UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT Pursuant

to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 29, 2020

 

 

HYCROFT MINING HOLDING CORPORATION

 

(Exact name of Registrant as Specified in Its Charter)

  

Delaware

001-38387

82-2657796

(State or Other Jurisdiction of

Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

8181 E. Tufts Avenue, Suite 510

Denver, Colorado

80237
(Address of principal executive offices)   (Zip Code)

 

(303) 524-1947

(Registrant’s Telephone Number, Including Area Code)

 

Mudrick Capital Acquisition Corporation
527 Madison Avenue, 6th Floor
New York, New York 10022

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

         
Title of each class  

Trading

Symbol(s)

 

Name of each exchange

on which registered

Class A common stock,

par value $0.0001 per share

  HYMC   The Nasdaq Capital Market
         
Warrants to purchase
Common Stock
  HYMCW   The Nasdaq Capital Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

INTRODUCTORY NOTE

 

On May 29, 2020, Hycroft Mining Holding Corporation, formerly known as Mudrick Capital Acquisition Corporation (the “Company” or “HYMC” or, prior to the business combination as described below, “MUDS”), consummated the transactions contemplated by the Purchase Agreement, dated as of January 13, 2020, by and among the Company, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft Mining Corporation (“Hycroft” or “Seller”), as amended by that certain Amendment to Purchase Agreement, dated as of February 26, 2020 (the “Purchase Agreement”). Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of Hycroft and substantially all of the other assets and assumed substantially all of the liabilities of Hycroft, a US-based gold and silver producer operating the Hycroft mine located in the mining region of northern Nevada. In connection with the completion of the business combination transactions contemplated by the Purchase Agreement, the Company changed its name from Mudrick Capital Acquisition Corporation to Hycroft Mining Holding Corporation. The above description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by the full text of the Purchase Agreement, which is included as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference. The terms “business combination”, “debt and warrant assumption”, “exchange”, “forward purchase”, “private investment” and “public units” have the same meaning as set forth in the final joint proxy statement/prospectus filed with the U.S. Securities and Exchange Commission (“SEC”) on May 7, 2020 (the “Proxy Statement/Prospectus”). Capitalized terms used but not defined in this Current Report on Form 8-K have the same meaning as set forth in the Proxy Statement/Prospectus.

 

Item 1.01 Entry into a Material Definitive Agreement.

 

To the extent required by Item 1.01 of Form 8-K, the disclosures contained in Item 2.01 of this Current Report on Form 8-K are incorporated by reference.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

As indicated in the Introductory Note above, the Company completed the business combination with Hycroft on May 29, 2020, in accordance with the terms of the Purchase Agreement.

 

In accordance with the Purchase Agreement, Allied VGH Inc., a Nevada corporation (“Allied VGH”), and Allied Nevada Delaware Holdings Inc., a Delaware corporation (“Allied Delaware”), were converted into limited liability companies prior to the consummation of the business combination. Pursuant to the business combination, Acquisition Sub (a) acquired from Hycroft (i) all of the issued and outstanding equity interests of Allied Nevada Gold Holdings, LLC, a Nevada limited liability company, Allied VGH (as converted), and Allied Delaware (as converted), the direct subsidiaries of Hycroft, and (ii) substantially all of the remaining assets of Hycroft subject to specified retained assets and the Company and (b) assumed substantially all of the liabilities of Hycroft.

 

The value of the aggregate consideration was estimated at approximately $615.0 million, which amount was inclusive of the value of the 15,140,584 shares of the Company’s Class A common stock, par value $0.0001 per share (the “HYMC Common Stock”), issued as consideration to Hycroft in the business combination (and promptly distributed pro rata to Hycroft’s shareholders), the value of Hycroft’s debt assumed by the Company at the closing of the business combination, and the value of Hycroft’s debt paid off or exchanged for shares of HYMC Common Stock and cancelled by Hycroft at the closing of the business combination.

 

On May 29, 2020, immediately prior to the consummation of the business combination, the Company issued, in a private placement transaction (the “PIPE Financing”), an aggregate of 7,596,309 shares of HYMC Common Stock and 3.25 million warrants to purchase HYMC Common Stock at an exercise price of $11.50 per share (the “PIPE warrants”) for an aggregate purchase price of approximately $76.0 million, to certain funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine (such funds and/or their permitted assigns, the “Initial Subscribers”) pursuant to the terms of separate Subscription/Backstop Agreements, dated January 13, 2020 and amended as of May 28, 2020 (collectively, the “Subscription Agreements”).

 

On May 29, 2020, immediately prior to the consummation of the business combination, Mudrick Capital Acquisition Holdings LLC (“sponsor”) surrendered to the Company 3,511,820 shares of MUDS Class B common stock for cancellation in accordance with the terms of the Purchase Agreement and that certain letter agreement, dated as of January 13, 2020, by and between the Company and sponsor (the “Parent Sponsor Letter Agreement”).

 

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At the consummation of the business combination, the Company, sponsor, Cantor Fitzgerald & Co. (“Cantor”), holders of Excess Notes and 1.5 Lien Notes that received shares of the HYMC Common Stock upon exchange of such Excess Notes and 1.5 Lien Notes, certain stockholders of Hycroft that received shares of HYMC Common Stock in the business combination and may be affiliates of the Company after consummation of the business combination, the Initial Subscribers and Sprott Private Resource Lending II (Collector), L.P. (“Lender” and, such persons or entities, collectively, the “restricted stockholders”) entered into the Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the restricted stockholders are entitled to, among other things, customary registration rights, including demand, piggy-back and shelf registration rights, subject to cut-back provisions. The restricted stockholders have agreed in the Registration Rights Agreement not to sell, transfer, pledge or otherwise dispose of shares of HYMC Common Stock they hold or receive for certain time periods, ranging from between 30 days after the consummation of the business combination for warrants purchased in the PIPE Financing to six months for shares received in the exchange, to one year after the consummation of the business combination for founder shares (as defined in the Proxy Statement/Prospectus), subject to certain exceptions. Pursuant to the terms of the Registration Rights Agreement, the Company is obligated to file a shelf registration statement on Form S-3, or Form S-1 if unavailable, and may be required to register up to approximately 62 million shares of HYMC Common Stock, in addition to warrants.

 

Concurrently with the consummation of the business combination, sponsor also purchased 625,000 shares of HYMC Common Stock and 2,500,000 forward purchase units, each such unit comprised of one share of HYMC Common Stock and one warrant to purchase one share of HYMC Common Stock for $11.50 per share, in accordance with the terms of the Forward Purchase Contract, dated January 24, 2018, between the Company and sponsor (the “Forward Purchase Contract”).

 

On October 4, 2019, Hycroft, as borrower, certain subsidiaries of Hycroft, as guarantors, Lender, and Sprott Resource Lending Corp., as arranger, executed a secured multi-advance term credit facility pursuant to which Lender committed to make, subject to certain conditions set forth therein, term loans in an aggregate principal amount up to $110,000,000 (the “Initial Sprott Credit Agreement”). On May 29, 2020, the Company and certain of its subsidiaries, as guarantors, entered into the Amended and Restated Credit Agreement (the “Sprott Credit Agreement”) to update the conditions precedent and effect certain other changes to conform the terms of the Initial Sprott Credit Agreement to the details of the business combination. At the consummation of the business combination, the Company assumed the Initial Sprott Credit Agreement pursuant to the terms of the Purchase Agreement, entered into the Sprott Credit Agreement, borrowed $70,000,000 under such facility and issued to Lender 496,634 shares of HYMC Common Stock equal to approximately 1% of the Company’s post-closing shares of HYMC Common Stock outstanding. In addition, concurrently with the consummation of the business combination, the Company and Hycroft Resources & Development, LLC, a Delaware limited liability company (“HRD”) and an indirect wholly-owned subsidiary of Hycroft acquired by the Company in the business combination, entered into a Royalty Agreement with Sprott Private Resource Lending II (CO) Inc. (the “Sprott Royalty Agreement” and, together with the Sprott Credit Agreement, the “Sprott Agreements”), pursuant to which, among other things, HRD received $30,000,000 in cash consideration in exchange for a 1.5% net smelter perpectual royalty payment relating to the Hycroft mine, the principal asset of HRD acquired in the business combination.

 

On May 28, 2020, in connection with the closing of the business combination, Seller, Acquisition Sub, the 1.25 Lien Noteholders and the 1.5 Lien Noteholders entered into an Omnibus Amendment to the Note Purchase Agreement and Exchange Agreement (the “Omnibus Amendment”), which effected certain technical changes, and added certain representations and warranties to, the Exchange Agreement.

 

Certain affiliates, officers and directors of the Company had material relationships with Hycroft prior to the consummation of the business combination, as described in the Proxy Statement/Prospectus in the sections entitled “Certain Relationships and Related Transactions – MUDS’ Related Party Transactions – Interest in Seller, the Business Combination and Private Investment” beginning on page 295 and “Certain Relationships and Related Transactions – Seller Related Party Transactions” beginning on page 297, each of which sections is incorporated herein by reference.

 

On May 29, 2020, in connection with the consummation of the business combination, the Company amended and restated its existing amended and restated certificate of incorporation (such second amended and restated certificate of incorporation, the “Second Amended and Restated Charter”) to:

 

(a) change the name of the Company to Hycroft Mining Holding Corporation;

 

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(b) increase the total number of authorized shares of all classes of capital stock from 111,000,000 shares to 410,000,000, consisting of (i) 400,000,000 shares of the HYMC Common Stock and (ii) 10,000,000 shares of preferred stock;

 

(c) remove or amend those provisions of existing certificate of incorporation which terminated or otherwise ceased to be applicable following the completion of the business combination, including removal of certain provisions relating to the Company’s prior status as a blank check company and the Company’s Class B Common Stock that no longer apply;

 

(d) clarify the exclusive forum provision to provide the Court of Chancery of the State of Delaware as the exclusive forum for certain stockholder litigation shall not apply to any action to enforce any liability or duty under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, for which there is exclusive federal or concurrent federal and state jurisdiction;

 

(e) permit stockholder action by written consent;

 

(f) provide that the Company will not be governed by Section 203 of the Delaware General Corporation Law (“DGCL”) and included a provision that is substantially similar to Section 203 of the DGCL, but excludes the investment funds affiliated with sponsor and their respective successors and affiliates and the investment funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine and their respective successors and affiliates from the definition of “interested stockholder,”; and

 

(f) declassify the board of directors.

 

Upon consummation of the business combination, the Company assumed Hycroft’s liabilities and obligations under the warrant agreement, dated as of October 22, 2015, by and between Hycroft and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as warrant agent (the “Hycroft Warrant Agreement”). Each warrant of Hycroft outstanding and unexercised immediately prior to the effective time of the business combination is exercisable to purchase shares of HYMC Common Stock at an exercise price of $44.82 per share, and each warrant is exercisable into approximately 0.2523 shares of HYMC common stock.

 

Following the completion of the PIPE Financing and the business combination and related debt and warrant assumption, there were 50,160,042 shares of HYMC Common Stock outstanding. Immediately following the completion of such transactions, the Company’s share capital consisted of: (A) 15,140,584 shares of HYMC Common Stock issued to Hycroft and distributed pro rata to Hycroft’s stockholders in the business combination, (B) 1,688,180 shares of HYMC Common Stock issued to sponsor, which shares converted from an equal number of shares of MUDS Class B common stock in accordance with the terms of the amended and restated certificate of incorporation of MUDS, as amended, in effect immediately prior to the consummation of the business combination and the Parent Sponsor Letter Agreement, (C) 20,871,236 shares of HYMC Common Stock issued to the holders of the Excess Notes and the 1.5 Lien Notes in the exchange, (D) (x) 7,596,309 shares of HYMC Common Stock issued pursuant to the Subscription Agreements and (y) 3,249,999 warrants (the “PIPE warrants”) to purchase one share of HYMC Common Stock at an exercise price of $11.50 per share issued pursuant to the Subscription Agreements, in the private investment, (E) 1,197,704 shares of HYMC Common Stock, representing outstanding shares held by the Company’s public stockholders and not redeemed in connection with the business combination, (F) 20,800,000 outstanding warrants to purchase one share of HYMC Common Stock for $11.50 per share (“public warrants”), (G) 3,125,000 shares of HYMC Common Stock and 2,500,000 warrants to purchase one share of HYMC Common Stock at an exercise price of $11.50 per share, issued to sponsor in connection with the transactions contemplated by the Forward Purchase Contract, (H) 6,700,000 warrants to purchase one share of HYMC Common Stock (the “sponsor private placement warrants”) issued to sponsor, pursuant to the Private Placement Warrants Purchase Agreement, dated as of January 15, 2018, by and between MUDS and sponsor, (I) 1,040,000 warrants to purchase one share of HYMC Common Stock (together with the sponsor private placement warrants, the “private placement warrants”) issued to Cantor, pursuant to the Private Placement Warrant Purchase Agreement, dated as of January 16, 2018, by and between MUDS and Cantor, (J) restricted stock units convertible into shares of HYMC Common Stock valued at no more than $3,999,000 received in connection with the business combination in exchange for restricted stock units convertible into shares of Hycroft common stock, (K) 44,395 shares of HYMC Common Stock issued to Cantor as partial payment of Cantor’s deferred underwriting commission (the “underwriting commission issuance”), pursuant to the Underwriting Agreement, dated as of February 7, 2018, as amended on February 12, 2020, by and among MUDS and Cantor, as representative of the several underwriters, (L) 496,634 shares of HYMC Common Stock issued to Lender pursuant to the Sprott Credit Agreement, and (K) 12,721,623 Hycroft warrants exercisable into 3,210,213 shares of HYMC Common Stock at an exercise price of $44.82 per share following the business combination.

 

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The issuance of the shares of HYMC Common Stock to Hycroft for prompt distribution to its stockholders was registered with the SEC on the registration statement on Form S-4 filed with the SEC (File No. 333-236460) (as amended, the “Registration Statement”) and effective on May 7, 2020. The issuance of the shares of HYMC Common Stock to holders of stock options and restricted stock units issued under the HYMC 2020 Performance and Incentive Pay Plan (the “Incentive Plan”) will be registered with the SEC on a registration statement on Form S-8. The Company has agreed in the Registration Rights Agreement to file a registration statement in respect of shares of HYMC Common Stock and warrants held by the parties to the Registration Rights Agreement, including the shares of HYMC Common Stock underlying such warrants, with the SEC on a registration statement on Form S-3, or Form S-1 if Form S-3 is not available, as soon as practicable but in no event later than fifteen (15) business days following the completion of the business combination.

 

The foregoing descriptions of the Sprott Agreements, the Hycroft Warrant Agreement, the Subscription Agreements, the Registration Rights Agreement, the Omnibus Amendment, and the Second Amended and Restated Charter do not purport to be complete and are subject to and qualified in their entirety by reference to the Sprott Agreements, the Hycroft Warrant Agreement, the Subscription Agreements, the Registration Rights Agreement, the Omnibus Amendment and the Second Amended and Restated Charter, copies of which are included as Exhibits 10.1, 10.2, 4.1, 10.3, 10.4, 10.5, 10.12 and 3.1, respectively, of this Current Report on Form 8-K and incorporated herein by reference.

 

Form 10 information

 

Item 2.01(f) of Form 8-K states that, if the predecessor registrant was a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Prior to the completion of the business combination described in Item 2.01 above, the Company was a “shell company.” As a result of the completion of the business combination, the Company has ceased to be a shell company. Accordingly, the Company is providing the information below that would be included in a Form 10 if the Company were to file a Form 10. Please note that the information provided below relates to the resultant company after the consummation of the business combination, unless otherwise specifically indicated or the context otherwise requires.

 

BUSINESS

 

The business of the Company after the business combination will be the business of Hycroft prior to the business combination, which is described in the Proxy Statement/Prospectus in the section entitled “Information about the Seller and the Hycroft Business” beginning on page 206, which section is incorporated herein by reference.

 

Risk Factors

 

The risks associated with the Company’s business are described in the Proxy Statement/Prospectus in the sections entitled “Risk Factors – Risks Related to Seller’s Industry”, “Risk Factors – Risks Related to the Hycroft Business”, and “Risk Factors – Risks Related to MUDS and the Business Combination”, beginning on page 51, page 57 and page 66, respectively, which sections are incorporated herein by reference.

 

FINANCIAL INFORMATION

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

As a result of the completion of the business combination, the financial statements of Hycroft are now the financial statements of the Company. Prior to the business combination, the Company had no operating assets but, upon consummation of the business combination, the business and operating assets of Hycroft sold to the Company became the sole business and operating assets of the Company. Accordingly, the financial statements of Hycroft and its subsidiaries as they existed prior to the business combination and reflecting the sole business and operating assets of the Company going forward, are now the financial statements of the Company. Thus, the following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes of Hycroft included as Exhibit 99.1 to this Curent Report on Form 8-K. Unless the context otherwise requires, for purposes of this section, the terms “we,” “us,” “Seller”, or “Hycroft” refer to Hycroft Mining Corporation and its subsidiaries as they existed prior to the business combination. The following discussion of our financial condition and results of operations for the quarter ended March 31,2020 should be read in conjunction with the consolidated financial statements and related notes of Hycroft included in the Proxy Statement/Prospectus and incorporated by reference herein. This discussion contains forward-looking statements reflecting the Company’s current expectations, estimates, plans and assumptions concerning events and financial trends that involve risks and may affect the Company’s future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the Proxy Statement/Prospectus in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” beginning on pages 186 and 51, respectively.

 

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The information set forth in the section of the Proxy Statement/Prospectus entitled “Seller’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 235 thereof is incorporated herein by reference.

 

For information on the Company prior to the business combination, see the section in the Proxy Statement/Prospectus entitled “MUDS’ Management Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 201 and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed on May 8, 2020, each of which is incorporated by reference.

 

General

 

We are a U.S.-based development stage gold mining company that mines oxide, transition and sulfide heap ore at our sole property, the Hycroft Mine. The Hycroft Mine is an open-pit heap leach operation located in Nevada. Gold and silver sales represent 100% of our revenues and the market prices of gold and silver significantly impact our financial position, operating results and cash flows.

 

The Hycroft Mine restarted mining operations during the first half of 2019 after being in a care and maintenance mode for more than two years. From the beginning of 2017 through the first three months of 2019, the Hycroft Mine was in a care and maintenance mode, which it entered when it was determined that we could no longer economically recover metal. While in care and maintenance, our gold and silver production was a byproduct of our maintenance activities.

 

Effective July 31, 2019, M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”) and us, completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study prepared for Hycroft with an effective date of July 1, 2019, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K,which was filed as Exhibit 96.1 to the Proxy Statement/Prospectus (the “Hycroft Technical Report”), for a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores. As of June 30, 2019, based on the Hycroft Technical Report, the Hycroft Mine had proven and probable mineral reserves of 12.0 million ounces of gold and 481.4 million ounces of silver, which are contained in oxide, transition and sulfide ores. Pursuant to the current 34-year life of mine plan in the Hycroft Technical Report, once fully operational, mining will range from approximately 85 – 100 million tons per year. As set forth in the Hycroft Technical Report, we expect mining will be performed by a contract mining company or we will primarily use a short-term equipment rental fleet during the initial five-year ramp-up using customary truck and shovel open pit mining methods. After the initial ramp-up, we expect to self-perform mining with our own equipment fleet.

 

The Hycroft Technical Report classifies the ore into three categories based on how the ore will be processed. Category 1 ore, which is comprised of low-grade ore with high cyanide soluble gold, will not go through a pre-oxidation step nor will it be crushed due to its low-grade. Category 1 ore accounts for 4% of the ore over the current life of the mine. Category 2 ore, which is comprised of high-grade ore with high cyanide soluble gold, will be crushed, but will not go through a pre-oxidation step. Category 2 ore accounts for 2% of the ore over the current life of the mine. Category 3 ore, which is comprised of low cyanide soluble gold, will be crushed and go through a pre-oxidation step. Category 3 ore accounts for 94% of the ore over the current life of the mine. Categories 2 and 3 ore will each be crushed to increase surface area and will follow a slightly different process once crushed. As part of the crushing process, Category 3 ore will be mixed with soda ash to induce a pre-oxidation process, rinsed with fresh water and a saturated lime solution and then leached with lime and cyanide. The pre-oxidation period will vary based on the character of the ore. Once crushed, Category 2 ore will be leached using lime and cyanide. Category 1 ore will be stacked as run- of-mine (not crushed) and then leached using lime and cyanide. The focus of the Hycroft Technical Report was the test work done on the two-stage pre-oxidation and cyanide leaching of the Category 3 ores, which was determined to be economically effective.

 

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Pregnant solution from the heap leach pads, which will include solution from each of the three ore types, will be processed at our two existing Merrill-Crowe zinc-cementation facilities. The gold and silver doré produced at the mine site will be further refined by a third party to meet the required market standards of 99.95% pure gold and 99.90% pure silver, which will then be sold at current spot gold and silver prices.

 

Recent Developments

 

On May 29, 2020, we completed the business combination described in Item 2.01, which is incorporated herein by reference.

 

COVID-19

 

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. On January 30, 2020, the World Health Organization declared the outbreak to constitute a “Public Health Emergency of International Concern”. In February 2020, the first death due to the virus was reported in the United States. Subsequently, the virus has spread throughout the United States with a significant number of deaths reported. On March 13, 2020, President Trump declared a national state of emergency and issued guidelines including working from home whenever possible, avoiding social gatherings and discretionary travel and other protective measures of socially distancing to reduce the spread of COVID-19. The COVID-19 outbreak has disrupted and continues to disrupt supply chains and affect production and sales across a range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and the direct and indirect impacts on our employees, vendors and customers all of which are uncertain and cannot be fully anticipated or predicted. As of the date of this Current Report on Form 8-K, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain, but could be material and adverse.

 

Recently Issued Accounting Pronouncements

 

For a discussion of Recently Issued Accounting Pronouncements, see Note 2 — Summary of Significant Accounting Policies to Notes to Consolidated Financial Statements.

 

Critical Accounting Estimates

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, which we refer to as “GAAP”. The preparation of these statements requires us to make assumptions, estimates, and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. We base our assumptions, estimates, and judgments on historical experience, current trends and other factors that we believe to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review our accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ, and such differences could be material.

 

We consider an accounting estimate to be critical if it requires significant management judgment and assumptions about matters that are highly uncertain at the time the estimate is made and if changes in the estimate that are reasonably possible could materially impact our consolidated financial statements. Although other estimates are used in preparing our consolidated financial statements, we believe that the following accounting estimates are the most critical to understanding and evaluating our reported financial results. For information on all of our significant accounting policies, see Note 2 — Summary of Significant Accounting Policies to Notes to Consolidated Financial Statements.

 

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Ore on Leach Pads

 

Estimate Required

 

The recovery of gold and silver at the Hycroft Mine has been accomplished through a heap leaching process, the nature of which limits our ability to precisely determine the recoverable gold and silver ounces in ore on leach pads. We estimate the quantity of recoverable gold and silver ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, and estimated recovery rates based on ore type, domain and level of oxidation actually achieved prior to leaching. The estimated recoverable gold and silver ounces placed on the leach pads and recovery rates are periodically reconciled by comparing the related ore processed to the actual gold and silver ounces recovered (metallurgical balancing) from such ore. The ultimate recoverable gold and silver ounces over the life-of- mine is unknown until mining operations cease. A change in the recovery rate or the quantity of recoverable gold and silver ounces in our ore on leach pads could materially impact our consolidated financial statements.

 

Impact of Change in Estimate

 

Changes in recovery rate estimates or estimated recoverable gold and silver ounces that do not result in write-downs are accounted for on a prospective basis; however, if a write-down is required, ore on leach pads would be adjusted to market values before prospectively accounting for the remaining costs and revised estimated recoverable gold ounces.

 

During the three months ended March 31, 2020, Hycroft recognized a $6.9 million write-down of ore on leach pads as a result of metallurgical balancing. Cash production costs written-off were $6.4 million and capitalized depreciation and amortization costs written-off were $0.5 million. Based on metallurgical balancing results, Hycroft determined that 3,980 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. The write-off of these ounces was primarily due to poor execution of maintaining the critical variables necessary for oxidation and ultimately recovery of a specific cell of the leach pads. As a result, Hycroft determined that it would recover 20% less than planned of the mismanaged section of the leach pads.

 

Impairment of Long-Lived Assets

 

Estimate Required

 

Our long-lived assets, which consist of plant and equipment, are evaluated for recoverability annually and at interim periods if triggering events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value.

 

To determine fair value, we use a discounted cash flow model based on quantities of estimated recoverable minerals and incorporate projections and probabilities involving metal prices (considering current and historical prices, price trends and related factors), production levels, operating and production costs, and the timing and capital costs of expansion and sustaining projects, all of which are based on life-of- mine plans. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The assumptions, projections and probabilities used to determine estimates of future cash flows are consistent or reasonable in relation to internal budgets and projections. Any change in the assumptions, projections, or probabilities used in our impairment calculations could materially impact our consolidated financial statements.

 

Impact of Change in Estimate

 

There were no such impairments during the three months ended March 31, 2020 or 2019.

 

Reclamation Liability

 

Estimate Required

 

Hycroft will be required to perform reclamation activity at the Hycroft Mine in the future. As a result of this requirement, Hycroft has recorded a reclamation liability on our consolidated balance sheets that is based on its expectation of the costs that will be incurred years in the future. Any underestimate or unanticipated reclamation costs or any changes in governmental reclamation requirements could require us to record or incur additional reclamation costs. Reclamation liabilities are accrued when they become known, are probable and can be reasonably estimated.

 

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Impact of Change in Estimate

 

Whenever a previously unrecognized reclamation liability becomes known, or a previously estimated reclamation cost is increased, the amount of that liability and additional cost will be recorded at that time and could materially reduce our consolidated net income attributable to stockholders. There were no such increases during the three months ended March 31, 2020 or 2019.

 

As of March 31, 2020, Hycroft estimated that no significant reclamation expenditures will be made until 2047 and that reclamation work will be completed by the end of 2065.

 

Proven and Probable Ore Reserves

 

Estimate Required

 

Proven and probable ore reserves are the part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. Our proven and probable reserves are periodically updated, usually on an annual basis. Estimated recoverable gold ounces in our proven and probable reserves at the Hycroft Mine are used in units-of-production amortization calculations and are the basis for future cash flow estimates utilized in impairment calculations. When determining proven and probable reserves, we must make assumptions and estimates of future commodity prices, the mining methods we use and intend to use in the future, and the related costs incurred to develop, mine, and process our reserves. Our estimates of recoverable gold and silver ounces in proven and probable reserves are prepared by and are the responsibility of our employees. Any change in estimate or assumption used to determine our proven and probable reserves could change our estimated recoverable gold and silver ounces in such reserves, which may have a material impact on our consolidated financial statements and/or our calculations of units-of-production amortization and impairment charges (if any).

 

Impact of Change in Estimate

 

Future changes in estimates of recoverable gold ounces will be used in our units-of-production calculations and impairment calculations on a prospective basis.

 

Income Taxes

 

Estimate Required

 

We account for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of our liabilities and assets and the related income tax basis for such liabilities and assets. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future income, we make estimates about future gold and silver sales, metals prices and future production costs. Additionally, significant judgment must be used in determining how much weight to give each piece of evidence considered in determining realizability. Changes to any of these estimates or assumptions could change our conclusions regarding the realizability of deferred tax assets and corresponding income tax, which may have a material impact on our consolidated financial statements.

 

Impact of Change in Estimate

 

As of March 31, 2020 and December 31, 2019, based on the weight of available evidence, Hycroft determined that it was more likely than not that the benefit of its net deferred tax assets would not be realized and recorded full valuation allowances against such assets. In considering the evidence, Hycroft gave significant weight to recent operating results and future projections.

 

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Hycroft Mine

 

Restart of Mining Activities

 

On July 8, 2015, Hycroft suspended mining operations, but continued to operate the processing facilities to produce gold and silver from the ore that had been previously placed on the leach pads. At the beginning of 2017, the Hycroft Mine entered a care and maintenance mode to minimize expenditures and conserve cash. As part of the care and maintenance mode Hycroft stopped the use of cyanide and lime on the leach pads.

 

In late 2018, Hycroft began construction of new leach pads to demonstrate its recently developed heap oxidation and leach process, as discussed in the Hycroft Technical Report, in a commercial setting. Additionally, Hycroft began preparing the mine, including its facilities and mining equipment for a restart. Hycroft began mining in April 2019, with a focus on transition and sulfide ores, but supplemented with oxide ores to improve near-term cash flow and support crusher and equipment commissioning. Ore has been placed on the new leach pads and is in the active oxidation and leaching phase.

 

For the three months ended March 31, 2020, Hycroft recovered and sold 6,560 ounces of gold and 49,373 ounces of silver, at average realized prices of $1,574 per ounce of gold and $16 per ounce of silver. During the three months ended March 31, 2019 there were no sales of gold or silver.

 

The Hycroft Mine’s proven and probable reserves are contained in oxide, transition and sulfide ores. Hycroft has previously recovered metals contained in oxide and transition ores through our heap leach operations. Based on the Hycroft Technical Report, we intend to focus on heap leach oxidation of our transition and sulfide ores using soda ash to manage pH and alkalinity during the oxidation process and then subsequent cyanidation of the oxidized ores. The following simplified schematic outlines the process that is outlined in the Hycroft Technical Report.

 

 

 

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Mining

 

We mine using typical truck and shovel open pit mining methods. The mine plan developed for the Hycroft Technical Report requires a range of approximately 85 – 100 million tons per year to be mined (both ore and waste) throughout the 34-year mine life. Production will ramp up gradually from 10 million tons in year two (2020) to 85 million tons in year six. Another ramp-up in production is projected to occur in year 10 to 100 million tons. We currently have a small existing fleet of mine equipment that we own and began using again during 2019 alongside a small fleet of leased equipment. We plan on using contract mining or leasing equipment during the ramp up through year six. After year six, we expect to begin to transition back to our own fleet, which we will need to purchase.

 

Processing

 

The ore is being processed and will continue to be processed using the following methods:

 

Ore Category 1 — low-grade ore with high cyanide soluble gold will be cyanide leached to extract the gold and silver. This ore will not be pre-oxidized and will be stacked on the leach pads as run-of-mine ore. We expect this ore to account for 4% of the ore over the current life of the mine.

 

Ore Category 2 — high-grade ore with high cyanide soluble gold will be crushed to a P80 of 3∕4” and cyanide leached to extract the gold and silver. This ore will not be pre-oxidized. We expect this ore to account for 2% of the ore over the current life of the mine.

 

Ore Category 3 — low cyanide soluble ratio ores will be crushed to a P80 of 1∕2”. The crushed ore will be mixed with soda ash to induce an alkaline pre-oxidation process. After this ore has been oxidized to the desired extent, we will rinse the ore with fresh water and a saturated lime solution and then cyanide leach the ore to extract the gold and silver. We expect this ore to account for 94% of the ore over the current life of the mine. This process is the subject of a pending patent application.

 

Crushing Plant

 

The crushing system is initially designed to run a nominal capacity of 65,750 tons per day ramping up to 98,630 tons per day with the addition of two more tertiary crushers. Category 2 and Category 3 ores are transported to the primary crusher dump pocket via haul truck. Prior to the primary crusher, the ore that is being routed as Category 3 passes under a soda ash silo where a pre-determined amount of soda ash is added to the ore to begin the pre-oxidation process. The ore proceeds through three stages of crushing and exits the tertiary crushers routed as either 3∕4” crushed or 1∕2” crushed. It is then hauled to the leach pads.

 

Pre-Oxidation

 

We begin the pre-oxidation of the Category 3 ore at the crusher using in-situ moisture and solid soda ash. The amount of soda ash required for the ore is relative to the percent sulfide-sulfur content of the ore. We regularly sample the mined ore for reagent addition control.

 

Once we have placed Category 3 ore on the heap, additional soda ash solution is applied to bring the ore to field capacity (8 – 10% moisture). The solution in the heap is replenished on a regular basis using soda ash solution in order to offset evaporation and carbonate consumption.

 

We determine the pre-oxidation duration by the characteristics of the ore and the measured extent of oxidation based upon sulfate production. The extent of the oxidation will be determined by the target recoveries for each domain and the initial cyanide soluble gold, which is translated to degrees of oxidation already achieved. The number of days required to attain target oxidation is dependent upon the sulfide-sulfur content of the ore, with higher sulfide-sulfur corresponding to longer oxidations cycles. The majority of the Category 3 ore is expected to take between 30 and 120 days to complete pre-oxidation.

 

Rinse Cycle

 

When the pre-oxidation cycle has been completed, we rinse the Category 3 ore first with fresh water and then with a saturated lime solution prior to the commencement of cyanidation leach. This is necessary to remove sulfate and bicarbonate from the heap and reduce cyanide loss during leaching. The alkalinity of the solution in the heap is monitored to ensure rinse completion prior to the start of cyanidation.

 

Heap Leach Cyanidation

 

The cyanidation conditions for all placed ore is the same regardless of crush size or the use of pre- oxidation. The pH is controlled using lime. Category 1 and Category 2 ores, those ores not going through pre- oxidation or rinse, undergo a 200-day primary leach cycle. Category 3 ore, having already been oxidized and rinsed, undergo a nominal 60-day primary leach cycle.

 

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Merrill-Crowe and Refinery

 

Due to the high silver content of the pregnant solution, gold and silver are recovered by zinc cementation. We have two existing Merrill-Crowe plants, which are used to process pregnant solution from the heap leach operation. The older plant has a capacity of 4,500 gallons per minute. The newer plant is considerably larger, with a present capacity of 21,500 gallons per minute.

 

The wet filter cakes from the Merrill-Crowe circuits will be transferred to retort pans, which are then put into a retort furnace to remove water and mercury. Water and then mercury are sequentially volatilized from the precipitate by heating the precipitate under a partial vacuum. The dried filter cake is mixed with flux, a clarifying agent used to remove certain impurities and reduce the melting point of elements in the precipitate, and then transferred to an electric arc furnace where it is smelted to produce doré.

 

Results of Operations

 

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

 

Metal sales

 

Gold sales

 

The table below summarizes changes in gold sales, ounces sold and average realized prices for the following periods:

 

    Three months ended March 31,  
    2020     2019  
   

(dollars in thousands, except

ounce amounts)

 
Gold sales   $ 10,328     $ -  
Gold ounces sold     6,560       -  
Average realized price (per ounce)   $ 1,574     $ -  
             
    2020 vs. 2019        
The change in gold revenue was attributable to:                
Increase in ounces sold   $ 10,328          

 

During the three months ended March 31, 2020, Hycroft’s gold sales were $10.3 million, which was included as Revenues on its consolidated statements of operations compared to $0 in gold sales during the same period in the prior year. Hycroft did not restart mining operations until April 2019 and, accordingly, no gold ounces were sold during the first quarter of 2019.

