with paragraph 26. 26. THIS COURT ORDERS that any Notice of Appearance served in response to the Notice of Application shall be served on the solicitors for Fronteer, with a copy to counsel for Newmont, as soon as reasonably practicable, and, in any event, no later than 5:00 p.m. (Toronto time) on the fifth Business Day immediately preceding the hearing of this Application at the following addresses: (a) Davies Ward Phillips & Vinebergllp44th Floor, 1 First Canadian Place Toronto, ON M5X 1B1 Attention: James Doris Lawyers for Fronteer (b) Goodmans LLP Bay Adelaide Centre Suite 3400, 333 Bay Street Toronto, ON M5H 2S7 Attention: Tom Friedland Lawyers for Newmont 27. THIS COURT ORDERS that, subject to further order of this Honourable Court, the only persons entitled to appear and be heard at the hearing of the within application shall be: Fronteer; Newmont; and |
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(c) any person who has filed a Notice of Appearance herein in accordance with the Notice of Application, this Interim Order and theRules of Civil Procedure.THIS COURT ORDERS that any materials to be filed by Fronteer in support of the within Application for final approval of the Arrangement may be filed up to one day prior to the hearing of the Application without further order of this Honourable Court. THIS COURT ORDERS that in the event the within Application for final approval does not proceed on the date set forth in the Notice of Application, and is adjourned, only those persons who served and filed a Notice of Appearance in accordance with paragraph 26 shall be entitled to be given notice of the adjourned date. Precedence 30. THIS COURT ORDERS that, to the extent of any inconsistency or discrepancy between this Interim Order and the terms of any instrument creating, governing or collateral to the Fronteer Shares, Fronteer Options, or the articles or by laws of Fronteer, this Interim Order shall govern. Extra-Territorial Assistance 31. THIS COURT seeks and requests the aid and recognition of any court or any judicial, |
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regulatory or Commercial List File No: CV-11-91 16-OOCL administrative body in any province of Canada and any judicial, regulatory or administrative tribunal or other court constituted pursuant to the Parliament of Canada or the legislature of any province and any court or any judicial, regulatory or administrative body of the United States or other country to act in aid of and to assist this Honourable Court in carrying out the terms of this Interim Order. Variance 32. THIS COURT ORDERS that Fronteer shall be entitled to seek leave to vary this Interim Order upon such terms and upon the giving of such notice as this Honourable Court may direct. ENTERED AT / INSCRIT A TORONTO ON / BOOK NO: LE/DANSLEREGISTRENO.. FEB 28 2011 PER/PAM: IN |
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THE MATTER OF an application under section 182 of theBusiness Corporations Act,R.S.O. 1990, c. B.16, as amended; AND IN THE MATTER OF Rules 14.05(2) and 14.05(3) of theRules of Civil ProcedureAND IN THE MATTER OF a proposed arrangement of Fronteer Gold Inc.ONTARIOSUPERIOR COURT OF JUSTICE (Commercial List) Proceeding commenced at Toronto INTERIM ORDER Davies Ward Phillips & Vinebergllp 44th Floor, 1 First Canadian Place Toronto, ON M5X 1B1 James Doris (LSUC #33236P) Tel: 416.367.6919 Fax: 416.863.0871 Lawyers for the Applicant |
authority of any Canadian province or territory, the United States Securities and Exchange
Commission, or any securities regulatory authority of any U.S. State) has expressed an opinion
about the securities described herein and it is an offence to claim otherwise.
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– | Audited Consolidated Financial Statements of Pilot Gold | |||
– | Audited Consolidated Financial Statements of Pilot Gold in Respect of the Exploration Properties Business of Fronteer to be Acquired by Pilot Gold | |||
– | Unaudited Pro Forma Consolidated Financial Statements of Pilot Gold | |||
– | Management’s Discussion and Analysis — Pilot Gold for the period of April 23, 2010 to December 31, 2010 | |||
– | Management’s Discussion and Analysis — Exploration Properties Business Statements | |||
– | Pilot Gold Audit Committee Charter | |||
– | Mandate of the Board of Pilot Gold |
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1. | through Pilot Holdings Inc., all the issued and outstanding shares of Fronteer Investment Inc. (“FII”) (to be renamed Pilot Investment Inc.), a Cayman Islands company that holds: (a) a 40% participating interest in two Turkish joint venture companies (60% owned by Teck Madencilik Sanayi Ticaret A.S. (“TMST”), a subsidiary of Teck) which, in turn, hold the Halilaǧa copper-gold project (the “Halilaǧa Property”), the TV Tower gold |
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project (the “TV Tower Property” and, together with the Halilaǧa Property, the “Turkish Properties”) and several other early-stage exploration properties in northwestern Turkey; and (b) through a wholly-owned Turkish subsidiary, three other early-stage exploration properties in Turkey; |
2. | through Pilot USA, all mining claims and rights held by certain subsidiaries of Fronteer in respect of several gold exploration properties in the state of Nevada (known as the Anchor project, the Baxter Spring project, the New Boston project, the Stateline project, the Easter project, the Gold Springs 2 project and the Viper project) ; and | |
3. | two million common shares and one million share purchase warrants in the capital of Rae Wallace Mining Company (“Rae Wallace”) as well as the option agreement with Rae Wallace pursuant to which Pilot Gold will acquire a right to earn a 51% interest in up to two properties that Rae Wallace currently owns or may acquire within a 25,300 km2 area of interest, |
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Hole | From (ft) | To (ft) | Width (ft) | Au_g/t | Ag_g/t | Hole | From (ft) | To (ft) | Width (ft) | Au_g/t | Ag_g/t | |||||||||||||||||||||||||||||||||
NRE-054 | 260 | 285 | 25 | 5.7 | 33.7 | RK-2155 | 410 | 415 | 5 | 9.6 | 6.4 | |||||||||||||||||||||||||||||||||
RK-2557 | 540 | 560 | 20 | 9.1 | 168.3 | RK-2525 | 205 | 210 | 5 | 9.5 | 5.1 | |||||||||||||||||||||||||||||||||
RK-1918 | 395 | 410 | 15 | 10.7 | 14.4 | NRE-063 | 310 | 315 | 5 | 9.4 | 17.6 | |||||||||||||||||||||||||||||||||
RK-2712 | 550 | 565 | 15 | 8.4 | 19.5 | RK-2355 | 10 | 15 | 5 | 8.9 | 5.1 | |||||||||||||||||||||||||||||||||
NRE-080 | 305 | 315 | 10 | 12.0 | 115.7 | NRE-063 | 225 | 230 | 5 | 7.9 | 57.6 | |||||||||||||||||||||||||||||||||
RK-2411 | 165 | 175 | 10 | 12.2 | 35.8 | RK-1914 | 570 | 575 | 5 | 7.8 | 489.0 | |||||||||||||||||||||||||||||||||
RK-2549 | 485 | 490 | 5 | 49.9 | 490.9 | RK-1906 | 475 | 480 | 5 | 7.0 | 4.5 | |||||||||||||||||||||||||||||||||
RK-2421 | 390 | 395 | 5 | 29.8 | 15.4 | NRE-058 | 40 | 45 | 5 | 7.0 | 20.2 | |||||||||||||||||||||||||||||||||
RK-1937 | 20 | 25 | 5 | 29.6 | 36.5 | RK-2794 | 545 | 550 | 5 | 7.0 | 196.5 | |||||||||||||||||||||||||||||||||
RK-2207 | 65 | 70 | 5 | 28.1 | 188.5 | NRE-040 | 75 | 80 | 5 | 6.8 | 2.6 | |||||||||||||||||||||||||||||||||
NRE-054 | 200 | 205 | 5 | 23.8 | 28.2 | RK-2435 | 95 | 100 | 5 | 6.7 | 8.0 | |||||||||||||||||||||||||||||||||
RK-2220 | 380 | 385 | 5 | 22.1 | 19.8 | RK-1970 | 205 | 210 | 5 | 6.6 | 2.0 | |||||||||||||||||||||||||||||||||
RK-2551 | 15 | 20 | 5 | 18.4 | 121.6 | RK-2445 | 465 | 470 | 5 | 6.2 | 5.1 | |||||||||||||||||||||||||||||||||
RK-2167 | 335 | 340 | 5 | 14.1 | 16.6 | RK-2477 | 45 | 50 | 5 | 6.2 | 5.4 | |||||||||||||||||||||||||||||||||
RK-1952 | 170 | 175 | 5 | 12.0 | 3.8 | RE-002 | 25 | 30 | 5 | 5.9 | 24.3 | |||||||||||||||||||||||||||||||||
RK-2196 | 150 | 155 | 5 | 11.2 | 34.0 | RK-2201 | 10 | 15 | 5 | 5.5 | 2.2 | |||||||||||||||||||||||||||||||||
RK-1914 | 15 | 20 | 5 | 10.4 | 9.3 | RK-2194 | 110 | 115 | 5 | 5.3 | 6.4 | |||||||||||||||||||||||||||||||||
RK-2434 | 280 | 285 | 5 | 10.0 | 6.1 | RK-2550 | 25 | 30 | 5 | 5.2 | 86.4 | |||||||||||||||||||||||||||||||||
RK-2431 | 265 | 270 | 5 | 9.8 | 15.7 | RK-2045 | 20 | 25 | 5 | 5.1 | 14.1 |
* | The true widths cannot be reliably estimated until oriented core is drilled and the orientation of the veins better understood. |
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Regent Exploration Budget
Budget Item | Phase 1 (000$) | Phase 2 (000$) | ||||||
Admin/G and A | 752 | 900 | ||||||
Geochemistry/assays | 162 | 450 | ||||||
Drilling | 725 | 1,750 | ||||||
Geophysics | 25 | 0 | ||||||
Land and Legal | 125 | 30 | ||||||
Environmental | 45 | 140 | ||||||
Metallurgical Studies | 22 | 40 | ||||||
Resource Estimation and Modeling | 10 | 0 | ||||||
Contingency | 60 | 20 | ||||||
TOTAL (Cdn$) | 1,926 | 3,330 |
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• | MJTC-16 intersected 0.58 g/t gold over 13.85 metres. | |
• | MJTC-17 did not intersect any significant mineralization. |
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• | Kunk North (>0.5 g/t gold) is part of the Kunk Hill lithocap where strongly silicified, locally vuggy and brecciated volcanics. | |
• | Kumlugedik Hill (>1.0 g/t gold) has numerous float samples of silicified and quartz veined (more epithermal- low temperature) meta-sediments, volcano sediments. | |
• | Madendere (>0.2 g/t gold) has porphyry style alteration characterized by strong quartz sericiticsub-volcanics with a few millimetre thick quartz veins (B-type?). The size of the selectively sampled area is 2 km by~200m. |
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• | Continued environmental Baseline work. | |
• | Continued metallurgy testing. | |
• | Two phase infill and drill program (200 metres centres): |
1) | Phase 1: 10,000 metres, January – June | |
2) | Phase 2: 10,000 metres, June – December |
• | 30 line km IP survey over the south eastern portion of the property. |
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Activity | Cost US$ | |||
Labour | 350,000 | |||
Environmental | 570,000 | |||
Metallurgy | 50,000 | |||
Drilling (Phase 1, Jan-June 10,000 metres) | 1,454,000 | |||
Drilling (Phase 2, June- December 10,000 metres) | 1,454,000 | |||
Surveying | 20,000 | |||
Field Support | 188,000 | |||
Property | 24,000 | |||
Geophysics (30 line km) | 40,000 | |||
Assaying & Geochemistry | 450,000 | |||
Total | 4,600,000 | |||
• | A total of US$200,000 before November 1, 2005 |
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• | A further US$300,000 before November 1, 2006 | |
• | A further US$500,000 before November 1, 2007 | |
• | And a further US$1,000,000 before November 1, 2008 for a cumulative total of US$2,000,000. |
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• | Reconnaissance mapping and prospecting | |
• | Geochemistry surveying: 316 Rock samples, 96 silt samples |
• | 1:5,000 and 1:10,000 scale detailed geological mapping | |
• | 25 line-km of ground Mag (Kayali and Kücükdag targets) | |
• | 1315 soil samples | |
• | 485 rock-saw channel samples (1.5 km total length); sampling defined significant outcropping gold mineralization including 74m @ 1.3 g/t Au at Kayali and 1.9m @ 11 g/t Au at Nacak | |
• | 1300 PIMA samples. | |
• | 650 Hand specimens for magnetic susceptibility measurements | |
• | Seven targets were defined by geochemical results and mapping (Kücükdag , Kayali, Sarp, Kestancilik, Nacak, Tesbihcukuru and Kiraz) |
• | Detailed geological/alteration/mineralization mapping (Kücükdag , Sarp, Kayali, and Nacak) | |
• | 132 line-km detailed ground Mag (Kayali, Sarp, Kücükdag) | |
• | 14.6 line-km IP (Kayali, Kücükdag and Sarp) | |
• | 228 Soil samples | |
• | 485 rock samples | |
• | Three targets at the drill testing stage (Kayali, Nacak and Kücükdag) | |
• | 19 diamond drill holes totaling 4,184 metres |
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(1) | The Çamlca metamorphics. These occur as a NE-SW-trending strip of quartz-mica schists (Kemer unit) with calc-schist, quartzite and amphibolite horizons. | |
(2) | Kazdaǧ Massif. The second group of metamorphic rocks is exposed in the Kazdaǧ mountain range and consists of high-grade metamorphic rocks (amphibole-bearing gneisses with marble intercalations, meta-ophiolite, marble and gneiss). | |
(3) | Karakaya Complex. This group comprises two distinct lithologic associations: (a) a strongly deformed greenschist-facies metamorphic sequence of metabasites intercalated with phyllite and marble accompanied by minor amounts of metachert, meta-gabbro and serpentinite; and (b) a thick series of low grade metamorphic rocks. |
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• | Pervasive silicification; massive, vuggy, granular textured |
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• | Silicic alteration; quartz+/-alunite | |
• | Advance argillic alteration; dickite+alunite+/-kaolinite +pyrophylite | |
• | Argillic alteration; illite +/- smectite +/-sericite+/- kaolinite+/-gypsum | |
• | Propylitic alteration; chlorite +/- illite |
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(Estimated true widths are 60% to 90%of intersected widths)
Hole No. | Zone | From (m) | To (m) | Interval (m) | Au (g/t) | |||||||||||||||
KCD-02 | Kücükdag | 12.3 | 148.5 | 136.2 | 4.26 | |||||||||||||||
KCD-03 | Kücükdag | 44.4 | 51.7 | 7.3 | 0.52 | |||||||||||||||
KCD-04 | Kücükdag | 48.5 | 56 | 7.5 | 1.28 | |||||||||||||||
And | 135.9 | 139.8 | 3.9 | 1.99 | ||||||||||||||||
And | 155 | 163.2 | 8.2 | 4.09 | ||||||||||||||||
And | 200.6 | 213.6 | 13 | 4.54 | ||||||||||||||||
KYD-01 | Kayali | 4.5 | 119 | 114.5 | 0.87 | |||||||||||||||
KYD-02 | Kayali | 0.4 | 89 | 88.6 | 0.78 |
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• | Detailed geological mapping of the TV Tower Licence area, with an emphasis on the structural controls of the mineralization at Kücükdag , Sarp, Kiraz and Kayali. | |
• | Infill soil geochemistry on 125 metre spaced lines with detailed 62.5 metre spaced lines over target areas. | |
• | Infill IP surveying on 125 metres spaced lines over high priority targets (total of 50 line-km). | |
• | 15,000 metres of diamond drilling. | |
• | Continued prospecting and geochemical sampling over the remainder of licences. |
Activity | Cost US$ | |||
Wages | 300,000 | |||
Environmental | 180,000 | |||
Metallurgy | 50,000 | |||
Total Drilling | 2,200,000 | |||
Field Support | 180,000 | |||
Property | 100,000 | |||
Geophysics | 40,000 | |||
Assaying & Geochemistry | 450,000 | |||
TOTAL COSTS | 3,500,000 | |||
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Principal purpose | Amount | |||
Phase 1 recommended exploration program on the Regent Property | $ | 1,926,000 | (1) | |
Phase 2 recommended exploration program on the Regent Property | $ | 721,000 | (1)(2) | |
Committed capital requirements to advance the Halilaǧa projects | $ | 1,540,000 | (3) | |
Committed capital requirements to advance the TV Tower projects | $ | 1,494,000 | (3) | |
Exploration activities on other areas of interest | $ | 489,000 | (4) | |
G&A, professional fees and other corporate costs | $ | 3,419,000 | (5) | |
Total: | $ | 9,589,000 | ||
(1) | See in this Appendix “E”, “The Principal Properties —The Regent Property —Interpretations and Conclusions” |
(2) | Phase 2 of the recommended exploration program on the Regent Property will be undertaken if warranted based on the results of Phase 1. The amount related to Phase 2 in the table above reflects planned expenditures through to September 30, 2012 following an assessment phase on the results of Phase 1, and subject to a positive decision to undertake Phase 2. As noted, the table above includes only the 18 months following the anticipated completion of the Arrangement. The total recommended Phase 2 program on the Regent Property is $3.3 million. |
