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.‎

 

Waiver

 

6.6 The conditions in Section 6.5 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.‎

 

Article 7

REPRESENTATIONS AND WARRANTIES

 

Representations and Warranties of the Credit Parties

 

7.1 The Credit Parties hereby represent and warrant to the Lender as of the date of the First Tranche Advance and thereafter in accordance with Section 7.2, that:

 

(a) each Credit Party has been duly incorporated or formed and organized under the laws of its jurisdiction of incorporation or formation and is validly existing and is current and up-to-date with all filings required to be made under the laws of its jurisdiction of incorporation or formation to maintain its corporate or limited company existence and has all requisite corporate or limited company power to carry on its business as now conducted and to own, lease or operate its property, and no steps or proceedings have been taken by any Person, voluntary or otherwise, requiring or authorizing its dissolution or winding up;

 

(b) each Credit Party and any representative signing on its behalf has full power and capacity to enter into each of the Facility Documents to which it is a party and to do all acts and things and execute and deliver all documents as are required hereunder or thereunder to be done, observed, performed or executed and delivered by it in accordance with the terms hereof and thereof, and each Credit Party has taken all necessary corporate action to duly authorize the creation, execution, delivery and performance of each of the Facility Documents to which it is a party and to observe and perform the provisions of such Facility Documents in accordance with the provisions thereof;

 

 

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(c) upon the execution and delivery thereof, the Facility Documents will create legal, valid and binding obligations of each Credit Party that is party to them enforceable against each such Credit Party in accordance with their respective terms except as enforcement thereof maybe limited by bankruptcy, insolvency, moratorium and other laws relating to or affecting the rights of credits generally and except as limited by the application of equitable principles, and by the indemnity, contribution and waiver and the ability to sever unenforceable terms may be limited by Applicable Law;

 

(d) the entry into and the performance of its obligations under each Facility Document to which it is a party is in its best interests and for a proper purpose;

 

(e) none of the execution and delivery of the Facility Documents, the compliance by the Credit Parties with the provisions of the Facility Documents or the consummation of the transactions contemplated herein, does or will: (i) require the consent, approval, Authorization, order or agreement of, or registration or qualification with, any Governmental Authority, court, stock exchange, securities regulatory authority or other Person, except those listed on Schedule E, all of which will have been obtained or will be obtained before the applicable Closing Date, as required hereunder; (ii) conflict with or result in any breach or violation of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust, material lease or other agreement or instrument to which any Credit Party is a party or by which it or any of its properties or assets is bound; or (iii) conflict with or result in any breach or violation of any provisions of, or constitute a default under the Constating Documents of any Credit Party or any resolution passed by the directors (or any committee thereof) or stockholders of any Credit Party, or any statute or any judgment, decree, order, rule, policy or regulation of any court, Governmental Authority, any arbitrator, stock exchange or securities regulatory authority applicable to any Credit Party or any of the properties or assets thereof;

 

(f) except as set forth in Schedule C, no Credit Party owns, beneficially or of record, or exercises Control over, any Equity Interests of any Person;

 

(g) other than as disclosed in the Borrower SEC Reports filed with the SEC on or prior to the First Tranche Closing Date (to the extent the qualifying nature of such disclosure is readily apparent from the content of such Borrower SEC Reports), no Person has any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement, for the purchase, acquisition, subscription for, or issue of, any of the unissued shares or other securities of the Borrower or any other Credit Party;

 

(h) no Credit Party carries on business, has an office or owns any properties or assets located, outside of Colorado, Nevada, Texas or Delaware;

 

(i) each Credit Party is licensed, registered or qualified as a foreign corporation in all jurisdictions where the character of any of its owned or leased properties or assets or the nature of the activities conducted by it make licensing, registration or qualification necessary and is carrying on the business thereof in compliance in all material respects with all Applicable Laws of each such jurisdiction;

 

(j) each Credit Party has conducted and is conducting its business in compliance in all material respects with Applicable Law and possesses all Authorizations necessary to carry on the business currently carried on by it in all material respects, is in compliance with the Model in all material respects and all terms and conditions of all such Authorizations, and no Credit Party has received any written notice of the modification, revocation or cancellation of, any intention to modify, revoke, or cancel, or any proceeding relating to the modification, revocation or cancellation of any such Authorization;

 

 