 

Silver sales

 

The table below summarizes changes in silver sales, ounces sold and average realized prices for the following periods:

 

    Three months ended March 31,  
    2020     2019  
   

(dollars in thousands, except

ounce amounts)

 
Silver sales   $ 796     $ -  
Silver ounces sold     49,373       -  
Average realized price (per ounce)   $ 16     $ -  
                 
    2020 vs. 2019        
The change in silver revenue was attributable to:                
Increase in ounces sold   $ 796          

 

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During the three months ended March 31, 2020, Hycroft’s silver sales were $0.8 million, which was included as Revenues on its consolidated statements of operations compared to $0 in silver sales during the same period in the prior year. Hycroft did not restart mining operations until April 2019 and, accordingly, no silver ounces were sold during the first quarter of 2019.

 

Total cost of sales

 

Total cost of sales consists of production costs and depreciation and amortization. The table below summarizes changes in total cost of sales for the following periods:

 

    Three months ended March 31,  
    2020     2019  
    (dollars in thousands)  
Production costs   $ 15,569     $ -  
Depreciation and amortization     1,334       -  
Write-down of production inventories     6,965          
Total cost of sales   $ 23,868     $ -  
                 
    2020 vs. 2019        
The change in cost of sales was attributable to:                
Increase in ounces sold   $ 10,003        
Write-down of production inventories due to metallurgical balancing     6,965          
Period costs directly expensed to cost of sales     6,900          
Total change in cost of sales, excluding write-down of production inventories   $ 23,868          

 

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Production costs

 

For the three months ended March 31, 2020, Hycroft recognized $15.6 million in production costs, or $2,373 per ounce of gold sold. The cost per ounce of gold sold was significantly higher than is expected in future periods primarily driven by (1) $5.3 million in contractors costs to supplement areas where we are lacking manpower, (2) $3.8 million in maintenance costs primarily as a result of unplanned maintenance, and (3) $7.8 million in reagents, which was higher than expected primarily due to consuming more soda ash and lime than planned. Hycroft made the decision to expense $6.4 million of these costs immediately. Excluding the $6.4 million of period costs, the production costs per ounce of gold sold decreased to $1,404, which was still higher than is expected in future periods and was primarily a result of (1) the use of contractors to supplement maintenance employees and (2) higher than anticipated consumption of reagents. Replacing contractors with full time employees has been a focus for us for more than six months and it is expected it to continue to be a focus for us during 2020 as it has proven challenging to hire qualified employees given the low unemployment levels across Northern Nevada and competition from other nearby mining companies.

 

Depreciation and amortization

 

Depreciation and amortization expense was $1.3 million, or $203 per ounce of gold sold for the three months ended March 31, 2020. Depreciation and amortization expense mostly related to buildings, processing equipment and the leach pad.

 

Write-down of production inventories

 

As discussed above in Critical Accounting Estimates, the estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related gold ore contents to the actual gold ounces recovered (metallurgical balancing). Based on metallurgical balancing results, Hycroft determined that 3,980 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result of the write-off Hycroft recognized a Write-down of production inventories on the consolidated statements of operations of $6.9 million. Cash production costs written-off were $6.4 million and capitalized depreciation and amortization costs written-off were $0.5 million. The write-off of these ounces was primarily due to poor execution of maintaining the critical variables necessary for oxidation and ultimately recovery of a specific cell of the leach pads. As a result, Hycroft determined that it would recover 20% less than planned of the mismanaged section of the leach pads.

 

Operating expenses

 

Care and maintenance, net

 

Care and maintenance, net decreased from $3.8 million for the three months ended March 31, 2019 to $0 for the 2020 period. The decrease in Care and maintenance, net was primarily driven by the restart of mining operations at the Hycroft Mine. Upon restarting in April 2019, Hycroft no longer recorded any costs to care and maintenance, net.

 

Project and development

 

Project and development costs decreased from $2.2 million for the three months ended March 31, 2019 to $0 for the 2020 first quarter. In late 2018, the Company began the process of restating mining operations and, as noted above, restarted mining in April 2019. During 2019, Hycroft completed all project and development of the mine and have not incurred any costs in 2020 that were classified as project and development now that the mine is in operation. During the 2019 first quarter, costs were incurred related to the restart of the Hycroft Mine, such as maintenance and repair of mobile mining equipment and processing equipment (crusher, Merrill-Crowe facility), to prepare for use after sitting idle for several years. During 2019, Hycroft also incurred costs to prepare feasibility studies, including the Hycroft Technical Report.

 

Pre-production depreciation and amortization

 

Pre-production depreciation and amortization represents expense recognized prior to the restart of mining operations at the Hycroft Mine. For first quarter of 2019, pre-production depreciation and amortization was $0.8 million compared to $0 for the three months ended March 31, 2020. The decrease in pre-production depreciation and amortization was due to restarting mining operations and, therefore, recording depreciation and amortization to ore on the leach pads (beginning April 2019), which was recognized on the Consolidated Statements of Operations as part of Total cost of sales as ounces of gold are sold.

 

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Accretion

 

For each of the three months ended March 31, 2020 and 2019, Hycroft recognized $0.1 million in accretion expense.

 

General and administrative

 

General and administrative costs for the three months ended March 31, 2020 and 2019 were $2.0 million and $1.9 million, respectively. The increase in general and administrative costs was primarily driven by a $0.2 million increase in stock-based compensation costs, due to restricted stock units being granted in February 2019 and, therefore, Hycroft only recognized expense for part of the quarter in 2019, whereas in 2020 Hycroft recognized a full quarter of expense. Additionally, the cost of certain of Hycroft’s insurance policies increased by $0.2 million from the prior year. The increases were partially offset by a $0.3 million decrease in expense recognition related to Hycroft’s phantom shares as a result of granting fewer shares in 2020.

 

Interest expense

 

For the three months ended March 31, 2020 and 2019, interest expense was $19.9 million and $14.4 million, respectively, an increase of $5.5 million, or 38%. The increase was primarily due to an increase in the average debt balance from $442.2 million for the 2019 first quarter to $574.7 million for the 2020 first quarter. The average debt balance increased due to PIK interest on our Second Lien Notes, the 1.5 Lien Notes and the 1.25 Lien Notes. Additionally, Hycroft issued 1.25 Lien Notes during 2019 and the first quarter of 2020, which were issued to fund the restart of mining operations and pay operating costs that were in excess of Hycroft’s sales proceeds. The increase in the interest rate on the First Lien Credit Agreement also contributed to the increase in interest expense. Interest expense for the three months ended March 31, 2020 and 2019 was reduced by less than $0.1 million and $0.1 million, respectively, for interest that was capitalized to projects during each period.

 

Reorganization items, net

 

On March 10, 2015, Hycroft filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in an effort to recapitalize Hycroft’s balance sheet by reducing its debt balances while concurrently providing additional liquidity. Expenses directly associated with finalizing the chapter 11 cases before the Bankruptcy Court were reported as Reorganization items, net in the Consolidated Statements of Operations. We incurred legal and professional fees of $0 and $0.3 million for the three months ended March 31, 2020 and 2019, respectively. The decrease was a result of the final claims being settled during the third quarter of 2019 and no additional costs being incurred after the settlements. On October 3, 2019, the Bankruptcy Court finalized the proceedings and closed the case.

 

Income tax expense and benef it

 

There was no income tax expense or benefit recognized during the three months ended March 31, 2020 or 2019.

 

Net loss

 

Due to the activity discussed above, Hycroft realized net losses of $34.6 million and $23.4 million for the first quarters of 2020 and 2019, respectively.

 

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Liquidity and Capital Resources

 

General

 

In the absence of profitable operations following Hycroft’s emergence from chapter 11 bankruptcy proceedings, Hycroft’s primary source of liquidity beginning in 2016 and through the end of 2018 was from the issuance of 1.5 Lien Notes to the Fund Lenders. Hycroft’s primary continuing liquidity needs prior to restarting operations were to finance its operational needs for care and maintenance of the leach pads, to continue to conduct test work related to the two-stage oxidation and subsequent leaching of our sulfide and transition ores, preparation of the Hycroft Technical Report, its general and administrative costs, and debt service, primarily interest payments pursuant to the First Lien Credit Agreement.

 

Hycroft began the restart of mining operations in 2019. Hycroft financed the restart with the issuance of 1.25 Lien Notes to the holders of the 1.5 Lien Notes. Hycroft expected to recapitalize our business with both debt and equity which will be used to finance the remaining cash requirements of the restart as operations and related gold and silver production and sales are ramped up.

 

During 2019, Hycroft began to produce and sell gold from mining performed during 2019. Despite gold and silver sales in 2019 and 2020, Hycroft continued to incur losses due to the costs expended on the restart in conjunction with operational missteps and inefficiencies. Hycroft did not generate sufficient cash flow from its operations during either 2019 or the first quarter of 2020 to cover its operating costs, general and administrative costs, and capital project costs and Hycroft was reliant upon additional debt funding to continue operations. Hycroft was reliant on debt issuances to fund operations in 2019 and through the closing of the business combination with MUDS.

 

Upon closing the business combination with MUDS we received net cash proceeds of approximately $212.7 million, of which we will utilize as much as $39.0 million for capital expenditures through the remainder of 2020. This includes $30.0 million to $35.0 million to construct a new leach pad, $2.0 million to $3.0 million of capital expenditures associated with our cone crushers, and approximately $2.5 million of miscellaneous sustaining capital expenditures. Assuming we are able to ramp up operations and produce and sell the forecasted volumes, we believe that we will be able to meet our funding needs for at least the next twelve months.

 

Sprott Credit Agreement

 

On October 4, 2019, Hycroft, as borrower, and certain of its subsidiaries, as guarantors, entered into the Initial Sprott Credit Agreement with Lender for a secured multi-advance term credit facility with an original aggregate principal amount not in excess of $110.0 million. In connection with the consummation of the business combination, the Company assumed the Initial Sprott Credit Agreement pursuant to the terms of the Purchase Agreement, entered into an amended and restated credit agreement (i.e., the Sprott Credit Agreement), with HYMC becoming a party thereto, borrowed $70,000,000 under such facility and issued to Lender 496,634 shares of HYMC Common Stock equal to approximately 1% of the Company’s post-closing shares of HYMC Common Stock outstanding. As a result, HYMC is the borrower under the Sprott Credit Agreement.

 

The obligations of the borrower under the Sprott Credit Agreement are guaranteed by (i) HRD and Allied VGH and their respective successors and permitted assigns and (ii) any existing or future subsidiary of the guarantors or the borrower, which we collectively refer to as the “Credit Parties,” other than the guarantors, that acquires or holds any assets with a book value greater than $1.0 million other than certain equity interests disclosed to Lender. The obligations under the Sprott Credit Agreement will be secured by a lien on all properties and assets now owned, leased or hereafter acquired or leased by any Credit Party including a security interest to Lender of all membership interests in HRD and Allied VGH.

 

The Sprott Credit Agreement will be accessed by the borrower through one or more advances. The initial two advances were in the principal amounts of $55.0 million and $15.0 million, respectively, and the Lender may make a subsequent advance, assuming satisfaction of applicable conditions and production milestones, for up to an additional $40.0 million in aggregate principal amount. The Sprott Credit Agreement was made available at an original issue discount of 2%. The Sprott Credit Agreement has been, and will be used for, (i) repayment of indebtedness and liabilities under the existing first lien secured facility with Scotia Bank, as administrator, and other payoff amounts, (ii) payment of costs and expenses to put the Hycroft Mine into commercial production and/or to maintain or increase commercial production, and (iii) payment of Lender’s fees and expenses incurred in connection with the Sprott Credit Agreement.

 

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Advances under the Sprott Credit Agreement bear interest monthly at a floating rate equal to seven percent (7%) plus the greater of (i) US Dollar three month LIBOR and (ii) one and one-half percent (1.50%), per annum, accruing daily and compounded monthly. For a period of twelve (12) months following the initial advance, no cash payments of interest or principal will be due, with 100% of interest accruing being capitalized on a monthly basis and added to the outstanding principal balance of the Sprott Credit Agreement.

 

For each calendar quarter commencing on March 1, 2021 and ending on the maturity date, the borrower shall pay Lender additional interest on the last business day of such calendar quarter, calculated according to a formula set forth in the Sprott Credit Agreement. Upon the prepayment of the entire Sprott Credit Agreement, all remaining additional interest payments and all remaining and yet unpaid additional interest must be prepaid as well.

 

The borrower shall be required under the Sprott Credit Agreement to make principal repayments beginning on August 31, 2021 and on the last business day of each calendar quarter thereafter. The first four (4) principal repayments will be in an amount equal to two and one-half percent (2.50%) of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). All subsequent principal repayments shall be in an amount equal to seven and one-half (7.50%) of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). The entire outstanding balance of the Sprott Credit Agreement, together with all unpaid interest and fees (including all capitalized interest, if any), is due on the day that is five years from the last day of the month of the initial closing date, which shall be no later than May 31, 2025, the maturity date.

 

The Sprott Credit Agreement may be repaid in whole or in part, at any time prior to the maturity date. Each prepayment or cancellation of the Sprott Credit Agreement (including capitalized interest, if any), whether in whole or in part, voluntarily or mandatory, subject to certain exceptions, that occurs on or prior to the fourth anniversary of the date of the initial advance is subject to a prepayment premium, payable on the date of the prepayment or cancellation as follows.

 

Prepayment Date   Percentage of Principal
Amount Outstanding
Prior to 2nd anniversary of initial advance date   5.0%
After 2nd anniversary but prior to 4th anniversary of initial advance date   3.0%

 

In addition to the required quarterly repayment of principal beginning on August 31, 2021, the borrower will be required under the Sprott Credit Agreement to make a mandatory prepayment (A) if at any time after the date of the initial advance, any Credit Party (i) sells or otherwise disposes of certain assets other than those permitted by the Sprott Credit Agreement in one or more transactions, to the extent that cash proceeds of such sale or other disposal exceed $500,000 when aggregated with the proceeds of all other sales and disposals of the Credit Parties, or (ii) receives any insurance proceeds greater than $1.0 million which are not otherwise expended on the Hycroft Mine within one-hundred eighty (180) days, and (B) upon the occurrence of a change of control (in certain circumstances) other than any change of control resulting from the business combination. In addition to the amount of any such mandatory prepayment, borrower shall pay to the Lender an amount equal to the applicable prepayment premium unless otherwise excused by the Sprott Credit Agreement.

 

Sprott Royalty Agreement

 

The Company, HRD and Sprott Private Resource Lending II (Co) Inc. (the “Payee”), an affiliate of the Lender, entered into a royalty agreement with respect to the Hycroft Mine (the “Sprott Royalty Agreement”) at the closing of the business combination. Pursuant to the terms of the Sprott Royalty Agreement, at the closing of the business combination, Payee paid to HRD cash consideration in the amount of $30.0 million, for which HRD granted to Payee a perpetual royalty equal to one and one-half percent (1.50%) of net smelter returns, payable monthly. Net smelter returns for any given month are calculated by monthly production multiplied by monthly average gold price or monthly average silver price, minus allowable deductions.

 

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HRD has the right to repurchase a portion of the royalty on the each of the first and second anniversary of the effective date of the Sprott Royalty Agreement. For the first anniversary, the repurchase right is in respect of up to 33.3% of the initial royalty in consideration of a purchase price calculated pursuant to a formula described in the Sprott Royalty Agreement. For the second anniversary, the repurchase right is in respect of any remaining portion of the initial royalty that was not acquired on the first anniversary up to the ceiling of 33.3% of the initial royalty plus up to 33.3% of the increased amount of the royalty in consideration of a purchase price calculated pursuant to a formula described in the Sprott Royalty Agreement.

 

In addition to the terms generally described above, the Sprott Royalty Agreement contains other terms and conditions commonly contained in royalty agreements of this nature.

 

New Subordinated Notes

 

In connection with the business combination, HYMC assumed $80.0 million in aggregate principal amount of the New Subordinated Notes. The New Subordinated Notes are secured and subordinate in priority to the senior debt obligations under the Sprott Credit Agreement. The New Subordinated Notes bear interest at a rate of 10% per annum, payable in kind on a quarterly basis. The principal on the New Subordinated Notes is due December 1, 2025.

 

Cash and liquid assets

 

Hycroft placed substantially all of its cash in operating accounts with two well-capitalized financial institutions, thereby ensuring balances remain readily available. Due to the nature of our operations and the composition of our current assets, Hycroft’s cash and metal inventories balances represented substantially all of its liquid assets on hand. As of March 31, 2020, Hycroft had existing cash of $6.5 million, an increase of $0.3 million from $6.2 million at December 31, 2019.

 

Restricted cash

 

As of March 31, 2020, Hycroft held $42.5 million in restricted cash accounts. The majority of the restricted cash, or $39.6 million, was held as collateral for Hycroft’s surface management surety bonds while the remaining $2.9 million was held in accordance with certain of its debt covenants. All the restricted cash was held by well-capitalized financial institutions.

 

Available sources of liquidity

 

The following table summarizes our available sources of liquidity:

 

    March 31,
2020
    December 31,
2019
 
Cash   $ 6,566     $ 6,220  
Metal inventories(1)     2,098       1,894  
Ore on leach pads(2)     26,122       22,062  
Total liquidity sources   $ 34,786     $ 30,1766  

 

 

 

(1) Metal inventories contained approximately 1,604 ounces of gold which are expected to be sold within the next 12 months. Assuming a gold selling price of $1,608.95 per ounce (the March 31, 2020 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from our metal inventories would provide Hycroft with $2.6 million of revenue.

 

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(2) Ore on leach pads contained approximately 18,921 ounces of gold which are expected to be sold within the next 12 months. Assuming a gold selling price of $1,608.95 per ounce (the March 31, 2020 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from our ore on leach pads would provide Hycroft with $30.4 million of revenue.

 

Sources and uses of cash:

 

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

 

    Three months ended March 31,  
    2020     2019  
    (dollars in thousands)  
Net loss   $ (34,618 )   $ (23,440 )
Net non-cash adjustments     26,040       13,503  
Net change in operating assets and liabilities     (10,867 )     864  
Net cash used in operating activities     (19,445 )     (9,073 )
Net cash used in investing activities     (2,090 )     (4,498 )
Net cash provided by financing activities     21,658       17,154  
Net decrease in cash     123       3,583  
Cash, beginning of period     48,967       52,861  
Cash, end of period   $ 49,090     $ 56,444  

 

Cash used in and provided by operating activities

 

For the three months ended March 31, 2020, Hycroft used $19.4 million of cash for operating activities primarily attributable to a net loss of $34.6 million and increases in the following operating assets; production-related inventories ($10.4 million), prepaid and other ($1.5 million) and accounts receivable ($0.8 million), and a decrease in interest payable ($0.4 million). The cash outflows driven by the items described above were partially offset by certain non-cash expenses, including a $17.0 million non-cash portion of interest expense, $7.0 million write-down of production inventories, $1.3 million depreciation and amortization and $0.4 million stock-based compensation. There was also an increase in accounts payable ($2.4 million) that partially offset the cash outflows.

 

For the three months ended March 31, 2019, Hycroft used $9.1 million of cash for operating activities primarily attributable to a net loss of $23.4 million and a decrease in interest payable ($0.4 million). The negative impact on cash flow from operations of the net loss and decrease in interest payable were partially offset by certain non-cash expenses, including a $11.9 million non-cash portion of interest expense, $0.8 million depreciation and amortization and $0.5 million of phantom share compensation. Additionally, there were increases in accounts payable ($1.6 million) that offset the negative impact on cash flow from operations of the net loss and interest payable.

 

Cash used in investing activities

 

For the three months ended March 31, 2020 and 2019, Hycroft used $2.1 million and $4.5 million, respectively, in investing activities. For 2020, the costs primarily related to (1) construction of new leach pad space of $1.1 million, and (2) construction or purchases of processing equipment of $0.6 million. For the 2019 period the spend was mostly driven by (1) construction of new leach pad space for the restart of $2.2 million and (2) the purchase and installation of four new cone crushers for $1.9 million.

 

Cash used in and provided by financing activities

 

Cash generated by financing activities was $21.7 million for the three months ended March 31, 2020, which was mostly driven by net issuances of $24.9 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs). The 1.25 Lien Notes were used to fund operational costs and capital expenditures due to not generating enough cash from sales. Hycroft spent $2.6 million for legal and consulting fees related to the business combination and $0.6 million for extending the maturity of the First Lien Credit Agreement, partially offsetting the net cash received from the issuance of 1.25 Lien Notes.

 

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The amount of cash generated by financing activities was $17.2 million for the three months ended March 31, 2019, which was mostly driven by net issuances of $18.0 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs). The 1.25 Lien Notes were used to fund the restart of mining operations. Hycroft spent $0.7 million for legal and consulting fees related to the business combination and the review of its other strategic alternatives and $0.1 million for extending the maturity of the First Lien Credit Agreement, partially offsetting the net cash received from the issuance of 1.25 Lien Notes.

 

Future capital and cash requirements

 

The following table provides Hycroft’s gross contractual cash obligations as of March 31, 2020, which are grouped in the same manner as they were classified in the Condensed Consolidated Statements of Cash Flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. We believe the following provides the most meaningful presentation of near-term obligations expected to be satisfied using current and available sources of liquidity

 

          Payments Due by Period  
          Less than     1 - 3     3 - 5     More than  
    Total     1 Year     Years     Years     5 Years  
    (dollars in thousands)  
Operating activities                                        
Interest related to debt (1)   $ 13,287     $ 13,287     $ -     $ -     $ -  
Operating lease requirements (2)     12,213       11,660       553       -       -  
Remediation and reclamation expenditures (3)     62,213       -       -       -       62,213  
Financing activities                                        
Repayments of debt principal (4)     596,335       596,335       -       -       -  
Repayment of pay-in-kind interest (5)     16,578       16,578       -       -       -  
    $ 700,626     $ 637,860     $ 553     $ -     $ 62,213  

 

 

(1) Interest payments were calculated based on the debt outstanding as of March 31, 2020 and includes interest that will be paid at maturity, but not added to the principal balance as payment-in-kind interest.
(2) As noted below in Off-balance sheet arrangements, the Company has two operating leases which are included.
(3) Mining operations are subject to extensive environmental regulations in the jurisdictions in which they are conducted and we are required, upon cessation of operations, to reclaim and remediate the lands that our operations have disturbed. The estimated undiscounted cash outflows of these remediation and reclamation obligations are reflected here.
(4) Repayments of principal on debt consists of amounts due under term obligations.
(5) Repayments of payment-in-kind interest will occur at debt maturity and only includes interest that will be added to the principal during 2020.

 

Off-balance sheet arrangements

 

As of March 31, 2020 and December 31, 2019, Hycroft’s off-balance sheet arrangements consisted of an operating lease agreement and royalty agreements. During the first quarter of 2020, Hycroft also signed a lease for mining equipment.

 

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The operating lease for our office space in Denver, Colorado is $0.1 million annually and expires in January 2022. We have a one-year operating lease for mobile mining equipment that we will use to supplement our own fleet. As of March 31, 2020, none of the equipment had been placed into service, but certain equipment was placed into service subsequent to the quarter end and before the date of this filing. Once all equipment is placed into service, the equipment lease is for $12.6 million, part of which was prepaid as of March 31, 2020.

 

As we have elected to take advantage of the extended transition period for complying with new or revised accounting standards, the liability for our operating leases will remain off of our balance sheet until the new lease accounting rules apply to privately-held companies in accordance with the JOBS Act or we are no longer an emerging growth company.

 

A portion of the Hycroft Mine is subject to a mining lease that requires a 4% net profit royalty be paid to the owner of patented and unpatented mining claims relating to the Hycroft Mine. The mining lease also requires an annual advance payment of $120,000 every year mining occurs on the leased claims. An additional advance payment is required in any year in which five million tons or more are mined from the property, subject to the 4% net profit royalty. This lease is classified as an off-balance sheet arrangement because the royalty payments are contingent upon mining activity and other events. All advance payments are credited against the future payments due under the 4% net profit royalty. The total payments due under the mining lease are capped at $7.6 million. Through March 31, 2020 and December 31, 2019, Hycroft had paid $2.6 million and $2.5 million, respectively.

 

Hycroft entered into a bonus plan whereby, upon the consummation of a sale transaction or certain other transformative transactions as defined in the plan, including the consummation of the business combination, Hycroft will be obligated to pay certain senior level employees a total of $5.9 million, based upon the value of the transaction.

 

PROPERTIES

 

The Company’s physical properties after consummation of the business combination are described in the disclosure regarding the properties of Hycroft and its subsidiaries set forth in the Proxy Statement/Prospectus in the section entitled “Information about Seller and the Hycroft Business—Operating Properties” beginning on page 218, which section is incorporated herein by reference, and see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off Balance Sheet Arrangement” in this Current Report on Form 8-K for information on the mining lease with respect to which Hycroft’s property is subject. As reflected in the information included in such section and incorporated by reference herein, Hycroft and the Company elected to early adopt and comply with the rules set forth under Modernization of Property Disclosures for Mining Registrants as promulgated and adopted by the SEC.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information concerning the ownership of HYMC Common Stock immediately following the completion of the business combination on May 29, 2020, by (i) those persons who are known to the Company to be the beneficial owner(s) of more than five percent of the HYMC Common Stock, (ii) each of the Company’s directors and named executive officers and (iii) all directors and executive officers of the Company as a group.

 

The number of shares of HYMC Common Stock beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership generally includes any shares of HYMC Common Stock over which the individual has sole or shared voting power or investment power as well as any shares of HYMC Common Stock that the individual has the right to acquire within 60 days of June 1, 2020, through the exercise of warrants or other rights. Unless otherwise indicated in the footnotes to this table, the Company believes each of the stockholders named in this table has sole voting and investment power with respect to the shares of HYMC Common Stock indicated as beneficially owned.

 

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Name and Address of Beneficial Owner   Shares
Beneficially
Owned
    Percentage of
Beneficial
Ownership
 
5% or Greater Stockholders                
Mudrick Capital Management L.P. and affiliated entities(1)     23,277,130       45.2 %
Mudrick Capital Acquisition Holdings LLC(2)     9,813,180       17.8 %
Whitebox Advisors and affiliated entities(3)     13,012,516       25.5 %
Highbridge Capital Management LLC and affiliated entities(4)     7,427,411       14.7 %
Aristeia Capital, LLC and affiliated entities(5)     4,989,085       9.9 %
Wolverine Asset Management, LLC and affiliated entities(6)     2,420,473       4.8 %
                 
Named Executive Officers and Directors(7)                
Randy Buffington     --       -- %
Stephen M. Jones     --       -- %
John Ellis     --       -- %
Michael Harrison(8)     --       -- %
Eugene Davis     --       -- %
Marni Wieshofer     --       -- %
Thomas Weng     --       -- %
David Kirsch(9)     --       -- %
All current executive officers and directors as a group (8 individuals)               %

 

(1) Includes 1,295,892 shares of HYMC Common Stock underlying warrants. Mudrick Capital Management, L.P. is the investment manager of Blackwell Partners LLC – Series A, Boston Patriot Batterymarch St. LLC, Boston Patriot Newbury St. LLC, Mercer QIF Fund PLC, Mudrick Distressed Opportunity Drawdown Fund, L.P., Mudrick Distressed Opportunity Fund Global L.P., Mudrick Distressed Opportunity Specialty Fund, LP, Mudrick Distressed Senior Secured Fund Global, L.P., and Mudrick Distressed Opportunity Drawdown Fund II, L.P. (the “Mudrick Funds”) and holds voting and dispositive power over the shares of HYMC Common Stock held by the Mudrick Funds. Mudrick Capital Management, LLC is the general partner of Mudrick Capital Management, L.P., and Jason Mudrick is the sole member of Mudrick Capital Management, LLC. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the shares of HYMC Common Stock directly held by the Mudrick Funds. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of such holders is 527 Madison Avenue, 6th Floor, New York, New York 10022.

 

(2) Includes 5,000,000 shares of HYMC Common Stock and shares underlying warrants that constitute the forward purchase units. Sponsor is the record holder of such shares. Mudrick Capital Management, L.P. is the managing member of sponsor and has voting and investment discretion with respect to the securities held by sponsor. Jason Mudrick is the sole member of Mudrick Capital Management, LLC, the general partner of Mudrick Capital Management, L.P. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the shares of HYMC Common Stock directly held by sponsor. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. Sponsor is 100% owned by investment funds and separate accounts managed by Mudrick Capital Management, L.P. The business address of such holders is 527 Madison Avenue, 6th Floor, New York, New York 10022.

 

David Kirsch has a pecuniary interest in shares of HYMC Common Stock of the issuer through his ownership of membership interests of our sponsor but does not beneficially own such shares.

 

(3) Includes 913,017 shares of HYMC Common Stock underlying warrants. Whitebox Advisors LLC is the investment manager of Whitebox Institutional Partners, LP, Whitebox Asymmetric Partners, LP, Whitebox Credit Partners, LP, Whitebox Multi-Strategy Partners, LP (the “Whitebox Funds”) and holds voting and disposable power over the shares of the Company held by the Whitebox Funds. Whitebox Advisors LLC is owned by Robert Vogel, Paul Twitchell, Jacob Mercer, Paul Roos, and Mark Strefling. The address of these persons is 3033 Excelsior Blvd., Suite 500, Minneapolis, Minnesota 55416.

 

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(4) Includes 520,532 shares of HYMC Common Stock underlying warrants. Highbridge Capital Management, LLC (“HCM”), the trading manager of Highbridge MSF International Ltd. (“MSF”) and Highbridge Tactical Credit Master Fund, L.P. (“TCF” and, together with MSF, the “Highbridge Funds”), may be deemed to be the beneficial owner of the shares held by the Highbridge Funds. Mark Vanacore is responsible for the investment and voting decisions made by HCM with respect to the shares held by MSF, and Jonathan Segal and Jason Hempel are responsible for the investment and voting decisions made by HCM with respect to the shares held by TCF. The Highbridge Funds and the foregoing individuals disclaim any beneficial ownership of these shares. The business address of HCM is 277 Park Avenue, 23rd Floor, New York, NY 10172 and the business address of the Highbridge Funds is c/o HedgeServ (Cayman) Ltd., Cricket Square, Floor 6, George Town, Grand Cayman KY1-1104, Cayman Islands.

 

(5) Includes 350,573 shares of HYMC Common Stock underlying warrants. Aristeia Capital, L.L.C. and Aristeia Advisors, L.P. (collectively, “Aristeia”) may be deemed the beneficial owners of the securities described herein in their capacity as the investment manager and/or general partner, as the case may be, of APSV, LLC, ALSV Limited and Windermere Ireland Fund PLC (collectively, the “Aristeia Funds”), which are the holders of such securities. As investment manager, trading advisor and/or general partner of each Aristeia Fund, Aristeia has voting and investment control with respect to the securities held by each Aristeia Fund. Anthony M. Frascella and William R. Techar are the Co-Chief Investment Officers of Aristeia. Each of Aristeia and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in the Aristeia Funds.The business address of such holders is One Greenwich Plaza, Third Floor, Greenwich, Connecticut 06830.

 

(5) Includes 169,985 shares of HYMC Common Stock underlying warrants. Wolverine Asset Management, LLC is wholly owned by Wolverine Holdings, L.P. (“Wolverine Holdings”). Robert R. Bellick and Christopher L. Gust may be deemed to control Wolverine Trading Partners, Inc. (“WTP”), the general partner of Wolverine Holdings. The business address of such holders is 175 W. Jackson Blvd., Suite 340, Chicago, Illinois 60604.

 

(7) The business address of the individuals is 8181 E. Tufts Avenue, Suite 510, Denver, Colorado 80237.

 

(8) Mr. Harrison disclaims beneficial ownership of HYMC Common Stock issued to Sprott entities pursuant to the Sprott Credit Agreement.

 

(9) Mr. Kirsch has a pecuniary interest in shares of HYMC Common Stock through his ownership of membership interests of sponsor but does not beneficially own such shares.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The directors and executive officers of the Company following the business combination and the remaining information required to be provided herein are described in the disclosure in Item 5.02 of this Current Report on Form 8-K and in the Proxy Statement/Prospectus in the section entitled “Management After the Business Combination” beginning on page 270, which are each incorporated herein by reference.

 

EXECUTIVE COMPENSATION

 

The executive compensation of the Company’s executive officers and directors is set forth in the Proxy Statement/Prospectus in the section entitled “Management After the Business Combination – HYMC Executive Officer and Director Compensation” beginning on page 274, which section is incorporated herein by reference.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The certain relationships and related party transactions of the Company are described in the Proxy Statement/Prospectus in the section entitled “Certain Relationships and Related Transactions” beginning on page 295, which section is incorporated herein by reference.

 

The Company’s board of directors has determined that Messrs. Ellis, Harrison, Kirsch, Davis and Weng and Ms. Wieshofer are “independent directors” under Nasdaq Capital Market listing standards. The Company’s board of directors reviews independence on an annual basis and has also determined that each current member of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is independent as defined under the applicable Nasdaq Stock Market listing standards and SEC rules. The Company’s board of directors further determined that Ms. Wieshofer qualifies as an audit committee financial expert in accordance with applicable rules and guidance. In making these determinations, the Company’s board of directors found that none of these directors had a material or other disqualifying relationship with the Company.

 

LEGAL PROCEEDINGS

 

On February 7, 2020, a purported class action complaint was filed by a purported holder of Hycroft warrants, in the Court of Chancery of the State of Delaware against Hycroft and MUDS. The complaint sought a declaratory judgment that the transactions contemplated under the Purchase Agreement constitute a “Fundamental Change” under the terms of the Hycroft Warrant Agreement and thereby requiring that the Hycroft warrants be assumed by MUDS as part of the transactions, in addition to asserting claims for (i) breach or anticipatory breach of contract against Hycroft, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against Hycroft, and (iii) tortious interference with contractual relations against MUDS. The complaint sought unspecified money damages and also sought an injunction enjoining Hycroft and MUDS from consummating the transactions. On February 26, 2020, MUDS and Hycroft entered into an Amendment to the Purchase Agreement whereby Hycroft’s liabilities and obligations under the Hycroft Warrant Agreement were included as a Parent Assumed Liability under the Purchase Agreement. On March 27, 2020, MUDS and Hycroft filed motions to dismiss the complaint. On May 15, 2020, a hearing was held and the complaint was dismissed with prejudice. On May 21, 2020, Plaintiff filed a motion to alter or amend the Court’s order in order to retain jurisdiction in order to file application for a mootness fee, to which MUDS and Hycroft, while disputing factual assertions and characterizations, did not oppose.

 

MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Prior to the completion of the business combination on May 29, 2020, the Company’s publicly-traded units, Class A common stock and warrants were listed on the NASDAQ Capital Market (“NASDAQ”) under the symbols “MUDSU”, “MUDS” and “MUDSW”, respectively. The Company listed its publicly-traded HYMC Common Stock and warrants effective upon the consummation of the business combination on NASDAQ under the symbols “HYMC” and “HYMCW”, respectively. The Company will use its commercially reasonable best efforts to register and apply to list the Hycroft warrants for trading on NASDAQ, subject to applicable listing requirements, as soon as reasonably practicable.