(3) | Our forecast for the use of capital as it relates to the planned Halilaǧa and TV Tower exploration program has been developed using the following assumptions: (i) the exploration and development budget determined by Teck for 2012 will be similar to the exploration and development budget for 2011, (ii) monthly capital commitments from Teck (see in this Appendix “E”, “Business Objectives and Operations” as it relates to the Halilaǧa and TV Tower projects, and the anticipated capital requirements of Teck, the Corporation’s joint venture partner), will be consistent with actual activity and cash calls to date as compared to budget. Amounts included in this table thus reflect Pilot Gold management’s best estimate of costs determinable as at the date of the Circular, based on year to date activities and ongoing fieldwork. Key differences from budget include: (A) activity through to August 2011 led by Teck on the TV Tower project is expected to relate only to ongoing soil sampling and geophysical evaluation. Drilling and activity that is more capital intensive is not expected to begin until late in 2011. Cash call amounts anticipated by Pilot Gold have been reduced accordingly. If the capital requirement to advance the TV Tower project is materially different than forecast, Pilot Gold will redirect funds to meet its capital obligations; (B) semi-annually, Teck undertakes an assessment related to its exploration programs and activities. Through 2011, cash calls and activity have been lower than forecast as Teck completes and assesses the progress and results of exploration activities in advance of its semi-annual assessment. Cash call amounts anticipated by Pilot Gold have been reduced to reflect the Corporation’s understanding of activity underway and planned in the near term. If the capital requirement to advance the Halilaǧa project is materially different than forecast, Pilot Gold will redirect funds to meet its capital obligations. |
(4) | Exploration programs on other areas of interest include title maintenance costs, annual renewal fees and licenses, filing and recording fees and other costs to maintain ongoing access on the Corporation’s other Nevada and Turkish properties. The balance also includes an allocation of certain wages and overhead to carry out initial exploration activities. These resources could be redirected to the Corporation’s other exploration projects if required. |
(5) | Estimated general and administrative expenses, professional fees and other corporate costs for the 18 months following completion of the Arrangement, comprised of wages and employment benefits ($1,980,000), rent and office related costs ($893,000), investor relations, listing and filing fees ($324,000) and professional and advisory fees ($222,000). |
E-34
E-35
Selected Pro forma Consolidated Financial Statement Information
Balance Sheet as at
December 31, 2010
(unaudited – $)
Assets | ||||
Current Assets | ||||
Cash | $ | 9,726,963 | ||
Receivables and other | 286,503 | |||
Total Current Assets | $ | 10,013,466 | ||
Property, plant and equipment | 962,402 | |||
Long-term investments | 419,217 | |||
Reclamation deposits | 12,858 | |||
Exploration properties and deferred exploration expenditures | 3,091,652 | |||
Equity investments in Turkish properties | 3,447,021 | |||
Total Assets | $ | 17,946,616 | ||
Liabilities and Shareholders’Equity | ||||
Total current liabilities | $ | 74,006 | ||
Total long term liabilities | 2,657 | |||
Total shareholders’ equity | 17,869,953 | |||
Total Liabilities and Shareholders’Equity | $ | 17,946,616 | ||
Selected Pro forma Consolidated Financial Statement Information
Statements of Operations — Year ended
December 31, 2010
(unaudited – $)
Expenses | $ | 1,362,081 | ||
Loss before other items | $ | (1,362,081 | ) | |
Other items | $ | (215,204 | ) | |
Net loss | $ | (1,577,258 | ) | |
Loss per share | $ | (0.03 | ) | |
Pro forma number of Pilot Gold Shares | 50,478,794 |
E-36
Amount outstanding | Amount outstanding | Amount outstanding | ||||||
as of | as of the date | assuming completion of | ||||||
Capital | Authorized | December 31, 2010(1) | of the Circular(1) | the Arrangement(2) | ||||
Pilot Gold Shares | Unlimited | $1,215,486 | $1,215,486 | $66,213,841 | ||||
(10,000,001 Pilot Gold Shares) | (10,000,001 Pilot Gold Shares) | (50,478,794 Pilot Gold Shares) |
(1) | See in this Appendix “E”, “Prior Sales”. |
(2) | These figures are extracted from the unaudited pro forma consolidated financial statements of Pilot Gold attached to this Appendix “E” as Schedule III, which are presented on the basis that the Arrangement was completed as at December 31, 2010. See also in the Circular, “The Arrangement — Principal Steps of the Arrangement” and “The Arrangement — Procedure for Exchange of Fronteer Shares”. |
E-37
Issue price per | ||||||||
Date | Number of Pilot Gold Shares | Pilot Gold Share | ||||||
November 18, 2010(1) | 1 | $ | 1.00 | |||||
December 30, 2010(2) | 10,000,000 | $ | 0.1215 |
(1) | Pilot Gold was incorporated on November 18, 2010. One Pilot Gold Share was issued to Fronteer at a price of $1.00 to facilitate the initial organization of Pilot Gold. |
(2) | On December 30, 2010, 10,000,000 Pilot Gold Shares were issued to Fronteer. See in this Appendix “E”, “Description of the Business — Acquisition of the Pilot Gold Properties and the Pilot Gold Assets — The 2010 Pilot Gold Purchases”. |
See also “Consolidated Capitalization”. |
Number of Pilot | Percentage of | |||||||||||||||||||
Percentage of | Gold Shares | Pilot Gold Shares | ||||||||||||||||||
Number of Pilot | Pilot Gold Shares | Assuming | Assuming | |||||||||||||||||
Type of | Gold Shares at | at Date of | Completion of the | Completion of the | ||||||||||||||||
Name | Ownership | Date of Circular | Circular | Arrangement(1) | Arrangement(1) | |||||||||||||||
Fronteer | Direct | 10,000,001 | 100 | % | 10,045,280 | (2) | 19.9 | %(3) |
(1) | Pursuant to the Plan of Arrangement, upon the Arrangement being effected, one Pilot Gold Share will be distributed for each of the outstanding Fronteer shares. The Pilot Gold Shares will then be consolidated on aone-for-four basis as part of the Arrangement (see in the Circular “The Arrangement”: “Principal Steps of the Arrangement”, “Procedure for Exchange of Fronteer Shares”, “Procedure for Exchange of Fronteer Shares”, “No Fractional Shares to be Issued” and “Cancellation of Rights After Six Years”). Information as to holdings of Fronteer Shares and for the purposes of these calculations has been taken from the central securities registers of Fronteer or from insider reports or other disclosure documents electronically filed with regulators and publicly available through the Internet at the website for the Canadian System for Electronic Disclosure by Insiders (SEDI) atwww.sedi.ca or SEDAR atwww.sedar.com. |
(2) | Following the completion of the Arrangement, these Pilot Gold Shares will be held by Newmont or one of its affiliates. Assumes 50,478,794 Pilot Gold Shares issued and outstanding after completion of the Arrangement. |
(3) | The same percentage will be held by this entity on a fully diluted basis. The number of Pilot Gold Shares that will be owned by Newmont or one of its affiliates following the completion of the Arrangement is subject to adjustment if any Fronteer Shareholders exercise their Dissent Rights and in connection with the elimination of fractional Pilot Gold Shares pursuant to the Plan of Arrangement. |
E-38
Number and Percentage of Pilot Gold | ||||
Shares Beneficially Owned, Directly | ||||
Name and Residence and | Principal Occupation for | or Indirectly, or Over which Control | ||
Position with Pilot Gold | Five Preceding Years(1) | or Direction is Exercised(2) | ||
Mark O’Dea(4) British Columbia, Canada Director, Chairman of the Board | President and Chief Executive Officer of Fronteer (May 2001 to present) President and Chief Executive Officer of Aurora Energy Resources Inc., a mineral exploration company (June 2005 to April 2009) Director, Laurentian Goldfields Ltd., a mineral exploration company (January 2010 to present) Director, XDM Resources (February 2011 to present) | 554,540 (1.10%) | ||
Matthew Lennox-King British Columbia, Canada President, Chief Executive Officer and Director | Senior Geologist of Fronteer (May 2008 to present) Manager-CMB Project, Aurora Energy Resources Inc., a mineral exploration company (April 2006 to April 2008) Project Geologist, Fronteer (January 2004 to March 2006) | 19,884 (0.04%) |
E-39
Number and Percentage of Pilot Gold | ||||
Shares Beneficially Owned, Directly | ||||
Name and Residence and | Principal Occupation for | or Indirectly, or Over which Control | ||
Position with Pilot Gold | Five Preceding Years(1) | or Direction is Exercised(2) | ||
John Wenger British Columbia, Canada Chief Financial Officer and Corporate Secretary | Professional Practice Manager, Ernst & Young LLP, a public accounting and advisory firm (February 2009 to February 2011) Audit and Assurance Manager, Ernst & Young LLP, a public accounting and advisory firm (July 2007 to February 2009) Audit and Assurance Staff, Ernst & Young LLP, a public accounting and advisory firm (September 2003 to July 2007) | Nil | ||
Ian Cunningham-Dunlop British Columbia, Canada Chief Operating Officer | Vice President, Exploration of Fronteer (2004 to present) Vice President, Exploration of Aurora Energy Resources Inc., a mineral exploration company (March 2006 to June 2008) | 152,375 (0.30%) | ||
Donald McInnes(3) British Columbia, Canada Director | Vice Chairman and Chief Executive Officer and former President of Plutonic Power Corporation, an emerging power producer (June 1999 to present) President of Blackstone Ventures Inc., a mineral exploration company (June 1993 to March 2008) President of Western Keltic Mines Inc., a mineral exploration company (June 1993 to April 2006) | 86,911 (0.17%) | ||
Robert Pease British Columbia, Canada Director | Director, President and Chief Executive officer of Terrane Metals Corp., a mining company (April 2006 to October 2010) President of R. Pease Consulting Inc. (December 2010 to present) Director and Advisor of Richfield Ventures Corp., a mineral exploration company (November 2010 to present) General Manager, Canada Exploration and Global Major Projects of Placer Dome Inc., a mining company (2002 to 2006) | Nil | ||
Sean Tetzlaff(3)(4) British Columbia, Canada Director | Chief Financial Officer, Vice President, Finance and Corporate Secretary of Fronteer (January 2005 to present) Chief Financial Officer, Vice-President, Finance, and Corporate Secretary, Aurora Energy Resources Inc., a mineral exploration company (March 2006 to February 2008) | 231,715 (0.46%) |
E-40
Number and Percentage of Pilot Gold | ||||
Shares Beneficially Owned, Directly | ||||
Name and Residence and | Principal Occupation for | or Indirectly, or Over which Control | ||
Position with Pilot Gold | Five Preceding Years(1) | or Direction is Exercised(2) | ||
John Dorward(3)(4) British Columbia, Canada Director | Vice-President, Business Development of Fronteer (November 2009 to present) Chief Financial Officer of Mineral Deposits Limited, an Australian mining company (November 2006 to June 2009) Chief Financial Officer and Company Secretary of Leviathon Resources Limited, an Australian mining company (October 2004 to November 2006) | 62,750 (0.12%) |
(1) | All companies noted are still carrying on business as of the date of the Circular unless otherwise noted. |
(2) | Reflects theone-for-four consolidation of Pilot Gold Shares to be effected pursuant to the Plan of Arrangement and assumes 50,728,794 Pilot Gold Shares issued and outstanding after the completion of the Arrangement and the exercise or surrender pursuant to the Plan of Arrangement of: (a) such number of Fronteer Options that the individuals in the table above have indicated they currently intend to exercise or surrender; and (b) all of the in-the-money Fronteer Options held by other Fronteer Optionholders. The information as to Pilot Gold Shares to be beneficially owned, directly or indirectly, or over which control or direction is exercised, is based upon information furnished to Pilot Gold by its proposed directors and officers as of the date hereof. |
(3) | Proposed member of the Audit Committee of the Corporation (the “Audit Committee”). |
(4) | Proposed member of the Compensation Committee of the Corporation (the “Compensation Committee”). |
E-41
E-42
(a) | was subject to: |
(i) | a cease trade order (including any management cease trade order which applied to directors or executive officers of a company, whether or not the person is named in the order), or | |
(ii) | an order similar to a cease trade order, or | |
(iii) | an order that denied the relevant company access to any exemption under securities legislation, |
(b) | was subject to an Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer. |
E-43
(a) | been a director or executive officer of any company (including Pilot Gold) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or | |
(b) | become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder. |
(a) | any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or | |
(b) | any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision. |
E-44
E-45
E-46
E-47
Member | Relevant Education and Experience | |
Sean Tetzlaff | • Currently Chief Financial Officer of Fronteer and previously served as Chief Financial Officer of Aurora Energy Resources Inc., Valerie Gold Resources Ltd. and Emgold Mining Corporation. | |
• Previously a Senior Manager, Tax at KPMG LLP. | ||
• Chartered Accountant and holds Bachelor of Commerce from the University of British Columbia. | ||
Donald McInnes | • Past president and a director of Western Keltic Mines Inc., former director of Atikwa Minerals Inc. and current director and past President of Blackstone Ventures Inc. | |
• President and Director of Plutonic Power Corporation. | ||
• Significant experience evaluating financial statements. | ||
• Currently serving on the audit committee of Blackstone Ventures Inc. and formerly served on the audit committees of Atikwa Minerals Corp., Western Keltic Mines Inc. and Fronteer. | ||
John Dorward | • Former Chief Financial Officer to Mineral Deposits Limited and Leviathan Resources Limited. | |
• Holds a Bachelor of Commerce degree from Melbourne University. |
E-48
Name of director | Other reporting issuer (or equivalent in a foreign jurisdiction) | |
Mark O’Dea | • Director, Laurentian Goldfields Ltd. | |
Donald McInnes | • Chairman of the board, and a director, of Blackstone Ventures Inc. | |
• Vice Chair and Chief Executive Officer of Plutonic Power Corporation | ||
Robert Pease | • Director of Richfield Ventures Corp. |
E-49
E-50
(a) | provides leadership to the Board with respect to its functions as described in the Board Mandate and as otherwise may be appropriate, including overseeing the logistics of the operations of the Board; | |
(b) | chairs meetings of the Board, unless not present, including in camera sessions; | |
(c) | ensures that the Board meets on a regular basis and at least quarterly, or more often as is necessary; | |
(d) | establishes a schedule for holding meetings of the Board; | |
(e) | establishes the agenda for each meeting of the Board, with input from other Board members and any other relevant parties, as applicable; | |
(f) | ensures that Board materials are available to any director on request; | |
(g) | ensures that the members of the Board understand and discharge their duties and obligations; | |
(h) | fosters ethical and responsible decision making by the Board and its individual members; | |
(i) | oversees the structure, composition, membership and activities of the Board; | |
(j) | ensures that resources and expertise are available to the Board so that it may conduct its work effectively and efficiently and pre-approves work to be done for the Board by consultants; | |
(k) | facilitates effective communication between members of the Board and management; and | |
(l) | attends each meeting of shareholders to respond to any questions from shareholders that may be put to the Chairman. |
(a) | provides leadership to the Committee with respect to its functions as described in the applicable charter and as otherwise may be appropriate, including overseeing the logistics of the operations of the Committee; | |
(b) | chairs meetings of the Committee, unless not present, including in camera sessions, and reports to the Board following each meeting of the Committee on the findings, activities and any recommendations of the Committee; |
E-51
(c) | ensures that the Committee meets on a regular basis and at least twice per year, or more often as is necessary; | |
(d) | in consultation with the Chairman of the Board and the Committee members, establishes a schedule for holding meetings of the Committee; | |