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(k) no Credit Party has incurred any Indebtedness or guaranteed the obligations of any Person, except for Permitted Indebtedness;

 

(l) the contracts, agreements and other documents listed in Schedule D represent all Material Contracts of the Credit Parties, each of which is in full force and effect, unamended, and true and complete copies of which have been provided to the Lender;

 

(m) any and all of the agreements and other documents and instruments pursuant to which any Credit Party holds any material property and/or assets (including any interest in, or right to earn an interest in, any property) are valid and subsisting agreements, documents or instruments in full force and effect, enforceable in accordance with the terms thereof except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium and other laws relating to or affecting the rights of creditors generally and except as limited by the application of equitable principles, and by the indemnity, contribution and waiver and the ability to sever unenforceable terms may be limited by Applicable Law. No Credit Party is in default in any material respect of any provision of any such agreements, documents or instruments, nor has any such default been alleged, and such material properties and assets are in good standing under the Applicable Laws of the jurisdictions in which they are situated, and all material leases, licenses and claims pursuant to which any Credit Party derives the interests thereof in such property and assets are in good standing and there has been no default under any such lease, licence or claim. None of the material properties or assets (or any interest in, or right to earn an interest in, any property) of any Credit Party is subject to any right of first refusal, purchase, acquisition or similar right;

 

(n) Hycroft Resources holds freehold title, mining leases, mining claims or other conventional property, proprietary or contractual interests or rights, recognized in the jurisdiction in which a particular property is located, in respect of the ore bodies, metals and minerals located in properties in which it has an interest as described in the Updated Project Feasibility Study under valid, subsisting and enforceable title documents (except as enforcement thereof maybe limited by bankruptcy, insolvency, moratorium and other laws relating to or affecting the rights of credits generally and except as limited by the application of equitable principles, and by the indemnity, contribution and waiver and the ability to sever unenforceable terms may be limited by Applicable Law) or other recognized and enforceable agreements or instruments, sufficient to permit them to explore and extract the metals and minerals relating thereto as contemplated in the Model, all such property, leases or claims and all property, leases or claims in respect of the Project in which they have an interest or right have been validly located and recorded in accordance with Applicable Law in all respects and are valid and subsisting; Hycroft Resources has all necessary surface rights, access rights and other necessary rights and interests relating to the properties in which it has an interest as described in the Updated Project Feasibility Study in respect of the Project granting it the right and ability to access, explore and extract minerals, ore and metals for development purposes as contemplated in the Model as are appropriate in view of the rights and interest therein, with only such exceptions as do not interfere with the use made by it of the rights or interests so held and each of the proprietary interests or rights and each of the documents, agreements and instruments and obligations relating thereto referred to above is currently in good standing in its name;

 

 

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(o) each Credit Party has good and valid right, title and interest in and to all of its properties and assets, movable (personal) or immovable (real), free and clear of all Encumbrances, whether registered or unregistered, except Permitted Encumbrances, and no such properties or assets are subject to any earn-in right, right of first refusal, purchase, acquisition or similar right, granted in favour of any Person, except Permitted Encumbrances;

 

(p) the description of the Project contained in Schedule A is a true and complete description of the Project;

 

(q) the Credit Parties are in compliance with all reclamation obligations applicable to the Project required under Applicable Law or pursuant to the written directive of any relevant Government Authority, have in place a mine closure plan approved by the appropriate Governmental Authorities and have posted all bonding, security and other financial commitments which is required under Applicable Law in connection therewith, pursuant to all Applicable Law;

 

(r) each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state laws;

 

(s) there are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(t) (i) no ERISA Event has occurred, and neither the Borrower nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan or Multiemployer Plan; (ii) neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (iii) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to section 4069 or section 4212(c) of ERISA; and (iv) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan;

 

(u) with respect to each scheme or arrangement mandated by a government other than the United States (a “Foreign Government Scheme or Arrangement”) and with respect to each employee benefit plan maintained or contributed to by any Credit Party or any Subsidiary of any Credit Party that is not subject to United States law (a “Foreign Plan”):

 

(i) any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices;

 

(ii) the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles; and

 

(iii) each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities;

 

 

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(v) each Credit Party owns or has the right to use under license, sub-license or otherwise all intellectual property used by it in its business, including copyrights, industrial designs, trademarks, trade secrets, know-how and proprietary rights, free and clear of any and all Encumbrances except Permitted Encumbrances;