 

The Company has not paid any cash dividends on its common stock to date. The payment of cash dividends in the future (following consummation of the business combination) will be dependent upon the Company’s revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any cash dividends subsequent to the business combination will be within the discretion of the Company’s board of directors at such time. In addition, the Company is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if the Company incurs any indebtedness, its ability to declare dividends may be limited by restrictive covenants it may agree to in connection therewith.

 

As of June 1, 2020, there were 54 record holders of HYMC Common Stock.

 

The Company has no equity compensation plans currently in effect that were in effect as of December 31, 2019. The information in the table below reflects the issuance of replacement equity incentive awards under the Incentive Plan in the form of an equivalent value of restricted stock units convertible into shares of the Company’s common stock to holders of Hycroft’s equity awards granted in 2019.

 

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    (a)     (b)     (c)  
Plan category   Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options,
warrants and rights
    Number of securities
remaining available for
future issuance under
equity compensation  plans
(excluding securities
reflected in column (a))
 
Equity compensation plans approved by security holders(1)     196,841        N/A       2,311,161  
Equity compensation plans not approved by security holders     --       --       --  

 

(1) Includes the Incentive Plan and is based on the closing stock price on the date of the transaction of $12.65 to determine the number of shares to be issued. While the value of  the awards issued has been determined, the actual number of shares to be issued will be determined on the vesting dates using the closing prices on those dates.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

The disclosure concerning the Company’s founder shares, the private placement warrants, shares of HYMC Common Stock and the PIPE warrants pursuant to the Subscription Agreements in connection with the PIPE Financing, the shares issued to Sprott pursuant to the Sprott Credit Agreement, and the shares issued pursuant to the Forward Purchase Contract contained in the section of the Proxy Statement/Prospectus entitled, respectively, “Description of Securities – Authorized and Outstanding Stock– MUDS Founder Shares”, “– WarrantsMUDS Private Placement Warrants, – Pipe Warrants Issued in Private Investment” beginning on page 284 and “The Purchase Agreement and Related Agreements – Related Agreements – Forward Purchase Agreement”, beginning on page 168, are incorporated by reference. The founder shares, the shares issued to Cantor, the shares of HYMC Common stock and warrants issued pursuant to the Forward Purchase Contract, the private placement warrants and the shares of HYMC Common Stock issued pursuant to the Sprott Credit Agreement and the PIPE Financing, have not been registered under the Securities Act, and were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering without any form of general solicitation or general advertising.

 

DESCRIPTION OF SECURITIES

 

General

 

These summaries are not intended to be a complete discussion of the rights of Company stockholders and are qualified in their entirety by reference to the Delaware General Corporation Law and the various documents of the Company that are referred to in the summaries, as well as reference to the Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, copies of which are included as Exhibits 3.1 and 3.2, respectively, of this Current Report on Form 8-K and incorporated herein by reference.

 

Authorized Capital Stock

 

The Second Amended and Restated Certificate of Incorporation authorizes the issuance of up to 400,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock.

 

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Company Class A Common Stock

 

Voting Power

 

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, under the Second Amended and Restated Certificate of Incorporation, the holders of HYMC Common Stock possess all voting power for the election of directors and all other matters requiring stockholder action and are entitled to one vote per share on matters to be voted on by stockholders. The holders of HYMC Common Stock will at all times vote together as one class on all matters submitted to a vote of the Company common stockholders under the Second Amended and Restated Certificate of Incorporation.

 

Preferred Shares

 

The Second Amended and Restated Certificate of Incorporation provides that shares of preferred stock may be issued from time to time in one or more series. The Company’s board of directors is authorized to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Company’s board of directors is able, without stockholder approval, to issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of the Company’s board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. The Company has no preferred stock outstanding at the date hereof. Although the Company does not currently intend to issue any shares of preferred stock, it cannot assure you that it will not do so in the future.

 

Dividends

 

Subject to the rights, if any, of holders of any outstanding shares of preferred stock, the Second Amended and Restated Certificate of Incorporation provides that holders of HYMC Common Stock are entitled to receive such dividends and other distributions, if any, as may be declared from time to time by the Company board of directors in its discretion out of legally available funds and shall share equally on a per share basis in such dividends and distributions.

 

Number and Election of Directors

 

The Second Amended and Restated Certificate of Incorporation and the Company’s Amended and Restated Bylaws provide that the Company’s board of directors will be elected at each annual meeting of stockholders. The term of all directors shall be for one year and will expire at the next annual meeting of stockholders or until their respective successors are duly elected and qualified. With the approval of the stockholders at the special meeting of the stockholders on May 29, 2020, the Company board of directors was declassified and the seven directors nominated were elected to the Company board of directors upon the completion of the business combination. The directors and executive officers of the Company following the business combination are described in the disclosure in Item 5.02 of this Current Report on Form 8-K and in the Proxy Statement/Prospectus in the section entitled “Management After the Business Combination” beginning on page 270, which are each incorporated herein by reference.

 

Under the Second Amended and Restated Certificate of Incorporation, there is no cumulative voting with respect to the election of directors, with the result that directors will be elected by a plurality of the votes cast at a meeting of stockholders by holders of common stock.

 

Liquidation Preference

 

The Second Amended and Restated Certificate of Incorporation provides that in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of HYMC Common Stock will be entitled to receive all of the remaining assets of the Company available for distribution to stockholders, ratably in proportion to the number of shares of common stock held by them, after the rights of creditors and the holders of the preferred stock have been satisfied.

 

 

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Business Combinations

 

The Second Amended and Restated Certificate of Incorporation provides that the Company will not be governed by Section 203 of the DGCL and includes a provision that is substantially similar to Section 203 of the DGCL, but excludes the investment funds affiliated with sponsor and their respective successors and affiliates and the investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC and their respective successors and affiliates from the definition of “interested stockholder.”

 

Pre-emption Rights

 

The holders of HYMC Common Stock will not have preemptive or other subscription rights and there will be no sinking fund or redemption provisions applicable to the HYMC Common Stock.

 

Removal of Directors; Vacancies on the Board of Directors

 

The Second Amended and Restated Certificate of Incorporation and the Company’s Amended and Restated Bylaws provide that, subject to the rights of the holders of any series of the Company preferred stock, directors may be removed only by the affirmative vote of the holders of a majority of the voting power of all shares then entitled to vote at an election of directors. Furthermore, subject to the rights of the holders of any series of the Company preferred stock, any vacancy on the Company’s board of directors, however occurring, including a vacancy resulting from an increase in the size of the Company’s board, may only be filled by the affirmative vote of a majority of the Company’s directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by a vote of the stockholders.

 

Corporate Opportunity

 

The Second Amended and Restated Certificate of Incorporation provides that, to the extent allowed by applicable law, the doctrine of corporate opportunity, or any other analogous doctrine, does not apply with respect to the Company or any of its officers or directors in circumstances where the application of such corporate opportunity doctrine would conflict with any fiduciary duties or contractual obligations they may have. Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC and the investment funds affiliated with them, including their respective partners, principals, directors, officers, members, managers, equity holders and/or employees (including any of the foregoing who serve as officers or directors of the Company) do not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Company or any of its subsidiaries, except as may otherwise be provided in separate agreement between such person or entity and the Company.

 

Amendment of Certificate of Incorporation or Bylaws

 

As required by the DGCL, any amendment of the Second Amended and Restated Certificate of Incorporation must first be approved by a majority of the Company’s board of directors and, if required by law or the Second Amended and Restated Certificate of Incorporation, thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment, and a majority of the outstanding shares of each class entitled to vote on the amendment as a class.

 

The Company’s Amended and Restated Bylaws may be amended, altered or repealed by the affirmative vote of a majority of the Company directors then in office, and may also be amended, altered or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote generally in the election of directors.

 

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Warrants

 

HYMC Public Warrants

 

Each public warrant of the Company issued in the Company’s initial public offering consummated on February 12, 2018 (the “IPO” and each such warrant, an “HYMC public warrant”) entitles the registered holder to purchase one share of HYMC Common Stock at an exercise price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of the business combination. Pursuant to the warrant agreement relating to the HYMC public warrants (the “HYMC Warrant Agreement”), a public warrant holder may exercise its HYMC public warrants only for a whole number of shares of HYMC Common Stock. The HYMC public warrants will expire five years after the completion of the business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

 

The Company is not obligated to deliver any shares of its HYMC Common Stock pursuant to the exercise of a HYMC public warrant and will have no obligation to settle such HYMC public warrant exercise unless a registration statement under the Securities Act with respect to the shares of HYMC Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to registration. No HYMC public warrant will be exercisable, and the Company will not be obligated to issue any shares to holders seeking to exercise their HYMC public warrants, unless the shares of HYMC Common Stock issuable upon such warrant exercise have been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the HYMC public warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to an HYMC public warrant, the holder of such HYMC public warrant will not be entitled to exercise such HYMC public warrant and such HYMC public warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any HYMC public warrant.

 

The Company has agreed pursuant to the Registration Rights Agreement that as soon as practicable, but in no event later than fifteen (15) business days after the consummation of the business combination, it will use its best efforts to file with the SEC a registration statement on Form S-3, or Form S-1 if Form S-3 is not available, for the registration, under the Securities Act, of the shares of HYMC Common Stock issuable upon exercise of the HYMC public warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement and a current prospectus relating thereto, until the expiration of the HYMC public warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of HYMC Common Stock issuable upon exercise of the HYMC public warrants is not effective by the sixtieth (60th) day after the closing of the business combination, HYMC public warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.

 

Once the HYMC public warrants become exercisable, the Company may call the HYMC public warrants for redemption:

 

in whole and not in part;

 

at a price of $0.01 per public warrant;

 

upon not less than 30 days’ prior written notice of redemption (the “30 day redemption period”) to each HYMC public warrant holder; and

 

if, and only if, the last reported sale price of the HYMC Common Stock equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period ending three business days prior to the date the Company sends the notice of redemption to the HYMC public warrant holders.

 

If and when the HYMC public warrants become redeemable, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

 

If the foregoing conditions are satisfied and the Company issues a notice of redemption of the HYMC public warrants, each HYMC public warrant holder will be entitled to exercise his, her or its HYMC public warrant prior to the scheduled redemption date. However, the price of the HYMC Common Stock may fall below the $18.00 redemption trigger price (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) as well as the $11.50 per share warrant exercise price after the redemption notice is issued.

 

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If the Company calls the HYMC public warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to exercise his, her or its HYMC public warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their public warrants on a “cashless basis,” the Company’s management will consider, among other factors, the Company’s cash position, the number of HYMC public warrants that are outstanding and the dilutive effect on stockholders of issuing the maximum number of shares of HYMC Common Stock issuable upon the exercise of its HYMC public warrants. If the Company board of directors takes advantage of this option, all holders of HYMC public warrants would pay the exercise price by surrendering their HYMC public warrants for that number of shares of HYMC Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of HYMC Common Stock underlying the HYMC public warrants, multiplied by the difference between the exercise price of the HYMC public warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported closing price of the HYMC Common Stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of HYMC Common Stock to be received upon exercise of the HYMC public warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a HYMC public warrant redemption. If the Company’s management does not take advantage of this option, sponsor and its permitted transferees would still be entitled to exercise their HYMC private placement warrants described in “ – HYMC Private Placement Warrants” below for cash or on a cashless basis using the same formula described above that other HYMC warrant holders would have been required to use had all HYMC public warrant holders been required to exercise their HYMC public warrants on a cashless basis, as described in more detail below.

 

A holder of a HYMC public warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such public warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the HYMC public warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as specified by the holder) of the shares of HYMC Common Stock outstanding immediately after giving effect to such exercise.

 

If the number of outstanding shares of HYMC Common Stock is increased by a stock dividend payable in shares of HYMC Common Stock, or by a split-up of HYMC Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of HYMC Common Stock issuable on exercise of each HYMC public warrant will be increased in proportion to such increase in outstanding HYMC Common Stock. A rights offering to holders of shares of HYMC Common Stock entitling holders to purchase shares of HYMC Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of HYMC Common Stock equal to the product of (i) the number of shares of HYMC Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for HYMC Common Stock) and (ii) the quotient of (x) the price per share of HYMC Common Stock paid in such rights offering and (y) the fair market value. For these purposes, (i) if the rights offering is for securities convertible into or exercisable for HYMC Common Stock, in determining the price payable for the HYMC Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of the HYMC Common Stock as reported during the ten trading day period ending on the trading day prior to the first date on which the HYMC Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

 

In addition, if the Company, at any time while the HYMC public warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of shares of HYMC Common Stock on account of such HYMC Common Stock (or other shares of our share capital into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of shares of HYMC Common Stock in connection with the business combination, (d) to satisfy the redemption rights of the holders of HYMC Common Stock in connection with a stockholder vote to amend the existing charter (i) to modify the substance or timing of our obligation to redeem 100% of HYMC Common Stock if we do not complete our initial business combination within 24 months from the closing of IPO or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of HYMC Common Stock in respect of such event.

  

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If the number of outstanding shares of HYMC Common Stock is decreased by a consolidation, combination, reverse share split or reclassification of shares of HYMC Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse share split, reclassification or similar event, the number of HYMC Common Stock issuable on exercise of each HYMC public warrant will be decreased in proportion to such decrease in outstanding share of HYMC Common Stock.

 

Whenever the number of shares of HYMC Common Stock purchasable upon the exercise of the HYMC public warrants is adjusted, as described above, the HYMC public warrant exercise price will be adjusted by multiplying the HYMC public warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of HYMC Common Stock purchasable upon the exercise of the HYMC public warrants immediately prior to such adjustment and (y) the denominator of which will be the number of shares of HYMC Common Stock so purchasable immediately thereafter.

 

In case of any reclassification or reorganization of the outstanding shares of HYMC Common Stock (other than those described above or that solely affects the par value of such HYMC Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of HYMC Common Stock), or in the case of any sale or conveyance to another corporation or entity of the Company’s assets or other property as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the public warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the HYMC public warrants and in lieu of the shares of HYMC Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the HYMC public warrants would have received if such holder had exercised his, her or its warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of shares of HYMC Common Stock in such transaction is payable in the form of shares of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the HYMC public warrant properly exercises the HYMC public warrant within 30 days following public disclosure of such transaction, the HYMC public warrant exercise price will be reduced as specified in the HYMC Warrant Agreement based on the Black-Scholes value (as defined in the HYMC Warrant Agreement) of the HYMC public warrant . The purpose of such exercise price reduction is to provide additional value to holders of the HYMC public warrants when an extraordinary transaction occurs during the exercise period of the HYMC public warrants pursuant to which the holders of the HYMC public warrants otherwise do not receive the full potential value of the HYMC public warrants.

 

The HYMC public warrants have been issued in registered form under the HYMC Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and HYMC. The HYMC Warrant Agreement provides that the terms of the HYMC public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then issued and outstanding HYMC public warrants to make any change that adversely affects the interests of the registered holders of HYMC public warrants, including any modification or amendment to increase the HYMC public warrant price or shorten the exercise period.

 

The HYMC public warrants may be exercised upon surrender of the HYMC public warrant certificate on or prior to the expiration date at the offices of the HYMC warrant agent, with the exercise form on the reverse side of the HYMC public warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of HYMC public warrants being exercised. The HYMC public warrant holders do not have the rights or privileges of holders of shares of HYMC Common Stock and any voting rights until they exercise their HYMC public warrants and receive shares of HYMC Common Stock. After the issuance of shares of HYMC Common Stock upon exercise of the HYMC public warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

 

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No fractional shares will be issued upon exercise of the HYMC public warrants. If, upon exercise of the HYMC public warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of HYMC Common Stock to be issued to the HYMC public warrant holder.

 

The foregoing description of the HYMC public warrants do not purport to be complete and are subject to and qualified in their entirety by reference to the HYMC Warrant Agreement, a copy of which is included as Exhibit 4.2 of this Current Report on Form 8-K and incorporated herein by reference.

 

Private Placement Warrants

 

The (a) 6,700,000 warrants to purchase one share of HYMC Common Stock issued to the sponsor pursuant to the Private Placement Warrant Purchase Agreement, dated as of January 15, 2018, by and between the Company and sponsor, (b) 1,040,000 warrants to purchase one share of HYMC Common Stock issued to Cantor pursuant to the Private Placement Warrant Purchase Agreement, dated as of January 15, 2018, by and between the Company and Cantor and the (c) 2,500,000 warrants to purchase one share of HYMC Common Stock issued to sponsor pursuant to the Forward Purchase Contract (all such warrants issued to the sponsor and Cantor, collectively, the “private placement warrants”), including the shares of HYMC Common Stock issuable upon exercise of the private placement warrants, are not transferable, assignable or salable until 30 days after the completion of the business combination (except, among other limited exceptions, to the Company’s officers and directors and other persons or entities affiliated with the sponsor or Cantor) and they will not be redeemable so long as they are held by the sponsor, Cantor or their permitted transferees. The sponsor, Cantor or their permitted transferees have the option to exercise the private placement warrants on a cashless basis. Except as described below, the private placement warrants have terms and provisions that are identical to those of the public warrants described above. If the private placement warrants are held by holders other than the sponsor, Cantor or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the HYMC public warrants. For as long as the private placement warrants are held by Cantor or its designees or affiliates, they may not be exercised after February 7, 2023, which is five years from the effective date of the registration statement filed in connection with the IPO.

 

If holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of HYMC Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of HYMC Common Stock underlying the warrants, multiplied by the difference between the exercise price of the private placement warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported closing price of the HYMC Common Stock for the ten trading days ending on the third trading day prior to the date on which the notice of private placement warrant exercise is sent to the warrant agent.

 

The foregoing description of the private placement warrants does not purport to be complete and are subject to and qualified in their entirety by reference to the HYMC Warrant Agreement, a copy of which is included as Exhibit 4.2 of this Current Report on Form 8-K and incorporated herein by reference.

 

PIPE Warrants Issued in Private Investment

 

On May 29, 2020, in connection with the closing of the business combination, the Company issued 7,596,309 shares of HYMC Common Stock pursuant to the Subscription Agreements and issued 3,249,999 PIPE warrants to the Initial Subscribers in the private investment. The PIPE warrants have substantially the same terms as the private placement warrants.

 

The foregoing description of the PIPE warrants does not purport to be complete and are subject to and qualified in their entirety by reference to the Warrant Agreement included as Exhibit 4.3 of this Current Report on Form 8-K and incorporated herein by reference.

 

Assumed Hycroft Warrants

 

Stockholders of Hycroft’s predecessor received warrants pursuant to the Hycroft Warrant Agreement with a 7-year term that represented 17.5% of the outstanding new Hycroft common stock (the “Hycroft warrants”). Pursuant to the Purchase Agreement, the liabilities and obligations under the Hycroft Warrant Agreement were assumed by the Company upon consummation of the transactions contemplated under the Purchase Agreement. Hycroft and the Company elected to treat the business combination as if it constituted a Fundamental Change under the Hycroft Warrant Agreement and each Hycroft warrant outstanding and unexercised immediately prior to the effective time is now exercisable to purchase shares of the HYMC Common Stock.

 

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The initial number of shares of Hycroft common stock issuable upon exercise of the Hycroft warrants was determined by the Bankruptcy Court pursuant to Hycroft’s plan of reorganization. Pursuant to the Hycroft Warrant Agreement, the number of shares of Hycroft common stock for which a Hycroft warrant is exercisable, and the exercise price per share, are subject to adjustment from time to time upon the occurrence of certain events, including (i) any issuance of a dividend on Hycroft common stock, payable in cash or additional shares of Hycroft common stock, (ii) any subdivision, split, reclassification or recapitalization of outstanding Hycroft common stock into a greater number of shares, or (iii) any combination, reclassification or recapitalization of outstanding Hycroft common stock into a smaller number of shares. As set forth in the Hycroft Warrant Agreement, the exercise price of the Hycroft warrants on any exercise date will be equal to the product of (x) the amount obtained by dividing (A) Hycroft’s adjusted equity value, as defined in the Hycroft Warrant Agreement, as of such exercise date by (B) the total share number, as defined in the Hycroft Warrant Agreement, as of such date multiplied by (y) the cheap stock factor, as defined in the Hycroft Warrant Agreement, as of such date. Additionally, in the case of any reclassification or capital reorganization of Hycroft’s capital stock, the holder of each Hycroft warrant outstanding immediately prior to the occurrence of such reclassification or reorganization shall have the right to receive upon exercise of the applicable Hycroft warrant, the kind and amount of stock, other securities, cash or other property that such holder would have received if such Hycroft warrant had been exercised. As of June 1, 2020, there were 12,721,623 Hycroft warrants outstanding that were exercisable to purchase an aggregate of 3,210,213 shares of HYMC Common Stock. As of June 1, 2020, the exercise price of each Hycroft warrant is equal to $44.82 per share and each Hycroft warrant is exercisable into approximately 0.2523 shares of HYMC Common Stock.

 

Under certain circumstances, such as a liquidity event, as defined in the Hycroft Warrant Agreement, the Hycroft warrants may be exercised on a cashless basis to the extent that, as of the exercise date, the fair market value, as defined in the Hycroft Warrant Agreement, of a share of HYMC Common Stock exceeds the exercise price, which cashless exercise would reduce the number of shares of HYMC Common Stock issuable. In the event of a liquidity event in which the fair market value, as defined in the Hycroft Warrant Agreement, of a share of HYMC Common Stock, as of the exercise date, exceeds the exercise price, no cashless exercise would be available. If any exercise of a Hycroft warrant would result in a fraction of a share of HYMC Common Stock, in lieu of issuing such fractional share, the Company may elect to make a cash payment in respect of such fractional share, in an amount equal to the product of such fraction multiplied by the fair market value, as defined in the Hycroft Warrant Agreement, of a share of HYMC Common Stock, as of the exercise date.

 

In addition, if the Company issues (or, as provided in the Hycroft Warrant Agreement, is deemed to issue), after the effective date of the Hycroft warrants, any additional shares, as defined in the Hycroft Warrant Agreement, of HYMC Common Stock, without consideration or for consideration per share less than the fair market value of HYMC Common Stock immediately prior to such issuance or, if such additional shares are issued (or deemed to be issued) to any restricted person, as defined in the Hycroft Warrant Agreement, then the cheap stock factor, as defined in the Hycroft Warrant Agreement, shall be reduced, thereby increasing the number of shares of HYMC Common Stock for which a Hycroft warrant is exercisable and reducing the per share exercise price of the Hycroft warrants.

 

Pursuant to the Hycroft Warrant Agreement, no Hycroft warrants may be transferred if such transfer would result in any violation of the Securities Act or any state securities laws or regulations, or any other applicable federal or state laws or order, unless the Company is then already subject to the reporting obligations under Sections 13 or 15(d) of the Exchange Act.

 

Pursuant to the Hycroft Warrant Agreement, holders of Hycroft warrants are not entitled to any of the rights of a stockholder or a holder of any other securities of the Company. Holders of Hycroft warrants have no right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or of any other matter, or any rights whatsoever as stockholders of the Company (including appraisal rights, dissenters rights, subscription rights or otherwise), or be deemed the holder of capital stock of the Company.

 

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Pursuant to the Hycroft Warrant Agreement, if the Company issues or sells equity securities to any person who was a stockholder of Hycroft’s predecessor on the effective date of the Hycroft warrants for consideration per share that is greater than the then exercise price of the Hycroft warrants, then each registered holder (or in the case of Hycroft warrants evidenced by global warrant certificates, each beneficial holder) that is an accredited investor would have the right for a period of 20 days after the Company delivers notice of such issuance or sale to such eligible holder, to participate in such issuance or sale on a pro rata basis (based on such eligible holder’s percentage ownership of shares of HYMC Common Stock) and all other outstanding options, warrants, or convertible securities that also have a pro rata right to participate in such issuance or sale.

 

In addition, following the business combination, eligible holders are not entitled to participate in any of the following exempted issuances: (i) issuances of equity securities in connection with the refinancing or repayment of any indebtedness or debt securities of the Company or any of its subsidiaries, (ii) issuances of equity securities to employees, directors, consultants and other service providers pursuant to an equity compensation plan approved by the Company’s board of directors, (iii) issuances of equity securities by means of a pro rata distribution to all holders of HYMC Common Stock, (iv) issuances of equity securities in a public offering, and (v) issuances of equity securities upon exercise, conversion or exchange of any equity securities that were issued in any issuance described in any of the foregoing exempted issuances. Pursuant to the Hycroft Warrant Agreement, if the HYMC Common Stock is listed for trading on a national securities exchange, the Company must use commercially reasonable efforts to list the Hycroft warrants for trading on such national securities exchange (subject to applicable listing requirements). In addition, if any holder of shares of HYMC Common Stock is granted piggy-back registration rights, the holders of HYMC Common Stock issued upon exercise of the Hycroft warrants would also be granted piggyback registration rights on substantially the same terms as such other holder.

 

Pursuant to the Hycroft Warrant Agreement, in the event of a merger of the Company into, or a consolidation of the Company with, or a sale of all or substantially all of the Company’s assets to, any other person, or any merger of another person into the Company, in each case, in which the previously outstanding shares of HYMC Common Stock are cancelled, reclassified or converted or changed into or exchanged for securities of the Company and/or other property (including cash), and such transaction is not a liquidity event, as defined in the Hycroft Warrant Agreement, the holder of each Hycroft warrant would have the right upon any subsequent exercise (and payment of the applicable exercise price) to receive (out of legally available funds) the kind and amount of stock, other securities, cash and assets that such holder would have received if such Hycroft warrant had been exercised immediately prior to such transaction.

 

Pursuant to the Hycroft Warrant Agreement, if the Company shall be a party to or otherwise engage in any transaction or series of related transactions constituting (x) a merger of the Company into, a consolidation of the Company with, or a sale of all or substantially all of the Company’s assets to, any other person, or (y) any merger of another person into the Company in which, in the case of clause (x) or clause (y), the previously outstanding shares of HYMC Common Stock shall be cancelled, reclassified or converted or changed into or exchanged for securities of the Company or other property (including cash) or any combination of the foregoing; and (ii) such transaction or series of related transactions is not a liquidity event (as defined in the Hycroft Warrant Agreement) (any such transaction or series of related transactions, is referred to as a “Fundamental Change” under the Hycroft Warrant Agreement), the holder of each Hycroft warrant outstanding immediately prior to the occurrence of such Fundamental Change will have the right upon any subsequent exercise (and payment of the applicable exercise price) to receive the kind and amount of stock, other securities, cash and assets that such holder of a Hycroft warrant would have received if such Hycroft warrant had been exercised pursuant to the terms provided in the Hycroft Warrant Agreement immediately prior to such Fundamental Change (assuming such holder of a Hycroft warrant failed to exercise his, her or its rights of election, if any, as to the kind or amount of stock, securities, cash or other property receivable upon such Fundamental Change); provided, however, that the amount of such stock, other securities, cash and assets that would be received upon exercise of a Hycroft warrant following the consummation of such Fundamental Change shall be calculated on the applicable exercise date in a manner consistent with, and on terms as nearly as equivalent as practicable to, the provisions of the Hycroft Warrant Agreement regarding (i) the number of securities into which the Hycroft warrant shall be exercisable and (ii) the exercise price for the purchase of such securities under the Hycroft warrant, with respect to the aggregate consideration received by the Company stockholders in such Fundamental Change. The Hycroft Warrant Agreement further provides that upon each Fundamental Change, appropriate adjustment shall be deemed to be made, including, without limitation, with respect to the kind and amount of stock, securities, cash or assets thereafter acquirable upon exercise of each Hycroft warrant, such that the provisions of the Hycroft Warrant Agreement shall thereafter be applicable, as nearly as possible, to any shares of stock, securities, cash or assets thereafter acquirable upon exercise of each Hycroft warrant. If the Company is not the surviving or resulting person from such Fundamental Change, the Company may not consummate a Fundamental Change transaction unless the surviving or resulting person assumes, by written instrument substantially similar in form and substance to this Agreement, the obligation to deliver to the holders of Hycroft warrants such shares of stock, securities, cash or assets which such holder would be entitled to receive upon exercise of each Hycroft warrant.

 

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The foregoing description of the Hycroft warrants does not purport to be complete and are subject to and qualified in their entirety by reference to the Hycroft Warrant Agreement, a copy of which is included as Exhibit 4.1 of this Current Report on Form 8-K and incorporated herein by reference.

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

The disclosure in Item 5.02(d) of this Current Report on Form 8-K concerning indemnification agreements entered into by the Company’s directors and executive officers is incorporated herein by reference.

 

The indemnification agreements, the Second Amended and Restated Charter and the Amended and Restated Bylaws require the Company to indemnify all directors and officers to the fullest extent permitted by Delaware law against any and all expenses, judgments, liabilities, fines, penalties, and amounts paid in settlement of any claims. The indemnification agreements, the Second Amended and Restated Charter and the Amended and Restated Bylaws require the Company also provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to the Company, provided that the indemnified officer or director agree to repay all amounts so advanced if it is found that such indemnitee is not entitled to such indemnification under applicable law.

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Reference is made to the disclosure set forth in Item 9.01 of this Current Report on Form 8-K concerning the Company’s and Hycroft’s financial statements, which are incorporated herein by reference.

 

Further reference is made to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as set forth above in Item 2.01, which is incorporated herein by reference.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The disclosure regarding the Sprott Agreements in Item 2.01 of this Current Report on Form 8-K are incorporated herein by reference. The disclosure concerning assumption of debt by the Company contained in the Proxy Statement/Prospectus in the section entitled “Description of Certain Indebedness-New Subordinated Notes” beginning on page 292 is incorporated herein by reference.

 

Item 3.02. Unregistered Sales of Equity Securities.

 

The disclosure concerning the Company’s issuance of the founder shares, the shares issued to Cantor, the private placement warrants, shares of HYMC Common Stock and the PIPE warrants pursuant to the Subscription Agreements in connection with the PIPE Financing, the shares issued to Sprott pursuant to the Sprott Credit Agreement, and the shares issued pursuant to the Forward Purchase Contract contained in Item 2.01 of this Current Report on Form 8-K in the section entitled “Recent Sales of Unregistered Securities” is incorporated herein by reference.

 

Item 3.03. Material Modification to Rights of Security Holders.

 

The disclosures concerning material modifications to the Company’s organizational documents contained in the Proxy Statement/Prospectus in the sections entitled “Proposals No. 2 Through 8 – The Charter Proposals” and “Proposal No. 9 – The Director Election Proposal” beginning on page 312 are incorporated herein by reference.

 

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Item 5.01. Changes in Control of Registrant.

 

The disclosures in Item 2.01 and Item 5.02 of this Current Report on Form 8-K are incorporated herein by reference. As a result of the completion of the business combination pursuant to the Purchase Agreement, a change of control of the Company has occurred.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.

 

(c) Effective as of immediately following the business combination on May 29, 2020, Randy Buffington became the Company’s Chairman, President and Chief Executive Officer and Stephen M. Jones became Executive Vice President, Chief Financial Officer and Secretary. Biographical information for the newly appointed officers is included in the section entitled “Management After the Business Combination” beginning on page 270 of the Proxy Statement/Prospectus, which information is incorporated herein by reference. There are no family relationships among any of the Company’s directors and executive officers.

 

Effective as of the closing of the business combination, 2,508,002 shares of HYMC Common Stock, equal to 5% of the issued and outstanding shares of HYMC Common Stock immediately following the business combination have been reserved for issuance under the Incentive Plan, which Incentive Plan was approved by the Company’s stockholders in connection with the business combination. Messrs. Buffington and Jones will be entitled to participate in the Incentive Plan. Under the terms of employment agreements entered into by Hycroft with Messrs. Buffington and Jones, they were each entitled to an equity incentive award. In February 2019, the Company authorized time-based and performance-based equity incentive awards in the aggregate amount of $1,575,000 and $1,062,500 to Messrs. Buffington and Jones, respectively, in the form of restricted stock units convertible following vesting into shares of Hycroft common stock. Under the terms of those agreements and as provided in the Purchase Agreement, mirror replacement equity awards have been issued under the Incentive Plan to Messrs. Buffington and Jones in the amount of 80,072 shares and 54,018 shares, respectively.

 

(d) Effective as of immediately following the business combination, the size of the Company’s board of directors was increased from five to seven and the Company’s board was declassified so that each member of the Company’s board of directors is elected at each annual meeting of stockholders, as opposed to the Company having three classes of directors with only one class of directors being elected in each year and each class serving a three-year term. On May 29, 2020, the Company’s stockholders elected Randy Buffington, John Ellis, Michael Harrison, David Kirsch, Eugene Davis, Marni Wieshofer and Thomas Weng to serve as directors on the Company’s board of directors until the next annual meeting or when their successors are appointed.

 

Eugene Davis, Thomas Weng and Marni Wieshofer were appointed as members of the Audit Committee after the business combination. Marni Wieshofer was appointed as chair of the Audit Committee. John Ellis, David Kirsch and Marni Wieshofer were appointed as members of the Compensation Committee after the business combination and Mr. Kirsch was appointed as chairman of the Compensation Committee. Eugene Davis, David Kirsch and Thomas Weng were appointed as members of the Nominating and Governance Committee after the business combination and Mr. Davis was appointed as chairman of the Nominating and Governance Committee. John Ellis, Michael Harrison and Randy Buffington were appointed as members of the Safety, Sustainability and Technical Committee after the business combination and Mr. Ellis was appointed as chairman of the Safety, Sustainability and Technical Committee.

 

Biographical information for the newly appointed directors is included in the section entitled “Management After the Business Combination” beginning on page 270 of the Proxy Statement/Prospectus, which information is incorporated herein by reference. The Company expects to provide compensation to its non-employee directors for their services. This compensation will be reported in the Company’s reports pursuant to the Exchange Act as required by the Exchange Act and regulations promulgated thereunder. In connection with the business combination, the Company executed indemnification agreements with each of its directors and executive officers. The form of these indemnification agreements is attached as Exhibit 10.6 to this Current Report on Form 8-K and incorporated herein by reference.

 

(e) To the extent required by Item 5.02(e) of Form 8-K, the disclosures in Item 2.01 of this Current Report on Form 8-K are incorporated by reference. For a discussion of the Incentive Plan assumed by the Company in connection with the business combination, please refer to the section entitled “Proposal No. 10 – The Incentive Plan Proposal” commencing on page 320 of the Proxy Statement/Prospectus, which information is incorporated herein by reference.

 

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Item 5.06. Change in Shell Company Status.

 

As a result of the business combination, the Company ceased being a shell company. The disclosure contained in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial statements of business acquired.

 

Audited financial statements of Hycroft for the fiscal years ended December 31, 2019 and 2018 were previously filed as part of Amendment No. 2 to the registration statement filed with the SEC on April 24, 2020 (File No. 333-236460) (the “Amended Registration Statement”), beginning on page F-21, which information is incorporated herein by reference. Unaudited financial statements of Hycroft for the three months ended March 31, 2020 are included as Exhibit 99.2 to this Current Report on Form 8-K.