(e) | establishes the agenda for each meeting of the Committee, with input from other Committee members, the Chairman of the Board and any other parties as applicable; | |
(f) | ensures that Committee materials are available to any director on request; | |
(g) | acts as liaison and maintains communication with the Board Chairman and the Board generally to optimize and coordinate input from Board members, and to optimize the effectiveness of the Committee. This includes reporting to the full Board on all proceedings and deliberations of the Committee at the first meeting of the Board after each Committee meeting and at such other times and in such manner as the Committee considers advisable; | |
(h) | reports annually to the Board on the role of the Committee and the effectiveness of the Committee’s role in contributing to the objectives and responsibilities of the Board as a whole; | |
(i) | ensures that the members of the Committee understand and discharge their duties and obligations; | |
(j) | fosters ethical and responsible decision making by the Committee and its individual members; | |
(k) | oversees the structure, composition, membership and activities delegated to the Committee from time to time; | |
(l) | ensures that resources and expertise are available to the Committee so that it may conduct its work effectively and efficiently and pre-approves work to be done for the Committee by consultants; | |
(m) | facilitates effective communication between members of the Committee and management; | |
(n) | when possible, attends each meeting of Shareholders to respond to any questions from Shareholders as may be put to the Chair; and | |
(o) | performs such other duties and responsibilities as may be delegated to the Chair or by the Board from time to time. |
E-52
E-53
E-54
E-55
E-56
E-57
E-58
E-59
E-60
E-61
E-62
(a) | the Arrangement Agreement; | |
(b) | the agreement dated October 19, 2004 between Fronteer and TMST with respect to the Biǧa Properties; | |
(c) | the First Nevada Eagle Agreement; | |
(d) | the Second Nevada Eagle Agreement; | |
(e) | the Fronteer USA Agreement; | |
(f) | the FII Share Purchase Agreement; and | |
(g) | the Fronteer Agreement. |
(a) | The Regent Property — Dr. Paul Klipfel prepared a report in accordance with NI43-101 for Pilot Gold entitled “Summary Technical Report — Regent Gold Project, Mineral County, Nevada” dated January 4, 2011. | |
(b) | The Halilaǧa Property — Ian Cunningham-Dunlop prepared a report in accordance with NI43-101 for Pilot Gold entitled “Technical Report on the Halilaǧa Exploration Property, Çanakkale, Western Turkey” dated February 15, 2011. | |
(c) | The TV Tower Property — Ian Cunningham-Dunlop prepared a report in accordance with NI43-101 for Pilot Gold entitled “Technical Report on the TV Tower Exploration Property, Çanakkale, Western Turkey” dated February 15, 2011 |
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December 31, | ||||
2010 | ||||
ASSETS | ||||
Non-current assets | ||||
Exploration properties and deferred exploration expenditures (Note 5) | $ | 1,146,621 | ||
Total assets | $ | 1,146,621 | ||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||
Current liabilities | ||||
Trade and other payables | $ | 22,227 | ||
Total current liabilities | 22,227 | |||
Non-current liabilities | ||||
Future Income taxes (Note 4) | — | |||
Shareholder’s Equity | ||||
Share capital | 1,215,486 | |||
Contributed Surplus | 79,838 | |||
Accumulated deficit | (170,930 | ) | ||
Total equity | 1,124,394 | |||
Total equity and liabilities | $ | 1,146,621 | ||
“Matthew Lennox-King”, Director | “Sean Tetzlaff”, Director |
E-67
For the period | ||||
April 23, 2010 to | ||||
December 31, 2010 | ||||
Operating expenses: | ||||
Stock-based compensation | $ | 52,758 | ||
Wages and benefits | 49,889 | |||
Professional fees | 36,503 | |||
Office and general | 20,780 | |||
Investor relations, promotion and advertising | 11,000 | |||
Loss before income taxes | 170,930 | |||
Future income taxes (Note 4) | — | |||
Net loss and comprehensive loss for the period | $ | 170,930 | ||
E-68
Common Shares | Accumulated Other | |||||||||||||||||||
Total | ||||||||||||||||||||
Contributed | Accumulated | Shareholder’s | ||||||||||||||||||
Shares | Amount | Surplus | Deficit | Equity | ||||||||||||||||
# | $ | $ | $ | $ | ||||||||||||||||
Balance as at April 23, 2010 | — | — | — | — | — | |||||||||||||||
Shares issued on incorporation | 1 | 1 | — | — | 1 | |||||||||||||||
Private placement by Fronteer | 10,000,000 | 1,215,485 | 1,215,485 | |||||||||||||||||
Costs allocated by Fronteer | 79,838 | 79,838 | ||||||||||||||||||
Net loss for the period | — | — | (170,930 | ) | (170,930 | ) | ||||||||||||||
Balance as at December 31, 2010 | 10,000,001 | 1,215,486 | 79,838 | (170,930 | ) | 1,124,394 | ||||||||||||||
E-69
For the period | ||||
April 23, 2010 to | ||||
December 31, 2010 | ||||
Cash flows from operating activities | ||||
Loss for the period | $ | (170,930 | ) | |
Items not affecting cash: | ||||
Stock based compensation | 52,758 | |||
Movements in working capital: | ||||
Accounts payable and accrued liabilities | 22,227 | |||
Net cash used by operating activities | $ | (95,945 | ) | |
Cash flows from investing activities | ||||
Acquisition of exploration properties and deferred exploration expenditures | $ | (1,215,486 | ) | |
Net cash used by investing activities | $ | (1,215,486 | ) | |
Cash flows from financing activities | ||||
Funding received from parent for operations and purchase of exploration properties and deferred exploration expenditures | $ | 1,311,431 | ||
Net cash generated by financing activities | $ | 1,311,431 | ||
Net increase (decrease) in cash and cash equivalents | $ | — | ||
Cash and cash equivalents at beginning of period | $ | — | ||
Cash and cash equivalents at end of the period | $ | — | ||
E-70
Notes to the Consolidated Financial Statements
From April 23 to December 31, 2010
(Expressed in Canadian dollars)
1. | INCORPORATION AND BASIS OF PRESENTATION |
2. | NATURE OF OPERATIONS |
3. | SIGNIFICANT ACCOUNTING POLICIES |
E-71
i. | monetary assets and liabilities at the rates of exchange in effect at the balance sheet date; | |
ii. | non-monetary assets at historical rates; | |
iii. | revenue and expense items at the average rates for the period, except for depreciation and amortization, which are based on historical rates. |
• | Held-to-maturity investments, loans and receivables and other financial liabilities are initially measured at fair value and subsequently measured at amortized cost. Amortization of premiums or discounts and losses due to impairment are included in current period net earnings. | |
• | Available-for-sale financial assets are measured at fair value. Revaluation gains and losses are included in other comprehensive income until the asset is removed from the balance sheet. Losses due to impairment are included in net earnings. | |
• | Held for trading financial instruments are measured at fair value. All gains and losses are included in net earnings in the period in which they arise. | |
• | All derivative financial instruments are classified as held for trading financial instruments and are measured at fair value, even when they are part of a hedging relationship. All gains and losses are included in net earnings in the period in which they arise, except for derivative instruments which represent a cash flow hedge, where the gain or loss is recognized in other comprehensive income. |
E-72
4. | INCOME TAXES |
a) | Provision for income taxes: |
December 31, | ||||
2010 | ||||
$ | ||||
Loss before taxes | (170,930 | ) | ||
Expected income tax recovery | (48,715 | ) | ||
Permanent difference: | ||||
Stock based compensation | 15,246 | |||
Difference between fair value and continuity of interest accounting | (23,933 | ) | ||
Rate differences in other jurisdictions | (1,817 | ) | ||
Changes in enacted and substantively enacted rates | 3,270 | |||
Valuation allowance | 55,949 | |||
Income tax expense | — | |||
b) | Future tax balances: |
December 31, | ||||
2010 | ||||
$ | ||||
Operating tax losses carried forward | 355,206 | |||
Valuation Allowance | (55,949 | ) | ||
Mineral property | (299,257 | ) | ||
Net Future Tax Asset/(Liability) | — | |||
5. | EXPLORATION PROPERTIES AND DEFERRED EXPLORATION EXPENDITURES |
Total | Total | |||||||||||
April 23, | Additions/ | December 31, | ||||||||||
2010 | Allocations | 2010 | ||||||||||
$ | $ | $ | ||||||||||
Regent | — | 702,373 | 702,373 | |||||||||
South Monitor | — | 27,730 | 27,730 | |||||||||
Cold Springs | — | 175,741 | 175,741 | |||||||||
Buckskin | — | 63,042 | 63,042 | |||||||||
Brik | — | 177,735 | 177,735 | |||||||||
Total | — | 1,146,621 | 1,146,621 | |||||||||
6. | CAPITAL DISCLOSURES |
E-73
7. | FINANCIAL RISK MANAGEMENT |
8. | SEGMENT INFORMATION |
December 31, | ||||
2010 | ||||
$ | ||||
Canada | — | |||
USA | 1,146,621 | |||
1,146,621 | ||||
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December 31, | December 31, | |||||||
2010 | 2009 | |||||||
(expressed in Canadian dollars) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 86,963 | $ | 229,314 | ||||
Accounts receivable and other | 286,503 | 259,909 | ||||||
373,466 | 489,223 | |||||||
Property & equipment (Note 4) | 962,402 | 777,043 | ||||||
Long term investments (Note 7) | 419,217 | — | ||||||
Reclamation deposits | 12,858 | — | ||||||
Exploration properties and deferred exploration expenditures (Note 5) | 1,972,761 | 383,971 | ||||||
Equity investments in Turkish Properties (Note 6) | 3,087,021 | 918,822 | ||||||
$ | 6,827,725 | $ | 2,569,059 | |||||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 51,779 | $ | 36,648 | ||||
51,779 | 36,648 | |||||||
Future income taxes (Note 8) | 2,657 | 2,682 | ||||||
Equity | ||||||||
Contributed surplus | 10,483,522 | 4,824,863 | ||||||
Accumulated other comprehensive loss | (8,771 | ) | — | |||||
Accumulated deficit | (3,701,462 | ) | (2,295,134 | ) | ||||
6,773,289 | 2,529,729 | |||||||
$ | 6,827,725 | $ | 2,569,059 | |||||
Nature of operations (Note 2) | ||||||||
Commitments (Note 11) |
“Mark O’Dea”, Director | “Oliver Lennox-King”, Director |
E-77
For the year ended December 31, | ||||||||
2010 | 2009 | |||||||
Operating expenses: | ||||||||
Amortization | $ | 398,897 | $ | 369,466 | ||||
Wages and benefits | 312,569 | 85,629 | ||||||
Office and general | 187,118 | 79,193 | ||||||
Professional fees | 94,756 | 72,962 | ||||||
Stock-based compensation | 164,267 | 27,328 | ||||||
Investor relations, promotion and advertising | 33,544 | 6,649 | ||||||
Write down of exploration properties and deferred exploration expenditures (Note 5) | — | 1,085,436 | ||||||
Loss from operations | 1,191,151 | 1,726,663 | ||||||
Other income (expenses): | ||||||||
Change in fair value of financial instruments | (72,112 | ) | — | |||||
Foreign exchange gain (loss) | (48,141 | ) | (37,116 | ) | ||||
Equity income (loss) from Turkish Properties | (94,951 | ) | — | |||||
(215,204 | ) | (37,116 | ) | |||||
Loss before income taxes | (1,406,355 | ) | (1,763,779 | ) | ||||
Future income tax recovery (loss) (Note 8) | 27 | (242 | ) | |||||
Net loss for the year | $ | (1,406,328 | ) | $ | (1,764,021 | ) | ||
E-78
For the year ended December 31, | ||||||||
2010 | 2009 | |||||||
Cash provided (used for): | ||||||||
Operating activities: | ||||||||
Net loss for the year | $ | (1,406,328 | ) | $ | (1,764,021 | ) | ||
Items not affecting cash: | ||||||||
Stock-based compensation | 164,267 | 27,328 | ||||||
Amortization | 398,897 | 369,466 | ||||||
Equity income from Turkish properties | 94,951 | — | ||||||
Foreign exchange | 48,141 | 37,116 | ||||||
Future income taxes | (27 | ) | 242 | |||||
Write down of exploration properties and deferred exploration expenditure | — | 1,085,436 | ||||||
Change in fair value of financial instruments | 72,112 | — | ||||||
Changes in non-cash working capital: | ||||||||
Accounts receivable and other | (26,594 | ) | (259,909 | ) | ||||
Accounts payable and accrued liabilities | 15,131 | 36,650 | ||||||
Cash used in operating activities | (639,450 | ) | (467,692 | ) | ||||
Financing activities: | ||||||||
Funding received from parent for operations and purchase of mineral properties | 5,465,005 | 1,142,793 | ||||||
Cash provided by financing activities | 5,465,005 | 1,142,793 | ||||||
Investing activities: | ||||||||
Purchase of capital equipment | (584,257 | ) | (282,796 | ) | ||||
Nevada Eagle Resources acquisition | (886,399 | ) | — | |||||
Purchase of marketable securities and long term investments | (520,950 | ) | — | |||||
Investment in Turkish Properties | (2,187,512 | ) | — | |||||
Interest in exploration properties and deferred exploration expenditures | (788,788 | ) | (162,991 | ) | ||||
Cash used in investing activities | (4,967,906 | ) | (445,787 | ) | ||||
(Decrease) increase in cash and cash equivalents | (142,351 | ) | 229,314 | |||||
Cash, beginning of year | 229,314 | — | ||||||
Cash, end of year | $ | 86,963 | $ | 229,314 | ||||
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Accumulated Other | ||||||||||||||||
Contributed | Comprehensive | Accumulated | ||||||||||||||
Surplus | Loss | Deficit | Total Equity | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Balance as at December 31, 2009 | 4,824,863 | — | (2,295,134 | ) | 2,529,729 | |||||||||||
Funding provided and expenses paid by Fronteer Gold and its subsidiaries | 1,002,372 | — | — | 1,002,372 | ||||||||||||
Net assets contributed by Fronteer Gold and its subsidiaries | 4,656,287 | — | — | 4,656,287 | ||||||||||||
Unrealized loss on long-term investments | — | (8,771 | ) | — | (8,771 | ) | ||||||||||
Net loss for the period | — | — | (1,406,328 | ) | (1,406,328 | ) | ||||||||||
Balance as at December 31, 2010 | 10,483,522 | (8,771 | ) | (3,701,462 | ) | 6,773,289 | ||||||||||
2010 | 2009 | |||||||
$ | $ | |||||||
Net loss for the year | (1,406,328 | ) | (1,764,021 | ) | ||||
Other comprehensive items: | ||||||||
Unrealized loss on long-term investments | (8,771 | ) | — | |||||
Total comprehensive loss | (1,415,099 | ) | (1,764,021 | ) | ||||
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Notes to the Consolidated Financial Statements
For the year ended December 31, 2010
(Expressed in Canadian Dollars)
1. | TRANSFER OF ASSETS AND BASIS OF PRESENTATION |
2. | NATURE OF OPERATIONS |
3. | SIGNIFICANT ACCOUNTING POLICIES |
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Computer equipment | 30% | Declining balance | ||
Computer software | 50% | Straight line | ||
Field equipment | 20% | Declining balance | ||
Furniture and fixtures | 20% | Declining balance | ||
Leasehold improvements | Term of lease | |||
Automotive equipment | 30% | Declining balance |
i. | monetary assets and liabilities at the rates of exchange in effect at the balance sheet date; | |
ii. | non-monetary assets at historical rates; | |
iii. | revenue and expense items at the average rates for the period, except for depreciation and amortization, which are based on historical rates. |
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• | Held-to-maturity investments, loans and receivables and other financial liabilities are initially measured at fair value and subsequently measured at amortized cost. Amortization of premiums or discounts and losses due to impairment are included in current period net earnings. | |
• | Available-for-sale financial assets are measured at fair value. Revaluation gains and losses are included in other comprehensive income until the asset is removed from the balance sheet. Losses due to impairment are included in net earnings. | |
• | Held for trading financial instruments are measured at fair value. All gains and losses are included in net earnings in the period in which they arise. | |
• | All derivative financial instruments are classified as held for trading financial instruments and are measured at fair value, even when they are part of a hedging relationship. All gains and losses are included in net earnings in the period in which they arise, except for derivative instruments which represent a cash flow hedge, where the gain or loss is recognized in other comprehensive income. |
4. | PROPERTY AND EQUIPMENT |
2010 | 2009 | |||||||||||||||||||||||
Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||||||||