 

(w) no Subsidiaries of the Borrower other than Hycroft Resources own any properties or assets or have any liabilities, except for stockholdings disclosed in Schedule C;

 

(x) no Credit Party maintains, or has any obligation or liability in relation to, any contributory pension plan, other than ongoing obligations relating to 401(k) plans;

 

(y) there are no pending or threatened legal actions or proceedings of any kind which could reasonably be expected to have a Material Adverse Effect;

 

(z) except for Permitted Encumbrances, there are no royalty obligations or similar obligations applicable to the properties of any Credit Party, including but not limited to the property interests comprising the Project;

 

(aa) no Credit Party has approved entering into any agreement in respect of (i) the sale of any property of such Credit Party, or assets or any interest therein or the sale, transfer or other disposition of any property of such Credit Party, or assets or any interest therein currently owned, directly or indirectly, by such Credit Party whether by asset sale, transfer of shares or otherwise or (ii) any Change of Control;

 

(bb) the consolidated financial statements of each of the Borrower, the Original Hycroft Borrower and each of their respective Subsidiaries for the fiscal years ended December 31, 2018 and December 31, 2019 that have been provided to the Lender have been made in accordance with Applicable Law, give a true and fair view of the Borrower’s or the Original Hycroft Borrower‘s (as the case may be) consolidated financial position as at the date thereof in all material respects, comply with U.S. GAAP in all material respects, and no adverse material change in the financial position of the Credit Parties, taken as a whole, has taken place since the date thereof;

 

(cc) other than liabilities associated with this Agreement, none of the Credit Parties has any liabilities, fixed or contingent, of the type required to be reflected as liabilities in financial statements prepared in accordance with U.S. GAAP as of the date of the most recently completed audited consolidated financial statements, that are not reflected in the most recent audited consolidated financial statements of the Borrower and its Subsidiaries, or in the notes thereto, that have been provided to the Lender;

 

(dd) the Borrower’s and the Original Hycroft Borrower’s Auditors are independent certified public accountants and have participant status with the American Institute of Certified Public Accountants and Public Company Accounting Oversight Board;

 

(ee) all Taxes of each Credit Party have been paid when due and all Tax returns, declarations, remittances and filings required to be filed by any Credit Party have been filed with all appropriate Governmental Authorities and all such returns, declarations, remittances and filings were, at the time of filing, complete and accurate in all respects and no fact or facts have been omitted therefrom which could make any of them misleading. There are no issues or disputes outstanding with any Governmental Authority respecting any Taxes that have been paid, or may be payable, by any Credit Party and no examination of any Tax return of any Credit Party is currently in progress (save in respect of any issue, dispute or examination which the relevant Credit Party (or Credit Parties) is disputing in good faith and pursuant to appropriate proceedings diligently conducted);

 

 

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(ff) (i) no Credit Party is in violation of any Environmental Laws including laws relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum by-products (collectively, “Hazardous Materials”) or the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials; (ii) each Credit Party has all Authorizations required under any applicable Environmental Laws and, each Credit Party is in compliance with such Authorizations; (iii) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of non-compliance or, to any Credit Party’s knowledge, violation, investigation or proceedings relating to any Environmental Laws against any Credit Party; and (iv) there are no events or circumstances that could reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental Authority, against or affecting any Credit Party relating to any Environmental Laws, which in each case in respect of any matter referred to in (i) to (iv) could reasonably be expected to have a Material Adverse Effect;

 

(gg) each Credit Party operates its business in compliance in all material respects with all Applicable Laws relating to employment and there are no material legal proceedings nor, to the knowledge of any Credit Party, any material legal proceedings threatened, against any Credit Party pursuant to any Applicable Laws relating to employment. There are no outstanding decisions, orders, judgments or settlements or pending settlements under any Applicable Laws relating to employment, which place any obligation upon any Credit Party to do or refrain from doing any act. Each Credit Party is up to date in the payment of all premiums or assessments under applicable workers compensation or other worker safety legislation applicable in the Relevant Jurisdictions, and no Credit Party is subject to any special assessment or penalty under any such legislation;

 