 

Audited financial statements of the Company for the fiscal years ended December 31, 2019 and 2018 were previously filed as part of the Amended Registration Statement, beginning on page F-2, which information is incorporated herein. Unaudited financial statements of the Company for the three months ended March 31, 2020 were previously filed on the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2020, filed on May 8, 2020.

 

(b) Pro forma financial information.

 

Unaudited pro forma condensed combined financial information for the year ended December 31, 2019 was previously filed as part of the Proxy Statement/Prospectus in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 172, which information is incorporated herein by reference. The updated unaudited pro forma condensed combined financial information as of March 31, 2020, is included as Exhibit 99.5 to this Current Report on Form 8-K.

 

(c) Shell company.

 

See (a) and (b) of this Item 9.01.

 

(d) Exhibits

 

The list of exhibits is set forth on the Exhibit Index of this Current Report on Form 8-K and is incorporated herein by reference.

 

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EXHIBIT INDEX

 

Exhibit
Number
  Description
2.1   Purchase Agreement, dated as of January 13, 2020, by and among Mudrick Capital Acquisition Corporation, MUDS Acquisition Sub, Inc. and Hycroft Mining Corporation (Incorporated by reference to Exhibit 2.1. to the Registrant’s Form 8-K, filed with the SEC on January 14, 2020).
2.2   Amendment to Purchase Agreement, dated as of February 26, 2020, by and among Mudrick Capital Acquisition Corporation, MUDS Acquisition Sub, Inc. and Hycroft Mining Corporation (incorporated by reference to Annex A-1 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on April 7, 2020).
3.1   Second Amended and Restated Certificate of Incorporation of Mudrick Capital Acquisition Corporation.*
3.2   Amended and Restated Bylaws of Mudrick Capital Acquisition Corporation.*
4.1   Warrant Agreement, dated as of October 22, 2015, by and between Hycroft Mining Corporation, Computershare Inc. and its wholly-owned subsidiary, Computershare Trust Company N.A., a federally chartered trust company, collectively as warrant agent (Incorporated by reference to Exhibit 10.11 to the joint proxy statement/prospectus on Form S-4/A of the Registrant filed with the SEC on April 7, 2020).
4.2   Warrant Agreement, dated February 7, 2018, by and between and Mudrick Capital Acquisition Corporation and Continental Stock Transfer & Trust Company, LLC (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K, filed with the SEC on February 13, 2018).
4.3   Warrant Agreement, dated May 28, 2020, by and between Hycroft Mining Holding Corporation (f/k/a/ Mudrick Capital Acquisition Corporation) and Continental Stock Transfer & Trust Company, LLC.*
10.1   Amended and Restated Credit Agreement, dated as of May 29, 2020, by and between Hycroft Mining Holding Corporation, as borrower, MUDS Acquisition Sub, Inc., MUDS Holdco, Inc., Hycroft Resources & Development, LLC and Allied VGH LLC, as guarantors, Sprott Private Resource Lending II (Collector), LP, as lender, and Sprott Resource Lending Corp., as arranger.*
10.2   Sprott Royalty Agreement, dated May 29, 2020, by and between the Registrant, Hycroft Resources & Development, LLC and Sprott Private Resource Lending II (Co) Inc.*
10.3   Form of Subscription/Backstop Agreement, dated January 13, 2020, entered into by Mudrick Capital Acquisition Corporation, and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC (Incorporated by reference to Exhibit 10.1 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).
10.4   Form of Amendment to Subscription Agreement, dated May 28,2020 entered into by Mudrick Capital Acquisition Corporation, and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P.,  Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC.*
10.5   Amended and Restated Registration Rights Agreement, dated May 29, 2020, by and between Mudrick Capital Acquisition Corporation, Mudrick Capital Acquisition Holdings LLC, Cantor Fitzgerald & Co.  and the restricted stockholders.*
10.6   Form of Indemnification Agreement of the Registrant entered May 29, 2020 by Randy Buffington, John Ellis, Michael Harrison, David Kirsch, Eugene Davis, Marni Wieshofer, Thomas Weng or Stephen M. Jones.*

 

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10.7   HYMC 2020 Performance and Incentive Pay Plan.*
10.8   Employment Agreement, dated March 15, 2019, by and between Hycroft Mining Corporation and Randy Buffington.*
10.9   Employment Agreement, dated March 15, 2019, by and between Hycroft Mining Corporation and Stephen M. Jones.*
10.10   Seller Support Agreement, dated as of January 13, 2020, by and among Mudrick Capital Acquisition Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC (Incorporated by reference to Exhibit 10.2 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).
10.11   Exchange Agreement, dated as of January 13, 2020, by and among MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.3 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).
10.12   Omnibus Amendment to Note Purchase Agreements and Exchange Agreement, dated May 28, 2020 by and between MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain of its direct and indirect subsidiaries and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto.*
10.13   Note Exchange Agreement, dated as of January 13, 2020, by and among Hycroft Mining Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.7 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).
10.14   Omnibus Amendment to Note Purchase Agreements and Note Exchange Agreement, dated May 28, 2020 by and between MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain of its direct and indirect subsidiaries and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto.*
10.15   Parent Sponsor Letter Agreement, dated as of January 13, 2020, by and among Mudrick Capital Acquisition Holdings LLC and Mudrick Capital Acquisition Corporation (Incorporated by reference to Exhibit 10.4 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).
10.16   Forward Purchase Contract, dated January 24, 2018, between Mudrick Capital Acquisition Corporation and Mudrick Capital Acquisition Holdings LLC (Incorporated by reference to Exhibit 10.10 to the Registrant’s registration statement on Form S-1/A filed with the SEC on January 26, 2018).
10.17   Underwriting Agreement, dated February 7, 2018, between the Registrant and Cantor Fitzgerald & Co. as representatives of the several underwriters (Incorporated by reference to Exhibit 1.1 to the Registrant’s Form 8-K filed with the SEC on February 13, 2018).
10.18   Amendment to Underwriting Agreement, dated as of February 12, 2020, by and among the Registrant and Cantor Fitzgerald & Co., as representatives of the several underwriters (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the SEC on February 14, 2020).
10.19   Restricted Stock Unit Agreement (Performance) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Randy Buffington.*

 

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10.20   Restricted Stock Unit Agreement (Time) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Randy Buffington.*
10.21   Restricted Stock Unit Agreement (Performance) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Stephen Jones.*
10.22   Restricted Stock Unit Agreement (Time) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Stephen Jones.*
10.23   Amendment to the Restricted Stock Unit Agreement (Performance) dated as of May 29, 2020, by and between Hycroft Mining Corporation and Randy Buffington.*
10.24   Amendment to the Restricted Stock Unit Agreement (Time) dated as of May 29, 2020, by and between Hycroft Mining Corporation and Randy Buffington.*
10.25   Amendment to the Restricted Stock Unit Agreement (Performance) dated as of May 29, 2020, by and between Hycroft Mining Corporation and Stephen Jones.*
10.26   Amendment to the Restricted Stock Unit Agreement (Time) dated as of May 29, 2020, by and between Hycroft Mining Corporation and Stephen Jones.*
21.1   Subsidiaries of the Registrant.*
99.1   Audited financial statements of Hycroft Mining Corporation for the fiscal years ended December 31, 2019 and 2018 (Incorporated by reference to the financial statements beginning on Page F-21 included in the joint proxy statement/prospectus on Form S-4/A of the Registrant filed with the SEC on April 24, 2020).
99.2   Unaudited financial statements of Hycroft Mining Corporation for the three months ended March 31, 2020 and 2019.*
99.3   Audited financial statements of Mudrick Capital Acquisition Corporation for the fiscal years ended December 31, 2019 and 2018 (Incorporated by reference to the financial statements beginning on Page F-2 included in the joint proxy statement/prospectus on Form S-4/A of the Registrant filed with the SEC on April 24, 2020).
99.4   Unaudited financial statements of Mudrick Capital Acquisition Corporation for the three months ended March 31, 2020  and 2019 (Incorporated by reference to the Registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 8, 2020).
99.5   Unaudited pro forma condensed combined financial information for the year ended December 31, 2019 (Incorporated by reference to the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 172 in the joint proxy statement/prospectus on Form S-4/A of the Registrant filed with the SEC on April 24, 2020).
99.6   Updated unaudited pro forma condensed combined financial information as of March 31, 2020. *

 

 

* Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: June 4, 2020 Hycroft Mining Holding Corporation
     
  By: /s/ Stephen M. Jones  
   

Stephen M. Jones

Executive Vice President and Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

Exhibit 3.1

 

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

MUDRICK CAPITAL ACQUISITION CORPORATION

 

May 29, 2020

 

Mudrick Capital Acquisition Corporation, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:

 

1. The name of the Corporation is “Mudrick Capital Acquisition Corporation”. The original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on August 28, 2017. The Corporation filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware on February 8, 2018 (the “First Amended and Restated Certif icate”). The Corporation filed an amendment to the First Amended and Restated Certificate with the Secretary of State of the State of Delaware on February 10, 2020.

 

2. This Second Amended and Restated Certificate of Incorporation (this “Second Amended and Restated Certif icate”) was duly adopted by the Board of Directors of the Corporation (the “Board”) and the stockholders of the Corporation in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware (as amended from time to time, the “DGCL”).

 

3. This Second Amended and Restated Certificate restates, integrates, and amends the provisions of the First Amended and Restated Certificate. Certain capitalized terms used in this Second Amended and Restated Certificate are defined where appropriate herein.

 

4. This Second Amended and Restated Certificate shall become effective on the date of filing with Secretary of State of Delaware.

 

5. The text of the First Amended and Restated Certificate is hereby restated and amended in its entirety to read as follows:

 

ARTICLE I

NAME

 

The name of the corporation is Hycroft Mining Holding Corporation (the “Corporation”).

 

ARTICLE II

PURPOSE

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. In addition to the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.

 

ARTICLE III

REGISTERED AGENT

 

The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, State of Delaware, 19808, and the name of the Corporation’s registered agent at such address is Corporation Service Company.

 

ARTICLE IV

CAPITALIZATION

 

Section 4.1 Authorized Capital Stock. The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 410,000,000 shares, consisting of (a) 400,000,000 shares of Class A common stock (the “Common Stock”) and (b) 10,000,000 shares of preferred stock (the “Preferred Stock”).

 

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Section 4.2 Preferred Stock. The Preferred Stock may be issued from time to time in one or more series. The Board is hereby expressly authorized to provide for the issuance of shares of the Preferred Stock in one or more series and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a “Preferred Stock Designation”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.

 

Section 4.3 Common Stock.

 

(a) Voting.

 

(i) Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of Common Stock shall exclusively possess all voting power with respect to the Corporation.

 

(ii) The holders of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of Common Stock are entitled to vote.

 

(iii) Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders of the Corporation, the holders of Common Stock, voting together as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of Common Stock shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of the Preferred Stock if the holders of such affected series are entitled exclusively, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any Preferred Stock Designation) or the DGCL.

 

(b) Dividends. Subject to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

(c) Liquidation, Dissolution or Winding Up of the Corporation. Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.

 

Section 4.4 Rights and Options. The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to purchase shares of any class or series of the Corporation’s capital stock or other securities of the Corporation, and such rights, warrants and options shall be evidenced by instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock subject thereto may not be less than the par value thereof.

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Section 4.5 No Class Vote on Changes in Authorized Number of Shares of Stock. Subject to the rights of the holders of any outstanding series of Preferred Stock, the number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of at least a majority of the voting power of the stock entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL.

 

ARTICLE V

BOARD OF DIRECTORS

 

Section 5.1 Board Powers. The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Second Amended and Restated Certificate, as it may be further amended from time to time, or the Amended and Restated By-Laws of the Corporation, as they may be further amended from time to time (“By-Laws”), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL and this Second Amended and Restated Certificate.

 

Section 5.2 Number, Election and Term.

 

(a) The number of directors of the Corporation, other than those who may be elected by the holders of one or more series of the Preferred Stock voting separately by class or series, shall be at least one, or such larger number as may be fixed from time to time by resolution of at least a majority of the directors then in office.

 

(b) Subject to the rights of the holders of one or more series of Preferred Stock, voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon.

 

(c) Subject to Section 5.5 hereof, a director shall hold office until the next annual meeting of stockholders and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

(d) Unless and except to the extent that the By-Laws shall so require, the election of directors need not be by written ballot.

 

Section 5.3 Newly Created Directorships and Vacancies. Subject to Section 5.5 hereof, newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause shall be filled solely by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office until the next annual meeting of stockholders and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

Section 5.4 Removal. Subject to Section 5.5 hereof, and except as required by law, any or all of the directors may be removed from office at any time by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

 

Section 5.5 Preferred Stock — Directors. Notwithstanding any other provision of this Article V, and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate (including any Preferred Stock Designation).

 

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ARTICLE VI
BYLAWS

 

In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power to adopt, amend, alter or repeal the By-Laws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the By-Laws. The By-Laws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Second Amended and Restated Certificate (including any Preferred Stock Designation), and except as set forth in Article XI, the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the By-Laws; and provided further, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such By-Laws had not been adopted.

 

ARTICLE VII

MEETINGS OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT

 

Section 7.1 Meetings. Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation may be called only by the Chairperson of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders to call a special meeting is hereby specifically denied.

 

Section 7.2 Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the By-Laws.

 

Section 7.3 Action by Written Consent. Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation not less than the minimum number of votes (determined as of the record date of such consent) that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereat were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

ARTICLE VIII

LIMITED LIABILITY; INDEMNIFICATION

 

Section 8.1 Limitation of Director Liability. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

 

Section 8.2 Indemnification and Advancement of Expenses.

 

(a) To the fullest extent permitted by the applicable laws of the State of Delaware, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation to procure a judgment in its favor (each, a “proceeding”) by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees and disbursements, judgments, fines, ERISA excise taxes, damages, claims and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a), except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

 

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(b) The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Second Amended and Restated Certificate as it may be further amended from time to time, the By-Laws, an agreement, vote of stockholders or disinterested directors, or otherwise.

 

(c) Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Section 8.2, shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

 

(d) This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.

 

ARTICLE IX

CORPORATE OPPORTUNITY

 

(a) To the extent allowed by law, the doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors in circumstances where the application of any such doctrine to a corporate opportunity would conflict with any fiduciary duties or contractual obligations they may have as of the date of this Second Amended and Restated Certificate or in the future. The Corporation renounces any expectancy that any of the directors or officers of the Corporation will offer any such corporate opportunity of which he or she may become aware to the Corporation, except, the doctrine of corporate opportunity shall apply with respect to any of the directors or officers of the Corporation with respect to a corporate opportunity that was offered to such person solely in his or her capacity as a director or officer of the Corporation and (i) such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue and (ii) the director or officer is permitted to refer that opportunity to the Corporation without violating any legal obligation.

 

(b) Without limiting the foregoing, to the extent permitted by applicable law, each of Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC and the investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC and their respective successors and Affiliates (as defined in Article 10.3) (other than the Corporation and its subsidiaries) and all of their respective partners, principals, directors, officers, members, managers, equity holders and/or employees, including any of the foregoing who serve as officers or directors of the Corporation (each, an “Exempted Person”) shall not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries, except as otherwise expressly provided in any agreement entered into between the Company and such Exempted Person. To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time available to the Exempted Persons, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and each such Exempted Person shall have no duty to communicate or offer such business opportunity to the Corporation (and there shall be no restriction on the Exempted Persons using the general knowledge and understanding of the industry in which the Corporation operates which it has gained as an Exempted Person in considering and pursuing such opportunities or in making investment, voting, monitoring, governance or other decisions relating to other entities or securities) and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries or stockholders for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such Exempted Person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries, or uses such knowledge and understanding in the manner described herein, in each case, except as otherwise expressly provided in any agreement entered into between the Company and such Exempted Person. In addition to and notwithstanding the foregoing, a corporate opportunity shall not be deemed to belong to the Corporation if it is a business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or that is one in which the Corporation has no interest or reasonable expectancy. Any person or entity purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of the provisions of this Article IX.

 

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(c) Neither the alteration, amendment, addition to or repeal of this Article IX, nor the adoption of any provision of this Second Amended and Restated Certificate (including any Preferred Stock Designation) inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article IX, would accrue or arise, prior to such alteration, amendment, addition, repeal or adoption. This Article IX shall not limit any protections or defenses available to, or indemnification or advancement rights of, any director or officer of the Corporation under this Second Amended and Restated Certificate, the Bylaws or applicable law.

 

ARTICLE X

BUSINESS COMBINATIONS

 

Section 10.1 Opt Out of DGCL 203. The Corporation shall not be governed by Section 203 of the DGCL.

 

Section 10.2 Limitations on Business Combinations. Notwithstanding the foregoing, the Corporation shall not engage in any business combination, at any point in time at which the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, with any interested stockholder for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:

 

(a) prior to such time, the Board approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; or

 

(b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by: (i) persons who are directors and also officers; or (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

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(c) at or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two thirds of the outstanding voting stock of the Corporation which is not owned by the interested stockholder.

 

Section 10.3 Definitions. For purposes of this Article X, the term:

 

(a) “Aff iliate” means, with respect to any person, any other person that controls, is controlled by, or is under common control with such person.

 

(b) “associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

 

(c) “business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:

 

(i) any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation: (A) with the interested stockholder; or (B) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section 10.2 is not applicable to the surviving entity;

 

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;

 

(iii) any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (A) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (B) pursuant to a merger under Section 251(g) of the DGCL; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (D) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (E) any issuance or transfer of stock by the Corporation; provided, however, that in no case under items (C) – (E) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);

  

(iv) any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

 

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(v) any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.

 

(d) “control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article X, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

 

(e) “interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that: (i) is the owner of 15% or more of the outstanding voting stock of the Corporation; or (ii) is an Affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder; or (iii) an Affiliate or associate of any such person described in clauses (i) and (ii); provided, however, that the term “interested stockholder” shall not include: (A) the Sponsor Holders or their transferees; or (B) any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation; provided, that such person specified in this clause (B) shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

 

(f) “owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its Affiliates or associates:

 

(i) beneficially owns such stock, directly or indirectly; or

 

(ii) has: (A) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s Affiliates or associates until such tendered stock is accepted for purchase or exchange; or (B) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to 10 or more persons; or

 

(iii) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of subsection (ii) above), or disposing of such stock with any other person that beneficially owns, or whose Affiliates or associates beneficially own, directly or indirectly, such stock.

 

(g) “person” means any individual, corporation, partnership, unincorporated association or other entity.

 

(h) “stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.

 

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(i) “Sponsor Holders” means: (i) the investment funds affiliated with Mudrick Capital Acquisition Holdings LLC and their respective successors and Affiliates; and (ii) the investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC and their respective successors and Affiliates.

 

(j) “voting stock” means stock of any class or series entitled to vote generally in the election of directors.

 

ARTICLE XI

AMENDMENT OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate (including any Preferred Stock Designation), in the manner now or hereafter prescribed by this Second Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII, all rights, preferences and privileges herein conferred upon stockholders, directors or any other persons by and pursuant to this Second Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article XI.

 

ARTICLE XII

EXCLUSIVE FORUM FOR CERTAIN LAWSUITS

 

Section 12.1 Forum. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the DGCL or this Second Amended and Restated Certificate or the By-Laws, or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, (a) any action as to which the Court of Chancery determines that there is an indispensable party not subject to the personal jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination) and (b) any action asserted to enforce any liability or duty created by the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or, in each case, rules and regulations promulgated thereunder, for which there is exclusive federal or concurrent federal and state jurisdiction.

 

Section 12.2 Consent to Jurisdiction. If any action the subject matter of which is within the scope of Section 12.1 immediately above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 12.1 immediately above (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

 

Section 12.3 Severability. If any provision or provisions of this Article XII shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XII (including, without limitation, each portion of any sentence of this Article XII containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

Section 12.4 Consent. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XII.

 

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IN WITNESS WHEREOF, Mudrick Capital Acquisition Corporation has caused this Second Amended and Restated Certificate to be duly executed in its name and on its behalf by an authorized officer as of the date first set forth above.

 

  MUDRICK CAPITAL ACQUISITION CORPORATION 
     
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

 

 

 

 

[Signature Page to Second Amended and Restated Certificate of Incorporation

 

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Exhibit 3.2

 

AMENDED AND RESTATED BYLAWS OF

HYCROFT MINING HOLDING CORPORATION

(THE “CORPORATION”)

 

ARTICLE I

 

OFFICES

 

Section 1.1. Registered Office. The registered office of the Corporation within the State of Delaware shall be located at either (a) the principal place of business of the Corporation in the State of Delaware or (b) the office of the corporation or individual acting as the Corporation’s registered agent in the State of Delaware.

 

Section 1.2. Additional Offices. The Corporation may, in addition to its registered office in the State of Delaware, have such other offices and places of business, both within and outside the State of Delaware, as the Board of Directors of the Corporation (the “Board”) may from time to time determine or as the business and affairs of the Corporation may require.

 

ARTICLE II

 

STOCKHOLDERS MEETINGS

 

Section 2.1. Annual Meetings. The annual meeting of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 9.5(a). At each annual meeting, the stockholders entitled to vote on such matters shall elect those directors of the Corporation to fill any term of a directorship that expires on the date of such annual meeting and may transact any other business as may properly be brought before the meeting.

 

Section 2.2. Special Meetings. Subject to the rights of the holders of any outstanding series of the preferred stock of the Corporation (“Preferred Stock”), and to the requirements of applicable law, special meetings of stockholders, for any purpose or purposes, may be called only by the Chairperson of the Board, Chief Executive Officer, or the Board pursuant to a resolution adopted by a majority of the Board. Special meetings of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the Corporation’s notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 9.5(a).

 

Section 2.3. Notices. Notice of each stockholders meeting stating the place, if any, date, and time of the meeting, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be given in the manner permitted by Section 9.3 to each stockholder entitled to vote thereat by the Corporation not less than 10 nor more than 60 days before the date of the meeting. If said notice is for a stockholders meeting other than an annual meeting, it shall in addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting shall be limited to the matters so stated in the Corporation’s notice of meeting (or any supplement thereto). Any meeting of stockholders as to which notice has been given may be postponed, and any special meeting of stockholders as to which notice has been given may be cancelled, by the Board upon public announcement (as defined in Section 2.7(c)) given before the date previously scheduled for such meeting. 

 

Section 2.4. Quorum. Except as otherwise provided by applicable law, the Corporation’s Second Amended and Restated Certificate of Incorporation, as the same may be amended or restated from time to time (the “Certificate of Incorporation”) or these By-Laws, the presence, in person or by proxy, at a stockholders meeting of the holders of shares of outstanding capital stock of the Corporation representing a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting shall constitute a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. If a quorum shall not be present or represented by proxy at any meeting of the stockholders of the Corporation, the chairperson of the meeting may adjourn the meeting from time to time in the manner provided in Section 2.6 until a quorum shall attend. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the voting power of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any such other corporation to vote shares held by it in a fiduciary capacity.

 

 

 

 

Section 2.5. Voting of Shares.

 

(a) Voting Lists. The Secretary of the Corporation (the “Secretary”) shall prepare, or shall cause the officer or agent who has charge of the stock ledger of the Corporation to prepare, at least 10 calendar days before every meeting of stockholders, a complete list of the stockholders of record entitled to vote at such meeting and showing the mailing address and the number and class of shares registered in the name of each stockholder. Nothing contained in this Section 2.5(a) shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If a meeting of stockholders is to be held solely by means of remote communication as permitted by Section 9.5(a), the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list required by this Section 2.5(a) or to vote in person or by proxy at any meeting of stockholders.

 

(b) Manner of Voting. At any stockholders meeting, every stockholder entitled to vote may vote in person or by proxy. If authorized by the Board, the voting by stockholders or proxy holders at any meeting conducted by remote communication may be effected by a ballot submitted by electronic transmission (as defined in Section 9.3), provided that any such electronic transmission must either set forth or be submitted with information from which the Corporation can determine that the electronic transmission was authorized by the stockholder or proxy holder. The Board, in its discretion, or the chairperson of the meeting of stockholders, in such person’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

 

(c) Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as it is, coupled with an interest. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the Corporation’s stock or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary either an instrument in writing revoking the proxy or another duly executed proxy bearing a later date. Proxies need not be filed with the Secretary until the meeting is called to order, but shall be filed with the Secretary before being voted. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority. No stockholder shall have cumulative voting rights.

 

(i) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature. 

 

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(ii) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

 

(d) Required Vote. Subject to the rights of the holders of one or more series of Preferred Stock, voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon. All other matters shall be determined by the vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon, unless the matter is one upon which, by applicable law, the Certificate of Incorporation, these By-Laws or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of such matter.

 

(e) Inspectors of Election. The Board may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, who may be employees of the Corporation or otherwise serve the Corporation in other capacities, to act at such meeting of stockholders or any adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board, the chairperson of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain and report the number of outstanding shares and the voting power of each; determine the number of shares present in person or represented by proxy at the meeting and the validity of proxies and ballots; count all votes and ballots and report the results; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors.

 

Section 2.6. Adjournments. Any meeting of stockholders, annual or special, may be adjourned by the chairperson of the meeting, from time to time, whether or not there is a quorum, to reconvene at the same or some other place. Notice need not be given of any such adjourned meeting if the date, time, and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the stockholders or the holders of any class or series of stock entitled to vote separately as a class, as the case may be, may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

Section 2.7. Advance Notice for Business.

 

(a) Annual Meetings of Stockholders. No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the annual meeting by or at the direction of the Board or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.7(a) and on the record date for the determination of stockholders entitled to vote at such annual meeting and (y) who complies with the notice procedures set forth in this Section 2.7(a). Notwithstanding anything in this Section 2.7(a) to the contrary, only persons nominated for election to succeed a director whose term expires on the date of the annual meeting pursuant to Section 3.2 will be considered for election at such meeting. 

 

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(i) In addition to any other applicable requirements, for business (other than nominations) to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary and such business must otherwise be a proper matter for stockholder action. Subject to Section 2.7(a)(iii), a stockholder’s notice to the Secretary with respect to such business, to be timely, must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day before the anniversary of the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the close of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Corporation. The public announcement of an adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described in this Section 2.7(a).

 

(ii) To be in proper written form, a stockholder’s notice to the Secretary with respect to any business (other than nominations) must set forth as to each such matter such stockholder proposes to bring before the annual meeting (A) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event such business includes a proposal to amend these By-Laws, the language of the proposed amendment) and the reasons for conducting such business at the annual meeting, (B) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, (D) a description of all arrangements or understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons (including their names) in connection with the proposal of such business by such stockholder, (E) any material direct or indirect interest of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made in such business and (F) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

 

(iii) The foregoing notice requirements of this Section 2.7(a) shall be deemed satisfied by a stockholder as to any proposal (other than nominations) if the stockholder has notified the Corporation of such stockholder’s intention to present such proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such stockholder has complied with the requirements of such Rule for inclusion of such proposal in a proxy statement prepared by the Corporation to solicit proxies for such annual meeting. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.7(a), provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.7(a) shall be deemed to preclude discussion by any stockholder of any such business. If the Board or the chairperson of the annual meeting determines that any stockholder proposal was not made in accordance with the provisions of this Section 2.7(a) or that the information provided in a stockholder’s notice does not satisfy the information requirements of this Section 2.7(a), such proposal shall not be presented for action at the annual meeting. Notwithstanding the foregoing provisions of this Section 2.7(a), if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present the proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such matter may have been received by the Corporation.

 

(iv) In addition to the provisions of this Section 2.7(a), a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 2.7(a) shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

 

(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting only pursuant to Section 3.2.

 

 

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(c) Public Announcement. For purposes of these By-Laws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

 

Section 2.8. Conduct of Meetings. The chairperson of each annual and special meeting of stockholders shall be the Chairperson of the Board or, in the absence (or inability or refusal to act) of the Chairperson of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act of the Chief Executive Officer or if the Chief Executive Officer is not a director, the President (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the President or if the President is not a director, such other person as shall be appointed by the Board. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairperson of the meeting. The Board may adopt such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with these By-Laws or such rules and regulations as adopted by the Board, the chairperson of any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairperson of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairperson of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The secretary of each annual and special meeting of stockholders shall be the Secretary or, in the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary so appointed to act by the chairperson of the meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

Section 2.9. Action by Written Consent. Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having not less than the minimum number of votes (determined as of the record date of such consent) that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereat were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

ARTICLE III

DIRECTORS

 

Section 3.1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders. Directors need not be stockholders of the Corporation or residents of the State of Delaware.

 

Section 3.2. Board Composition. The number, election and term of the directors of the Corporation shall be set forth in the Certificate of Incorporation.

 

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Section 3.3. Chairperson of the Board. The Board may elect a Chairperson of the Board (the “Chairperson”) from among the members of the Board. If elected, the Board shall designate the Chairperson as either a non-executive Chairperson or an executive Chairperson. The Chairperson shall not be deemed an officer of the Corporation, unless the Board shall determine otherwise. Subject to the control vested in the Board by statute, by the Certificate of Incorporation, or by these By-Laws, the Chairperson shall, if present, preside over all meetings of the stockholders and of the Board and shall have such other duties and powers as from time to time may be assigned to him or her by the Board, the Certificate of Incorporation or these By-Laws. In the absence (or inability or refusal to act) of the Chairperson, the Chief Executive Officer (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board. The powers and duties of the Chairperson shall not include supervision or control of the preparation of the financial statements of the Corporation (other than through participation as a member of the Board). The position of Chairperson and Chief Executive Officer may be held by the same person.

 

Section 3.4. Advance Notice for Nomination of Directors.

 

(a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one or more series of Preferred Stock to elect directors. Nominations of persons for election to the Board at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors as set forth in the Corporation’s notice of such special meeting, may be made (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3.2 and on the record date for the determination of stockholders entitled to vote at such meeting and (y) who complies with the notice procedures set forth in this Section 3.2.

 

(b) In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary. To be timely, a stockholder’s notice to the Secretary must be received by the Secretary at the principal executive offices of the Corporation (i) in the case of an annual meeting, not later than the close of business on the 90th day nor earlier than the close of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the close of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting was first made by the Corporation; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the 10th day following the day on which public announcement of the date of the special meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting or special meeting commence a new time period for the giving of a stockholder’s notice as described in this Section 3.2.

 

(c) Notwithstanding anything in paragraph (b) to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is greater than the number of directors whose terms expire on the date of such annual meeting and there is no public announcement by the Corporation naming all of the nominees for the additional directors to be elected or specifying the size of the increased Board before the close of business on the 90th day prior to the anniversary date of the immediately preceding annual meeting of stockholders, a stockholder’s notice required by this Section 3.2 shall also be considered timely, but only with respect to nominees for the additional directorships created by such increase that are to be filled by election at such annual meeting, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the date on which such public announcement was first made by the Corporation.

 

(d) To be in proper written form, a stockholder’s notice to the Secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, (B) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, (C) a description of all arrangements or understandings relating to the nomination to be made by such stockholder among such stockholder, the beneficial owner, if any, on whose behalf the nomination is made, each proposed nominee and any other person or persons (including their names), (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder and the beneficial owner, if any, on whose behalf the nomination is made that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

  

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(e) If the Board or the chairperson of the meeting of stockholders determines that any nomination was not made in accordance with the provisions of this Section 3.2, then such nomination shall not be considered at such meeting. Notwithstanding the foregoing provisions of this Section 3.2, if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Corporation.

 

(f) In addition to the provisions of this Section 3.2, a stockholder shall also comply with all of the applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 3.2 shall be deemed to affect any rights of the holders of Preferred Stock to elect directors pursuant to the Certificate of Incorporation.

 

Section 3.5. Fees and Expenses. The Board shall have authority to fix the amount of compensation of directors. Directors shall receive such reasonable fees for their services on the Board and any committee thereof and reimbursement of their expenses associated with their attendance at meetings of the Board and any committee thereof. No payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. The Board shall also have the power and discretion to provide for and pay fair compensation to directors for rendering services to the Corporation not ordinarily rendered by directors.

 

Section 3.6. Newly Created Directorships and Vacancies. Unless otherwise restricted by the Certificate of Incorporation, newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause shall be filled solely by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office until the next annual meeting of stockholders and until such director’s successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

Section 3.7. Resignation. Any director may resign at any time by giving written notice of resignation (including by electronic transmission) to the Chairperson, the Chief Executive Officer, or the Secretary. Unless otherwise specified in the written notice, the resignation shall take effect upon receipt thereof and unless otherwise specified in it, the acceptance of the resignation shall not be necessary to make it effective.

 

Section 3.8. Removal. Subject to the Certificate of Incorporation and Section 3.9 hereof, and except as otherwise required by law, any or all of the directors may be removed from office at any time by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.

 

Section 3.9. Preferred Stock – Directors. Notwithstanding any other provision of this Article III, and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate (including any Preferred Stock Designation).

  

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Section 3.10. Reliance on Accounts, Reports, Etc. A director, or a member of any committee designated by the Board of Directors under Article V of these By- Laws, shall, in the performance of such director’s or committee member’s duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees designated by the Board, or by any other person as to the matters the director or the member reasonably believes are within such other person’s professional or expert competence and who the director or member reasonably believes or determines has been selected with reasonable care by or on behalf of the Corporation.

 

ARTICLE IV

 

BOARD MEETINGS

 

Section 4.1. Annual Meetings. The Board shall meet as soon as practicable after the adjournment of each annual stockholders meeting at the place of the annual stockholders meeting unless the Board shall fix another time and place and give notice thereof in the manner required herein for special meetings of the Board. No notice to the directors shall be necessary to legally convene this meeting, except as provided in this Section 4.1.

 

Section 4.2. Regular Meetings. The Board by resolution may provide for the holding of regular meetings, which meetings of the Board may be held without notice at such times, dates and places as shall from time to time be determined by the Board.

 

Section 4.3. Special Meetings. Special meetings of the Board (a) may be called by the Chairperson of the Board or President and (b) shall be called by the Chairperson of the Board, President or Secretary on the written request of at least a majority of directors then in office, or the sole director, as the case may be, and shall be held at such time, date and place as may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in such written request. Notice of each special meeting of the Board shall be given, as provided in Section 9.3, to each director (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such notice is sent through the United States mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given by the officer who called the meeting or the directors who requested the meeting. Any and all business that may be transacted at a regular meeting of the Board may be transacted at a special meeting. Except as may be otherwise expressly provided by applicable law, the Certificate of Incorporation, or these By-Laws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice or waiver of notice of such meeting. A special meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.4.

 

Section 4.4. Quorum; Required Vote. A majority of the Board shall constitute a quorum for the transaction of business at any meeting of the Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these By-Laws. If a quorum shall not be present at any meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

 

Section 4.5. Consent In Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions (or paper reproductions thereof) are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

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Section 4.6. Organization. The chairperson of each meeting of the Board shall be the Chairperson of the Board or, in the absence (or inability or refusal to act) of the Chairperson of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the Chief Executive Officer or if the Chief Executive Officer is not a director, a chairperson elected from the directors present. The Secretary shall act as secretary of all meetings of the Board. In the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary shall perform the duties of the Secretary at such meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

ARTICLE V

 

COMMITTEES OF DIRECTORS

 

Section 5.1. Establishment. The Board may by resolution passed by a majority of the Board designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.