Cost | Amortization | Value | Cost | Amortization | Value | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
Equipment | 874,008 | 458,086 | 415,922 | 685,209 | 327,558 | 357,651 | ||||||||||||||||||
Computer software | 544,378 | 473,344 | 71,034 | 416,811 | 361,553 | 55,258 | ||||||||||||||||||
Furniture and fixtures | 329,207 | 147,997 | 181,210 | 313,296 | 104,928 | 208,368 | ||||||||||||||||||
Leasehold improvements | 538,009 | 243,773 | 294,236 | 286,029 | 130,263 | 155,766 | ||||||||||||||||||
2,285,602 | 1,323,200 | 962,402 | 1,701,345 | 924,302 | 777,043 | |||||||||||||||||||
5. | EXPLORATION PROPERTIES AND DEFERRED EXPLORATION EXPENDITURES |
Total | Transferred | Total | ||||||||||||||
December | to Equity | December 31, | ||||||||||||||
31, 2009 | Additions | Interest | 2010 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
USA | ||||||||||||||||
Anchor | — | 158,544 | — | 158,544 | ||||||||||||
Baxter Spring | — | 167,603 | — | 167,603 | ||||||||||||
Easter | — | 150,135 | — | 150,135 | ||||||||||||
Gold Springs 2 | — | 250,225 | — | 250,225 | ||||||||||||
New Boston | — | 335,344 | — | 335,344 | ||||||||||||
Stateline | — | 150,135 | — | 150,135 | ||||||||||||
Viper | 120,550 | 215,869 | — | 336,419 | ||||||||||||
120,550 | 1,427,855 | — | 1,548,405 | |||||||||||||
TURKEY | ||||||||||||||||
TV Tower | 36,698 | 63,561 | (100,259 | ) | — | |||||||||||
Isper | 165,424 | 6,829 | — | 172,253 | ||||||||||||
Aktarma | 57,936 | 6,993 | — | 64,929 | ||||||||||||
Yuntdag | 3,363 | 8,339 | — | 11,702 | ||||||||||||
263,421 | 85,722 | (100,259 | ) | 248,884 | ||||||||||||
PERU | — | 175,472 | — | 175,472 | ||||||||||||
— | 175,472 | — | 175,472 | |||||||||||||
383,971 | 1,689,049 | (100,259 | ) | 1,972,761 | ||||||||||||
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USA | Turkey | Peru | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
December 31, 2009 | 120,550 | 263,421 | — | 383,971 | ||||||||||||
2010 expenditures: | ||||||||||||||||
Acquisition costs | 909,855 | — | — | 909,855 | ||||||||||||
Assaying & geochemical | 127,092 | 1,203 | — | 128,295 | ||||||||||||
Option payments | — | — | 156,285 | 156,285 | ||||||||||||
Camp & field costs | 7,131 | — | — | 7,131 | ||||||||||||
Geophysics | 66,662 | — | — | 66,662 | ||||||||||||
Transportation | 10,719 | 12,380 | — | 23,099 | ||||||||||||
Wages, consulting and management fees | 225,063 | 18,940 | 19,187 | 263,190 | ||||||||||||
Claim maintenance and advance royalty fees | 65,905 | — | — | 65,905 | ||||||||||||
Environmental | 5,883 | — | — | 5,883 | ||||||||||||
Other | 9,545 | 53,199 | — | 62,744 | ||||||||||||
1,427,855 | 85,722 | 175,472 | 1,689,049 | |||||||||||||
Transferred to Equity Interest | — | (100,259 | ) | — | (100,259 | ) | ||||||||||
— | (100,259 | ) | — | (100,259 | ) | |||||||||||
December 31, 2010 | 1,548,405 | 248,884 | 175,472 | 1,972,761 | ||||||||||||
6. | EQUITY INVESTMENTS IN TURKISH PROPERTIES |
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7. | LONG TERM INVESTMENTS |
• | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities | |
• | Level 2 — Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and | |
• | Level 3 — Inputs that are not based on observable market data. |
Financial assets at fair value as at December 31, 2010 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Rae Wallace common shares (2,000,000 common shares) | 380,076 | — | — | 380,076 | ||||||||||||
Rae Wallace share purchase warrants (1,000,000 warrants) | — | 39,141 | — | 39,141 | ||||||||||||
380,076 | 39,141 | — | 419,217 | |||||||||||||
8. | INCOME TAXES |
a) | Provision for income taxes: |
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
$ | $ | |||||||
Loss before taxes | (1,406,355 | ) | (1,763,779 | ) | ||||
Expected income tax recovery | (400,811 | ) | (529,134 | ) | ||||
Permanent differences: | ||||||||
Non deductible items for tax purposes | 47,168 | 8,238 | ||||||
Foreign exchange | 5,458 | 7,423 | ||||||
Effect of foreign tax rates | 37,327 | 128,615 | ||||||
Changes in enacted and substantively enacted rates | 11,248 | 15,858 | ||||||
Other | 2,714 | 3,153 | ||||||
Change in valuation allowance | 296,869 | 366,089 | ||||||
Income tax expense (recovery) | (27 | ) | 242 | |||||
b) | Future tax balances: |
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
$ | $ | |||||||
Future income tax assets (liabilities): | ||||||||
Operating losses carried forward | 983,584 | 387,571 | ||||||
Equipment | 227,219 | 165,289 | ||||||
Mineral properties | (407,655 | ) | (33,890 | ) | ||||
Investments | 12,717 | — | ||||||
Valuation allowance | (818,522 | ) | (521,652 | ) | ||||
(2,657 | ) | (2,682 | ) | |||||
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9. | CAPITAL DISCLOSURES |
10. | FINANCIAL RISK MANAGEMENT |
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11. | COMMITMENTS |
Year | Amount | |||
$ | ||||
2011 | 368,061 | |||
2012 | 348,347 | |||
2013 | 286,026 | |||
2014 | 280,473 | |||
2015 | 286,985 | |||
2016+ | 941,111 | |||
2,511,003 | ||||
12. | SEGMENT INFORMATION |
December 31, | ||||||||
2010 | 2009 | |||||||
$ | $ | |||||||
Canada | 421,056 | 470,037 | ||||||
USA | 507,556 | 263,176 | ||||||
Turkey | 33,790 | 43,830 | ||||||
Peru | — | — | ||||||
962,402 | 777,043 | |||||||
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E-88
Pro Forma Consolidated Balance Sheet
as at December 31, 2010
(Unaudited)
Exploration Properties | Pro forma | |||||||||||||||||||
Pilot | Business of | Pro forma | consolidated | |||||||||||||||||
Gold Inc. | Fronteer Gold Inc. | Note | adjustments | Pilot Gold Inc | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 86,963 | 2 b | ) | $ | 9,640,000 | $ | 9,726,963 | ||||||||||
2 b | ) | 54,998,355 | ||||||||||||||||||
2 b | ), 2 c) | (54,998,335 | ) | |||||||||||||||||
Accounts receivable and other | 286,503 | 286,503 | ||||||||||||||||||
— | 373,466 | 9,640,000 | 10,013,466 | |||||||||||||||||
Property, plant and equipment | — | 962,402 | 962,402 | |||||||||||||||||
Long-term investments | — | 419,217 | 419,217 | |||||||||||||||||
Reclamation deposits | — | 12,858 | 12,858 | |||||||||||||||||
Exploration properties and deferred exploration expenditures | 1,146,621 | 1,972,761 | 2 c | ) | (27,730 | ) | 3,091,652 | |||||||||||||
Equity Investments in Turkish Properties | — | 3,087,021 | 2 b | ) | 360,000 | 3,447,021 | ||||||||||||||
$ | 1,146,621 | $ | 6,827,725 | $ | 9,972,270 | $ | 17,946,616 | |||||||||||||
LIABILITIES | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 22,227 | $ | 51,779 | $ | — | $ | 74,006 | ||||||||||||
22,227 | 51,779 | — | 74,006 | |||||||||||||||||
Future income taxes | — | 2,657 | 2,657 | |||||||||||||||||
22,227 | 54,436 | — | 76,663 | |||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Share capital | 1,215,486 | — | 2 b | ), 2 c) | 64,998,355 | 66,213,841 | ||||||||||||||
Contributed surplus | 79,838 | 10,483,522 | 2 b | ), 2 c) | (10,563,360 | ) | — | |||||||||||||
Accumulated other comprehensive loss | — | (8,771 | ) | (8,771 | ) | |||||||||||||||
Accumulated deficit | (170,930 | ) | (3,701,462 | ) | 2 b | ) | (44,462,725 | ) | (48,335,117 | ) | ||||||||||
1,124,394 | 6,773,289 | 9,972,270 | 17,869,953 | |||||||||||||||||
$ | 1,146,621 | $ | 6,827,725 | $ | 9,972,270 | $ | 17,946,616 | |||||||||||||
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Pro forma Consolidated Statement of Operations
Year ended December 31, 2010
(Unaudited)
Exploration Properties | ||||||||||||
Pilot Gold Inc. | Business of Fronteer | |||||||||||
Gold Inc. for the | Gold Inc. for the | Pro forma | ||||||||||
period April 23, 2010 to | year ended | consolidated | ||||||||||
December 31, 2010 | December 31, 2010 | Pilot Gold Inc. | ||||||||||
$ | $ | $ | ||||||||||
Expenses | ||||||||||||
Stock-based compensation | 52,758 | 164,267 | 217,025 | |||||||||
Wages and benefits | 49,889 | 312,569 | 362,458 | |||||||||
Professional fees | 36,503 | 94,756 | 131,259 | |||||||||
Office and general | 20,780 | 187,118 | 207,898 | |||||||||
Investor relations, promotion and advertising | 11,000 | 33,544 | 44,544 | |||||||||
Amortization | — | 398,897 | 398,897 | |||||||||
Loss from operations | 170,930 | 1,191,151 | 1,362,081 | |||||||||
Other income (expenses) | ||||||||||||
Change in fair value of financial instruments | — | (72,112 | ) | (72,112 | ) | |||||||
Equity loss from Turkish Investments | — | (94,951 | ) | (94,951 | ) | |||||||
Foreign exchange gain (loss) | — | (48,141 | ) | (48,141 | ) | |||||||
— | (215,204 | ) | (215,204 | ) | ||||||||
Loss before income taxes | (170,930 | ) | (1,406,355 | ) | (1,577,285 | ) | ||||||
Future income tax recovery | — | 27 | 27 | |||||||||
Net loss | (170,930 | ) | (1,406,328 | ) | (1,577,258 | ) | ||||||
E-90
Consolidated Statement of Exploration Properties
As at December 31, 2010
(Unaudited)
Exploration | ||||||
Expenditures | ||||||
$ | ||||||
Turkey: | ||||||
Aktarma | 64,929 | |||||
Isper | 172,253 | |||||
Yuntdag | 11,702 | |||||
248,884 | ||||||
Nevada: | ||||||
Anchor | 158,544 | |||||
Baxter Spring | 167,603 | |||||
Brik | 177,735 | |||||
Buckskin North | 63,042 | |||||
Cold Springs | 175,741 | |||||
Easter | 150,135 | |||||
Gold Springs 2 | 250,225 | |||||
New Boston | 335,344 | |||||
Regent | 702,373 | |||||
Stateline | 150,135 | |||||
Viper | 336,419 | |||||
2,667,296 | ||||||
Peru: | ||||||
Rae Wallace | 175,472 | |||||
3,091,652 | ||||||
E-91
Notes to the Pro-forma Consolidated Financial Statements
For the year ended December 31, 2010
(Expressed in Canadian Dollars)(unaudited)
1. | TRANSFER OF ASSETS AND BASIS OF PRESENTATION |
2. | PRO-FORMA ASSUMPTIONS |
a) | The balances used in the unaudited pro-forma financial statements are those of the Exploration Properties Business of Fronteer Gold Inc. as at and for the year ended December 31, 2010 and Pilot Gold as at December 31, 2010 and for the period April 23, 2010 to December 31, 2010. | |
b) | Prior to the effective date of the Arrangement, Pilot Gold will issue shares to Fronteer in consideration for the transfer of the following assets: (a) the cash funding of Pilot Gold in the amount of approximately $9,640,000 (representing $10,000,000 less any cash call payments anticipated to be made by Fronteer for the Turkish joint venture operations from the date the Arrangement was announced to the effective date of the arrangement), (b) approximately CDN$51,800,000 in cash (representing the estimated cash amount required for a Pilot Gold subsidiary to acquire the shares of Fronteer Investments Inc. which holds Fronteer’s Halilaǧa and TV Tower assets in Turkey), (c) approximately CDN$1,428,404 in cash (representing the cash amount required for a Pilot Gold subsidiary to acquire the remaining six Nevada Eagle Assets after deducting the value of South Monitor which will be transferred back to a subsidiary of Fronteer to be acquired by Newmont and the Viper Property), and (d) other assets of Fronteer being transferred to Pilot Gold including the shares, warrants and option agreement of Rae Wallace. As these transactions are between Fronteer and Pilot Gold, a subsidiary of Fronteer, the acquired assets have been recorded at Fronteer’s carrying values. The difference between the amount paid and their fair value has been applied against contributed surplus and accumulated deficit. The amount paid is subject to adjustment based on the determined fair market value of any of the transferred assets (or underlying assets) on the date of transfer to Pilot Gold. | |
c) | Prior to the effective date of the Arrangement, the South Monitor property which was owned by Pilot Gold on December 31, 2010, and carried at $27,730 will be transferred back for $120,000 to a subsidiary of Fronteer to be acquired by Newmont. |
E-92
3. | CAPITAL DISCLOSURES |
Accumulated | ||||||||||||||||||||||||
other | ||||||||||||||||||||||||
Number of | Contributed | comprehensive | Shareholders | |||||||||||||||||||||
shares | Share capital | surplus | income | Deficit | equity | |||||||||||||||||||
# | $ | $ | $ | $ | $ | |||||||||||||||||||
Pilot Gold and the Exploration | ||||||||||||||||||||||||
Properties Business | 10,000,001 | 1,215,486 | 10,563,360 | (8,771 | ) | (3,872,392 | ) | 7,897,683 | ||||||||||||||||
Mineral properties adjustment (Note 2c)) | — | — | 92,270 | — | — | 92,270 | ||||||||||||||||||
Shares issued in connection with the Arrangement | 40,478,793 | 64,998,355 | (10,655,630 | ) | — | (44,462,725 | ) | 9,880,000 | ||||||||||||||||
Pro forma shareholder’s equity December 31, 2010 | 50,478,794 | 66,213,841 | — | (8,771 | ) | (48,335,117 | ) | 17,869,953 | ||||||||||||||||
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E-94
Period from April 23, 2010 | ||||
to December 31, 2010 | ||||
Consolidated Statement of Operations | ||||
Net loss and comprehensive loss for the period | $ | 170,930 | ||
Consolidated Balance Sheet | ||||
Current Assets | $ | — | ||
Total Assets | $ | 1,146,621 | ||
Total Current Liabilities | $ | 22,227 | ||
Total Liabilities | $ | 22,227 | ||
Shareholder’s Equity | $ | 1,124,394 | ||
Number of Common Shares Outstanding | 10,000,001 |
E-95
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• | In 2010, our joint venture partner Teck, completed 9,077 metres of core drilling at Halilaǧa. Our 40% share of costs was $1,500,000. | |
• | In the third quarter of 2010, the Exploration Properties Business paid US$150,000 for a three year option from Rae Wallace to earn a 51% interest in up to two gold exploration properties within a 23,500-square-kilometre area in Peru that Rae Wallace currently owns or may acquire. In addition, the Exploration Properties Business participated in a non-brokered private placement in Rae Wallace, purchasing 2,000,000 units of Rae Wallace at US$0.25 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each whole warrant entitles us to acquire one additional common share of Rae Wallace for US$0.375 per share until September 30, 2012. |
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2010 | 2009 | |||||||
Total revenues | Nil | Nil | ||||||
Net loss for the year | $ | 1,406,328 | $ | 1,764,021 | ||||
Comprehensive loss for the year | $ | 1,415,099 | $ | 1,764,021 | ||||
Total assets | $ | 6,827,725 | $ | 2,569,059 | ||||
Total liabilities | $ | 54,436 | $ | 39,330 | ||||
Cash dividends declared | Nil | Nil |
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E-104
Year | Amount | |||
2011 | $ | 368,061 | ||
2012 | 348,347 | |||
2013 | 286,026 | |||
2014 | 280,473 | |||
2015 | 286,985 | |||
2016+ | 941,111 | |||
$ | 2,511,003 | |||
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I. | PURPOSE |
• | conduct such reviews and discussions with management and the external auditors relating to the audit and financial reporting as are deemed appropriate by the Committee; | |
• | assess the integrity of internal controls and financial reporting procedures of the Corporation and ensure implementation of such controls and procedures; | |
• | ensure that there is an appropriate standard of corporate conduct including, if necessary, adopting a corporate code of ethics for senior financial personnel; | |
• | review the quarterly and annual financial statements and management’s discussion and analysis of the Corporation’s financial position and operating results and report thereon to the Board for approval of same; | |
• | recommend to the Board for approval by shareholders, the Corporation’s external auditors (the “Independent Auditors”); | |
• | select and monitor the independence and performance of the Corporation’s Independent Auditors, including attending private meetings with the Independent Auditors and reviewing and approving all renewals or dismissals of the Independent Auditors and their remuneration; and | |
• | provide oversight of related party transactions entered into by the Corporation. |
II. | AUTHORITY OF THE AUDIT COMMITTEE |
1. | The Committee shall have the authority to: |
(a) | engage independent counsel and other advisors as it determines necessary to carry out its duties; | |
(b) | set and pay the compensation for advisors employed by the Committee; and | |
(c) | communicate directly with the internal and external auditors. |
III. | COMPOSITION AND MEETINGS |