(hh) (i) no material complaint for wrongful dismissal, constructive dismissal or any other claim, complaint, litigation or other proceeding respecting employment and employment practices, terms and conditions of employment, pay equity and wages is pending against any Credit Party or threatened against any Credit Party as of the date hereof; (ii) no grievance or arbitration arising out of or under any collective bargaining agreement is pending against any Credit Party or threatened against it; and (iii) no strike, or labour dispute, slowdown or stoppage is pending or threatened against any Credit Party;

 

(ii) save except as set out on Schedule H hereto or on account of Existing Debt Facilities (all of which, except for the 1.25 Lien Notes which will have been exchanged for the Exchanged 1.25 Lien Notes, will be repaid or converted prior to or concurrently with the First Tranche Advance) incurred to the First Tranche Closing Date, none of the directors, officers or employees of any Credit Party or any Affiliate of a Credit Party had or has any interest, direct or indirect, in any transaction or any proposed transaction with any Credit Party;

 

(jj) the assets of each Credit Party and their respective businesses and operations are insured against loss or damage with insurers on a basis consistent with insurance obtained by reasonably prudent participants in comparable businesses, such coverage is in full force and effect, and no Credit Party has failed to promptly give any notice of any claim thereunder. There are no claims by any Credit Party under any such policy or instrument as to ‎which any insurance company is denying liability‎;

 

 

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(kk) no Credit Party is in breach or default of any term of its Constating Documents. No Credit Party is in breach or default of any term or provision of any agreement, indenture or other instrument applicable to it which could reasonably be expected to result in any Material Adverse Effect, and there is no action, suit, proceeding or investigation commenced, pending or threatened which, either in any case or in the aggregate, could reasonably be expected to result in any Material Adverse Effect or which places, or could place, in question the validity or enforceability of this Agreement, or any document or instrument delivered, or to be delivered, by any Credit Party pursuant hereto;

 

(ll) no Credit Party is in breach or default of any term, covenant or condition under or in respect of any judgment, order, agreement or instrument to which it is a party or to which it or any of the property or assets thereof are subject which, and no event has occurred and is continuing, and no circumstance exists which has not been waived, which constitutes a default in respect of any commitment, agreement, document or other instrument to which any Credit Party is a party or by which it is otherwise bound entitling any other party thereto to accelerate the maturity of any amount owing thereunder or which could reasonably be expected to result in any Material Adverse Effect;

 

(mm) no Credit Party has committed or commenced any act of bankruptcy, liquidation, receivership, dissolution, winding-up, relief of debtors, is otherwise insolvent, has proposed a compromise or arrangement to its respective creditors generally, has had a petition or receiving order in bankruptcy filed against it, has made a voluntary assignment in bankruptcy, has taken any proceedings with respect to a compromise or arrangement, has taken any proceedings to have a receiver appointed for any of its property or has had any execution or distress become enforceable or become levied against it or upon any of its property or assets;

 

(nn) there are no actions, suits, proceedings, inquiries or investigations existing, pending or threatened against or adversely affecting any Credit Party or to which any of their properties or assets is subject, at law or equity, or before or by any Governmental Authority which individually or in aggregate could reasonably be expected to have a Material Adverse Effect and no Credit Party is subject to any judgment, order, writ, injunction, decree, award, rule, policy or regulation of any Governmental Authority which individually or in aggregate could reasonably be expected to have a Material Adverse Effect;

 

(oo) the Credit Parties have disclosed to the Lender in writing, prior to the date hereof, all material aspects of the ongoing class action litigation matters represented by LBP Holdings Ltd. v Hycroft Mining Corporation, et al. (court file no. CV-14-50851300-CP in the Ontario Superior Court of Justice) and In Re Allied Nevada Gold Corp. (lead case number 3:14-cv-00175-LRH-WGC in the United States District Court District of Nevada); all liability exposure thereunder, including all costs of such proceedings, is fully insured through policies of insurance held by one or more of the Credit Parties; and none of the Credit Parties has received any notice or other indication from its insurers that such insurance coverage in respect of such proceedings will not be, or continue to be, fully insured;

 

(pp) no Credit Party and no director or officer, and to the best of the knowledge of the Credit Parties after all due inquiry, no agent, employee or other Person acting on behalf of any Credit Party has, in the course of its actions for, or on behalf of, any Credit Party (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Corruption of Foreign Public Officials Act (Canada), the US Foreign Corrupt Practices Act of 1977, or any other similar laws (the “Anti-Corruption Laws”); or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official, employee or other Person;