 

Section 5.2. Powers. Any committee established pursuant to Section 5.1 hereof, to the extent permitted by applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it, but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the General Corporation Law of the State of Delaware (the “DGCL”) to be submitted to stockholders for approval; or (b) adopting, amending or repealing any bylaw of the Corporation.

 

Section 5.3. Alternate Members. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member.

 

Section 5.4. Resignation. Any member (and any alternate member) of any committee may resign at any time by submitting an electronic transmission or by delivering a written notice of resignation, signed by such member, to the Board or the Chairperson. Unless otherwise specified therein, such resignation shall take effect upon delivery.

 

Section 5.5. Removal. Any member (and any alternate member) of any committee may be removed at any time, either for or without cause, by resolution adopted by a majority of the total authorized number of directors.

 

Section 5.6. Vacancies. If any vacancy shall occur in any committee, by reason of disqualification, death, resignation, removal or otherwise, the remaining members (and any alternate members) shall continue to act, and any such vacancy may be filled by the Board.

 

Section 5.7. Procedures. Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall be determined by such committee. At meetings of a committee, a majority of the number of members of the committee (but not including any alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of Incorporation, these By-Laws or the Board. If a quorum is not present at a meeting of a committee, the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Unless the Board otherwise provides and except as provided in these By-Laws, each committee designated by the Board may make, alter, amend and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board is authorized to conduct its business pursuant to Article III and Article IV of these By-Laws.

 

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ARTICLE VI

 

OFFICERS

 

Section 6.1. Officers. The officers of the Corporation elected by the Board shall be a Chief Executive Officer, a Chief Financial Officer, a Secretary and such other officers (including without limitation, one or more Presidents, Vice Presidents, Assistant Secretaries and Treasurers) as the Board from time to time may determine. Officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article VI. Such officers shall also have such powers and duties as from time to time may be conferred by the Board. The Chief Executive Officer or President may also appoint such other officers (including without limitation one or more Vice Presidents and Controllers) as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers shall have such powers and duties and shall hold their offices for such terms as may be provided in these By-Laws or as may be prescribed by the Board or, if such officer has been appointed by the Chief Executive Officer or President, as may be prescribed by the appointing officer.

 

(a) Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation, shall (i) have general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of the Board, (ii) shall be responsible for the execution of the policies of the Board with respect to such matters, (iii) appoint and remove subordinate officers, agents and employees, except those appointed by the Board, and (iv) possess such other powers and perform such other duties as may be assigned by the Board and as may be incident to the office of the Chief Executive Officer of the Corporation. In the absence (or inability or refusal to act) of the Chairperson of the Board, the Chief Executive Officer (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board. The position of Chief Executive Officer and President may be held by the same person.

 

(c) President. The President shall make recommendations to the Chief Executive Officer on all operational matters that would normally be reserved for the final executive responsibility of the Chief Executive Officer. In the absence (or inability or refusal to act) of the Chairperson of the Board and Chief Executive Officer, the President (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board. The President shall also perform such duties and have such powers as shall be designated by the Board. The position of President and Chief Executive Officer may be held by the same person.

 

(d) Vice Presidents. In the absence (or inability or refusal to act) of the President, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board) shall perform the duties and have the powers of the President. Any one or more of the Vice Presidents may be given an additional designation of rank or function.

 

(e) Secretary.

 

(i) The Secretary shall attend all meetings of the stockholders, the Board and (as required) committees of the Board and shall record the proceedings of such meetings in books to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board and shall perform such other duties as may be prescribed by the Board, the Chairperson of the Board, Chief Executive Officer or President. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary, or any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his or her signature.

 

(ii) The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, if one has been appointed, a stock ledger, or duplicate stock ledger, showing the names of the stockholders and their addresses, the number and classes of shares held by each and, with respect to certificated shares, the number and date of certificates issued for the same and the number and date of certificates cancelled.

 

(f) Assistant Secretaries. The Assistant Secretary or, if there be more than one, the Assistant Secretaries in the order determined by the Board shall, in the absence (or inability or refusal to act) of the Secretary, perform the duties and have the powers of the Secretary.

 

 

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(g) Chief Financial Officer. The Chief Financial Officer shall perform all duties commonly incident to that office (including, without limitation, (i) having the custody of the corporate funds and securities, except as otherwise provided by the Board, (ii) keeping full and accurate accounts of receipts and disbursements in books belonging to the Corporation, (iii) depositing all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board, (d) disbursing the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and (e) rendering to the Chief Executive Officer and the Board, whenever they may require it, an account of all his or her transactions as Chief Financial Officer and of the financial condition of the Corporation).

 

(h) Treasurer. The Treasurer shall, in the absence (or inability or refusal to act) of the Chief Financial Officer, perform the duties and exercise the powers of the Chief Financial Officer.

 

Section 6.2. Term of Office; Removal; Vacancies. The elected officers of the Corporation shall be appointed by the Board and shall hold office until their successors are duly elected and qualified by the Board or until their earlier death, resignation, retirement, disqualification, or removal from office. Any officer may be removed, with or without cause, at any time by the Board. Any officer appointed by the Chief Executive Officer or President may also be removed, with or without cause, by the Chief Executive Officer or President, as the case may be, unless the Board otherwise provides. Any vacancy occurring in any elected office of the Corporation may be filled by the Board. Any vacancy occurring in any office appointed by the Chief Executive Officer or President may be filled by the Chief Executive Officer, or President, as the case may be, unless the Board then determines that such office shall thereupon be elected by the Board, in which case the Board shall elect such officer.

 

Section 6.3. Other Officers. The Board may delegate the power to appoint such other officers and agents, and may also remove such officers and agents or delegate the power to remove same, as it shall from time to time deem necessary or desirable.

 

Section 6.4. Multiple Officeholders; Stockholder and Director Officers. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-Laws otherwise provide; provided, however, that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Second Amended and Restated Certificate of Incorporation or these By-Laws to be executed, acknowledged or verified by two or more officers. Officers need not be stockholders or residents of the State of Delaware.

 

ARTICLE VII

 

SHARES

 

Section 7.1. Certificated and Uncertificated Shares. The shares of the Corporation may be certificated or uncertificated, subject to the sole discretion of the Board and the requirements of the DGCL.

 

Section 7.2. Multiple Classes of Stock. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the Corporation shall (a) cause the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights to be set forth in full or summarized on the face or back of any certificate that the Corporation issues to represent shares of such class or series of stock or (b) in the case of uncertificated shares, within a reasonable time after the issuance or transfer of such shares, send to the registered owner thereof a written notice containing the information required to be set forth on certificates as specified in clause (a) above; provided, however, that, except as otherwise provided by applicable law, in lieu of the foregoing requirements, there may be set forth on the face or back of such certificate or, in the case of uncertificated shares, on such written notice a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights.

 

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Section 7.3. Signatures. Each certificate representing capital stock of the Corporation shall be signed by or in the name of the Corporation by (a) the Chairperson of the Board, Chief Executive Officer, the President or a Vice President and (b) the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar on the date of issue.

 

Section 7.4. Consideration and Payment for Shares.

 

(a) Subject to applicable law and the Certificate of Incorporation, shares of stock may be issued for such consideration, having in the case of shares with par value a value not less than the par value thereof, and to such persons, as determined from time to time by the Board. The consideration may consist of any tangible or intangible property or any benefit to the Corporation including cash, promissory notes, services performed, contracts for services to be performed or other securities, or any combination thereof.

 

(b) Subject to applicable law and the Certificate of Incorporation, shares may not be issued until the full amount of the consideration has been paid, unless upon the face or back of each certificate issued to represent any partly paid shares of capital stock or upon the books and records of the Corporation in the case of partly paid uncertificated shares, there shall have been set forth the total amount of the consideration to be paid therefor and the amount paid thereon up to and including the time said certificate representing certificated shares or said uncertificated shares are issued.

 

Section 7.5. Lost, Destroyed or Wrongfully Taken Certificates.

 

(a) If an owner of a certificate representing shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation shall issue a new certificate representing such shares or such shares in uncertificated form if the owner: (i) requests such a new certificate before the Corporation has notice that the certificate representing such shares has been acquired by a protected purchaser; (ii) if requested by the Corporation, delivers to the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, wrongful taking or destruction of such certificate or the issuance of such new certificate or uncertificated shares; and (iii) satisfies other reasonable requirements imposed by the Corporation.

 

(b) If a certificate representing shares has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the Corporation of that fact within a reasonable time after the owner has notice of such loss, apparent destruction or wrongful taking and the Corporation registers a transfer of such shares before receiving notification, the owner shall be precluded from asserting against the Corporation any claim for registering such transfer or a claim to a new certificate representing such shares or such shares in uncertificated form.

 

Section 7.6. Transfer of Stock.

 

(a) If a certificate representing shares of the Corporation is presented to the Corporation with an endorsement requesting the registration of transfer of such shares or an instruction is presented to the Corporation requesting the registration of transfer of uncertificated shares, the Corporation shall register the transfer as requested if:

 

(i) in the case of certificated shares, the certificate representing such shares has been surrendered;

 

(ii) (A) with respect to certificated shares, the endorsement is made by the person specified by the certificate as entitled to such shares; (B) with respect to uncertificated shares, an instruction is made by the registered owner of such uncertificated shares; or (C) with respect to certificated shares or uncertificated shares, the endorsement or instruction is made by any other appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;

 

(iii) the Corporation has received a guarantee of signature of the person signing such endorsement or instruction or such other reasonable assurance that the endorsement or instruction is genuine and authorized as the Corporation may request;

 

(iv) the transfer does not violate any restriction on transfer imposed by the Corporation that is enforceable in accordance with Section 7.8(a); and

 

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(v) such other conditions for such transfer as shall be provided for under applicable law have been satisfied.

 

(b) Whenever any transfer of shares shall be made for collateral security and not absolutely, the Corporation shall so record such fact in the entry of transfer if, when the certificate for such shares is presented to the Corporation for transfer or, if such shares are uncertificated, when the instruction for registration of transfer thereof is presented to the Corporation, both the transferor and transferee request the Corporation to do so.

 

Section 7.7. Registered Stockholders. Before due presentment for registration of transfer of a certificate representing shares of the Corporation or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote such shares, receive dividends or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are provided under applicable law, may also so inspect the books and records of the Corporation.

 

Section 7.8. Effect of the Corporation’s Restriction on Transfer.

 

(a) A written restriction on the transfer or registration of transfer of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, if permitted by the DGCL and noted conspicuously on the certificate representing such shares or, in the case of uncertificated shares, contained in a notice, offering circular or prospectus sent by the Corporation to the registered owner of such shares within a reasonable time prior to or after the issuance or transfer of such shares, may be enforced against the holder of such shares or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

 

(b) A restriction imposed by the Corporation on the transfer or the registration of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, even if otherwise lawful, is ineffective against a person without actual knowledge of such restriction unless: (i) the shares are certificated and such restriction is noted conspicuously on the certificate; or (ii) the shares are uncertificated and such restriction was contained in a notice, offering circular or prospectus sent by the Corporation to the registered owner of such shares within a reasonable time prior to or after the issuance or transfer of such shares.

 

Section 7.9. Regulations. The Board shall have power and authority to make such additional rules and regulations, subject to any applicable requirement of law, as the Board may deem necessary and appropriate with respect to the issue, transfer or registration of transfer of shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.

 

ARTICLE VIII

 

INDEMNIFICATION

 

Section 8.1. Right to Indemnification. To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (hereinafter an “Indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such Indemnitee in connection with such proceeding; provided, however, that, except as provided in Section 8.3 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify an Indemnitee in connection with a proceeding (or part thereof) initiated by such Indemnitee only if such proceeding (or part thereof) was authorized by the Board. 

 

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Section 8.2. Right to Advancement of Expenses. In addition to the right to indemnification conferred in Section 8.1, an Indemnitee shall also have the right to be paid by the Corporation to the fullest extent not prohibited by applicable law the expenses (including, without limitation, attorneys’ fees) incurred in defending or otherwise participating in any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the DGCL requires, an advancement of expenses incurred by an Indemnitee in his or her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon the Corporation’s receipt of an undertaking (hereinafter an “undertaking”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this Article VIII or otherwise.

 

Section 8.3. Right of Indemnitee to Bring Suit. If a claim under Section 8.1 or Section 8.2 is not paid in full by the Corporation within 60 days after a written claim therefor has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by an Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that, the Indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including a determination by its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, shall be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation.

 

Section 8.4. Non-Exclusivity of Rights; Other Sources. The rights provided to any Indemnitee pursuant to this Article VIII shall not be exclusive of any other right, which such Indemnitee may have or hereafter acquire under applicable law, the Certificate of Incorporation, these By-Laws, an agreement, a vote of stockholders or disinterested directors, or otherwise. The Corporation hereby acknowledges that Indemnitees may have certain rights to indemnification, advancement of expenses and/or insurance provided by sources other than the Corporation (hereinafter the “Third Party Indemnitors”). The Corporation hereby agrees that it (a) is the indemnitor of first resort (i.e., its obligations to the Indemnitees are primary and any obligation of the Third Party Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by the Indemnitees are secondary), (ii) shall be required to advance the full amount of expenses incurred by the Indemnitees and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this paragraph and these By-Laws from time to time (or any other agreement between the Corporation and the Indemnitees), without regard to any rights the Indemnitees may have against the Third Party Indemnitors, and (iii) irrevocably waives, relinquishes and releases the Third Party Indemnitors from any and all claims against the Third Party Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Corporation further agrees that no advancement or payment by the Third Party Indemnitors on behalf of the Indemnitees with respect to any claim for which the Indemnitees have sought indemnification from the Corporation shall affect the foregoing and the Third Party Indemnitors shall have a right of contribution and/or to be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Indemnitees against the Corporation. The Corporation and the Indemnitees agree that the Third Party Indemnitors are express third party beneficiaries of the terms of this paragraph.

 

 

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Section 8.5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and/or any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

Section 8.6. Indemnification of Other Persons. This Article VIII shall not limit the right of the Corporation to the extent and in the manner authorized or permitted by law to indemnify and to advance expenses to persons other than Indemnitees. Without limiting the foregoing, the Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation and to any other person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, to the fullest extent of the provisions of this Article VIII with respect to the indemnification and advancement of expenses of Indemnitees under this Article VIII.

 

Section 8.7. Exceptions to Rights of Indemnification and Advancement. Notwithstanding any provision in this Article VIII, the Corporation shall not be obligated by this Article VIII to make any indemnity or advancement in connection with any claim made against an Indemnitee:

 

(a) subject to Section 8.4, for which payment has actually been made to or on behalf of such Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision;

 

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by such Indemnitee of securities of the Corporation within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law;

 

(c) for reimbursement to the Corporation of any bonus or other incentive-based or equity based compensation or of any profits realized by Indemnitee from the sale of securities of the Corporation in each case as required under the Exchange Act; or

 

(d) in connection with any proceeding (or any part of any Proceeding) initiated by such Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by such Indemnitee against the Corporation or its directors, officers, employees or other Indemnitees, unless (i) the Corporation has joined in or, prior to such Proceeding’s initiation, the Board of Directors authorized such Proceeding (or any part of such Proceeding), (ii) the Corporation provides the indemnification or advancement, in its sole discretion, pursuant to the powers vested in the Corporation under applicable law, or (iii) the Proceeding is one to enforce such Indemnitee’s rights under this Article VI, Article VII of the Certificate of Incorporation or any other indemnification, advancement or exculpation rights to which Indemnitee may at any time be entitled under applicable law or any agreement.

 

Section 8.8. Amendments. Any repeal or amendment of this Article VIII by the Board or the stockholders of the Corporation or by changes in applicable law, or the adoption of any other provision of these By-Laws inconsistent with this Article VIII, will, to the extent permitted by applicable law, be prospective only (except to the extent such amendment or change in applicable law permits the Corporation to provide broader indemnification rights to Indemnitees on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision; provided further, that any amendment or repeal of this Article VIII shall require the affirmative vote of the stockholders holding at least 66 2/3% of the voting power of all outstanding shares of capital stock of the Corporation. 

 

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Section 8.9. Certain Definitions. For purposes of this Article VIII, (a) references to “other enterprise” shall include any employee benefit plan; (b) references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; (c) references to “serving at the request of the Corporation” shall include any service that imposes duties on, or involves services by, a person with respect to any employee benefit plan, its participants, or beneficiaries; and (d) a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” for purposes of Section 145 of the DGCL.

 

Section 8.10. Contract Rights. The rights provided to Indemnitees pursuant to this Article VIII shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer, agent or employee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators.

 

Section 8.11. Severability. If any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VIII shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of this Article VIII containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1. Place of Meetings. If the place of any meeting of stockholders, the Board or committee of the Board for which notice is required under these By-Laws is not designated in the notice of such meeting, such meeting shall be held at the principal business office of the Corporation; provided, however, if the Board has, in its sole discretion, determined that a meeting shall not be held at any place, but instead shall be held by means of remote communication pursuant to Section 9.5 hereof, then such meeting shall not be held at any place.

 

Section 9.2. Fixing Record Dates.

 

(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

 

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

Section 9.3. Means of Giving Notice.

 

(a) Notice to Directors. Whenever under applicable law, the Certificate of Incorporation or these By-Laws notice is required to be given to any director, such notice shall be given either (i) in writing and sent by mail, or by a nationally recognized delivery service, (ii) by means of facsimile telecommunication or other form of electronic transmission, or (iii) by oral notice given personally or by telephone. A notice to a director will be deemed given as follows: (i) if given by hand delivery, orally, or by telephone, when actually received by the director, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (iv) if sent by facsimile telecommunication, when sent to the facsimile transmission number for such director appearing on the records of the Corporation, (v) if sent by electronic mail, when sent to the electronic mail address for such director appearing on the records of the Corporation, or (vi) if sent by any other form of electronic transmission, when sent to the address, location or number (as applicable) for such director appearing on the records of the Corporation.

 

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(b) Notice to Stockholders. Whenever under applicable law, the Certificate of Incorporation or these By-Laws notice is required to be given to any stockholder, such notice may be given (i) in writing and sent either by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery, or (ii) by means of a form of electronic transmission consented to by the stockholder, to the extent permitted by, and subject to the conditions set forth in Section 232 of the DGCL. A notice to a stockholder shall be deemed given as follows: (i) if given by hand delivery, when actually received by the stockholder, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the stockholder at the stockholder’s address appearing on the stock ledger of the Corporation, (iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the stockholder at the stockholder’s address appearing on the stock ledger of the Corporation, and (iv) if given by a form of electronic transmission consented to by the stockholder to whom the notice is given and otherwise meeting the requirements set forth above, (A) if by facsimile transmission, when directed to a number at which the stockholder has consented to receive notice, (B) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice, (C) if by a posting on an electronic network together with separate notice to the stockholder of such specified posting, upon the later of (1) such posting and (2) the giving of such separate notice, and (D) if by any other form of electronic transmission, when directed to the stockholder. A stockholder may revoke such stockholder’s consent to receiving notice by means of electronic communication by giving written notice of such revocation to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the Secretary or an Assistant Secretary or to the Corporation’s transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

(c) Electronic Transmission. “Electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process, including but not limited to transmission by telex, facsimile telecommunication, electronic mail, telegram and cablegram.

 

(d) Notice to Stockholders Sharing Same Address. Without limiting the manner by which notice otherwise may be given effectively by the Corporation to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these By-Laws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. A stockholder may revoke such stockholder’s consent by delivering written notice of such revocation to the Corporation. Any stockholder who fails to object in writing to the Corporation within 60 days of having been given written notice by the Corporation of its intention to send such a single written notice shall be deemed to have consented to receiving such single written notice.

 

(e) Exceptions to Notice Requirements. Whenever notice is required to be given, under the DGCL, the Certificate of Incorporation or these By-Laws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting that shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

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Whenever notice is required to be given by the Corporation, under any provision of the DGCL, the Certificate of Incorporation or these By-Laws, to any stockholder to whom (1) notice of two consecutive annual meetings of stockholders and all notices of stockholder meetings or of the taking of action by written consent of stockholders without a meeting to such stockholder during the period between such two consecutive annual meetings, or (2) all, and at least two payments (if sent by first-class mail) of dividends or interest on securities during a 12-month period, have been mailed addressed to such stockholder at such stockholder’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting that shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth such stockholder’s then current address, the requirement that notice be given to such stockholder shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to Section 230(b) of the DGCL. The exception in subsection (1) of the first sentence of this paragraph to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.

 

Section 9.4. Waiver of Notice. Whenever any notice is required to be given under applicable law, the Certificate of Incorporation, or these By-Laws, a written waiver of such notice, signed before or after the date of such meeting by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice shall be deemed equivalent to such required notice. All such waivers shall be kept with the books of the Corporation. Attendance at a meeting shall constitute a waiver of notice of such meeting, except where a person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.

 

Section 9.5. Meeting Attendance via Remote Communication Equipment.

 

(a) Stockholder Meetings. If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxy holders not physically present at a meeting of stockholders may, by means of remote communication:

 

(i) participate in a meeting of stockholders; and

 

(ii) be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and, if entitled to vote, to vote on matters submitted to the applicable stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such votes or other action shall be maintained by the Corporation.

 

(b) Board Meetings. Unless otherwise restricted by applicable law, the Certificate of Incorporation or these By-Laws, members of the Board or any committee thereof may participate in a meeting of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.

 

Section 9.6. Dividends. The Board may from time to time declare, and the Corporation may pay, dividends (payable in cash, property or shares of the Corporation’s capital stock) on the Corporation’s outstanding shares of capital stock, subject to applicable law and the Certificate of Incorporation.

 

Section 9.7. Reserves. The Board may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

  

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Section 9.8. Contracts and Negotiable Instruments. Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-Laws, any contract, bond, deed, lease, mortgage or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officer or officers or other employee or employees of the Corporation as the Board may from time to time authorize. Such authority may be general or confined to specific instances as the Board may determine. The Chairperson of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer or any Vice President may execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation. Subject to any restrictions imposed by the Board, the Chairperson of the Board Chief Executive Officer, President, the Chief Financial Officer, the Treasurer or any Vice President may delegate powers to execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation to other officers or employees of the Corporation under such person’s supervision and authority, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

 

Section 9.9. Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board.

 

Section 9.10. Seal. The Board may adopt a corporate seal, which shall be in such form as the Board determines. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

 

Section 9.11. Books and Records. The books and records of the Corporation may be kept within or outside the State of Delaware at such place or places as may from time to time be designated by the Board.

 

Section 9.12. Surety Bonds. Such officers, employees and agents of the Corporation (if any) as the Chairperson of the Board, Chief Executive Officer, President or the Board may direct, from time to time, shall be bonded for the faithful performance of their duties and for the restoration to the Corporation, in case of their death, resignation, retirement, disqualification or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation, in such amounts and by such surety companies as the Chairperson of the Board, Chief Executive Officer, President or the Board may determine. The premiums on such bonds shall be paid by the Corporation and the bonds so furnished shall be in the custody of the Secretary.

 

Section 9.13. Securities of Other Corporations. Powers of attorney, proxies, waivers of notice of meeting, consents in writing and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairperson of the Board, Chief Executive Officer, President, any Vice President or any officers authorized by the Board. Any such officer, may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities, or to consent in writing, in the name of the Corporation as such holder, to any action by such corporation, and at any such meeting or with respect to any such consent shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed. The Board may from time to time confer like powers upon any other person or persons.

 

Section 9.14. Amendments. The Board shall have the power to adopt, amend, alter or repeal these By-Laws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal these By-Laws. These By-Laws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by applicable law or the Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power (except as otherwise provided in Section 8.7) of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, shall be required for the stockholders to adopt, amend, alter or repeal these By-Laws.

 

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Exhibit 4.3

 

EXECUTION VERSION

 

WARRANT AGREEMENT

 

THIS WARRANT AGREEMENT (this “Agreement”), dated as of May 29, 2020, is by and between Hycroft Mining Holding Corporation f/k/a Mudrick Capital Acquisition Corporation, a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”, also referred to herein as the “Transfer Agent”).

 

WHEREAS, the Company, MUDS Acquisition Sub, Inc. a Delaware corporation and an indirect, wholly-owned subsidiary of the Company, and Hycroft Mining Corporation, a Delaware corporation (“Seller”), entered into that certain Purchase Agreement (the “Purchase Agreement”), dated as of January 13, 2020 and amended on February 26, 2020, whereby, subject to the approval of the Company’s stockholders at the special meeting of the stockholders of the Company, the Company will, directly or indirectly, purchase and assume (as applicable) from Seller, and Seller will sell and transfer (as applicable) to the Company, directly or indirectly, substantially all of the assets and substantially all of the liabilities of Seller (such transaction, the “Business Combination”);

 

WHEREAS, the Company entered into those certain Subscription/Backstop Agreements, dated as of January 13, 2020 and as amended or otherwise modified, with certain persons or entities (such persons or entities, or their successors or permitted assigns, as set forth on Exhibit C hereto, the “Warrantholders”), pursuant to which the Company agreed to issue to the Warrantholders an aggregate of 3,249,999 warrants (the “Warrants”) to purchase one (1) share of Class A common stock of the Company (the “Common Stock”), bearing the Legend set forth in Exhibit B hereto;

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants;

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

 

 

 

 

2. Warrants.

 

2.1 Form of Warrant. Each Warrant shall be issued in registered form only, and, if a physical certificate (a “Physical Certificate”) is issued, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Company’s board of directors (the “Board”), President, Chief Executive Officer, Chief Financial Officer, Secretary or other principal officer of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance. All of the Warrants shall initially be represented by one (1) or more book-entry certificates (each, a “Book-Entry Warrant Certificate”).

 

2.2 Effect of Countersignature. If a physical certificate is issued, unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant certificate shall be invalid and of no effect and may not be exercised by the holder thereof.

 

2.3 Registration.

 

2.3.1 Warrant Register. The Warrant Agent shall maintain books (the “Warrant Register”) for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants in book entry form, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.

 

2.3.2 Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant is registered in the Warrant Register (the “Registered Holder”) as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on a Physical Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

2.4 Transfer of Warrants. So long as the Warrants are held by the Warrantholders or any of their Permitted Transferees (as defined below), the Warrants: (i) may be exercised for cash or on a “cashless basis,” pursuant to Section 3.3.1(b) hereof, and (ii) may not be transferred, assigned or sold until thirty (30) days after the consummation of the Business Combination; provided, however, that in the case of (ii), the Warrants, and any shares of Common Stock held by a Warrantholder or any Permitted Transferees of such Warrantholder, as applicable, and issued upon exercise of the Warrants may be transferred by the holders thereof:

 

(a) to the Company’s officers or directors, any affiliate or family member of any of the Company’s officers or directors, any affiliate of such Warrantholder or to any holders of equity interests of such Warrantholder or any affiliates of such Warrantholder;

 

(b) in the case of an individual, by gift to a member of such individual’s immediate family or to a trust, the beneficiary of which is a member of such individual’s immediate family, an affiliate of such individual or to a charitable organization;

 

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(c) in the case of an individual, by virtue of the laws of descent and distribution upon death of such person;

 

(d) in the case of an individual, pursuant to a qualified domestic relations order;

 

(e) by virtue of the laws of the state of Delaware upon dissolution of such Warrantholder; or

 

(f) in the event that, following the consummation of the Business Combination, the Company completes a liquidation, a merger, capital stock exchange, reorganization or other similar transaction that results in all of the holders of the Company’s equity securities having the right to exchange their shares of Common Stock for cash, securities or other property; provided, however, that, in the case of clauses (a) through (e), these transferees (the “Permitted Transferees”) shall first enter into a written agreement with the Company agreeing to be bound by the transfer restrictions set forth in this Agreement.

 

3. Terms and Exercise of Warrants.

 

3.1 Warrant Price. Each Warrant shall entitle the Registered Holder thereof, subject to the provisions of such Warrant and of this Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $11.50 per share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1. The term “Warrant Price” as used in this Agreement shall mean the price per share at which shares of Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole discretion may lower the Warrant Price at any time prior to the Expiration Date (as defined below) for a period of not less than twenty (20) Business Days, provided, that the Company shall provide at least twenty (20) days prior written notice of such reduction to Registered Holders of the Warrants and, provided, further, that any such reduction shall be identical among all of the Warrants.

 

3.2 Duration of Warrants. A Warrant may be exercised only during the period (the “Exercise Period”) commencing on the date that is thirty (30) days after the date hereof and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years after the date hereof and (y) the Redemption Date (as defined below) as provided in Section 6.2 hereof (the “Expiration Date”); provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable conditions, as set forth in Section 3.3.2 hereof with respect to an effective registration statement. Except with respect to the right to receive the Redemption Price (as defined below), in the event of a redemption (as set forth in Section 6 hereof), each outstanding Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at 5:00 p.m. New York City time on the Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by delaying the Expiration Date; provided, that the Company shall provide at least twenty (20) days prior written notice of any such extension to Registered Holders of the Warrants and, provided, further, that any such extension shall be identical in duration among all the Warrants.

 

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3.3 Exercise of Warrants.

 

3.3.1 Payment. Subject to the provisions of the Warrant and this Agreement, a Warrant may be exercised by the Registered Holder thereof by delivering to the Warrant Agent at its corporate trust department (i) the Physical Certificate evidencing the Warrants to be exercised, or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised (the “Book-Entry Warrants”) on the records of the Depositary to an account of the Warrant Agent at the Depositary designated for such purposes in writing by the Warrant Agent to the Depositary from time to time, (ii) an election to purchase (“Election to Purchase”) shares of Common Stock pursuant to the exercise of a Warrant, properly completed and executed by the Registered Holder on the reverse of the Physical Certificate or, in the case of a Book-Entry Warrant Certificate, properly delivered by the Depositary or an institution that has an account with the Depositary (each such institution, with respect to a Warrant in its account, a “Participant”) in accordance with the Depositary’s procedures, and (iii) payment in full of the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for the shares of Common Stock and the issuance of such shares of Common Stock, as follows:

 

(a) by certified check payable to the order of the Warrant Agent or by wire transfer;

 

(b) in the event of a redemption pursuant to Section 6 hereof in which the Board has elected to require all holders of the Warrants to exercise the Warrants on a “cashless basis,” by surrendering such Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value”, as defined in this Section 3.3.1(b) by (y) the Fair Market Value. Solely for purposes of this Section 3.3.1(b), the “Fair Market Value” shall mean the average last sale price of the Common Stock for the ten (10) trading days ending on the third (3rd) trading day prior to the date on which the notice of redemption is sent to the holders of the Warrants, pursuant to Section 6 hereof;

 

(c) with respect to any Warrant, so long as such Warrant is held by a Warrantholder or a Permitted Transferee, as applicable, by surrendering the Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value”, as defined in this Section 3.3.1(c), by (y) the Fair Market Value. Solely for purposes of this Section 3.3.1(c), the “Fair Market Value” shall mean the average reported last sale price of the Common Stock for the ten (10) trading days ending on the third trading day prior to the date on which notice of exercise of the Warrant is sent to the Warrant Agent; or

 

(d) as provided in Section 7.4 hereof.

 

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3.3.2 Issuance of Shares of Common Stock on Exercise. As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the Warrant Price (if payment is pursuant to Section 3.3.1(a)), the Company shall issue to the Registered Holder of such Warrant a book-entry position or certificate, as applicable, for the number of full shares of Common Stock to which he, she or it is entitled, registered in such name or names as may be directed by him, her or it, and if such Warrant shall not have been exercised in full, a new book-entry position or countersigned Warrant, as applicable, for the number of shares of Common Stock as to which such Warrant shall not have been exercised. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a notation shall be made to the records maintained by the Depositary, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of the Warrants remaining after such exercise. Notwithstanding the foregoing, the Company shall not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Warrant and shall have no obligation to settle such Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the Warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations under Section 7.4 hereof. No Warrant shall be exercisable and the Company shall not be obligated to issue shares of Common Stock upon exercise of a Warrant unless the Common Stock issuable upon such Warrant exercise has been registered, qualified or deemed to be exempt from registration or qualification under the securities laws of the state of residence of the Registered Holder of the Warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In no event will the Company be required to net cash settle the Warrant exercise. If, by reason of any exercise of Warrants on a “cashless basis,” the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share of Common Stock, the Company shall round down to the nearest whole number, the number of shares of Common Stock to be issued to such holder.

  

3.3.3 Valid Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and non-assessable.

 

3.3.4 Date of Issuance. Each person in whose name any book-entry position or certificate, as applicable, for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares of Common Stock on the date on which the Warrant, or book-entry position representing such Warrant, was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate in the case of a certificated Warrant, except that, if the date of such surrender and payment is a date when the share transfer books of the Company or book-entry system of the Warrant Agent are closed, such person shall be deemed to have become the holder of such shares of Common Stock at the close of business on the next succeeding date on which the share transfer books or book-entry system are open.

 

3.3.5 Maximum Percentage. A holder of a Warrant may notify the Company in writing in the event it elects to be subject to the provisions contained in this subsection 3.3.5; however, no holder of a Warrant shall be subject to this subsection 3.3.5 unless he, she or it makes such election. If the election is made by a holder, the Warrant Agent shall not effect the exercise of the holder’s Warrant, and such holder shall not have the right to exercise such Warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the Warrant Agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by the holder)(the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock that would be issuable upon (x) exercise of the remaining, unexercised portion of the Warrant beneficially owned by such person and its affiliates and (y) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of the Warrant, in determining the number of outstanding shares of Common Stock, the holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent annual report on Form 10-K, quarterly report on Form 10-Q, current report on Form 8-K or other public filing with the Commission as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written request of the holder of the Warrant, the Company shall, within two (2) Business Days, confirm orally and in writing to such holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of equity securities of the Company by the holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the holder of a Warrant may from time to time increase or decrease the Maximum Percentage applicable to such holder to any other percentage specified in such notice; provided, however, that any such increase shall not be effective until the sixty-first (61st) day after such notice is delivered to the Company.

 

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4. Adjustments.