1. | The Committee and its membership shall meet all applicable legal, regulatory and listing requirements, including, without limitation, those of any stock exchange on which the Corporation’s shares are listed, theCanada Business Corporations Act, the Ontario Securities Commission (the “OSC”) and all applicable securities regulatory authorities. | |
2. | The Committee members will be elected annually at the first meeting of the Board following the annual general meeting of shareholders. | |
3. | The Committee shall be composed of three or more directors as shall be designated by the Board from time to time. The members of the Committee shall appoint from among themselves a member who shall serve as Chair. |
E-110
4. | Each member of the Committee shall be “independent” and financially literate (as such terms are defined under applicable securities laws and exchange requirements for audit committee purposes). Each member of the Committee shall be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. | |
5. | The Committee shall meet at least quarterly, at the discretion of the Chair or a majority of its members, as circumstances dictate or as may be required by applicable legal or listing requirements. A minimum of two of the members of the Committee present either in person or by telephone shall constitute a quorum. | |
6. | If within one hour of the time appointed for a meeting of the Committee, a quorum is not present, the meeting shall stand adjourned to the same hour on the second business day following the date of such meeting at the same place. If at the adjourned meeting a quorum as hereinbefore specified is not present within one hour of the time appointed for such adjourned meeting, such meeting shall stand adjourned to the same hour on the second business day following the date of such meeting at the same place. If at the second adjourned meeting a quorum as hereinbefore specified is not present, the quorum for the adjourned meeting shall consist of the members then present. | |
7. | If and whenever a vacancy shall exist, the remaining members of the Committee may exercise all of its powers and responsibilities so long as a quorum remains in office. | |
8. | The time and place at which meetings of the Committee shall be held, and procedures at such meetings, shall be determined from time to time by, the Committee. A meeting of the Committee may be called by letter, telephone, facsimile, email or other communication equipment, by giving at least 48 hours notice, provided that no notice of a meeting shall be necessary if all of the members are present either in person or by means of conference telephone or if those absent have waived notice or otherwise signified their consent to the holding of such meeting. | |
9. | Any member of the Committee may participate in the meeting of the Committee by means of conference telephone or other communication equipment, and the member participating in a meeting pursuant to this paragraph shall be deemed, for purposes hereof, to be present in person at the meeting. | |
10. | The Committee shall keep minutes of its meetings which shall be submitted to the Board. The Committee may, from time to time, appoint any person who need not be a member, to act as a secretary at any meeting. | |
11. | The Committee may invite such officers, directors and employees of the Corporation and its subsidiaries, and other persons, as it may see fit, from time to time, to attend at meetings of the Committee. | |
12. | The Board may at any time amend or rescind any of the provisions hereof, or cancel them entirely, with or without substitution. | |
13. | Any matters to be determined by the Committee shall be decided by a majority of votes cast at a meeting of the Committee called for such purpose. Actions of the Committee may be taken by an instrument or instruments in writing signed by all of the members of the Committee, and such actions shall be effective as though they had been decided by a majority of votes cast at a meeting of the Committee called for such purpose. |
IV. | CHAIR |
1. | The Chair of the Committee: |
(a) | provides leadership to the Committee with respect to its functions as described in this Charter and as otherwise may be appropriate, including overseeing the logistics of the operations of the Committee; | |
(b) | chairs meetings of the Committee, unless not present (including in camera sessions), and reports to the Board of Directors following each meeting of the Committee on the findings, activities and any recommendations of the Committee; | |
(c) | ensures that the Committee meets on a regular basis and at least four times per year; | |
(d) | in consultation with the Lead Director (if an individual other than the Chair) and the Committee members, establishes a calendar for holding meetings of the Committee; | |
(e) | establishes the agenda for each meeting of the Committee, with input from other Committee members, the Lead Director (if an individual other than the Chair) and any other parties, as applicable; | |
(f) | ensures that Committee materials are available to any Director on request; |
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(g) | acts as liaison and maintains communication with the Lead Director (if an individual other than the Chair) and the Board to optimize and coordinate input from Board members, and to optimize the effectiveness of the Committee. This includes reporting to the full Board on all proceedings and deliberations of the Committee at the first meeting of the Board after each Committee meeting and at such other times and in such manner as the Committee considers advisable; | |
(h) | reports annually to the Board on the role of the Committee and the effectiveness of the Committee in contributing to the objectives and responsibilities of the Board as a whole; | |
(i) | ensures that the members of the Committee understand and discharge their duties and obligations; | |
(j) | fosters ethical and responsible decision making by the Committee and its individual members; | |
(k) | ensures that resources and expertise are available to the Committee so that it may conduct its work effectively and efficiently and pre-approves work to be done for the Committee by consultants; | |
(l) | facilitates effective communication between members of the Committee and management; | |
(m) | attends each meeting of shareholders to respond to any questions from shareholders as may be put to the Chair; and | |
(n) | performs such other duties and responsibilities as may be delegated to the Chair by the Board from time to time. |
V. | RESPONSIBILITIES |
A. | Financial Accounting and Reporting Process and Internal Controls |
1. | The Committee shall review the annual audited financial statements to satisfy itself that they are presented in accordance with applicable Canadian accounting standards and report thereon to the Board and recommend to the Board whether or not same should be approved prior to their being filed with the appropriate regulatory authorities. The Committee shall also review and approve the interim financial statements prior to their being filed with the appropriate regulatory authorities. The Committee shall discuss significant issues regarding accounting principles, practices, and judgments of management with management and the Independent Auditors as and when the Committee deems it appropriate to do so. The Committee shall satisfy itself that the information contained in the annual audited financial statements is not significantly erroneous, misleading or incomplete and that the audit function has been effectively carried out. | |
2. | The Committee shall review management’s internal control report and the evaluation of such report by the Independent Auditors, together with management’s response. The Committee shall assess the integrity of internal controls and financial reporting procedures and ensure implementation of such controls and procedures. | |
3. | The Committee shall review the financial statements, management’s discussion and analysis relating to annual and interim financial statements, annual and interim earnings press releases and any other public disclosure documents that are required to be reviewed by the Committee under any applicable laws before the Corporation publicly discloses this information. | |
4. | The Committee shall be satisfied that adequate procedures are in place for the review of the Corporation’s public disclosure of financial information extracted or derived from the Corporation’s financial statements, and periodically assess the adequacy of these procedures. | |
5. | The Committee shall meet no less frequently than annually with the Independent Auditors and the Chief Financial Officer or, in the absence of a Chief Financial Officer, with the officer of the Corporation in charge of financial matters, to review accounting practices, internal controls and such other matters as the Committee, Chief Financial Officer or, in the absence of a Chief Financial Officer, with the officer of the Corporation in charge of financial matters, deems appropriate. | |
6. | The Committee shall inquire of management and the Independent Auditors about significant risks or exposures, both internal and external, to which the Corporation may be subject, and assess the steps management has taken to minimize such risks. | |
7. | The Committee shall review the post-audit or management letter containing the recommendations of the Independent Auditors and management’s response and subsequentfollow-up to any identified weaknesses. |
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8. | The Committee shall oversee the Corporation’s plans to adopt changes to accounting standards and related disclosure obligations. | |
9. | The Committee shall ensure that there is an appropriate standard of corporate conduct including, if necessary, adopting a corporate code of ethics for senior financial personnel. | |
10. | The Committee shall establish procedures for: |
(a) | the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and | |
(b) | the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters. |
11. | The Committee shall provide oversight to related party transactions entered into by the Corporation. |
B. | Independent Auditors |
1. | The Committee shall be directly responsible for the selection, appointment, compensation and oversight of the Independent Auditors and the Independent Auditors shall report directly to the Committee. | |
2. | The Committee shall ensure that in compliance with applicable law, the lead audit partner at the Independent Auditor is replaced every five years. | |
3. | The Committee shall be directly responsible for overseeing the work of the external auditors, including the resolution of disagreements between management and the external auditors regarding financial reporting. | |
4. | The Committee shall pre-approve all audit and non-audit services not prohibited by law to be provided by the Independent Auditors. | |
5. | The Committee shall monitor and assess the relationship between management and the Independent Auditors and monitor, confirm, support and assure the independence and objectivity of the Independent Auditors. The Committee shall establish procedures to receive and respond to complaints with respect to accounting, internal accounting controls and auditing matters. | |
6. | The Committee shall review the Independent Auditor’s audit plan, including scope, procedures, timing and staffing of the audit. | |
7. | The Committee shall review the results of the annual audit with the Independent Auditors, including matters related to the conduct of the audit, and receive and review the auditor’s interim review reports. | |
8. | The Committee shall obtain timely reports from the Independent Auditors describing critical accounting policies and practices, alternative treatments of information within applicable Canadian accounting principles that were discussed with management, their ramifications, and the Independent Auditors’ preferred treatment and material written communications between the Corporation and the Independent Auditors. | |
9. | The Committee shall review fees paid by the Corporation to the Independent Auditors and other professionals in respect of audit and non-audit services on an annual basis. | |
10. | The Committee shall review and approve the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and former auditors of the Corporation. |
C. | Other Responsibilities |
1. | The Committee shall: |
(a) | perform any other activities consistent with this Charter and governing law, as the Committee or the Board deems necessary or appropriate; and | |
(b) | review and assess the adequacy of this Charter annually and submit any proposed revisions to the Board of Directors for approval. |
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1. | The directors are elected by the shareholders and are responsible for the stewardship of the business and affairs of Pilot Gold Inc. (the “Corporation”). The Board of Directors (the “Board”) seeks to discharge this responsibility by reviewing, discussing and approving the Corporation’s strategic planning and organizational structure and supervising management to oversee that the strategic planning and organizational structure enhance and preserve the business of the Corporation and the underlying value of the Corporation. |
2. | The Board shall consist of persons who possess skills and competencies in areas that are relevant to the Corporation’s activities. At least a majority of the directors shall be individuals who are “independent” directors in accordance with applicable securities laws and stock exchange policies. |
3. | The powers of the Board may be exercised at a meeting for which notice has been given and at which a quorum is present or, in appropriate circumstances, by resolution in writing signed by all the directors. | |
4. | The quorum for the transaction of business at any meeting of the Board shall be a majority of directors or such other number of directors as the Board may from time to time determine according to the articles of incorporation of the Corporation. | |
5. | The Board shall have at least four scheduled meetings per year. The chair of the Board (“Chair”) and the Chief Executive Officer (“CEO”) shall develop the agenda for each meeting. | |
6. | Committee meetings may be held in person, by video-conference, by telephone or by any combination of the foregoing. | |
7. | Independent directors shall meet at the end of each Board meeting without management and non-independent directors. | |
8. | A Lead Director is elected annually at the first meeting of the Board following the shareholders meeting. This role is normally filled by the Chair. At any time when the Chair is an employee of the Corporation, the non-management directors shall select an independent director to carry out the functions of a Lead Director. This person would chair regular meetings of the non-management directors and assume other responsibilities which the non-management directors as a whole have designated. | |
9. | At meetings of the Board, resolutions shall be approved by a majority of the votes cast on the resolution. | |
10. | Board meetings shall normally proceed as follows: |
(a) | Review and approval of the minutes of the preceding Board meeting; | |
(b) | Business arising from the previous minutes; | |
(c) | Reports of committees; | |
(d) | Report of the President and CEO, financial and operational reports; | |
(e) | Other business; | |
(f) | Setting the date and time of the next meeting; | |
(g) | In-camera session with solely independent directors; and | |
(h) | Adjournment. |
11. | A secretary should be named for each Board and committee meeting and minutes should be circulated in due course after such meeting. | |
12. | Minutes of the committee meetings will be provided to each Board member. |
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13. | The Board discharges its responsibility for overseeing the management of the Corporation’s business by delegating to the Corporation’s senior officers the responsibility forday-to-day management of the Corporation. The Board discharges its responsibilities directly and through its committees; namely, the Audit Committee, the Compensation Committee and, if established, the Corporate Governance and Nominating Committee. In addition to these regular committees, the Board may appoint ad hoc committees periodically to address issues of a more short-term nature. The Board’s primary roles are overseeing corporate performance and providing quality, depth and continuity of management to meet the Corporation’s strategic objectives. | |