 

4.1 Stock Dividends.

 

4.1.1 Split-Ups. If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of the Common Stock entitling holders to purchase shares of Common Stock at a price less than the “Fair Market Value” (as defined below) shall be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for the Common Stock) and (ii) one (1) minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the Fair Market Value. For purposes of this subsection 4.1.1, (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there shall be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) “Fair Market Value” means the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

 

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4.1.2 Extraordinary Dividends. If the Company, at any time while the Warrants are outstanding and unexpired, shall pay a dividend or make a distribution in cash, securities or other assets to the holders of Common Stock on account of such shares of Common Stock (or other shares of the Company’s capital stock into which the Warrants are convertible), other than (a) as described in Section 4.1.1 hereof or (b) Ordinary Cash Dividends (as defined below) (any such non-excluded event being referred to herein as an “Extraordinary Dividend”), then the Warrant Price shall be decreased, effective immediately after the effective date of such Extraordinary Dividend, by the amount of cash and/or the fair market value (as determined by the Board, in good faith) of any securities or other assets paid on each share of Common Stock in respect of such Extraordinary Dividend. For purposes of this Section 4.1.2, “Ordinary Cash Dividends” means any cash dividend or cash distribution which, when combined on a per share basis, with the per share amounts of all other cash dividends and cash distributions paid on the Common Stock during the 365-day period ending on the date of declaration of such dividend or distribution (as adjusted to appropriately reflect any of the events referred to in other subsections of this Section 4 and excluding cash dividends or cash distributions that resulted in an adjustment to the Warrant Price or to the number of shares of Common Stock issuable on exercise of each Warrant) does not exceed $0.50.

 

4.2 Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 4.6 hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.

 

4.3 Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in Section 4.1.1 or Section 4.2 hereof, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

 

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4.4 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than a change under Section 4.1.1, or Section 4.1.2 or Section 4.2 hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another entity or conversion of the Company as another entity (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the Warrants shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event (the “Alternative Issuance” ); provided, however, that in connection with the closing of any such consolidation, merger, sale or conveyance, the successor or purchasing entity shall execute an amendment hereto with the Warrant Agent providing for delivery of such Alternative Issuance; provided, further, that (i) if the holders of Common Stock were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets constituting the Alternative Issuance for which each Warrant shall become exercisable shall be deemed to be the weighted average of the kind and amount received per share by the holders of Common Stock in such consolidation or merger that affirmatively make such election, and (ii) if a tender, exchange or redemption offer shall have been made to and accepted by the holders of Common Stock (other than a tender, exchange or redemption offer made by the Company in connection with redemption rights held by stockholders of the Company as provided for in the Company’s amended and restated certificate of incorporation or as a result of the repurchase of shares of Common Stock by the Company in connection with the Business Combination) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor rule)) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act (or any successor rule)) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act (or any successor rule)) more than 50% of the outstanding shares of Common Stock, the holder of a Warrant shall be entitled to receive as the Alternative Issuance, the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 4; provided, further, that if less than 70% of the consideration receivable by the holders of Common Stock in the applicable event is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the Registered Holder properly exercises the Warrant within thirty (30) days following the public disclosure of the consummation of such applicable event by the Company pursuant to a Current Report on Form 8-K filed with the Commission, the Warrant Price shall be reduced by an amount (in dollars) (but in no event less than zero) equal to the difference of (i) the Warrant Price in effect prior to such reduction minus (ii) (A) the Per Share Consideration (as defined below) minus (B) the Black-Scholes Warrant Value (as defined below). The “Black-Scholes Warrant Value” means the value of a Warrant immediately prior to the consummation of the applicable event based on the Black-Scholes Warrant Model for a Capped American Call on Bloomberg Financial Markets (“Bloomberg”). For purposes of calculating such amount, (1) Section 6 of this Agreement shall be taken into account, (2) the price of each share of Common Stock shall be the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable event, (3) the assumed volatility shall be the 90 day volatility obtained from the HVT function on Bloomberg determined as of the trading day immediately prior to the day of the announcement of the applicable event, and (4) the assumed risk-free interest rate shall correspond to the U.S. Treasury rate for a period equal to the remaining term of the Warrant. “Per Share Consideration” means (i) if the consideration paid to holders of the Common Stock consists exclusively of cash, the amount of such cash per share of Common Stock, and (ii) in all other cases, the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable event. If any reclassification or reorganization also results in a change in shares of Common Stock covered by Section 4.1.1 hereof, then such adjustment shall be made pursuant to Section 4.1.1 or Section 4.2, Section 4.3 hereof and this Section 4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers. In no event will the Warrant Price be reduced to less than the par value per share issuable upon exercise of the Warrant.

 

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4.5 Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares of Common Stock issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Section 4.1, Section 4.2, Section 4.3 or Section 4.4 hereof, the Company shall give written notice of the occurrence of such event to each holder of a Warrant, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

4.6 No Fractional Shares. Notwithstanding any provision contained in this Agreement to the contrary, the Company shall not issue fractional shares of Common Stock upon the exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to such holder.

 

4.7 Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares of Common Stock as is stated in the Warrants initially issued pursuant to this Agreement; provided, however, that the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

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4.8 Other Events. In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 4 are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid an adverse impact on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case, the Company shall appoint a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing, which shall give its opinion as to whether or not any adjustment to the rights represented by the Warrants is necessary to effectuate the intent and purpose of this Section 4 and, if they determine that an adjustment is necessary, the terms of such adjustment. The Company shall adjust the terms of the Warrants in a manner that is consistent with any adjustment recommended in such opinion.

 

5. Transfer and Exchange of Warrants.

 

5.1 Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, in the case of certificated Warrants, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. In the case of certificated Warrants, the Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

 

5.2 Procedure for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered Holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant Certificate or Physical Certificate, each Book-Entry Warrant Certificate and Physical Certificate may be transferred only in whole and only to The Depository Trust Company (the “Depositary”), to another nominee of the Depositary, to a successor depository, or to a nominee of a successor depository; provided, further, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend (as in the case of the Warrants), the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange thereof until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.

 

5.3 Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result in the issuance of a warrant certificate or book-entry position for a fraction of a warrant.

 

5.4 Service Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.

 

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5.5 Warrant Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

 

6. Redemption.

 

6.1 Redemption. Not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the Registered Holders of the Warrants, as described in Section 6.2 hereof, at the price of $0.01 per Warrant (the “Redemption Price”), provided, that the last sales price of the Common Stock reported has been at least $18.00 per share (subject to adjustment in compliance with Section 4 hereof), on each of twenty (20) trading days within the thirty (30) trading-day period ending on the third Business Day prior to the date on which notice of the redemption is given and provided that there is an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the thirty (30)-day Redemption Period (as defined in Section 6.2 hereof) or the Company has elected to require the exercise of the Warrants on a “cashless basis” pursuant to Section 3.3.1 hereof.

 

6.2 Date Fixed for, and Notice of, Redemption. In the event that the Company elects to redeem all of the Warrants, the Company shall fix a date for the redemption (the “Redemption Date”). Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (the “30-day Redemption Period”) to the Registered Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Registered Holder received such notice.

 

6.3 Exercise After Notice of Redemption. The Warrants may be exercised, for cash (or on a “cashless basis” in accordance with Section 3.3.1(b) of this Agreement) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2 hereof and prior to the Redemption Date. In the event that the Company determines to require all holders of Warrants to exercise their Warrants on a “cashless basis” pursuant to Section 3.3.1 hereof, the notice of redemption shall contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the Warrants, including the “Fair Market Value” (as such term is defined in Section 3.3.1(b) hereof) in such case. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

 

7. Other Provisions Relating to Rights of Holders of Warrants.

 

7.1 No Rights as Stockholder. A Warrant does not entitle the Registered Holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.

 

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7.2 Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

 

7.3 Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

 

7.4 Registration of Common Stock. The Company agrees that as soon as practicable, but in no event later than fifteen (15) Business Days after the closing of the Business Combination, it shall use its best efforts to file with the Commission a registration statement for the registration, under the Securities Act, of the shares of Common Stock issuable upon exercise of the Warrants. The Company shall use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of this Agreement. If any such registration statement has not been declared effective by the 60th Business Day following the closing of the Business Combination, holders of the Warrants shall have the right, during the period beginning on the 61st Business Day after the closing of the Business Combination and ending upon such registration statement being declared effective by the Commission, and during any other period when the Company shall fail to have maintained an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants, to exercise such Warrants on a “cashless basis,” by exchanging the Warrants (in accordance with Section 3(a)(9) of the Securities Act (or any successor rule) or another exemption) for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value” (as defined below) by (y) the Fair Market Value. Solely for purposes of this Section 7.4, “Fair Market Value” shall mean the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the date that notice of exercise is received by the Warrant Agent from the holder of such Warrants or its securities broker or intermediary. The date that notice of cashless exercise is received by the Warrant Agent shall be conclusively determined by the Warrant Agent. For the avoidance of any doubt, unless and until all of the Warrants have been exercised or have expired, the Company shall continue to be obligated to comply with its registration obligations under the first three sentences of this Section 7.4.

 

8. Concerning the Warrant Agent and Other Matters.

 

8.1 Payment of Taxes. The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of the Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares of Common Stock.

 

12  

 

 

8.2 Resignation, Consolidation, or Merger of Warrant Agent.

 

8.2.1 Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

8.2.2 Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the Transfer Agent for the Common Stock not later than the effective date of any such appointment.

 

8.2.3 Merger or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement without any further act.

 

8.3 Fees and Expenses of Warrant Agent.

 

8.3.1 Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and shall, pursuant to its obligations under this Agreement, reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

 

13  

 

 

8.3.2 Further Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.

 

8.4 Liability of Warrant Agent.

 

8.4.1 Reliance on Company Statement. Whenever in the performance of its duties under this Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the Chief Executive Officer, Chief Financial Officer, President, Executive Vice President, Vice President, Secretary or Chairman of the Board and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.

 

8.4.2 Indemnity. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and hold it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the Warrant Agent’s gross negligence, willful misconduct or bad faith.

 

8.4.3 Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock shall, when issued, be valid and fully paid and non-assessable.

 

8.5 Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of the Warrants.

 

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8.6 Waiver. The Warrant Agent has no right of set-off or any other right, title, interest or claim of any kind (“Claim”) in, or to any distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of February 7, 2018, by and between the Company and the Warrant Agent as trustee thereunder) and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever. The Warrant Agent hereby waives any and all Claims against the Trust Account and any and all rights to seek access to the Trust Account.

 

9. Miscellaneous Provisions.

 

9.1 Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

 

9.2 Notices. Any notice, statement or demand authorized by this Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

Hycroft Mining Holding Corporation

8181 E. Tufts Ave, Suite 510

Denver, CO 8023710022

Attention: Corporate Secretary

 

Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, NY 10004

Attention: Compliance Department

 

9.3 Applicable Law. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

 

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9.4 Persons Having Rights under this Agreement. Nothing in this Agreement shall be construed to confer upon, or give to, any person or corporation other than the parties hereto and the Registered Holders of the Warrants any right, remedy, or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the Registered Holders of the Warrants.

 

9.5 Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent may require any such holder to submit such holder’s Warrant for inspection by the Warrant Agent.

 

9.6 Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

9.7 Effect of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation thereof.

 

9.8 Amendments. This Agreement may be amended by the parties hereto without the consent of any Registered Holder (i) for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the Registered Holders, and (ii) to provide for the delivery of Alternative Issuance pursuant to Section 4.4 hereof. All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period and any amendment to the terms of the Warrants shall require the vote or written consent of the Registered Holders of 65% of the then outstanding Warrants. Notwithstanding the foregoing, the Company may lower the Warrant Price or extend the duration of the Exercise Period pursuant to Section 3.1 and Section 3.2 hereof, respectively, without the consent of the Registered Holders.

 

9.9 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

[Signature Page Follows]

 

16  

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

  HYCROFT MINING HOLDING CORPORATION
   
  By: /s/ Jason Mudrick
  Name: Jason Mudrick
  Title: Chief Executive Officer
   
  CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent
   
  By: /s/ Margaret B. Lloyd
  Name: Margaret B. Lloyd
  Title: Vice President

 

[Signature Page to Warrant Agreement]

 

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EXHIBIT A

 

[Form of Warrant Certificate]

 

[FACE]

 

Number

 

Warrants

 

THIS WARRANT SHALL BE VOID IF NOT EXERCISED PRIOR TO

THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR

IN THE WARRANT AGREEMENT DESCRIBED BELOW

 

HYCROFT MINING HOLDING CORPORATION

Incorporated Under the Laws of the State of Delaware

 

CUSIP 44862P 117

 

Warrant Certificate

 

This Warrant Certificate certifies that [●], or registered assigns, is the registered holder of warrant(s) evidenced hereby (the “Warrants” and each, a “Warrant”) to purchase shares of Class A common stock, $0.0001 par value per share (“Common Stock”), of Hycroft Mining Holding Corporation, a Delaware corporation (the “Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive from the Company that number of fully paid and non-assessable shares of Common Stock as set forth below, at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant Agreement, payable in lawful money (or through “cashless exercise” as provided for in the Warrant Agreement) of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.

 

Each Warrant is initially exercisable for one (1) fully paid and non-assessable share of Common Stock. No fractional shares will be issued upon exercise of any Warrant. If, upon the exercise of Warrants, a holder would be entitled to receive a fractional interest in a share of Common Stock, the Company will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the Warrant holder. The number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

 

The initial Exercise Price per share of Common Stock for any Warrant is equal to $11.50 per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

 

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Subject to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised by the end of such Exercise Period, such Warrants shall become void.

 

Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.

 

This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.

 

This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles thereof.

 

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  HYCROFT MINING HOLDING CORPORATION
   
  By:                
  Name:
  Title:
   
  CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent
   
  By:  
  Name:
  Title:

 

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[Form of Warrant Certificate]

 

[Reverse]

 

The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of [●], 2020 (the “Warrant Agreement”), duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words “holders” or “holder” meaning the Registered Holders or Registered Holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.

 

Warrants may be exercised at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise” as provided for in the Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.

 

Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and (ii) a prospectus thereunder relating to the shares of Common Stock is current, except through “cashless exercise” as provided for in the Warrant Agreement.

 

The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Common Stock issuable upon exercise of the Warrants set forth on the face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive a fractional interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the holder of the Warrant. Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.

 

Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.

 

The Company and the Warrant Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.

 

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Election to Purchase

  

(To Be Executed Upon Exercise of Warrant)

 

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment for such shares of Common Stock to the order of Hycroft Mining Holding Corporation (the “Company”) in the amount of $[●] in accordance with the terms hereof. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of [●], whose address is [●] and that such shares of Common Stock be delivered to [●] whose address is [●]. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of [●], whose address is [●] and that such Warrant Certificate be delivered to [●], whose address is [●].

 

In the event that the Warrant has been called for redemption by the Company pursuant to Section 6 of the Warrant Agreement and the Company has required cashless exercise pursuant to Section 6.3 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 3.3.1(b) and Section 6.3 of the Warrant Agreement.

 

In the event that the Warrant is to be exercised on a “cashless” basis pursuant to Section 3.3.1(c) of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 3.3.1(c) of the Warrant Agreement.

 

In the event that the Warrant is to be exercised on a “cashless” basis pursuant to Section 7.4 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.

 

In the event that the Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares of Common Stock that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which allows for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive shares of Common Stock. If said number of shares is less than all of the shares of Common Stock purchasable hereunder (after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of [●], whose address is [●] and that such Warrant Certificate be delivered to [●], whose address is [●].

 

[Signature Page Follows]

 

22  

 

 

Date:         , 20

 

 

   
  (Signature)
   
   
   
   
  (Address)
   
   
   
  (Tax Identification Number)

 

Signature Guaranteed:
 
   

 

 

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE)).

 

23  

 

 

EXHIBIT B

 

LEGEND

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR “BLUE SKY” LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR ANY APPLICABLE “BLUE SKY” LAWS. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED PRIOR TO THE DATE THAT IS THIRTY (30) DAYS AFTER THE DATE UPON WHICH THE ISSUER OF SUCH SECURITIES (THE “COMPANY”) COMPLETES THE BUSINESS COMBINATION (AS DEFINED IN THAT CERTAIN WARRANT AGREEMENT (THE “WARRANT AGREEMENT”), DATED AS OF MAY 29, 2020 BY AND AMONG THE COMPANY AND CONTINENTAL STOCK TRANSFER & TRUST COMPANY) EXCEPT TO A PERMITTED TRANSFEREE (AS DEFINED IN SECTION 2 OF THE WARRANT AGREEMENT) WHO AGREES IN WRITING WITH THE COMPANY TO BE SUBJECT TO SUCH TRANSFER PROVISIONS.

 

SECURITIES EVIDENCED BY THIS CERTIFICATE AND SHARES OF COMMON STOCK OF THE COMPANY ISSUED UPON EXERCISE OF SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER, AND ARE ENTITLED TO REGISTRATION RIGHTS, AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT (THE “AGREEMENT”) DATED AS OF MAY 29, 2020 BY AND AMONG THE COMPANY AND THE OTHER SIGNATORIES PARTY THERETO. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, CONTRACTED TO, PLEDGED, GRANTED ANY OPTION TO PURCHASE, SOLD SHORT OR OTHERWISE DISPOSED OF DURING THE TERM OF SUCH TRANSFER RESTRICTIONS EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT. A COPY OF THE AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.

 

24  

 

Exhibit 10.1

 

Execution Version

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

 

DATED AS OF MAY 29, 2020

 

 

Between:

 

 

HYCROFT MINING HOLDING CORPORATION,
as Borrower

 

 

- and -

 

 

MUDS ACQUISITION SUB, INC., MUDS HOLDCO, INC., HYCROFT RESOURCES & DEVELOPMENT,

LLC and ALLIED VGH LLC as Guarantors

 

 

- and -

 

 

SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP,
as Lender

 

- and -

 

SPROTT RESOURCE LENDING CORP.
as Arranger

 

 

- ii -

 

TABLE OF CONTENTS

 

Article 1 INTERPRETATION - 2 -
  Definitions - 2 -
  Interpretation Not Affected by Headings - 17 -
  Statute References - 17 -
  Permitted Encumbrance - 17 -
  Currency - 18 -
  Use of the Words “Best Knowledge”, "continuing" and "indebtedness" - 18 -
  Non-Business Days - 18 -
  Governing Law - 18 -
  Paramountcy - 19 -
  Enurement - 19 -
  Interpretation - 19 -
  Time of Essence - 19 -
  Accounting Terms - 19 -
  Schedules - 19 -
Article 2 THE FACILITy - 19 -
  The Facility - 19 -
  Non-Revolvement - 20 -
  Notice of Borrowing - 20 -
  Term - 20 -
  Use of Proceeds - 20 -
  Interest - 21 -
  Additional Interest - 21 -
  Original Issue Discount - 22 -
  Computations - 22 -
  No Set-off - 23 -
  Time and Place of Payments - 23 -
  Record of Payments - 23 -
Article 3 SHARE PURCHASE RIGHT - 23 -
  Partner Alignment Shares - 23 -
Article 4 rePayment / prePayment - 24 -
  Principal Repayments - 24 -
  Voluntary Prepayment - 24 -
  Mandatory Prepayments of the Facility - 24 -
  Prepayment Premium - 25 -
Article 5 SECURITY - 26 -
  Security Documents - 26 -
  Registration of the Security - 26 -
  After Acquired Property and Further Assurances - 26 -
Article 6 CONDITIONS precedent to advances - 26 -
  Conditions Precedent to the First Tranche Advance - 26 -
  Waiver - 30 -
  Conditions Precedent to the Second Tranche Advance - 30 -
  Waiver - 32 -
  Conditions Precedent to Third Tranche Advances - 32 -
  Waiver - 34 -

 

- iii -

 

Article 7 REPRESENTATIONS AND WARRANTIES - 34 -
  Representations and Warranties of the Credit Parties - 34 -
  Acknowledgement - 41 -
  Survival and Inclusion - 41 -
  Representations and Warranties of the Lender - 42 -
Article 8 COVENANTS OF THE borrower - 42 -
  General Covenants - 42 -
  Negative Covenants of the Credit Parties - 46 -
  Continued Listing - 47 -
  To Pay Lender’s Fees and Expenses - 48 -
  Comply with Applicable Disclosure Obligations - 48 -
  To Pay Additional Amounts - 48 -
  Further Assurances - 49 -
  Lender May Perform Covenants - 49 -
Article 9 DEFAULT AND ENFORCEMENT - 50 -
  Events of Default - 50 -
  Acceleration on Default - 52 -
  Waiver of Default - 52 -
  Enforcement by the Lender - 53 -
  Application of Moneys - 53 -
  Persons Dealing with Lender - 53 -
  Lender Appointed Attorney - 53 -
  Remedies Cumulative - 53 -
Article 10 BREAK FEE - 54 -
  Break Fee - 54 -
Article 11 NOTICES - 54 -
  Notice to the Borrower - 54 -
  Notice to the Lender or the Arranger - 54 -
  Waiver of Notice - 55 -
Article 12 indemnities - 55 -
  General Indemnity - 55 -
  Environmental Indemnity - 55 -
  Action by Lender to Protect Interests - 56 -
Article 13 miscellaneous - 56 -
  Amendments and Waivers - 56 -
  No Waiver; Remedies Cumulative - 56 -
  Survival - 56 -
  Benefits of Agreement - 57 -
  Binding Effect; Assignment; Syndication - 57 -
  Maximum Return - 57 -
  Judgment Currency - 58 -
  Entire Agreement - 58 -
  Joint and Several - 58 -
  Payments Set Aside - 59 -
  Severability - 59 -
  Counterparts and facsimile - 59 -
  Confidentiality - 59 -
  Accounting. - 60 -
  Amendment and Restatement - 60 -

 

- iv -

 

SCHEDULES:

 

Schedule A - Project
Schedule B - Security Documents
Schedule C - Shares and ownership interests
Schedule D - Material contracts
Schedule E - Authorizations to be obtained on or prior to Advances
Schedule F - Compliance Certificate
Schedule G - Form of Sprott Royalty
Schedule H - Interest of Directors and Officers
Schedule I - Acquisition Transaction & Note Exchange Agreement
Schedule J - Purchase Agreement

 

 

amended and restated CREDIT AGREEMENT

 

THIS AGREEMENT made as of the 29th day of May, 2020

 

BETWEEN:

 

HYCROFT MINING HOLDING CORPORATION, a corporation organized and existing under the laws of Delaware

 

(hereinafter referred to as the “Borrower”)

 

AND:

 

MUDS HOLDCO, INC., a corporation organized and existing under the laws of Delaware

 

(hereinafter referred to as “MUDS Holdco”)

 

MUDS ACQUISITION SUB, INC., a corporation organized and existing under the laws of Delaware

 

(hereinafter referred to as “MUDS Acquisition”)

 

HYCROFT RESOURCES & DEVELOPMENT, LLC, a limited liability company organized and existing under the laws of Delaware

 

(hereinafter referred to as “Hycroft Resources”)

 

ALLIED VGH LLC, a limited liability company organized and existing under the laws of Delaware

 

(hereinafter referred to as “Allied VGH”, and together with MUDS Holdco, MUDS Acquisition and Hycroft Resources, the “Original Guarantors”)

 

AND:

 

SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP, a limited partnership organized and existing under the laws of the Province of Ontario

 

(hereinafter referred to as the “Lender”)

 

AND:

 

SPROTT RESOURCE LENDING CORP.

 

(hereinafter referred to as the “Arranger”)

 

 

- 2 -

 

WHEREAS Hycroft Mining Corporation (as borrower) (the “Original Hycroft Borrower”), Hycroft Resources (as guarantor), Allied VGH (as guarantor), the Lender and the Arranger entered into a credit agreement dated as of October 4, 2019, as amended by the first amendment to credit agreement dated as of January 18, 2020 (collectively, the “Original Hycroft Credit Agreement”) pursuant to which the Arranger arranged and the Lender agreed to establish a senior secured credit facility in favour of the Original Hycroft Borrower in the principal amount of up to $110,000,000, on and subject to the terms and conditions therein set forth;

 

AND WHEREAS the Borrower has agreed to assume all obligations of the Original Hycroft Borrower under the Original Hycroft Credit Agreement and to become the new borrower under this Agreement pursuant to the Borrower Assignment and Transfer Agreement;

 

AND WHEREAS the Borrower and the Guarantors have requested certain amendments to the Original Hycroft Credit Agreement;

 

AND WHEREAS the Borrower, the Guarantors, the Lender and the Arranger have agreed to amend and restate the Original Hycroft Credit Agreement on the terms and conditions set out in this Agreement.

 

NOW THEREFORE THIS CREDIT AGREEMENT WITNESSES that for good and valuable consideration, the receipt and sufficiency of which are acknowledged by each of the parties, the parties agree as follows:

 

Article 1
INTERPRETATION

 

Definitions

 

1.1 In this Agreement, unless there is something in the subject matter or context inconsistent therewith:

 

‎”1.25 Lien Notes” has the meaning attributed to such term in paragraph (e) as of the definition of Existing Debt Facilities;

 

1.5 Lien Notes” has the meaning attributed to such term in paragraph (c) as of the definition of Existing Debt Facilities;

 

Acquisition Transaction” means the acquisition from the Original Hycroft Borrower ‎of (i) all of the issued and outstanding Equity ‎Interests of Allied Nevada Gold Holdings LLC, a Nevada limited liability company, Allied VGH, a Delaware limited liability company ‎and Allied Nevada Delaware Holdings LLC, a Delaware limited liability company and (ii) the Transferred Assets (as ‎defined in the Purchase Agreement) by the Borrower pursuant to the Purchase Agreement, ‎all as described in Schedule I hereto; ‎

 

Additional Interest” has the meaning attributed to such term in Section 2.9;

 

Advances” means collectively, the advances of the Facility as contemplated herein, comprised of the First Tranche advance, the Second Tranche advance and the Third Tranche advance(s), and “Advance” means any one of them;

 

Affiliate” has the meaning given thereto in the Securities Act;

 

Agreement”, “this Agreement”, “hereto”, “hereby”, “hereunder”, “hereof”, herein” and similar expressions refer to this credit agreement, as amended, modified, supplemented, restated or replaced from time to time, and not to any particular Article, Section, subsection, paragraph, clause, subdivision or other portion hereof, and include any and every supplemental agreement; and the expressions “Article”, “Section”, “subsection” and “paragraph” followed by a number mean and refer to the specified Article, Section, subsection or paragraph of this Agreement;

 

 

- 3 -

 

Amount” or “Amount Payable” includes the principal amount advanced hereunder and any other amount payable hereunder or under any of the Facility Documents;

 

Anti-Corruption Laws” has the meaning attributed to such term in Section 7.1(pp);

 

Applicable Law” means, at any time, with respect to any Person, property, transaction, event or other matter, as applicable, all laws, rules, statutes, regulations, treaties, orders, judgments and decrees, and all official requests, directives, rules, guidelines, orders, policies, practices and other requirements of any Governmental Authority having the force of law relating or applicable at such time to such Person, property, transaction, event or other matter, and also includes any interpretation thereof by any Person having jurisdiction over it or charged with its administration or interpretation;

 

Applicable Securities Legislation” means the Securities Act, the Exchange Act and all other securities laws and the respective rules and regulations under such laws together with applicable published fee schedules, prescribed forms, policy statements, national or multilateral instruments, orders, blanket rulings and other applicable regulatory instruments of the SEC and the securities regulatory authorities in any other jurisdictions as may be agreed to between the Borrower and the Lender, in each case applicable to the Borrower and having the force of law;

 

Arranger” means Sprott Resource Lending Corp.;

 

Availability Period” means:

 

(a) in respect of the First Tranche, the period commencing on the date of this Agreement and ending on May 29, 2020;

 

(b) in respect of the Second Tranche, the period commencing on the date of this Agreement and ending on May 29, 2020; and

 

(c) in respect of the Third Tranche, the period commencing on the First Tranche Closing Date and ending on December 31, 2020,

 

or such later date as the Lender may determine in its sole and absolute discretion, by written notice to the Borrower;

 

Authorization” means any authorization, consent, approval, resolution, licence, permit, concession, exemption, filing, notarization or registration;

 

BNS Facility” has the meaning attributed to such term in paragraph (a) as of the definition of Existing Debt Facilities;

 

Borrower Assignment and Transfer Agreement” means the assignment and transfer agreement between the Original Hycroft Borrower, the Borrower, the Original Guarantors, the Lender and the Arranger, dated or about the date hereof, pursuant to which the Borrower has agreed to assume all obligations of the Original Hycroft Borrower under the Original Hycroft Credit Agreement and to become the borrower under this Agreement;

 

“Borrower SEC Reports” means all registration statements, reports, schedules, forms, statements and other documents filed by the Borrower with the SEC under the Securities Act and/or the Exchange Act since its formation (in each case, as amended since the time of their filing and including all exhibits thereto);

 

 

- 4 -

 

Borrower’s Auditors” means, at any time, a firm of certified public accountants duly appointed as auditors of the Borrower;

 

Borrowing Notice” has the meaning attributed to such term in Section 2.4;

 

Break Fee” has the meaning attributed to the term in 10.1;

 

Business Day” means any day other than Saturday, Sunday or a statutory holiday when banks are not open in Toronto, Ontario or Denver, Colorado;

 

Certificate of the Borrower” means an instrument signed in the name of the Borrower and without personal liability by any Director or senior officer of the Borrower, certifying the matters specified therein;

 

Change of Control” means the occurrence, after the date of execution and delivery of this Agreement, of any of the following events:

 

(a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Exchange Act) of 40% or more of the Voting Shares, on a fully diluted basis;

 

(b) there is consummated any amalgamation, consolidation, statutory arrangement (involving a business combination) or merger of the Borrower (1) in which the Borrower is not the continuing or surviving corporation or (2) pursuant to which any Voting Shares would be reclassified, changed or converted into or exchanged for cash, securities or other property, other than (in each case) an amalgamation, consolidation, statutory arrangement or merger of the Borrower in which the holders of the Voting Shares immediately prior to the amalgamation, consolidation, statutory arrangement or merger have, directly or indirectly, more than 80% of the Voting Shares of the continuing or surviving corporation immediately after such transaction; or

 

(c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (x) nominated by the board of directors of the Borrower nor (y) appointed or approved by directors so nominated;

 

Closing Date” means the First Tranche Closing Date, the Second Tranche Closing Date or the Third Tranche Closing Date(s), as applicable;

 

Code” means the Internal Revenue Code of 1986;

 

Commitment” means the aggregate principal amount of up to $110,000,000 (excluding capitalized interest, if any), which the Lender has agreed to make available to the Borrower in accordance with and subject to the terms of this Agreement;

 

Common Stock” means the shares of common stock in the capital of the Borrower as such shares exist on the First Tranche Closing Date;

 

Compliance Certificate” means a certificate in the form attached as Schedule F;

 

Constating Documents” means (i) with respect to a corporation, its certificate of incorporation or other similar documents by which it is established under its governing corporate legislation as a corporation, and its by-laws, if any, and (ii) with respect to any other Person which is an artificial body other than a corporation, the organization and governance documents of such Person; in each case as amended and supplemented from time to time;

 

 

- 5 -

 

Contingent Liabilities” means, with respect to a Person, any agreement, undertaking or arrangement by which the Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) the obligation, debt or other liability of any other Person or guarantees the payment of dividends or other distributions upon the shares of any Person. The amount of any Contingent Liability will, subject to any limitation contained therein, be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the obligation, debt or other liability to which the Contingent Liability is related;

 

Control” of any Person means:

 

(a) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

(i) cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of such Person; or

 

(ii) appoint or remove all, or the majority, of the directors or other equivalent officers of such Person; or

 

(iii) give directions with respect to the operating and financial policies of such Person with which the directors or other equivalent officers of such Person are obliged to comply; and/or

 

(b) the holding beneficially of more than 50% of the issued share capital of such Person;

 

Credit Parties” means collectively, the Borrower and the Guarantors, and “Credit Party” means any one of them;

 

Crofoot Royalty” means the 4% net profit interest royalty retained by the original owners of the Crofoot property granted pursuant to the Fourth Amendment Agreement dated January 1, 1996 between Daniel M. Crofoot, for himself and as trustee, BlackRock Properties, Inc., a Nevada corporation, and Hycroft Resources, which is payable to a maximum of $7,600,000, of which $5,110,153 is outstanding as of the date of this Agreement;

 

Current Assets” means, at any time, all current assets on the consolidated balance sheet of the Borrower, less an amount equal to the recorded book value of 50% of the estimated gold and silver inventory classified as current assets on the heap leach pads at the time of such calculation, each as determined from time to time in accordance with U.S. GAAP;

 

Current Liabilities” means, at any time, all current liabilities on the consolidated balance sheet of the Borrower, less the current portion of the outstanding Facility Indebtedness classified as current liabilities on the Borrower’s balance sheet, each as determined from time to time in accordance with U.S. GAAP;

 

Damage Event” has the meaning attributed to the term in Section 10.1;

 

Default” means an Event of Default or any event or circumstance specified in Section 9.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination or any combination of any of the foregoing) be an Event of Default;

 

Director” means a director of the Borrower for the time being and “Directors” means the board of directors of the Borrower or, whenever duly empowered, a committee of the board of directors of the Borrower, and reference to action by the Directors means action by the directors as a board or action by such a committee of the board as a committee;

 

 

- 6 -

 

Disclosure Record” means all proxy statements, prospectuses (including preliminary prospectuses), annual, quarterly and periodic reports, offering memoranda, financial statements, and news releases filed by the Original Hycroft Borrower with the Exchange and the SEC during the 12 months immediately preceding the date on which any representation is made herein with respect to such disclosure record;

 

Distribution” includes with respect to any Credit Party (i) any dividend or other distribution on issued shares or any other Equity Interest of such Credit Party, other than any dividend or other distribution on issued shares paid by one Credit Party to another Credit Party, (ii) any purchase, redemption or retirement of any issued share, warrant or other Equity Interest or any other option or right to purchase, redeem or retire any share or other Equity Interest of such Credit Party or (iii) any payment whether as consulting fees, management fees or other similar type payments to any Related Party of such Credit Party, other than payments made in the ordinary course of business at fair market value, consistent with past practice;

 

EDGAR” means the Electronic Data Gathering, Analysis and Retrieval online public database maintained by the U.S. Securities and Exchange Commission;

 

Encumbrance” means, with respect to any Person, any mortgage, debenture, pledge, hypothec, lien, charge, claim, deed of trust, royalty, assignment by way of security, hypothecation, security interest, conditional sales agreement, lease or title retention agreement or other encumbrance, granted or permitted by such Person or arising by operation of law, in respect of any of such Person’s property, or any consignment by way of security or finance lease of property by such Person or consignee or lessee, as the case may be, or any other security agreement, trust or arrangement having the effect of security for the payment of any debt, liability or other obligation, and “Encumbrances”, “Encumbrancer”, “Encumber” and “Encumbered” have corresponding meanings;

 

Environmental Laws” means all federal, provincial, state, municipal, county, local and other laws, statutes, codes, ordinances, by-laws, rules, regulations, policies, guidelines, certificates, approvals, permits, consents, directions, standards, judgments, orders and other Authorizations, as well as common law, civil law and other jurisprudence or authority, in each case, domestic or foreign, having the force of law at any time relating in whole or in part to any Environmental Matters and any permit, order, direction, certificate, approval, consent, registration, licence or other Authorization of any kind held or required to be held in connection with any Environmental Matters;

 

Environmental Matters” means:

 

(a) any condition or substance, heat, energy, sound, vibration, radiation or odour that may affect any component of the earth and its surrounding atmosphere or affect human health or any plant, animal or other living organism; and

 

(b) any waste, toxic substance, contaminant or dangerous good or the deposit, release or discharge of any thereof into any component of the earth and its surrounding atmosphere;

 

Equity Financing” means an equity financing in an aggregate amount of not less than $110,000,000, to be completed by the Borrower on or prior to the First Tranche Advance Date;

 

Equity Interests” means, with respect to any Person, shares in the capital of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or acquisition from such Person of shares in the capital of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares in the capital of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or non-voting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination;

 

 

- 7 -

 

ERISA” means the Employee Retirement Income Security Act of 1974;

 

ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of section 414(b) or (c) of the Code (and sections 414(m) and (o) of the Code for purposes of provisions relating to section 412 of the Code);

 

ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of sections 430, 431 and 432 of the Code or sections 303, 304 and 305 of ERISA; (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under section 4007 of ERISA, upon the Borrower or any ERISA Affiliate; or (i) a failure by the Borrower or any ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules in respect of a Pension Plan, whether or not waived, or the failure by the Borrower or any ERISA Affiliate to make any required contribution to a Multiemployer Plan;

 

Event of Default” has the meaning attributed to such term in Section 9.1;

 

Exchange” means either the NASDAQ or the NYSE American on which the Borrower will list or will continue to list its shares of Common Stock on or before the First Tranche Closing Date, and each successor thereto;

 

Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated from time to time thereunder;

 

Exchanged 1.25 Lien Notes” means the senior secured notes subordinate in priority to the Facility to be issued pursuant to the Note Exchange Agreement, in an aggregate principal amount not exceeding $80,000,000 (excluding all PIK Interest accruing thereon and any PIK Notes issued in respect thereof);

 

Existing Debt Facilities” means the Indebtedness of the Borrower and/or the other Credit Parties under each of the following agreements or instruments:

 

(a) the First Lien Term Loan Credit Agreement originally dated October 22, 2015 as amended to the date hereof and most recently amended on February 22, 2019 among the Original Hycroft Borrower, as borrower, the direct and indirect subsidiaries of Original Hycroft Borrower party thereto as guarantors, The Bank of Nova Scotia as administrative agent and collateral agent and the several lenders party thereto, in the principal amount of $125,468,436, as of September 30, 2019 (the “BNS Facility”);

 

(b) the Second Lien Senior Secured Convertible Notes due 2020, issued under the Notes Indenture, dated October 22, 2015, among Original Hycroft Borrower, as borrower, the guarantors party thereto, the purchasers party thereto and Wilmington Trust, National Association, as trustee, in the aggregate principal amount of $200,878,563, as of September 30, 2019 (the “Second Lien Notes”);

 

 

- 8 -

 

(c) the 1.5 Lien Senior Secured Notes due 2020 issued pursuant to a note purchase agreement, among Original Hycroft Borrower, as borrower, the purchasers party thereto, the direct and indirect subsidiaries of Original Hycroft Borrower party thereto as guarantors, WBox 2015-5 Ltd. as collateral agent and the several lenders party thereto, in the aggregate principal amount of $132,096,256, as of September 30, 2019 (the “1.5 Lien Notes”);

 

(d) the Promissory Note dated October 15, 2014 as amended to the date hereof and most recently amended on December 31, 2018, made by Hycroft Resources and Development, Inc., payable to Jacobs Field Services North America Inc., in the principal amount of $6,557,976, as of September 30, 2019 (the “Jacobs Note”); and

 

(e) the 1.25 Lien Senior Secured Notes due 2019 issued pursuant to note purchase agreements, among Original Hycroft Borrower, as borrower, the purchasers party thereto, the direct and indirect subsidiaries of Original Hycroft Borrower party thereto as guarantors, WBox 2015-5 Ltd. as collateral agent and the several lenders party thereto, in the aggregate principal amount of $54,744,227, as of September 30, 2019, which shall be exchanged for the Exchanged 1.25 Lien Notes on the closing of the Acquisition Transaction (the “1.25 Lien Notes”);

 

Facility” has the meaning attributed to such term in Section 2.1;

 

Facility Documents” means this Agreement, the Security Documents, the Guarantees and all other agreements, certificates, instruments, notices and documents delivered or to be delivered by the Credit Parties hereunder or thereunder but excluding, for avoidance of doubt, the Sprott Royalty, each as amended, modified, supplemented, restated or replaced from time to time;

 

Facility Indebtedness” means all present and future debts, liabilities and obligations of the Borrower and the Guarantors to the Lender under and in connection with this Agreement and all other Facility Documents, including all Amounts Payable and all fees and other money payable or owing from time to time pursuant to the terms of this Agreement or any of the other Facility Documents;

 

Finance Lease” means, with respect to a Person, a lease or other arrangement in respect of personal property that is required to be classified and accounted for as a finance lease obligation on a balance sheet of the Person in accordance with U.S. GAAP;

 

Finance Lease Obligation” means, with respect to a Person, the obligation of the Person to pay rent or other amounts under a Finance Lease and for the purposes of this definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date as determined in accordance with U.S. GAAP;

 

Financial Assistance” means, with respect to any Person, any loan, guarantee, assurance, acceptance, extension of credit, loan purchase, stock purchase, equity or capital contribution, investment or other form of direct or indirect financial assistance or support of any other Person or any obligation (contingent or otherwise), other than, for avoidance of doubt, trade payables incurred in the ordinary course of business;

 

Financial Instrument Obligations” means, with respect to any Person, obligations arising under:

 

(a) interest rate swap agreements, forward rate agreements, floor, cap or collar agreements, futures or options, insurance or other similar agreements or arrangements, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is interest rates or the price, value or amount payable thereunder is dependent or based upon interest rates or fluctuations in interest rates in effect from time to time (but excluding non-speculative conventional floating rate indebtedness);

 

 

- 9 -

 

(b) currency swap agreements, cross-currency agreements, forward agreements, floor, cap or collar agreements, futures or options, insurance or other similar agreements or arrangements, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is currency exchange rates or the price, value or amount payable thereunder is dependent or based upon currency exchange rates or fluctuations in currency exchange rates in effect from time to time; and

 

(c) any agreement for the making or taking of any commodity (including gold, silver, coal, natural gas, oil and electricity), swap agreement, floor, cap or collar agreement or commodity future or option or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is any commodity or the price, value or amount payable thereunder is dependent or based upon the price or fluctuations in the price of any commodity;

 

or any other similar transaction, including any option to enter into any of the foregoing, or any combination of the foregoing, in each case to the extent of the net amount due or accruing due by the Person under the obligations determined by marking the obligations to market in accordance with their terms in accordance with U.S. GAAP;

 

First Tranche” means $55,000,000 of the principal amount of the Facility to be advanced to the Borrower by way of a single Advance as contemplated herein;

 

First Tranche Advance” means the Advance of the First Tranche;

 

First Tranche Closing Date” means the closing date of the First Tranche Advance, to be made on such date as the Lender and the Borrower may agree in writing, which shall be no later than May 29, 2020;

 

First Tranche Original Issue Discount” has the meaning attributed to such term in Section 2.11;

 

Fiscal Quarter” means the three month period ending on March 31, June 30, September 30 and December 31, of each year;

 

Foreign Government Scheme or Arrangement” has the meaning attributed to such term in Section 7.1(u);

 

Foreign Plan” has the meaning attributed to such term in Section 7.1(u);

 

Fourth Anniversary” has the meaning attributed to such term in Section 4.7(b);

 

Governmental Authority” means each federal, state, provincial, county, municipal or other such governmental or public authority, including their authorized administrative bodies, courts, tribunals, commissions and agents, which have legal jurisdiction over a Person or a matter relevant to this Agreement;

 

Guarantees” means the guarantees to be provided by the Guarantors in connection with the Facility, as amended, modified, supplemented, restated or replaced from time to time;

 

 

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Guarantors” means, collectively, the Original Guarantors and their respective successors and permitted assigns and each Person that becomes a Guarantor by virtue of Section 8.1(x), and “Guarantor” means any one of them;

 

Hazardous Materials” has the meaning attributed to such term in Section 7.1(ff);

 

Indebtedness” means, with respect to a Person, without duplication:

 

(a) all obligations of the Person for borrowed money, including debentures, notes or similar instruments and other financial instruments and obligations with respect to bankers’ acceptances and contingent reimbursement obligations relating to letters of credit;

 

(b) all Financial Instrument Obligations of the Person;

 

(c) all Finance Lease Obligations and Purchase Money Obligations of the Person;

 

(d) all obligations to pay the deferred and unpaid purchase price of property or services, which purchase price is due and payable more than six months after the date of placing such property or service or taking delivery at the completion of such services;

 

(e) all indebtedness of any other Person secured by an Encumbrance on any asset of the Person;

 

(f) all obligations to repurchase, redeem or repay any issued shares of such Person that fall due prior to the Maturity Date; and

 

(g) all Contingent Liabilities of the Person with respect to obligations of another Person if such obligations are of the type referred to in paragraphs (a) to (f) above;

 

Indemnified Parties” has the meaning attributed to such term in Section 12.1(a);

 

Interest Payment Date” has the meaning attributed to the term in Section 2.7;

 

Interest Period” means, initially, the period commencing on the First Tranche Closing Date and ending on the last day of the calendar month in which the First Tranche Advance is made, and thereafter each successive calendar month; provided that any Interest Period which would otherwise end on a day which is not a London Banking Day shall be extended to end on the next London Banking Day, unless that next London Banking Day falls in the next calendar month, in which case that Interest Period shall be shortened to end on the preceding London Banking Day;

 

Jacobs Note” has the meaning attributed to such term in paragraph (d) as of the definition of Existing Debt Facilities;

 

Lender” means Sprott Private Resource Lending II (Collector), LP, an Ontario limited partnership, and every successor Person thereto and assignee;

 

Lender’s Counsel” means DLA Piper (Canada) LLP and, at any time, any other legal counsel retained by the Lender in the relevant jurisdiction to the matter in question;

 

LIBOR” means, in respect of an Interest Period, the rate of interest expressed as a percentage per annum on the basis of a 360 day year for deposits in U.S. Dollars in the London interbank market for a period equal to three (3) months that appears on the Reuters LIBOR 01 Page or the ICE Benchmark Administration (or any successor source from time to time) as of 11:00 a.m. (London time) on the first day of the relevant Interest Period;

 

 

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London Banking Day” means a day on which dealings in U.S. Dollar deposits by and between banks may be transacted in the London interbank market;

 

Material Adverse Effect” means, when used with reference to any event or circumstance, any event or circumstance which has, had, or could reasonably be expected to have a material adverse effect on:

 

(a) the business, operations, results of operations, assets, liabilities (contingent or otherwise), condition (financial or otherwise) or cash flows of the Credit Parties;

 

(b) the ability of the Credit Parties or any of them to perform their obligations when due under this Agreement or any of the other Facility Documents;

 

(c) the validity or enforceability of this Agreement or any other Facility Document; or

 

(d) the priority or ranking of any Encumbrance granted pursuant to any of the Security Documents or any of the rights or remedies of the Lender thereunder or under any other Facility Document;

 

in each case as reasonably determined by the Lender;

 

Material Contract” means any Project Document which (i) is prudent or necessary for the operation and development of the Project in accordance with the Model or (ii) contains terms and conditions which, if amended or, upon breach, termination, non-renewal or non-performance, could reasonably be expected to have a Material Adverse Effect, as more particularly described on Schedule D hereto;

 

Maturity Date” means the day that is five years from the last day of the month of the First Tranche Closing Date;

 

Model” means a financial model containing the Project mining plan and related financial projections, along with the Borrower’s financial forecast for all other revenues, costs and expenses and financings, to be incurred by the Borrower or any of its Subsidiaries, in a form and substance acceptable to the Lender, acting reasonably, as delivered and accepted by the Lender on or before the First Tranche Closing Date, as updated from time to time as contemplated herein;

 

“Multiemployer Plan” means any employee benefit plan of the type described in section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions;

 

“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in section 4064 of ERISA;

 

Note Exchange Agreement” means the note exchange agreement entered into by and among, inter alios, the Original Hycroft Borrower, each of its direct and indirect subsidiaries party thereto, and WBox 2015-5 Ltd., as amended, in form and on terms satisfactory to the Lender, all as described in Schedule I hereto;

 

“Original Issue Discount” has the meaning attributed to such term in Section 2.12.

 

Partner Alignment Shares” has the meaning attributed to such term in Section 3.1;

 

“PBGC” means the Pension Benefit Guaranty Corporation;

 

 

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“Pension Act” means the Pension Protection Act of 2006;

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, section 412 of the Code and section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, section 412, 430, 431, 432 and 436 of the Code and sections 302, 303, 304 and 305 of ERISA;

 

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under section 412 of the Code;

 

Permitted Disposal” means any sale, lease, license, transfer or other disposal:

 

(a) of inventory in the ordinary course of business;

 

(b) made by a Credit Party to another Credit Party, provided that if the disposing Credit Party had granted an Encumbrance in favour of the Lender over the asset or property subject to such disposal, equivalent security over such asset or property shall be granted in favour of the Lender by the acquiring Credit Party, in each case, on terms and conditions satisfactory to the Lender, acting reasonably;

 

(c) of fixed assets where the proceeds of disposal are used to purchase replacement assets comparable or superior as to type, value and quality;

 

(d) of the mill assets located in Houston, Texas and the related motors located in Las Vegas, Nevada, provided that they are disposed of for cash at fair market value to an arm’s length bona fide purchaser;

 

(e) of obsolete or redundant vehicles, plant and equipment for cash;

 

(f) of assets (other than shares of common stock) for cash where the consideration receivable when aggregated with the consideration receivable for any other sale, lease, license, transfer or disposal not allowed under paragraphs (a) to (e) above does not exceed $250,000; and

 

(g) made with the prior written consent of the Lender;

 

Permitted Encumbrances” means with respect to any Credit Party:

 

(a) any Encumbrance granted pursuant to the Security Documents;

 

(b) up to the First Tranche Closing Date but not thereafter, any Encumbrance granted by the Borrower securing Indebtedness under or in respect of the Existing Debt Facilities;

 

(c) any Encumbrance or deposit under workers’ compensation, social security, ERISA, or similar legislation or in connection with bids, tenders, leases or contracts or to secure related public or statutory obligations, surety and appeal bonds where required by law;

 

(d) any builders’, mechanics’, materialman’s, carriers’, warehousemen’s and landlords’ liens and privileges, in each case, which relate to obligations not yet due or delinquent;

 

(e) any Encumbrance for Taxes, assessments, unpaid wages or governmental charges or levies for the then current year and not at the time due and delinquent;

 

 

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(f) any right reserved to or vested in any Governmental Authority by the terms of any lease, licence, franchise, grant, claim or permit held or acquired by any Credit Party, or by any statutory provision, to terminate the lease, licence, franchise, grant, claim or permit or to purchase assets used in connection therewith or to require annual or other periodic payments as a condition of the continuance thereof;

 

(g) any Encumbrance created or assumed by any Credit Party in favour of a public utility or Governmental Authority when required by the utility or Governmental Authority in connection with the operations of such Credit Party that do not in the aggregate detract from the value of any of the Secured Assets or impair their use in the operation of the business of such Credit Party;

 

(h) any reservations, limitations, provisos and conditions expressed in original grants from any Governmental Authority;

 

(i) any applicable municipal and other Governmental Authority restrictions affecting the use of land or the nature of any structures which may be erected thereon, any minor encumbrance, such as easements, rights-of-way, servitudes or other similar rights in land granted to or reserved by other Persons, rights-of-way for sewers, electric lines, telegraph and telephone lines, oil and natural gas pipelines and other similar purposes, or zoning or other restrictions applicable to the use of real property by any Credit Party, or title defects, encroachments or irregularities, that do not materially detract from the value of the property or impair its use in the operation of the business of any Credit Party;

 

(j) any Encumbrances that secure Exchanged 1.25 Lien Notes, provided that such Encumbrances shall be fully subordinated and subject to the intercreditor agreement referred to in such Subsection (d) of the definition of Permitted Indebtedness;

 

(k) any Encumbrances that secure Permitted Indebtedness referred to under Subsection (i) of the definition of Permitted Indebtedness, provided that such Encumbrances are limited to the mobile equipment which was acquired with the proceeds of such Permitted Indebtedness;

 

(l) any Royalty Obligations, including any Encumbrance securing the Sprott Royalty;

 

(m) any Encumbrance on cash in respect of reclamation obligations or other bonding obligations required by Applicable Law or pursuant to the written directive of any relevant Government Authority; and

 

(n) any other Encumbrance consented to in writing by the Lender;

 

Permitted Indebtedness” means:

 

(a) Indebtedness under this Agreement and any other Facility Documents;

 

(b) up to the First Tranche Closing Date but not thereafter, any Indebtedness in respect of the Existing Debt Facilities;

 

(c) Indebtedness comprised of amounts owed to trade creditors and accruals in the ‎ordinary course of business, which are either not overdue or, if disputed and in that ‎case whether or not overdue, are being contested in good faith by such Credit Party by ‎appropriate proceedings diligently conducted, and provided always that: (i) the failure to ‎pay such Indebtedness could not be expected to result in a Material Adverse Effect and ‎‎(ii) the aggregate amount of such Indebtedness does not exceed $1,000,000;

 

 

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(d) any Indebtedness owed in respect of Exchanged 1.25 Lien Notes, in an aggregate principal amount not to exceed $80,000,000 as of the date of the exchange, which shall be subject to the terms of an intercreditor agreement in form and substance satisfactory to the Lender, providing for the full subordination and postponement of all such indebtedness (but permitting payments of PIK Interest by way of the issuance of PIK Notes thereunder) and any security therefor to the Facility Indebtedness and the repayment in full thereof and the Encumbrances granted under the Security Documents, executed and delivered in favour of the Lender (“Subordinated Indebtedness”);

 

(e) any unsecured inter-company Indebtedness between any Credit Parties (other than, for avoidance of doubt, trade payables incurred in the ordinary course of business);

 

(f) any Contingent Liability in respect of Permitted Indebtedness;

 

(g) any other Indebtedness which the Lender agrees in writing is Permitted Indebtedness for the purposes of this Agreement;

 

(h) any unsecured Indebtedness arising under a foreign exchange transaction for spot or forward delivery entered into in connection with protection against fluctuation in currency rates or Financial Instrument Obligation (and not a foreign exchange transaction for investment or speculative purposes), which Indebtedness does not exceed $5,000,000 in the aggregate for the Credit Parties at any time;

 

(i) any Indebtedness under Finance Leases and Purchase Money Obligations in respect of mobile equipment acquired for use in respect of the Project, which Indebtedness does not exceed $75,000,000 in the aggregate for the Credit Parties at any time;

 

(j) any Indebtedness not permitted by the preceding paragraphs (a) to (i) and the outstanding amount of which does not exceed $1,000,000 in aggregate for the Credit Parties at any time;

 

(k) Royalty Obligations, payable in accordance with their terms; and

 

(l) any Indebtedness in respect of reclamation or other bonding obligations required by Applicable Law or pursuant to the written directive of any relevant Government Authority in respect of the Project;

 

Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, or corporation with or without share capital, body corporate, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, government or Governmental Authority or entity, however designated or constituted;

 

PIK Interest” has the meaning attributed to that term in the Note Exchange Agreement;

 

PIK Notes” has the meaning attributed to that term in the Note Exchange Agreement;

 

“Plan” means any employee benefit plan within the meaning of section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is required to contribute on behalf of any of its employees;

 

Prepayment Premium” has the meaning attributed to such term in Section 4.7;

 

Project” means the Hycroft gold and silver mine project, as more particularly described on Schedule A;

 

 

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Project Consultant” means any project consultant appointed by the Lender, in consultation with the Borrower;

 

Project Document” means any agreement, contract, license, permit, instrument, lease, easement or other document which (i) deals with or is related to the construction, operation or development of the Project, and (ii) is executed from time to time by or on behalf of or is otherwise made or issued in favour of any Credit Party;

 

Project Repayment Covenant” has the meaning attributed to such term in Section 8.1(r);

 

‎“Purchase Agreement” means the purchase agreement entered into, as of January 13, 2020, by and among, inter ‎alios, the Borrower and the Original Hycroft Borrower, as amended, in form and on terms satisfactory to the ‎Lender, a true and complete copy of which is attached hereto as Schedule J;

 

Purchase Money Obligation” means, with respect to a Person, Indebtedness of the Person issued, incurred or assumed to finance all or part of the cost of acquiring any mobile asset;

 

Related Party” means, in respect of any Credit Party, (a) a Person which alone or in combination with others holds a number of securities or other Equity Interests, or has contractual rights, sufficient to affect the Control of such Credit Party, (b) a Person who beneficially owns, directly or indirectly, voting securities of such Credit Party or who exercises control or direction over voting securities of such Credit Party or a combination of both carrying more than 10% of the voting rights attached to all voting securities of such Credit Party for the time being outstanding, (c) a director or senior officer of a Credit Party or Related Party of any Credit Party, or (d) an Affiliate of any of the foregoing;

 

“Reportable Event” means any of the events set forth in section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived;

 

Relevant Jurisdiction” means, from time to time, any jurisdiction in which any Credit Party has any material properties or assets, or in which it carries on business and, for the purposes of this Agreement, includes (i) Nevada, (ii) Colorado, and (iii) Delaware;

 

Restricted Assignee” means those Persons set out in the side letter between the Lender and the Original Hycroft Borrower dated as of the date of the Original Hycroft Credit Agreement (as the same may be amended, restated or otherwise replaced from time to time);

 

Royalty Obligationsmeans:

 

(a) Crofoot Royalty; and

 

(b) the Sprott Royalty and all security therefor;

 

Sanctions” means sanctions administered or enforced from time to time by the U.S. government (including those administered by OFAC or the U.S. Department of State), the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority;

 

SEC” means the United States Securities and Exchange Commission;

 

Second Anniversary” has the meaning attributed to such term in Section 4.7(a);

 

Second Lien Notes” has the meaning attributed to such term in paragraph (b) as of the definition of Existing Debt Facilities;

 

 

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Second Tranche” means $15,000,000 of the principal amount of the Facility to be advanced to the Borrower by way of a single Advance simultaneously with the First Tranche Advance and as contemplated herein;

 

Second Tranche Advance” means the Advance of the Second Tranche;

 

Second Tranche Closing Date” means the closing date of the Second Tranche Advance;

 

Secured Assets” means the undertaking, properties and assets now owned, leased or hereafter acquired or leased by the Credit Parties or any of them, which shall be secured by the Security Documents;

 

Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time thereunder;

 

Security Documents” means, collectively, the agreements, instruments and documents listed in Schedule B hereto and delivered pursuant to Article 5 of this Agreement, as amended, modified, supplemented, restated or replaced from time to time;

 

SPRL II” means Sprott Private Resource Lending II (CO) Inc., an Ontario corporation;

 

Sprott Royalty” means the secured net smelter returns royalty to be granted by the Borrower and Hycroft Resources in favour of Sprott Private Resource Lending II (CO) Inc. concurrently with the closing of the First Tranche Advance, in the form attached as Schedule G hereto, as the same may be amended, restated, supplemented, modified or otherwise replaced from time to time;

 

Subordinated Indebtedness” has the meaning attributed to such term in Section (d) of the definition of Permitted Indebtedness;

 

Subsequent Tranche Advances” means collectively, all Advances in respect of the Second Tranche and the Third Tranche;

 

Subsidiary” means with respect to any Person (the “parent”) at any date, (i) any corporation, limited liability company, association or other business entity which the parent and/or one or more subsidiaries of the parent Controls, (ii) any partnership, (x) the sole general partner or the managing general partner of which is the parent and/or one or more subsidiaries of the parent or (y) the only general partners of which are the parent and/or one or more subsidiaries of the parent and (iii) any other Person that is otherwise Controlled by the parent and/or one or more subsidiaries of the parent;

 

Taxes” means all taxes, assessments, rates, levies, royalties, imposts, deductions, withholdings, dues, duties, fees and other charges of any nature, including any interest, fines, penalties or other liabilities with respect thereto, imposed, levied, collected, withheld or assessed by any Governmental Authority (of any jurisdiction), and whether disputed or not;

 

Term Sheet” means the indicative term sheet dated April 15, 2019 issued by the Lender to and accepted by the Original Hycroft Borrower, as amended, modified, supplemented, restated or replaced from time to time;

 

‎“Third Tranche” means $40,000,000 of the principal amount of the Facility to be advanced to the ‎Borrower by way of not more than two Advances subsequent to the Second Tranche Advance ‎and as contemplated herein;‎

 

‎“Third Tranche Advance” means any Advance of the Third Tranche, as applicable;‎

 

 

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‎“Third Tranche Closing Dates” means the closing date(s) of the Third Tranche Advance(s), as ‎applicable;‎

 

Unrestricted Cash” means, at any time, cash denominated in CAD$ or $ at a bank and credited to an account in the name of the Borrower with an account bank satisfactory to the Lender, and to which the Borrower is alone beneficially entitled, provided that:

 

(a) such cash is repayable on demand;

 

(b) the repayment of such cash is not contingent on the prior discharge of any Indebtedness of any Person whatsoever or on the satisfaction of any other condition;

 

(c) there is no Encumbrance over such cash or account (other than an Encumbrance in favour of the Lender pursuant to the Security Documents or a Permitted Encumbrance that is subordinate to the Encumbrance in favour of the Lender); and

 

(d) such cash is freely and immediately available to the Borrower;

 

Updated Project Feasibility Study” means the updated project feasibility study in respect of the Project dated July 31, 2019 and delivered to the Lender in August 2019;

 

“U.S. GAAP” means generally accepted accounting principles as in effect from time to time in the United States, applied in a manner consistent with that used in preparing the financial statements referred to in Section 7.1(bb);

 

Voting Shares” means shares of capital stock of any class of the Borrower carrying voting rights under all circumstances, provided that for the purposes of such definition, shares which only carry the right to vote conditionally on the happening of any event shall not be considered Voting Shares, whether or not such event shall have occurred, nor shall any shares be deemed to cease to be Voting Shares solely by reason of a right to vote accruing to shares of another class or classes by reason of the happening of such event; and

 

Working Capital” means Current Assets less Current Liabilities.

 

Interpretation Not Affected by Headings

 

1.2 The division of this Agreement into articles, sections, subsections and paragraphs, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

 

Statute References

 

1.3 Any reference in this Agreement to a statute shall be deemed to be a reference to such statute as amended, re-enacted or replaced from time to time.

 

Permitted Encumbrance

 

1.4 Any reference in any of the Facility Documents to a Permitted Encumbrance is not intended to and shall not be interpreted as subordinating or postponing, or as any agreement to subordinate or postpone, any obligation of any Credit Party to the Lender under any of the Facility Documents, or any security therefor, to such Permitted Encumbrance.

 

 

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Currency

 

1.5 Any reference in this Agreement to “Dollars”, “dollars” or “$” shall be deemed to be a reference to lawful money of the United States of America and any reference to any payments to be made by any Credit Party shall be deemed to be a reference to payments made in lawful money of the United States of America. Any reference in this Agreement to “CAD$” shall be deemed to be a reference to lawful money of Canada. Except as specifically provided in this Agreement or in any other Facility Document, the equivalent on any given date in one currency of an amount denominated in another currency is a reference to the amount of the first currency which could be purchased with the amount of the second currency at the screen rate published on Reuters or any substitute or successor of such service selected by the Lender or, if not available, the spot rate of exchange quoted to the Lender in the ordinary course of business at or about 11:00 a.m. (Toronto time) on such date for the purchase of the first currency with the second currency.

 

Use of the Words “Best Knowledge”, "continuing" and "indebtedness"

 

1.6 The words “best knowledge”, “to the best of the Borrower’s knowledge”, “to the knowledge of”, “of which they are aware”, “any knowledge of” or other similar expressions limiting the scope of any representation, warranty, acknowledgement, covenant or statement by the Borrower or the Credit Parties will be understood to be made on the basis of the actual knowledge of any of the senior officers of the Borrower or other Credit Party, in each case, after due and diligent inquiry.

 

1.7 A Default (other than an Event of Default) being “continuing” means that such Default has not been remedied to the Lender’s satisfaction or waived by the Lender and an Event of Default being “continuing” means that such Event of Default has not been waived by the Lender.

 

1.8 Any reference to “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent.

 

Non-Business Days

 

1.9 Whenever any payment to be made hereunder shall be due, any period of time would begin or end, any calculation is to be made or any other action is to be taken on or as of, a day other than a Business Day, such payment shall be made, such period of time shall begin or end, such calculation shall be made and such other actions shall be taken, as the case may be, unless otherwise specifically provided for herein, on or as of the next succeeding Business Day and the Lender shall be entitled to all additional accrued interest or other applicable payment in respect of such delay.

 

Governing Law

 

1.10 This Agreement shall be governed by, construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated in all respects as an Ontario contract. Each of the Credit Parties hereby irrevocably attorns to the non-exclusive jurisdiction of the Courts of the Province of Ontario in the City of Toronto. Each Credit Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any Court of the Province of Ontario. Each of the Credit Parties hereby irrevocably waives, to the fullest extent permitted by law, any forum non conveniens defence to the maintenance of such action or proceeding in any such court. Each Credit Party irrevocably consents to service of process in Ontario. Nothing in this Agreement will affect the right of the Lender to serve process in any other manner or in any other jurisdiction permitted by law or to commence suits, actions or legal proceedings in any other jurisdictions.

 

 

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Paramountcy

 

1.11 Notwithstanding any other provision of this Agreement or any Facility Document, in the event of a conflict or any inconsistency between the provisions of this Agreement and the provisions of any other Facility Document, the applicable provisions of this Agreement shall prevail and govern.

 

Enurement

 

1.12 The Facility Documents shall be binding upon and shall enure to the benefit of the Credit Parties and the Lender and their respective successors and permitted assigns.

 

Interpretation

 

1.13 In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders. In this Agreement the words “including” or “includes” mean “including without limitation” and “includes without limitation”, respectively.

 

Time of Essence

 

1.14 Time shall be of the essence in all respects in this Agreement.

 

Accounting Terms

 

1.15 All accounting terms not specifically defined herein shall be construed, and resulting calculations and determination made, in accordance with U.S. GAAP.

 

Schedules

 

1.16 The Schedules listed below are incorporated into this Agreement by reference and are deemed to be an integral part thereof:

 

Schedule A - Project
Schedule B - Security Documents
Schedule C - Shares and ownership interests
Schedule D - Material contracts
Schedule E - Authorizations to be obtained on or prior to Advances
Schedule F - Compliance Certificate
Schedule G - Form of Sprott Royalty
Schedule H - Interest of Directors and Officers
Schedule I - Acquisition Transaction & Note Exchange Agreement
Schedule J - Purchase Agreement

 

Article 2
THE FACILITy

 

The Facility

 

2.1 Subject to the terms and conditions hereof, the Lender hereby establishes in favour of the Borrower, a senior secured multi-advance reducing term credit facility (the “Facility”) in an amount equal to the Commitment amount, which shall be made available to the Borrower, or as the Borrower may direct, by way of one or more Advances made in accordance with this Agreement.

 

 

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Non-Revolvement

 

2.2 The Facility is a non-revolving facility, and any repayment or prepayment of the Facility shall not be re-borrowed. No amount cancelled under the Facility may be subsequently reinstated.

 

2.3 The Commitment with respect to each Advance shall automatically reduce to zero on the last day of the applicable Availability Period unless cancelled, reduced, terminated earlier or extended in accordance with the provisions of this Agreement.

 

Notice of Borrowing

 

2.4 The Borrower shall provide a notice of borrowing to the Lender in respect of each Advance no later than 12:00 p.m. (Toronto time) not less than 15 Business Days prior to the requested drawdown date (except in respect of the First Tranche Advance and the Second Tranche Advance, in which case such notice shall be delivered on the same Business Day as the requested drawdown date). The notice of borrowing shall be in form and on terms satisfactory to the Lender and shall be irrevocable (a “Borrowing Notice”). Prior to the issuance of a Borrowing Notice for the First Tranche Advance, the Borrower shall have satisfied or fulfilled all conditions precedent set out in Section 6.1 and provided to the Lender all documentation contemplated therein, and the Lender shall have confirmed to the Borrower in writing the satisfaction and fulfillment of the conditions precedent set out in Section 6.1 and the Lender’s satisfaction with all documentation delivered in connection therewith. Prior to the issuance of a Borrowing Notice for the Second Tranche Advance, the Borrower shall have satisfied or fulfilled all conditions precedent set out in Section 6.3 and provided to the Lender all documentation contemplated therein, and the Lender shall have confirmed to the Borrower in writing the satisfaction and fulfillment of the conditions precedent set out in Section 6.3 and the Lender’s satisfaction with all documentation delivered in connection therewith. Prior to the issuance of a Borrowing Notice for any Third Tranche Advance, the Borrower shall ‎have satisfied or fulfilled all conditions precedent set out in Section 6.5 and provided to the ‎Lender all documentation contemplated therein, and the Lender shall have confirmed to the ‎Borrower in writing the satisfaction and fulfillment of the conditions precedent set out in Section 6.5 and the Lender’s satisfaction with all documentation delivered in connection therewith.‎

 

Term

 

2.5 Except as otherwise provided herein, the outstanding principal amount of the Facility, together with all accrued but unpaid interest and all costs, fees, charges or other amounts payable hereunder from time to time, will be immediately due and payable by the Borrower to the Lender on the Maturity Date.

 

Use of Proceeds

 

2.6 Except with the prior written consent of the Lender, the Borrower shall use the proceeds of the Facility only as follows:

 

(a) in repayment of all indebtedness and liabilities of the Credit Parties under the BNS Facility and the Jacobs Note;

 

(b) in payment of the Original Issue Discount payable under Section 2.11 and Section 2.12 on each Closing Date;

 

(c) in payment of the Lender’s fees and expenses payable pursuant to Section 8.4;

 

(d) as to the balance, in payment of costs and expenses to put the Project into commercial production, maintain or increase commercial production, as outlined in and contemplated by the Model (including, to the extent that the Borrower has incurred indebtedness prior to the closing of the First Tranche Advance to place the Project into commercial production, the repayment of such indebtedness from the proceeds of either Advance hereunder shall be permitted); and

 

 

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(e) for such other purposes as the Lender may approve in writing from time to time.

 

Interest

 

2.7 Interest shall accrue on the outstanding principal amount of the Facility from and including the date of each Advance, as well as on all overdue amounts outstanding in respect of interest, costs or other fees, expenses or other amounts payable under the Facility Documents, in each case at a floating rate equal to 7.00% per annum plus the greater of (i) LIBOR and (ii) 1.50%, per annum, accruing daily, calculated and compounded monthly on the last day of every Interest Period, and be payable on the last Business Day of each Interest Period (each an “Interest Payment Date”) by the Borrower by way of wire transfer, net of all applicable Taxes, as well as after each of maturity, default and judgment. If a rate of interest is not determinable at the relevant time in accordance with the definition of LIBOR, whether by virtue of any disruption, replacement or abandonment of LIBOR or otherwise, the applicable rate of interest for LIBOR as used above for the determination of the applicable rate of interest payable by the Borrower pursuant to this Section 2.7, shall be equal to: (a) if LIBOR has been succeeded by another floating rate index that has a 3 month interest accrual period, is commonly accepted by market participants, and which has begun to be quoted by a recognized reporting service, such alternate index rate as determined by the Lender at approximately 11:00 a.m. (London time) on the first Business Day of the relevant Interest Period, or (b) in any other case, the rate, expressed as a rate of interest per annum on the basis of a year of 360 days, at which deposits in U.S. Dollars are offered by leading prime banks in the London inter-bank market, as determined by the Lender at approximately 11:00 a.m. (London time) on the first Business Day of the relevant Interest Period.