14. | Responsibilities of the Board include, but are not limited to: |
(a) | selecting and appointing, evaluating and (if necessary) terminating the CEO; | |
(b) | satisfying itself as to the integrity of the CEO and other executive officers and ensuring that they promote a culture of integrity throughout the organization; | |
(c) | adopting a strategic planning process, approving strategic plans, and monitoring performance against plans; | |
(d) | reviewing the Corporation’s long term strategy annually; | |
(e) | reviewing and approving annual operational budgets, capital expenditure limits and corporate objectives, and monitoring performance on each of the above; | |
(f) | approving all decisions involving unbudgeted operating expenditures in excess of $50,000 and unbudgeted project expenditures in excess of $100,000; | |
(g) | reviewing policies and procedures to identify business risks, and ensure that systems and actions are in place to monitor them; | |
(h) | reviewing policies and processes to ensure that the Corporation’s internal control and management information systems are operating properly; | |
(i) | approving the audited annual financial statements, MD&A, annual information form and other filings required under applicable securities laws; | |
(j) | assessing the contribution of the Board, committees and all directors annually, and planning for succession of the Board; | |
(k) | reviewing and approving committee chair nominees from time to time as recommended by the respective committees; | |
(l) | reviewing the Board size andmake-up on an annual basis; | |
(m) | arranging formal orientation programs for new directors, where appropriate; | |
(n) | establishing and maintaining an appropriate system of corporate governance including practices to ensure the Board functions effectively and independently of management, including reserving a portion of all Board and its committee meetings for in camera discussions without management present; | |
(o) | ensuring that a comprehensive compensation strategy is maintained which includes competitive industry positioning, weighting of compensation elements and relationship of compensation to performance; | |
(p) | ensuring that an adequate system of internal control is maintained to safeguard the Corporation’s assets and the integrity of its financial and other reporting systems; | |
(q) | overseeing public communication, disclosure and disclosure controls in compliance with all legal and regulatory requirements; | |
(r) | providing oversight of environmental matters; | |
(s) | reviewing and considering for approval all amendments or departures proposed by management from established strategy, capital and operating budgets, or matters of policy, which diverge from the ordinary course of business; |
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(t) | ensuring that a process is established that adequately provides for management succession planning, including the appointing, training, and monitoring of senior management; | |
(u) | annually assessing the charters of Board committees and revising where necessary; and | |
(v) | adhering to all other Board responsibilities set out in the Corporation’s by-laws and other statutory and regulatory requirements. |
15. | Responsibilities of the Chair of the Board include but are not limited to: |
(a) | providing leadership to the Board with respect to its functions as described in this Mandate and as otherwise may be appropriate, including overseeing the logistics of the operations of the Board; | |
(b) | chairing meetings of the Board, unless not present including in camera sessions; | |
(c) | ensuring that the Board meets on a regular basis and at least quarterly; | |
(d) | establishing a calendar for holding meetings of the Board; | |
(e) | establishing the agenda for each meeting of the Board, with input from other Board members and any other parties as applicable; | |
(f) | ensuring that Board materials are available to any director on request; | |
(g) | ensuring that the members of the Board understand and discharge their duties and obligations; | |
(h) | fostering ethical and responsible decision making by the Board and its individual members; | |
(i) | overseeing the structure, composition, membership and activities of the Board; | |
(j) | ensuring that resources and expertise are available to the Board so that it may conduct its work effectively and efficiently; | |
(k) | pre-approving work to be undertaken for the Board by consultants; | |
(l) | facilitating effective communication between members of the Board and management; and | |
(m) | attending each meeting of shareholders to respond to any questions from shareholders as may be put to the Chair. |
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1. | The Purpose of the Plan |
2. | Defined Terms |
2.1 | “Affiliate” means any corporation which is an affiliate, as such term is used in Subsection 1(2) of the Ontario Business Corporations Act, of the Corporation; | |
2.2 | “Associates” has the meaning ascribed thereto in theSecurities Act (Ontario); | |
2.3 | “Board” means the board of directors of the Corporation or, if established and duly authorized to act, the Executive Committee of the board of directors of the Corporation; | |
2.4 | “Committee” shall have the meaning attributed thereto in Section 3.1 hereof; | |
2.5 | “Corporation” means Pilot Gold Inc. and includes any successor corporation thereof; | |
2.6 | “Eligible Person” means: |
(a) | any director, officer or employee of the Corporation or any Affiliate, or any other Service Provider (an “Eligible Individual”); or | |
(b) | a corporation controlled by an Eligible Individual, the issued and outstanding voting shares of which are, and will continue to be, beneficially owned, directly or indirectly, by such Eligible Individual and/or the spouse, children and/or grandchildren of such Eligible Individual (an “Employee Corporation”); |
2.7 | “Insider” means any insider, as such term is defined in Subsection 1(1) of theSecurities Act (Ontario), of the Corporation, other than a person who falls within that definition solely by virtue of being a director or senior officer of an Affiliate, and includes any associate, as such term is defined in Subsection 1(1) of theSecurities Act (Ontario), of any such insider; | |
2.8 | “Market Price” at any date in respect of the Shares means the closing sale price of such Shares on The Toronto Stock Exchange (or, if such Shares are not then listed and posted for trading on The Toronto Stock Exchange, on such stock exchange in Canada on which such Shares are listed and posted for trading as may be selected for such purpose by the Board) on the trading day immediately preceding such date. In the event that such Shares did not trade on such trading day, the Market Price shall be the average of the bid and ask prices in respect of such Shares at the close of trading on such trading day. In the event that such Shares are not listed and posted for trading on any stock exchange, the Market Price shall be the fair market value of such Shares as determined by the Board in its sole discretion; | |
2.9 | “Maximum Term” means with respect to an Option, the later of (i) the date which is 10 years from the date of the grant of the Option; and (ii) the date which is the fifth day following the conclusion of a self-imposed blackout period of the Corporation which is in effect on the date which is 10 years from the date of the grant of the Option; | |
2.10 | “Option” means an option to purchase Shares granted to an Eligible Person under the Plan; | |
2.11 | “Option Price” means the price per Share at which Shares may be purchased under an Option, as the same may be adjusted from time to time in accordance with Article 8 hereof; | |
2.12 | “Optioned Shares” means the Shares issuable pursuant to an exercise of Options; |
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2.13 | “Optionee” means an Eligible Person to whom an Option has been granted and who continues to hold such Option; | |
2.14 | “Plan” means this 2011 Stock Option Plan, as the same may be amended or varied from time to time; | |
2.15 | “Service Provider” means: |
(a) | an employee or Insider of the Corporation or any Affiliate; or | |
(b) | any person or company engaged to provide management or consulting services for the Corporation or for any entity controlled by the Corporation other than any director, officer or employee of the Corporation or any Affiliate; |
2.16 | “Share Compensation Arrangement” means a stock option, stock option plan, employee stock purchase plan or any other compensation or incentive mechanism of the Corporation involving the issuance or potential issuance of shares to one or more Service Providers, including a share purchase from treasury which is financially assisted by the Corporation by way of a loan, guaranty or otherwise; and | |
2.17 | “Shares” means the common shares of the Corporation or, in the event of an adjustment contemplated by Article 8 hereof, such other shares or securities to which an Optionee may be entitled upon the exercise of an Option as a result of such adjustment. |
3. | Administration of the Plan |
3.1 | The Plan shall be administered by the Board or by any committee (the “Committee”) of the Board established by the Board for that purpose. | |
3.2 | The Board or Committee shall have the power, where consistent with the general purpose and intent of the Plan and subject to the specific provisions of the Plan: |
(a) | to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan; | |
(b) | to interpret and construe the Plan and to determine all questions arising out of the Plan or any Option, and any such interpretation, construction or determination made by the Board or the Committee shall be final, binding and conclusive for all purposes; | |
(c) | to determine the number of Shares covered by each Option; | |
(d) | to determine the Option Price of each Option; | |
(e) | to determine the time or times when Options will be granted and exercisable; | |
(f) | to determine if the Shares which are issuable on the exercise of an Option will be subject to any restrictions upon the exercise of such Option; and | |
(g) | to prescribe the form of the instruments relating to the grant, exercise and other terms of Options. |
3.3 | The Board or the Committee may, in its discretion, require as conditions to the grant or exercise of any Option that the Optionee shall have: |
(a) | represented, warranted and agreed in form and substance satisfactory to the Corporation that he or she is acquiring and will acquire such Option and the Shares to be issued upon the exercise thereof or, as the case may be, is acquiring such Shares, for his or her own account, for investment and not with a view to or in connection with any distribution, that he or she has had access to such information as is necessary to enable him or her to evaluate the merits and risks of such investment and that he or she is able to bear the economic risk of holding such Shares for an indefinite period; | |
(b) | agreed to restrictions on transfer in form and substance satisfactory to the Corporation and to an endorsement on any option agreement or certificate representing the Shares making appropriate reference to such restrictions; and | |
(c) | agreed to indemnify the Corporation in connection with the foregoing. |
3.4 | Any Option granted under the Plan shall be subject to the requirement that, if at any time counsel to the Corporation shall determine that the listing, registration or qualification of the Shares subject to such Option upon any securities exchange or under any law or regulation of any jurisdiction, or the consent or approval of any securities exchange or any governmental or regulatory body, is necessary as a condition of, or in connection |
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with, the grant or exercise of such Option or the issuance or purchase of Shares thereunder, such Option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board or the Committee. Nothing herein shall be deemed to require the Corporation to apply for or to obtain such listing, registration, qualification, consent or approval. |
3.5 | Without limiting the generality of Sections 3.3, 3.4 and 7.2 hereof, unless a registration statement relating to the Shares covered by any Option issued in favour of an Optionee resident in the United States of America has been filed with the United States Securities and Exchange Commission and is effective on the date of exercise, or, in the opinion of counsel to the Corporation, an exemption therefrom is available, the exercise of the Option by such Optionee will be contingent upon receipt from the Optionee of a representation in writing satisfactory to the Board or the Committee that at the time of such exercise it is the Optionee’s then intention to acquire the Shares being purchased for investment and not for resale or other distribution thereof to the public in the United States of America. If such representation in writing is required, the Board or the Committee may in its discretion inscribe an investment legend on the share certificates issued pursuant to the exercise of the Option. The issuance of Shares upon the exercise of the Option shall be subject to all applicable laws, rules and regulations and Shares shall not be issued except upon the approval of proper government agencies or stock exchanges as may be required. Provided, however, no Option shall be exercisable if at any date of exercise, it is the opinion of counsel for the Corporation that registration of the said Shares under the Securities Act of 1933 or other applicable statute or regulation is required and the Option shall again become exercisable only if the Corporation elects to and thereafter effects a registration of the Shares subject to the Option under the United States Securities Act of 1933, as amended or other applicable statute or regulation within the period of the Option. If the Option may not be exercised, the Corporation shall return to the Optionee, without interest or deduction, any funds received by it in connection with the proposed exercise of the Option. |
4. | Shares Subject to the Plan |
4.1 | Options may be granted in respect of authorized and unissued Shares, provided that the aggregate number of Shares reserved for issuance upon the exercise of all Options granted under the Plan, subject to any adjustment of such number pursuant to the provisions of Article 8 hereof, shall not exceed 10% of the total number of Shares issued and outstanding from time to time. Optioned Shares in respect of which Options are not exercised because the relevant Options expire or are cancelled, shall be available for issue upon the exercise of subsequent grants of Options. No fractional Shares may be purchased or issued under the Plan. In the event the number of Shares to be issued upon the exercise of an Option is a fraction, the Optionee will receive the next lowest whole number of Shares and will not receive any other form of compensation (cash or otherwise) for the fractional interest. |
5.1 | Options may be granted by the Board or the Committee to any Eligible Person. | |
5.2 | Subject as herein and otherwise specifically provided in this Article 5, the number of Shares subject to each Option, the Option Price of each Option, the expiration date of each Option, the extent to which each Option is exercisable from time to time during the term of the Option and other terms and conditions relating to each such Option shall be determined by the Board or the Committee. Notwithstanding any provision to the contrary hereof, the Board or the Committee may, in their entire discretion, by express resolution or by a Board-approved written contract with an Optionee, subsequent to the grant of Options hereunder, permit an Optionee to exercise any or all of the unvested Options then outstanding and granted to the Optionee under this Plan or any previously vested Options, in which event all such unvested or vested Options, as the case may be, then outstanding and granted to the Optionee shall be deemed to be immediately exercisable during such period of time as may be specified by the Board or the Committee or by Board-approved written contract with the Optionee up to but not beyond the expiry of the Maximum Term. | |