 

2.8 Notwithstanding Section 2.7, all interest calculated during the period commencing on the First Tranche Closing Date and ending on the last day of the calendar month which is twelve months after the First Tranche Closing Date, shall be capitalized at the end of each applicable Interest Period and thereafter be added to, and form part of, the outstanding principal amount of the Facility. All interest capitalized under this Section 2.8 shall bear interest at the rate set out in Section 2.7 from the date on which it is capitalized, until paid in full, without duplication.

 

Additional Interest

 

2.9 In addition to interest calculated and payable under Section 2.7 or elsewhere in this Agreement, ‎for each three month period (ending on May 31, August 31, November 30 and February 28 (29 if a leap year) of each year) commencing on February 28, 2021 and ending on the Maturity Date, the Borrower shall pay to the Lender as additional interest (“Additional Interest”) on the last ‎Business Day of each such three month period, with the first Additional Interest payment coming due on May 31, 2021, an amount calculated ‎as follows:

 

Each quarterly Additional Interest payment amount = A + (B x (C / D))‎

 

A = ‎ $432,049 for each quarterly Additional Interest payment
 
B =‎ $432,049 for each quarterly Additional Interest payment
   
C =‎ the aggregate principal amount of all Subsequent Tranche Advances made on or before December 31, 2020 ‎
   
D =‎ $55,000,000

 

 

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2.10 On any prepayment of the outstanding balance of the Facility and concurrently therewith, whether such prepayment is voluntary or mandatory (including for certainty, upon any acceleration of Facility Indebtedness pursuant to Section 9.2), the Borrower shall prepay all remaining unpaid Additional Interest payment amounts calculated under Section 2.9 to and including the Maturity Date.

 

Original Issue Discount

 

2.11 The First Tranche Advance shall be made to the Borrower at an original issue discount of 2% of the principal amount of the First Tranche (for greater certainty, being $1,100,000), which original issue discount shall not be credited against the interest payable pursuant to Section 2.7, but shall constitute additional interest paid in advance, which additional interest represents an annual interest rate for the purposes of the Interest Act (Canada) on such First Tranche Advance equal to 2% divided by the number of days from the First Tranche Closing Date to the Maturity Date, multiplied by 365 (“First Tranche Original Issue Discount”).

 

2.12 Each Subsequent Tranche Advance shall be made to the Borrower at an original issue discount of 2% of the principal amount of each Subsequent Tranche Advance, which original issue discount shall not be credited against the interest payable pursuant to Section 2.7, but shall constitute additional interest paid in advance, which additional interest represents an annual interest rate for the purposes of the Interest Act (Canada) on each Subsequent Tranche Advance equal to 2% divided by the number of days from the date of such Subsequent Tranche Advance to the Maturity Date, multiplied by 365 (together with the First Tranche Original Issue Discount, the “Original Issue Discount”).

 

Computations

 

2.13 The rates of interest under this Agreement are nominal rates, and not effective rates or yields. Unless otherwise stated, wherever in this Agreement reference is made to a rate of interest “per annum” or a similar expression is used, such interest shall be calculated on the basis of a year of 360 days for the actual number of days occurring in the period for which any such interest is payable. For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360. The ‎principle of deemed reinvestment of interest shall not apply to any interest calculation under ‎this Agreement. The parties hereto acknowledge and agree that when LIBOR is used herein as a reference rate and that while such reference rate is based on the three-month LIBOR rate, such rate shall be reset to the prevailing three-month LIBOR rate as of the first day of each Interest Period.

 

2.14 The Credit Parties acknowledge and confirm that this Agreement and the other Facility Documents, and all provisions relating to interest and other amounts payable hereunder or thereunder, satisfies the requirements of section 4 of the Interest Act (Canada) to the extent that section 4 of the Interest Act (Canada) applies to the expression, statement or calculation of any rate of interest or other rate per annum hereunder or thereunder; and the Credit Parties are each able to calculate the yearly rate or percentage of interest payable under this Agreement and any other Facility Document based on the methodology set out herein and therein. The Credit Parties hereby irrevocably agree not to, and agree to cause each of their Subsidiaries not to, plead or assert, whether by way of defense or otherwise, in any proceeding relating to this Agreement or any other Facility Document, that the interest payable thereunder and the calculation thereof has not been adequately disclosed to the Credit Parties or any Subsidiary thereof, whether pursuant to section 4 of the Interest Act (Canada) or any other applicable law or legal principle.

 

 

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No Set-off

 

2.15 All payments required to be made by the Borrower or any other Credit Party pursuant to the provisions hereof or any other Facility Document shall be made in immediately available funds and without any set-off, deduction, withholding or counter-claim or cross-claim.

 

Time and Place of Payments

 

2.16 All payments made by the Borrower pursuant to this Agreement or pursuant to any other Facility Document shall be made before 2:00 p.m. (Toronto, Ontario time) on the day specified for payment. Any payment received after 2:00 p.m. (Toronto, Ontario time) on the day specified for such payment shall be deemed to have been received before 2:00 p.m. (Toronto, Ontario time) on the immediately following Business Day. All payments shall be made to the Lender to the account and office of the Lender, as specified by the Lender (and, in the case of the office, in Section 11.2), or such other account or office as the Lender may designate in writing. If the date for payment of any Amount Payable is not a Business Day at the place of payment, then payment shall be made on the next Business Day at such place.

 

Record of Payments

 

2.17 The Lender shall maintain accounts and records evidencing all payments hereunder, which accounts and records shall constitute, in the absence of manifest error, prima facie evidence thereof.

 

Article 3
SHARE PURCHASE RIGHT

 

Partner Alignment Shares

 

3.1 Effective as of the First Tranche Closing Date, the Borrower grants to the Lender the right to subscribe for and purchase shares of Common Stock issued from treasury (the “Partner Alignment Shares”). The maximum number of Partner Alignment Shares that the Lender shall be entitled to subscribe for pursuant to this Section 3.1 shall be a number of shares equal to one percent (1.00%) of the Borrower’s total issued and outstanding shares of Common Stock as at the date hereof after giving effect to the closing of the Equity Financing. The aggregate subscription price of the Partner Alignment Shares shall be $1.00. The Lender may subscribe for the Partner Alignment Shares concurrently with the First Tranche Advance. The Partner Alignment Shares shall be registered in the name of the Lender, or as the Lender may direct, and shall be subject to a hold period under Applicable Securities Legislation of not more than six months from their date of issue and an indefinite hold period in Canada under applicable Canadian securities law, subject to certain exceptions.

 

3.2 Prior to the issuance of the Partner Alignment Shares to the Lender as contemplated in Sections 3.1 and 3.2, the Lender agrees that it shall provide to the Borrower such certificates and additional information relating to the Lender as the Borrower may reasonably request, including without limitation a certificate regarding the Lender’s status as an “accredited investor” within the meaning of National Instrument 45-106 – Prospectus Exemptions and section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, to permit the Borrower to issue the Partner Alignment Shares in compliance with applicable Canadian and US securities laws.

 

 

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Article 4
rePayment / prePayment

 

Principal Repayments

 

4.1 Commencing on August 31, 2021 (the “First Repayment Date”), and on the last Business Day of each three month period thereafter (ending on November 30, February 28 (29 if a leap year), May 31, and August 31 of each year), the Borrower shall repay to the Lender the principal amount of the Facility (including all capitalized interest thereon, if any) as follows:

 

(a) in respect of the first four principal repayments coming due under this Section 4.1, the Borrower shall make principal repayments each in an amount equal to 2.50% of the outstanding principal amount of the Facility on August 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due) (the “August 2021 Principal Balance”); and

 

(b) in respect of all subsequent principal repayments coming due under this Section 4.1, the Borrower shall make principal repayments each in an amount equal to 7.50% of the August 2021 Principal Balance.

 

4.2 The Borrower shall pay the outstanding principal amount of the Facility (including all capitalized interest thereon, if any) in full on the earlier of the Maturity Date and the date of any acceleration of the Facility pursuant to Section 9.2 (including the applicable Prepayment Premium in the case of any acceleration of the Facility pursuant to Section 9.2).

 

Voluntary Prepayment

 

4.3 The Borrower may prepay to the Lender the outstanding principal amount of the Facility, in whole or in part, at any time before the Maturity Date. The Borrower shall, in addition to the amount of such prepayment, pay to the Lender an amount equal to the applicable Prepayment Premium as contemplated pursuant to Section 4.7.

 

Mandatory Prepayments of the Facility

 

4.4

 

(a) If at any time after the First Tranche Closing Date, any Credit Party (i) sells or otherwise disposes of any assets in one or more transactions (other than pursuant to Subsection (a) to Subsection (d) of the definition of Permitted Disposal), to the extent that cash proceeds of such sale or other disposal exceed $500,000 when aggregated with the proceeds of all other sales and disposals of the Credit Parties following the date of the First Tranche Closing Date, or (ii) receives any insurance proceeds greater than $1,000,000 which are not otherwise expended on the Project within one-hundred and eighty (180) days, such Credit Party will pay or cause to be paid to the Lender (A) the proceeds of such sale, net of reasonable out-of-pocket selling costs required to be paid by such Credit Party to any third party in connection with such sale or other disposal or (B) such insurance proceeds (as the case may be), to be applied in repayment of the outstanding balance of the Facility. The Borrower shall, in addition to the amount of any prepayment under this Section 4.4(a), pay to the Lender an amount equal to the applicable Prepayment Premium as contemplated pursuant to Section 4.7.

 

(b) If at any time after the First Tranche Closing Date, any Credit Party (a) sells, leases, licenses, transfers or otherwise disposes of any assets referred to in Subsection (d) of the definition of Permitted Disposal in one or more transactions, (i) if no Default has occurred and is continuing, the Borrower shall pay to the Lender 50% of the net proceeds of such sale, lease, license, transfer or other disposal (after deduction of reasonable transaction costs associated with such sale actually paid to third parties) to be applied on account of the outstanding balance of the Facility and (ii) if a Default has occurred and is continuing, the Borrower shall pay to the Lender all of the net proceeds of such sale, lease, license, transfer or other disposal (after deduction of reasonable transaction costs associated with such sale actually paid to third parties) to be applied on account of the outstanding balance of the Facility. Payments under this subsection (b) shall not attract any Prepayment Premium.

 

 

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4.5 If at any time after the First Tranche Closing Date, any Credit Party sells or otherwise disposes of any assets in one or more transactions (other than pursuant to Subsection (a) to Subsection (c) of the definition of Permitted Disposal), to the extent that the proceeds of such transactions are not in the form of cash (or to the extent there are non-cash proceeds), such Credit Party will grant to the Lender a first ranking Encumbrance over such proceeds and provide the Lender with all such security documents, opinions and other documents as the Lender or the Lender’s Counsel may reasonably require.

 

4.6 Upon the occurrence of a Change of Control (i) the Commitment shall be immediately reduced to zero and (ii) the Facility will become immediately due and payable, in full and the Borrower shall, in addition to the amount of such prepayment, pay to the Lender in respect thereof, an amount equal to the applicable Prepayment Premium together with any accrued and unpaid interest, fees and charges hereunder.

 

Prepayment Premium

 

4.7 In connection with any prepayment of the principal amount of the Facility (including capitalized interest, if any), whether voluntary pursuant to Section 4.3, a mandatory prepayment pursuant to Section 4.4(a), any payment in connection with a Change of Control pursuant to Section 4.6 or subsequent to any acceleration of Facility Indebtedness pursuant to Section 9.2), the Borrower shall pay the following as a prepayment premium (“Prepayment Premium”), as applicable:

 

(a) if the Borrower prepays any principal amount of the Facility (including capitalized interest, if any) on or prior to the date which is two years after the First Tranche Closing Date (the “Second Anniversary”), the Borrower shall make a payment to the Lender of a Prepayment Premium in an amount equal to 5.00% of the principal amount prepaid (including capitalized interest, if any) in addition to the amount of such prepayment;

 

(b) if the Borrower prepays any principal amount of the Facility (including capitalized interest, if any) at any time after the Second Anniversary but on or prior to the fourth anniversary of the First Tranche Closing Date (the “Fourth Anniversary”), the Borrower shall make a payment to the Lender of a Prepayment Premium in an amount equal to 3.00% of the principal amount prepaid (including capitalized interest, if any) in addition to the amount of such prepayment; and

 

(c) if the Borrower prepays any principal amount of the Facility (including capitalized interest, if any) at any time after the Fourth Anniversary, the Borrower shall not be required to pay any Prepayment Premium in addition to the amount of such prepayment.

 

For avoidance of doubt, no Prepayment Premium shall be payable on (i) any Mandatory Prepayment pursuant to Section 4.1(b) or Section 4.5 or (ii)  on the cancellation of any part of the Facility following the expiry of the Availability Period.

 

 

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Article 5

SECURITY

 

Security Documents

 

5.1 To secure the due payment of all Indebtedness of the Credit Parties to the Lender in respect of the Facility and the payment and performance of all other obligations, indebtedness and liabilities of the Credit Parties to the Lender hereunder and under the other Facility Documents (other than the Sprott Royalty, which shall be secured in priority to Encumbrances granted pursuant to the Security Documents by security separate and apart from the Security Documents), including all interest capitalized hereunder, the Credit Parties shall execute and deliver or cause to be executed and delivered, as applicable, the Security Documents to the Lender.

 

Registration of the Security

 

5.2 The Lender shall, at the Borrower’s expense, register, file, record and give notice of (or cause to be registered, filed, recorded and given notice of) the Security Documents in all offices and registries where such registration, filing, recording or giving notice is necessary or desirable for the perfection of the Encumbrance constituted thereby and to ensure that such Encumbrance is first ranking, subject only to the Permitted Encumbrances.

 

After Acquired Property and Further Assurances

 

5.3 The Credit Parties shall from time to time, promptly execute and deliver all such further documents, deeds or other instruments of conveyance, assignment, transfer, mortgage, pledge or charge as may be necessary or desirable in the opinion of the Lender or Lender’s Counsel acting reasonably to complete and maintain the registration and perfection of the Encumbrances created pursuant to the Security Documents and to ensure that the Secured Assets, including any after-acquired property, are subject to the Encumbrances created and perfected pursuant to the Security Documents.

 

Article 6

CONDITIONS precedent to advances

 

Conditions Precedent to the First Tranche Advance

 

6.1 The obligation of the Lender to make the First Tranche Advance under this Agreement is subject to and conditional upon the following conditions precedent being satisfied, fulfilled or otherwise met to the satisfaction of the Lender or otherwise waived in accordance with Section 6.2 on or before the First Tranche Closing Date:

 

(a) receipt by the Lender of the following documents, each in full force and effect, and in form and substance satisfactory to the Lender and the Lender’s Counsel:

 

(i) a Borrowing Notice delivered in accordance with Section 2.4;

 

(ii) executed copies of the Facility Documents, including, without limitation, this Agreement, the Sprott Royalty and the Security Documents described in Schedule B;

 

(iii) the stock certificate or other evidence satisfactory to the Lender, acting reasonably, representing the Partner Alignment Shares;

 

(iv) a certificate of the Borrower confirming that as at the date of the First Tranche Closing Date:

 

 

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A. the Borrower is in compliance with all its obligations under the Applicable Securities Legislation and of the Exchange in all respects;

 

B. no order or ruling suspending the sale or ceasing the trading in any securities of the Borrower or prohibiting the sale of such securities has been issued by the SEC to or against the Borrower or its directors, officers or promoters and no investigations or proceedings for such purposes have been threatened or are pending or contemplated;

 

C. there has been no material change, as defined in the Applicable Securities Legislation, relating to the Borrower, which has not been fully disclosed in accordance with the requirements of the Applicable Securities Legislation and the rules and policies of the Exchange;

 

D. no portion of the Disclosure Record in effect as of the First Tranche Closing Date contains an untrue statement of a material fact as of the date thereof nor does it omit to state a material fact which, at the date thereof, was required to have been stated or was necessary to prevent a statement that was made from being false or misleading in light of the circumstances in which it was made;

 

E. the Borrower has in all respects complied with all disclosure obligations under Applicable Securities Legislation and the rules and regulations of the Exchange and, without limiting the generality of the foregoing, there has not occurred an adverse material change, financial or otherwise, in the assets, liabilities (contingent or otherwise), business, financial condition, capital of the Borrower and the Subsidiaries (taken as a whole) which was required to be disclosed and which was not disclosed; the information and statements in the Disclosure Record were true and correct in all material respects at the time such documents were filed on EDGAR; and the Disclosure Record conformed in all respects to Applicable Securities Legislation at the time such documents were filed on EDGAR;

 

F. the Borrower has the corporate power, capacity and authority to issue and deliver the Partner Alignment Shares;

 

G. the Partner Alignment Shares have been or will be validly issued as fully paid and non-assessable shares of Common Stock and none of the Partner Alignment Shares will be issued in violation of or subject to any pre-emptive rights or contractual rights to purchase securities issued by the Borrower;

 

H. the Borrower has complied with all Applicable Securities Legislation in connection with the issuance of the Partner Alignment Shares, including but not limited to, the listing of the Partner Alignment Shares on the Exchange; and

 

I. the Borrower will not be a reporting issuer in any jurisdiction of Canada, and will be a “foreign ‎issuer” (as defined in section 2.15(1) of National Instrument 45-101), on the First Tranche Closing Date;

 

(v) copies of all permits, leases and licences related to the Project and the initial Model received or entered into as of the First Tranche Closing Date;

 

 

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(vi) confirmation from the Borrower that (i) except for the Authorizations identified on Schedule E as not having been obtained prior to the First Tranche Closing Date, all Authorizations from each Governmental Authority necessary or required as of the date of the First Tranche Closing Date to enable the Borrower to develop and operate the Project have been obtained and are valid, subsisting and in good standing, (ii) except for those Material Contracts identified on Schedule D as not having been executed prior to the First Tranche Closing Date, all Material Contracts as of the First Tranche Closing Date required to construct and operate the Project have been executed and provided to, and accepted by, the Lender and (iii) each Authorization from each Governmental Authority necessary or required to enable the Borrower to develop and operate the Project, which by their nature do not need to be obtained until a future date, are expected to be obtained prior to the time it becomes necessary or required for the then current stage of the development or operation of the Project;

 

(vii) customary search reports as the Lender may reasonably require with respect to the Credit Parties and the Project;

 

(viii) an up-to-date perfection certificate and due diligence checklist, including a list of the properties and assets owned by the Credit Parties;

 

(ix) a Compliance Certificate;

 

(x) certificates of status or other similar type of evidence of existence for each of the Credit Parties in its jurisdiction of formation;

 

(xi) certified copies of the Constating Documents of each of the Credit Parties;

 

(xii) copies of all agreements and documents evidencing all Royalty Obligations of the Credit Parties;

 

(xiii) certified copies of the board of directors’ or member’s resolutions for each of the Credit Parties with respect to its authorization, execution and delivery of the Facility Documents to which it is a party and the performance of all its obligations thereunder;

 

(xiv) certificates of a director, managing partner or authorized officer, as applicable, of each of the Credit Parties, in each case providing customary certifications including certifying the names and the true signatures of the officers authorized to sign the Facility Documents to which it is a party;

 

(xv) all requisite Authorizations and regulatory, stockholder, board of director and other consents, consent agreements and approvals to the transactions contemplated herein, including other third party consents, consent agreements and approvals listed in Schedule E (which shall not include, for avoidance of doubt, any consents required in connection with any Material Contracts listed under the Permits, Mining Claims and Other Rights subheading of Schedule D);

 

(xvi) stock certificates (to the extent certificated), executed blank share transfer forms and authorizing resolutions in respect of all Equity Interests pledged as at the First Tranche Closing Date and the subject of any Security Document;

 

(xvii) releases and discharges (in registrable form where appropriate) covering all Encumbrances affecting any of the Secured Assets secured by the Security Documents described in Schedule B which are not Permitted Encumbrances, including but not limited to those in relation to the Existing Debt Facilities, together with a payout statements in respect thereof;

 

 

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(xviii) title opinions and legal opinions of counsel to the Credit Parties in each Relevant Jurisdiction; and

 

(xix) an irrevocable direction to pay with respect to the First Tranche Advance;

 

(b) the Lender shall have completed and be satisfied with its legal due diligence review of the Credit Parties and their respective properties and assets;

 

(c) the Borrower shall have delivered evidence satisfactory to the Lender confirming that it is in full compliance with the Project Repayment Covenant obligations set out in Section 8.1(r), demonstrating that the Borrower has the capacity to meet all present and future obligations as they come due under or in respect of the Facility and the Sprott Royalty;

 

(d) the Borrower and the Original Hycroft Borrower shall have completed the Acquisition Transaction and in connection therewith, the Borrower shall have completed the Equity Financing and its shares of Common Stock shall be listed and trading through the facilities of the Exchange;

 

(e) the Borrower shall have completed the exchange of the 1.25 Lien Notes for the Exchanged 1.25 Lien Notes pursuant to and in accordance with the Note Exchange Agreement and the Lender, the Borrower and the holders of the Exchanged 1.25 Lien Notes shall have entered into an intercreditor agreement in form and on terms satisfactory to the Lender;

 

(f) Lender’s satisfaction that all Encumbrances granted pursuant to the Security Documents described in Schedule B have been or will, simultaneously with the making of the First Tranche Advance, be duly perfected, registered or recorded, as applicable, in all Relevant Jurisdictions and any other relevant jurisdiction as required by the Lender and the Lender’s Counsel;

 

(g) there shall be no Encumbrances whatsoever attaching to the Secured Assets, other than Permitted Encumbrances, and the Borrower shall have delivered to the Lender a certificate confirming same;

 

(h) all of the representations and warranties of the Credit Parties contained herein and/or in any other Facility Document are true and correct in all material respects on and as of the First Tranche Closing Date as though made on and as of such date unless such representation is made at a point in time, and the Lender has received a Certificate of the Borrower so certifying to the Lender;

 

(i) all of the covenants and agreements of each of the Credit Parties contained herein and/or in any other Facility Document required to be fulfilled or satisfied on or before the First Tranche Closing Date have been so fulfilled or satisfied, and the Lender has received a Certificate of the Borrower so certifying to the Lender;

 

(j) no Default or Event of Default has occurred and is continuing, and the Lender has received a Certificate of the Borrower so certifying to the Lender;

 

(k) the Lender has received payment of all fees and all costs and expenses which are payable by the Borrower to the Lender on or prior to the First Tranche Closing Date in accordance with Section 8.4;

 

 

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(l) no event or circumstance shall have occurred or exist that could reasonably be expected to have a Material Adverse Effect and there shall be no pending or threatened litigation, proceedings or investigations which could reasonably be expected to have a Material Adverse Effect;

 

(m) a certificate of a senior officer of the Borrower certifying the authorized and issued shares in Common Stock of the Borrower as of the date of the First Tranche; and

 

(n) such other conditions precedent (including the delivery of such documents, certificates, opinions and agreements) as the Lender may reasonably require based on its due diligence review,

 

failing which the Lender shall have no further obligation to the Borrower hereunder and the Borrower shall promptly thereafter pay to the Lender all outstanding fees and expenses in accordance with Section 8.4, including all costs and expenses incurred by the Lender in connection with this Agreement.

 

Waiver

 

6.2 The conditions in Section 6.1 are inserted for the sole benefit of the Lender and may be waived by the Lender, in whole or in part, with or without conditions, as the Lender may determine in its sole and absolute discretion.

 

Conditions Precedent to the Second Tranche Advance

 

6.3 The obligation of the Lender to make the Second Tranche Advance under this Agreement is subject to and conditional upon the following conditions precedent being satisfied, fulfilled or otherwise met to the satisfaction of the Lender or otherwise waived in accordance with Section 6.4, on or before the Second Tranche Closing Date:

 

(a) receipt by the Lender of the following documents, each in full force and effect, and in form and substance satisfactory to the Lender and the Lender’s Counsel:

 

(i) a Borrowing Notice delivered in accordance with Section 2.4;

 

(ii) executed copies of the Facility Documents not previously executed and delivered hereunder, including any Security Documents, together with supporting legal opinions and other documents as the Lender may reasonably require;

 

(iii) the Borrower shall have delivered to the Lender a certificate confirming the matters set out in Section 6.1(a)(iv)A through 6.1(a)(iv)E, as at the date of the Second Tranche Closing Date;

 

(iv) confirmation from the Borrower that (i) all Authorizations from each Governmental Authority necessary or required to enable the Borrower to develop and operate the Project as of the Second Tranche Closing Date have been obtained and are valid, subsisting and in good standing, (ii) all Material Contracts required to construct and operate the Project as of the Second Tranche Closing Date have been executed and provided to, and accepted by, the Lender and (iii) each Authorization from each Governmental Authority necessary or required to enable the Borrower to develop and operate the Project, as of the Second Tranche Closing Date which by its nature does not need to be obtained until a future date, is expected to be obtained prior to the time it becomes necessary or required for the then current stage of the development or operation of the Project;

 

 

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(v) except for those Authorizations, regulatory approvals and other third party consents, consent agreements and approvals obtained in connection with the First Tranche Advance, all requisite Authorizations, regulatory approvals and other third party consents, consent agreements and approvals to the transactions contemplated herein, including the third party consents, consent agreements and approvals listed in Schedule E (which shall not include, for avoidance of doubt, any consents required in connection with any Material Contracts listed under the Permits, Mining Claims and Other Rights subheading of Schedule D);

 

(vi) the Lender, acting reasonably, shall be satisfied with all updates to Schedules made by the Borrower on or before the Second Tranche Closing Date, as contemplated herein;

 

(vii) customary search reports as the Lender may reasonably require with respect to the Credit Parties and the Project;

 

(viii) a Compliance Certificate;

 

(ix) title opinions and legal opinions of counsel to the Credit Parties in each Relevant Jurisdiction, to the extent not provided in connection with the satisfaction of the conditions in respect of the First Tranche Advance or in connection with the Sprott Royalty; and

 

(x) an irrevocable direction to pay with respect to the Second Tranche Advance;

 

(b) ‎Lender’s satisfaction that all Encumbrances granted pursuant to the Security Documents described in Schedule B not previously perfected, registered or recorded, as applicable, ‎will, simultaneously with the making of the Second Tranche Advance, be duly perfected, registered or recorded, as applicable,‎ in all Relevant Jurisdictions and any other relevant jurisdiction as required by the Lender and the Lender’s Counsel;

 

(c) there shall be no Encumbrances whatsoever attaching to any of the Secured Assets, other than Permitted Encumbrances, and the Borrower shall have delivered to the Lender a certificate confirming same;

 

(d) all of the representations and warranties of the Credit Parties contained herein or in any other Facility Document are true and correct in all material respects on and as of the Second Tranche Closing Date as though made on and as of such date, unless such representation is made at a point in time and the Lender has received a Certificate of the Borrower so certifying to the Lender;

 

(e) all of the covenants and agreements of each of the Credit Parties contained herein or in any other Facility Document required to be fulfilled or satisfied on or before the Second Tranche Closing Date have been so fulfilled or satisfied, and the Lender has reviewed a Certificate of the Borrower so certifying to the Lender;

 

(f) no Default or Event of Default has occurred and is continuing, and the Lender has received a Certificate of the Borrower so certifying to the Lender;

 

(g) the Lender has received payment of all fees and all costs and expenses which are payable by the Borrower to the Lender on or prior to the Second Tranche Closing Date in accordance with Section 8.4;

 

(h) no event or circumstance shall have occurred or exist that could reasonably be expected to have a Material Adverse Effect and there shall be no pending or threatened litigation, proceedings or investigations which could reasonably be expected to have a Material Adverse Effect;

 

 

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(i) the Lender shall have advanced to the Borrower the First Tranche as contemplated in this Agreement; and

 

(j) such other conditions precedent (including the delivery of such documents, certificates, opinions and agreements) as the Lender may reasonably require,

 

failing which the Lender shall have no further obligation to the Borrower hereunder and the Borrower shall promptly thereafter pay to the Lender all outstanding fees and expenses in accordance with Section 8.4, including all costs and expenses incurred by the Lender in connection with this Agreement.

 

Waiver

 

6.4 The conditions in Section 6.3 are inserted for the sole benefit of the Lender and may be waived by the Lender, in whole or in part, with or without conditions, as the Lender may determine in its sole and absolute discretion.

 

Conditions Precedent to Third Tranche Advances

 

6.5 The obligation of the Lender to make each Third Tranche Advance under this Agreement is subject to and conditional upon the following conditions precedent being satisfied, fulfilled ‎or otherwise met to the satisfaction of the Lender or otherwise waived in accordance with ‎Section 6.6, on or before the applicable Third Tranche Closing Date:‎

 

(a) ‎receipt by the Lender of the following documents, each in full force and effect, and in form and substance satisfactory to the Lender and the Lender’s Counsel:‎

 

(i) a Borrowing Notice delivered in accordance with Section 2.4;‎

 

(ii) executed copies of the Facility Documents not previously executed and delivered ‎hereunder, including any Security Documents, together with supporting legal ‎opinions and other documents as the Lender may reasonably require;‎

 

(iii) the Borrower shall have delivered to the Lender a certificate confirming the matters ‎set out in Section 6.1(a)(iv)A through 6.1(a)(iv)E, as at the date of the Third ‎Tranche Closing Date;‎

 

(iv) confirmation from the Borrower that (i) all Authorizations from each Governmental ‎Authority necessary or required to enable the Borrower to develop and ‎operate the Project as of the Third Tranche Closing Date have been obtained ‎and are valid, subsisting and in good standing, (ii) all Material Contracts ‎required to construct and operate the Project as of the Third Tranche Closing ‎Date have been executed and provided to, and accepted by, the Lender and ‎‎(iii) each Authorization from each Governmental Authority necessary or ‎required to enable the Borrower to develop and operate the Project, as of the ‎Third Tranche Closing Date which by its nature does not need to be obtained ‎until a future date, is expected to be obtained prior to the time it becomes ‎necessary or required for the then current stage of the development or ‎operation of the Project;‎

 

 

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(v) except for those Authorizations, regulatory approvals and other third party consents, ‎consent agreements and approvals obtained in connection with the First ‎Tranche Advance or the Second Tranche Advance, all requisite ‎Authorizations, regulatory approvals and other third party consents, consent ‎agreements and approvals to the transactions contemplated herein, including ‎the third party consents, consent agreements and approvals listed in Schedule E (which shall not include, for avoidance of doubt, any consents ‎required in connection with any Material Contracts listed under the Permits, ‎Mining Claims and Other Rights subheading of Schedule D);‎

 

(vi) the Lender, acting reasonably, shall be satisfied with all updates to Schedules made ‎by the Borrower on or before the applicable Third Tranche Closing Date, as ‎contemplated herein;‎

 

(vii) customary search reports as the Lender may reasonably require with respect to the Credit ‎Parties and the Project;‎

 

(viii) a Compliance Certificate;‎

 

(ix) title opinions and legal opinions of counsel to the Credit Parties in each Relevant ‎Jurisdiction, to the extent not provided in connection with the satisfaction of the ‎conditions in respect of the First Tranche Advance, the Second Tranche Advance ‎or in connection with the Sprott Royalty; and

 

(x) an irrevocable direction to pay with respect to the Third Tranche Advance;‎

 

(b) the Borrower shall have prepared and delivered to the Lender, and the Lender shall have ‎reviewed and be satisfied with, a written report confirming that (i) that the development of ‎the Project has not deviated in any material adverse respect from the Model (a material ‎adverse respect being an adverse change of 10% or more), (ii) that the unadvanced ‎portion of the Facility, plus the Borrower’s Unrestricted Cash and unadvanced Subordinated ‎Indebtedness, is sufficient for the Project to achieve commercial production as ‎contemplated by the Model, and (iii) the Borrower’s compliance with the Project ‎Repayment Covenant on a pro-forma basis inclusive of the Third Tranche Advance ‎‎(subject to any applicable cure period), and, in connection therewith the Lender and its ‎technical consultants may review such report and conduct site visits of the Project in ‎accordance with Section 8.1(r), at the Borrower’s cost and expense;‎

 

(c) the Lender shall be satisfied acting reasonably that the Project is operating in all material ‎respects within the metrics set out in the Updated Project Feasibility Study;‎

 

(d) evidence that all Encumbrances granted pursuant to the Security Documents described in ‎Schedule B not previously perfected, registered or recorded, as applicable, have been ‎duly perfected, registered or recorded, as applicable, in all Relevant Jurisdictions and ‎any other relevant jurisdiction as required by the Lender and the Lender’s Counsel;‎

 

(e) there shall be no Encumbrances whatsoever attaching to any of the Secured Assets, other than ‎Permitted Encumbrances, and the Borrower shall have delivered to the Lender a ‎certificate confirming same;‎

 

(f) all of the representations and warranties of the Credit Parties contained herein or in any other ‎Facility Document are true and correct in all material respects on and as of the Third ‎Tranche Closing Date as though made on and as of such date, unless such ‎representation is made at a point in time and the Lender has received a Certificate of the ‎Borrower so certifying to the Lender;‎

 

 

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(g) all of the covenants and agreements of each of the Credit Parties contained herein or in any ‎other Facility Document required to be fulfilled or satisfied on or before the Third Tranche ‎Closing Date have been so fulfilled or satisfied, and the Lender has reviewed a Certificate ‎of the Borrower so certifying to the Lender;‎

 

(h) no Default or Event of Default has occurred and is continuing, and the Lender has received a ‎Certificate of the Borrower so certifying to the Lender;‎

 

(i) the Lender has received payment of all fees and all costs and expenses which are payable by ‎the Borrower to the Lender on or prior to the Third Tranche Closing Date in accordance ‎with Section 8.4;‎

 

(j) no event or circumstance shall have occurred or exist that could reasonably be expected to have ‎a Material Adverse Effect and there shall be no pending or threatened litigation,‎ proceedings or investigations which could reasonably be expected to have a Material ‎Adverse Effect;‎

 

(k) the Lender shall have advanced to the Borrower the First Tranche as contemplated in this ‎Agreement; and

 

(l) such other conditions precedent (including the delivery of such documents, certificates, ‎opinions and agreements) as the Lender may reasonably require,‎

 

failing which the Lender shall have no further obligation to the Borrower hereunder and the ‎Borrower shall promptly thereafter pay to the Lender all outstanding fees and expenses in ‎accordance with Section 8.4, including all costs and expenses incurred by the Lender in ‎connection with this Agreement.‎