5.3 | Subject to any adjustments pursuant to the provisions of Article 8 hereof, the Option Price of any Option shall in no circumstances be lower than the Market Price on the trading day immediately preceding the day upon which the Option is granted. If, as and when any Shares have been duly purchased and paid for under the terms of an Option and all conditions relating to the exercise of an Option have been fulfilled to the satisfaction of the Board |
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or the Committee, such Shares shall be conclusively deemed allotted and issued as fully paid non-assessable Shares at the price paid therefor. |
5.4 | The term of an Option shall not exceed the Maximum Term. For greater certainty, notwithstanding anything contained in the Plan or any Option issued under the Plan, if the term of an Option held by an Optionee expires during a self-imposed blackout period of, or other trading restriction imposed by, the Corporation, in each case, that is applicable to the Optionee, the date of termination or expiry of such Option shall be extended to the close of business on the fifth day following the expiration of such blackout period or other trading restriction. | |
5.5 | No Options shall be granted to any Optionee if the total number of Shares issuable to such Optionee under this Plan, together with any Shares reserved for issuance to such Optionee under options for services or any other stock option plans, would exceed 5% of the issued and outstanding Shares. | |
5.6 | An Option is personal to the Optionee and non-assignable (whether by operation of law or otherwise), except as provided for herein. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of an Option contrary to the provisions of the Plan, or upon the levy of any attachment or similar process upon an Option, the Option shall, at the election of the Corporation, cease and terminate and be of no further force or effect whatsoever. | |
5.7 | Subject to regulatory approval and unless approved by the shareholders of the Corporation given by the affirmative vote of a majority of the votes cast at a meeting of shareholders of the Corporation, excluding the votes attached to shares beneficially owned by (a) Insiders to whom options may be granted under this Plan, other than persons who are Insiders solely by virtue of being a director or senior officer of a subsidiary of the Corporation; and (b) Associates of persons referred to in (a) above: |
(a) | the number of Shares reserved for issuance pursuant to Options or other stock options granted to Insiders and under all other Share Compensation Arrangements may not exceed 10% of the issued and outstanding Shares; | |
(b) | the issuance of Shares to Insiders under this Plan and under all other Share Compensation Arrangements, within a one-year period, may not exceed 10% of the issued and outstanding Shares; and | |
(c) | the issuance of Shares to any one Insider and such Insider’s Associates under this Plan and under all other Share Compensation Arrangements, within a one-year period, may not exceed 5% of the issued and outstanding Shares. |
6. | Termination of Employment; Death |
6.1 | Subject to Sections 5.2, 6.2 and 6.3 hereof and to any express resolution passed by the Board or the Committee with respect to an Option or any Board-approved written contract with an Optionee, an Option and all rights to purchase Shares pursuant thereto shall expire and terminate immediately upon the Optionee who holds such Option ceasing to be an Eligible Person. | |
6.2 | Subject to Section 5.2 hereof and to any express resolution passed by the Board or the Committee with respect to an Option or any Board-approved written contract with an Optionee, if an Optionee shall cease to be an Eligible Person while holding an Option which has not been fully exercised, such Optionee may, with the consent of the Board or Committee, exercise the Optionee’s Options that have vested at the date the Optionee ceases to be an Eligible Person at any time up to and including, but not after the earlier of: |
(a) | ninety days of the date the Optionee ceased to be an Eligible Person; and | |
(b) | the expiry date of the Optionee’s Options, |
6.3 | Subject to Sections 5.2 hereof and to any express resolution passed by the Board or the Committee with respect to an Option or any Board-approved written contract with an Optionee, if an Optionee shall die holding an Option which has not been fully exercised, his personal representatives, heirs or legatees may, with the consent |
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of the Board or Committee, exercise the Optionee’s Options that have vested at the date of the Optionee’s death at any time up to and including, but not after the earlier of: |
(a) | one year from the date of the Optionee’s death; or | |
(b) | the expiry date of the Optionee’s Option; |
6.4 | For greater certainty, Options shall not be affected by any change of employment of the Optionee or by the Optionee ceasing to be a director of the Corporation provided that the Optionee continues to be an Eligible Person. | |
6.5 | If the Optionee is an Employee Corporation, the references to the Optionee in this Article 6 shall be deemed to refer to the Eligible Individual associated with the Employee Corporation. |
7. | Exercise of Options |
7.1 | Subject to the provisions of the Plan, an Option may be exercised from time to time by delivery to the Corporation of a written notice of exercise addressed to the Secretary of the Corporation specifying the number of Shares with respect to which the Option is being exercised. Such notice shall be delivered to the office of the Corporation specified in the Option (or such other office as may be notified from time to time by the Corporation to the Optionee for the receipt of such notices) and accompanied by payment in full, by cash or cheque or other form of cash payment acceptable to the Corporation, of the Option Price of the Shares then being purchased. Subject to any provisions of the Plan or the Option to the contrary, certificates for such Shares shall be issued and delivered to the Optionee within a reasonable time following the receipt of such notice and payment. | |
7.2 | Notwithstanding any of the provisions contained in the Plan or in any share option agreement, the Corporation’s obligation to issue Shares to an Optionee pursuant to the exercise of any Option shall be subject to: |
(a) | completion of such registration or other qualification of such Shares or obtaining approval of such governmental or regulatory authority as the Corporation shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof; | |
(b) | the admission of such Shares to listing on any stock exchange on which the Shares may then be listed; | |
(c) | the receipt from the Optionee of such representations, warranties, agreements and undertakings, as the Corporation determines to be necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction; and | |
(d) | the satisfaction of any conditions on exercise prescribed pursuant to Article 3 hereof. |
7.3 | Options shall be evidenced by a written option agreement, instrument or certificate in such form as is inconsistent with this Plan as the Board or the Committee may from time to time determine. |
8. | Adjustments to Options |
8.1 | In the event that the Shares are at any time changed or affected as a result of the declaration of a stock dividend thereon or their subdivision or consolidation, the number of Shares reserved for issue upon the exercise of an Option shall be adjusted accordingly by the Board or the Committee to such extent as the Board or the Committee deems appropriate in its absolute discretion. In such event, the number of, and the price payable for, any Shares that are then subject to Option may also be adjusted by the Board or the Committee to such extent, if any, as the Board or the Committee deems appropriate in its absolute discretion. | |
8.2 | If at any time after the grant of an Option to any Optionee and prior to the expiration of the term of such Option, the Shares shall be reclassified, reorganized or otherwise changed, otherwise than as specified in Section 8.1 or, subject to the provisions of Subsection 9.2(a) hereof, the Corporation shall consolidate, merge or amalgamate with or into another corporation (the corporation resulting or continuing from such consolidation, merger or amalgamation being herein called the “Successor Corporation”) the Optionee shall be entitled to receive upon the subsequent exercise of his or her Option in accordance with the terms hereof and shall accept in lieu of the number of Shares to which he or she was theretofore entitled upon such exercise but for the same aggregate consideration payable therefor, the aggregate number of shares of the appropriate class and/or other securities of the Corporation or the Successor Corporation (as the case may be) and/or other consideration from the Corporation or the Successor Corporation (as the case may be) that the Optionee would have been entitled to |
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receive as a result of such reclassification, reorganization or other change or, subject to the provisions of Subsection 9.2(a) hereof, as a result of such consolidation, merger or amalgamation, if on the record date of such reclassification, reorganization or other change or the effective date of such consolidation, merger or amalgamation, as the case may be, he or she had been the registered holder of the number of Shares to which he or she was theretofore entitled upon such exercise. |
9. | Amendment or Discontinuance of the Plan |
9.1 | The Board may amend or discontinue the Plan at any time, provided, however, that no such amendment may materially and adversely affect any Option previously granted to an Optionee without the consent of the Optionee, except to the extent required by law. Any such amendment shall be subject to the receipt of requisite regulatory approval including, without limitation, the approval of any stock exchange upon which the Shares may trade from time to time, provided, however, shareholder approval will be required in the case of (i) any amendment to the amendment provisions of the Plan (other than those contemplated in paragraph (a) below), (ii) any increase in the maximum number of Shares that may be optioned under the Plan; or (iii) any change in the manner of determining the minimum Option Price, in addition to such other matters that are not specifically provided for below in paragraphs (a) through (e) or which require shareholder approval under the rules and policies of any stock exchange upon which the Shares may trade from time to time. Any amendments to the terms of an Option shall also require regulatory approval, including without limitation, the approval of any stock exchange upon which the Shares may trade from time to time. For greater certainty, the Board may make the following amendments without seeking the approval of the shareholders of the Corporation: |
(a) | amendments to the Plan to rectify typographical errors and/or to include clarifying provisions for greater certainty; | |
(b) | amendments to the vesting provisions of a security or the Plan; | |
(c) | amendments to the termination provisions of a security or a Plan which does not entail an extension beyond the original expiry date thereof; | |
(d) | increases to the exercise price of any Option; and | |
(e) | the inclusion of cashless exercise provisions in the Plan or in any option granted thereunder, which provide for a full deduction of the number of underlying securities from the Plan reserve. |
9.2 | Notwithstanding anything contained to the contrary in this Plan or in any resolution of the Board in implementation thereof: |
(a) | in the event the Corporation proposes to amalgamate, merge or consolidate with any other corporation (other than a wholly-owned subsidiary) or to liquidate, dissolve orwind-up, or in the event an offer to purchase or repurchase the Shares or any part thereof shall be made to all or substantially all holders of Shares, the Corporation shall have the right, upon written notice thereof to each Optionee holding Options under the Plan with the approval of the Board or Committee: |
(i) | to permit the Optionees to exercise the Options granted under the Plan, as to all or any of the optioned Shares in respect of which such Option has not previously been exercised (regardless of any vesting restrictions), during the period specified in the notice (but in no event later than the expiry date of the Option), so that the Optionees may participate in such transaction, offer or proposal; and | |
(ii) | to accelerate the time for the exercise of the said Options and the time for the fulfilment of any conditions or restrictions on such exercise; |
(b) | should changes be required to the Plan by any securities commission, stock exchange or other governmental or regulatory body of any jurisdiction to which the Plan or the Corporation now is or hereafter becomes subject, such changes shall be made to the Plan as are necessary to conform with such requirements and, if such changes are approved by the Board, the Plan, as amended, shall be filed with the records of the Corporation and shall remain in full force and effect in its amended form as of and from the date of its adoption by the Board; and | |
(c) | the Board may at any time by resolution amend or terminate this Plan. Where amended, such amendment shall be subject to regulatory approval. |
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10. | Vesting |
10.1 | The Board or the Committee may, in its entire discretion, at the time of the granting of Options hereunder, determine that provisions relating to the vesting of Options be contained in a written option agreement between the Corporation and the Optionee. |
11. | Withholding Taxes |
11.1 | In order to satisfy amounts that are required to be withheld on account of taxes of an Optionee in respect of the exercise of an Option to acquire Shares, the Corporation shall, subject to the terms of an agreement in respect of the Option: (a) withhold from any other cash amounts due to the Optionee an amount equal to such taxes; (b) require the Optionee to reimburse the Corporation for any such taxes, or (c) take such other steps as the Board may determine. |
12. | Miscellaneous Provisions |
12.1 | An Optionee shall not have any rights as a shareholder of the Corporation with respect to any of the Shares covered by such Option until the date of issuance of a certificate for Shares upon the exercise of such Option, in full or in part, and then only with respect to the Shares represented by such certificate or certificates. Without in any way limiting the generality of the foregoing, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such share certificate is issued. | |
12.2 | Nothing in the Plan or any written option agreement shall confer upon an Optionee any right to continue or be re-elected as a director of the Corporation or any right to continue in the employ of the Corporation or any Affiliate, or affect in any way the right of the Corporation or any Affiliate to terminate his or her employment at any time; nor shall anything in the Plan or any written option agreement be deemed or construed to constitute an agreement, or an expression of intent, on the part of the Corporation or any Affiliate, to extend the employment of any Optionee beyond the time which he or she would normally be retired pursuant to the provisions of any present or future retirement plan of the Corporation or any Affiliate or any present or future retirement policy of the Corporation or any Affiliate, or beyond the time at which he or she would otherwise be retired pursuant to the provisions of any contract of employment with the Corporation or any Affiliate. | |
12.3 | Notwithstanding Section 5.6 hereof, Options may be transferred or assigned between an Eligible Individual and the related Employee Corporation provided the assignor delivers notice to the Corporation prior to the assignment and the Board or the Committee approves such assignment. The Board or the Committee may decline to approve any such transfer or assignment in its sole discretion. | |
12.4 | The Plan and all matters to which reference is made herein shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. |
13.1 | The Plan and the exercise of any Options granted under the Plan shall be subject to approval by the shareholders of the Corporation to be effected by a resolution passed at a meeting of the shareholders of the Corporation, and to acceptance by The Toronto Stock Exchange and any other relevant regulatory authority. |
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• | Place of Shareholders’ Meetings. Under the CBCA, a shareholders’ meeting may be held at any place in Canada provided in the by-laws, or in the absence of such by-law, at the place within Canada that the directors determine, or it may be held at a place outside Canada if such place is specified in the articles of the company or all shareholders entitled to vote at the meeting agree the meeting is to be held at that place. Under the OBCA, a shareholders’ meeting may be held at such place in or outside Ontario (including outside Canada) as the directors may determine. | |
• | Notice of Shareholders’ Meetings. Under the CBCA, notice of a meeting of shareholders of a public company must be provided not less than 21 days and not more than 60 days before the meeting. Under the OBCA, a public company must give notice of a meeting of shareholders not less than 21 days and not more than 50 days before the meeting. However, public companies incorporated under either statute are currently subject to the requirements of National Instrument54-101 —Communication with Beneficial Owners of Securities of a Reporting Issuer of the Canadian Securities Administrators which provides for minimum notice periods of greater than the minimum21-day period in either statute. | |
• | Telephone or Electronic Meetings. Under the CBCA, a meeting of shareholders may be held entirely by telephonic or electronic means only if permitted by the by-laws of the company. Under the OBCA, a meeting of shareholders may be held by telephonic or electronic means unless the articles or by-laws of the company provide otherwise. | |
• | Shareholder Proposals. Under the CBCA, shareholder proposals may be submitted by both registered and beneficial shareholders who are entitled to vote at an annual shareholders’ meeting, provided that (i) the shareholder must have owned, directly or beneficially, for at least six months prior to the submission of the proposal, voting shares at least equal to 1% of the total number of outstanding voting shares of the company or whose fair market value, as determined at the close of business on the day before the shareholder submits the proposal to the company, is at least $2,000; or (ii) the proposal must have the support of persons who in the aggregate have owned, directly or beneficially, such number of voting shares for such period. Under the OBCA, proposals may be submitted by both registered and beneficial shareholders who are entitled to vote at a meeting of shareholders. | |
• | Registered Office. Under the CBCA, a company’s registered office shall be in the province in Canada specified in its articles and may be relocated within such province by resolution of the directors. Under the OBCA, a company’s registered office must be in Ontario and may be relocated to a different municipality within Ontario only by shareholders’ special resolution. | |
• | Quorum of Directors’ Meetings. Both the CBCA and OBCA state that, subject to the articles and by-laws of a company, quorum at meetings of directors consists of a majority of directors or the minimum number of directors required by the articles, although the OBCA also stipulates that in no case may quorum be less than 2/5 of the directors or the minimum number of directors. Further, the CBCA requires that 25% of the directors present at the meeting (or at least one if less than four directors are appointed) be resident Canadians. |
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• | Corporate Records. The CBCA permits corporate and accounting records to be kept outside of Canada, although there are still requirements to keep records and books of account within Canada under the Tax Act and other statutes administered by the Minister of National Revenue (such as theExcise Tax Act (Canada)). Also under the CBCA, if records are kept outside of Canada, companies are required to provide access to their records at a location in Canada, by means of a computer terminal or other technology. The OBCA and related Ontario statutes require records to be kept in Ontario. | |
• | Short Selling. Under the CBCA, insiders of a company are prohibited from short selling any securities of the company. The OBCA contains no such prohibition. | |
• | Oppression Remedy. The OBCA allows a court to grant relief where a prejudicial effect to the shareholder is merely threatened, whereas the CBCA only allows a court to grant relief if the effect actually exists (that is, it must be more than merely threatened). |
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(a) | amend its articles under section 168 to add, remove or change restrictions on the issue, transfer or ownership of shares of a class or series of the shares of the corporation; | |
(b) | amend its articles under section 168 to add, remove or change any restriction upon the business or businesses that the corporation may carry on or upon the powers that the corporation may exercise; | |
(c) | amalgamate with another corporation under sections 175 and 176; | |
(d) | be continued under the laws of another jurisdiction under section 181; or | |
(e) | sell, lease or exchange all or substantially all its property under subsection 184 (3), |
(2) | If a corporation resolves to amend its articles in a manner referred to in subsection 170 (1), a holder of shares of any class or series entitled to vote on the amendment under section 168 or 170 may dissent, except in respect of an amendment referred to in, |
(a) | clause 170 (1) (a), (b) or (e) where the articles provide that the holders of shares of such class or series are not entitled to dissent; or | |
(b) | subsection 170 (5) or (6). |
(3) | A shareholder of a corporation incorporated before the 29th day of July, 1983 is not entitled to dissent under this section in respect of an amendment of the articles of the corporation to the extent that the amendment, |
(a) | amends the express terms of any provision of the articles of the corporation to conform to the terms of the provision as deemed to be amended by section 277; or | |
(b) | deletes from the articles of the corporation all of the objects of the corporation set out in its articles, provided that the deletion is made by the 29th day of July, 1986. |
(4) | In addition to any other right the shareholder may have, but subject to subsection (30), a shareholder who complies with this section is entitled, when the action approved by the resolution from which the shareholder dissents becomes effective, to be paid by the corporation the fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of the close of business on the day before the resolution was adopted. |
(5) | A dissenting shareholder may only claim under this section with respect to all the shares of a class held by the dissenting shareholder on behalf of any one beneficial owner and registered in the name of the dissenting shareholder. |
(6) | A dissenting shareholder shall send to the corporation, at or before any meeting of shareholders at which a resolution referred to in subsection (1) or (2) is to be voted on, a written objection to the resolution, unless the corporation did not give notice to the shareholder of the purpose of the meeting or of the shareholder’s right to dissent. |
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(7) | The execution or exercise of a proxy does not constitute a written objection for purposes of subsection (6). |
(8) | The corporation shall, within ten days after the shareholders adopt the resolution, send to each shareholder who has filed the objection referred to in subsection (6) notice that the resolution has been adopted, but such notice is not required to be sent to any shareholder who voted for the resolution or who has withdrawn the objection. |
(9) | A notice sent under subsection (8) shall set out the rights of the dissenting shareholder and the procedures to be followed to exercise those rights. |
(10) | A dissenting shareholder entitled to receive notice under subsection (8) shall, within twenty days after receiving such notice, or, if the shareholder does not receive such notice, within twenty days after learning that the resolution has been adopted, send to the corporation a written notice containing, |
(a) | the shareholder’s name and address; | |
(b) | the number and class of shares in respect of which the shareholder dissents; and | |
(c) | a demand for payment of the fair value of such shares. |
(11) | Not later than the thirtieth day after the sending of a notice under subsection (10), a dissenting shareholder shall send the certificates representing the shares in respect of which the shareholder dissents to the corporation or its transfer agent. |
(12) | A dissenting shareholder who fails to comply with subsections (6), (10) and (11) has no right to make a claim under this section. |
(13) | A corporation or its transfer agent shall endorse on any share certificate received under subsection (11) a notice that the holder is a dissenting shareholder under this section and shall return forthwith the share certificates to the dissenting shareholder. |
(14) | On sending a notice under subsection (10), a dissenting shareholder ceases to have any rights as a shareholder other than the right to be paid the fair value of the shares as determined under this section except where, |
(a) | the dissenting shareholder withdraws notice before the corporation makes an offer under subsection (15); | |
(b) | the corporation fails to make an offer in accordance with subsection (15) and the dissenting shareholder withdraws notice; or | |
(c) | the directors revoke a resolution to amend the articles under subsection 168 (3), terminate an amalgamation agreement under subsection 176 (5) or an application for continuance under subsection 181 (5), or abandon a sale, lease or exchange under subsection 184 (8), |
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(15) | A corporation shall, not later than seven days after the later of the day on which the action approved by the resolution is effective or the day the corporation received the notice referred to in subsection (10), send to each dissenting shareholder who has sent such notice, |
(a) | a written offer to pay for the dissenting shareholder’s shares in an amount considered by the directors of the corporation to be the fair value thereof, accompanied by a statement showing how the fair value was determined; or | |
(b) | if subsection (30) applies, a notification that it is unable lawfully to pay dissenting shareholders for their shares. |
(16) | Every offer made under subsection (15) for shares of the same class or series shall be on the same terms. |
(17) | Subject to subsection (30), a corporation shall pay for the shares of a dissenting shareholder within ten days after an offer made under subsection (15) has been accepted, but any such offer lapses if the corporation does not receive an acceptance thereof within thirty days after the offer has been made. |
(18) | Where a corporation fails to make an offer under subsection (15) or if a dissenting shareholder fails to accept an offer, the corporation may, within fifty days after the action approved by the resolution is effective or within such further period as the court may allow, apply to the court to fix a fair value for the shares of any dissenting shareholder. |
(19) | If a corporation fails to apply to the court under subsection (18), a dissenting shareholder may apply to the court for the same purpose within a further period of twenty days or within such further period as the court may allow. |
(20) | A dissenting shareholder is not required to give security for costs in an application made under subsection (18) or (19). |
(21) | If a corporation fails to comply with subsection (15), then the costs of a shareholder application under subsection (19) are to be borne by the corporation unless the court otherwise orders. |
(22) | Before making application to the court under subsection (18) or not later than seven days after receiving notice of an application to the court under subsection (19), as the case may be, a corporation shall give notice to each dissenting shareholder who, at the date upon which the notice is given, |
(a) | has sent to the corporation the notice referred to in subsection (10); and | |
(b) | has not accepted an offer made by the corporation under subsection (15), if such an offer was made, of the date, |
(23) | All dissenting shareholders who satisfy the conditions set out in clauses (22)(a) and (b) shall be deemed to be joined as parties to an application under subsection (18) or (19) on the later of the date upon which the application is brought and the date upon which they satisfy the conditions, and shall be bound by the decision rendered by the court in the proceedings commenced by the application. |
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(24) | Upon an application to the court under subsection (18) or (19), the court may determine whether any other person is a dissenting shareholder who should be joined as a party, and the court shall fix a fair value for the shares of all dissenting shareholders. |
(25) | The court may in its discretion appoint one or more appraisers to assist the court to fix a fair value for the shares of the dissenting shareholders. |
(26) | The final order of the court in the proceedings commenced by an application under subsection (18) or (19) shall be rendered against the corporation and in favour of each dissenting shareholder who, whether before or after the date of the order, complies with the conditions set out in clauses (22) (a) and (b). |
(27) | The court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting shareholder from the date the action approved by the resolution is effective until the date of payment. |
(28) | Where subsection (30) applies, the corporation shall, within ten days after the pronouncement of an order under subsection (26), notify each dissenting shareholder that it is unable lawfully to pay dissenting shareholders for their shares. |
(29) | Where subsection (30) applies, a dissenting shareholder, by written notice sent to the corporation within thirty days after receiving a notice under subsection (28), may, |
(a) | withdraw a notice of dissent, in which case the corporation is deemed to consent to the withdrawal and the shareholder’s full rights are reinstated; or | |
(b) | retain a status as a claimant against the corporation, to be paid as soon as the corporation is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the corporation but in priority to its shareholders. |
(30) | A corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable grounds for believing that, |
(a) | the corporation is or, after the payment, would be unable to pay its liabilities as they become due; or | |
(b) | the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities. |
(31) | Upon application by a corporation that proposes to take any of the actions referred to in subsection (1) or (2), the court may, if satisfied that the proposed action is not in all the circumstances one that should give rise to the rights arising under subsection (4), by order declare that those rights will not arise upon the taking of the proposed action, and the order may be subject to compliance upon such terms and conditions as the court thinks fit and, if the corporation is an offering corporation, notice of any such application and a copy of any order made by the court upon such application shall be served upon the Commission. |
(32) | The Commission may appoint counsel to assist the court upon the hearing of an application under subsection (31), if the corporation is an offering corporation. |
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