 

 

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(qq) the Borrower has implemented and maintains in effect for itself and its Subsidiaries policies and procedures to ensure compliance by the Borrower, its Subsidiaries, and their respective officers, employees, directors, and agents with the Anti-Corruption Laws and applicable Sanctions;

 

(rr) none of the Borrower, any of its Subsidiaries or any director, officer, employee, agent, or affiliate of the Borrower or any of its Subsidiaries is an individual or entity that is, or is 50% or more owned (individually or in the aggregate, directly or indirectly) or controlled by individuals or entities (including any agency, political subdivision or instrumentality of any government) that are (i) the target of any Sanctions or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions;

 

(ss) no Credit Party enjoys immunity from suit or execution in relation to its obligations under any Facility Document to which it is a party;

 

(tt) the most recent Model delivered by the Borrower to the Lender has been prepared in good faith by the Borrower based upon (i) the assumptions stated therein (which assumptions are believed by the Borrower on the date of delivery of such Model, to be reasonable), and (ii) the best information available to the Borrower as of the date of delivery of such Model; as of the date of delivery of the most recent Model, to the knowledge of the Borrower, no material fact, occurrence, circumstance or effect has occurred that could result in or require any material adverse change to such Model; the development of the Project has not deviated from the Model; the intended use of proceeds of each Advance is in accordance and consistent with the Model; for the work completed to date, construction is progressing in all material respects in accordance with the Model (and failing which all cost overruns have been settled and paid from sources other than the Facility proceeds);

 

(uu) the most recent Model delivered by the Borrower to the Lender does not contemplate any mining or related activities which are contingent or dependent upon receipt of the final EIS and the ROD in respect thereof approving the final EIS, all as contemplated in Section 8.1(w), prior to December 31, 2021; and

 

(vv) there is no fact or circumstance which the Borrower has failed to disclose to the Lender in writing which could reasonably be expected to have a Material Adverse Effect. ‎As of the date hereof, the information included in the perfection certificate delivered by the Borrower to the Lender is true and ‎correct in all material respects.‎

 

Acknowledgement

 

7.2 The Credit Parties acknowledge that the Lender is relying upon the representations and warranties in this Article 7 in discharging its obligations under this Agreement and that such representations and warranties shall be deemed to be restated, save and except for those representations and warranties which are given at a point in time, effective on the date each Advance is made and on the date of each Compliance Certificate delivered after the First Tranche Closing Date.

 

Survival and Inclusion

 

7.3 The representations and warranties in this Article 7 will survive the termination of this Agreement. All statements, representations and warranties contained in any other Facility Document or in any instruments delivered by or on behalf of the Credit Parties or the Lender pursuant to this Agreement or any other Facility Document will be deemed to constitute statements, representations and warranties made by the Credit Parties to the Lender under this Agreement.

 

 

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Representations and Warranties of the Lender

 

7.4 The Lender hereby represents and warrants to the Credit Parties as of the First Tranche Closing Date and as of the date of each Subsequent Tranche Advance that, under Applicable Law (including, for the avoidance of doubt, the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital) as in effect as of the First Tranche Closing Date, interest payable hereunder to the Lender is not effectively connected with the conduct by the Lender of a trade or business in the United States.

 

Article 8

COVENANTS OF THE borrower

 

General Covenants

 

8.1 While any Facility Indebtedness is outstanding or the Facility remains available to the Borrower following the First Tranche Advance, the Credit Parties covenant and agree with the Lender as follows:

 

(a) the Borrower will duly and punctually pay or cause to be paid to the Lender each Amount Payable, on the dates, at the places, in the currency and in the manner mentioned herein, including, without limitation, upon the acceleration of the Facility in accordance with Section 9.2 the outstanding balance of the Facility;

 

(b) except as otherwise permitted by this Agreement, they will at all times maintain their corporate existence, obtain and maintain all Authorizations required or necessary in connection with their business, the Project and/or all of the Secured Assets, observe and perform all their obligations under all Authorizations and to carry on and conduct their business and exploit the Project in accordance with prudent mining industry standards;

 

(c) they will keep or cause to be kept proper books of account and make or cause to be made therein true and complete entries of all of their dealings and transactions in relation to their businesses in accordance with U.S. GAAP, and at all reasonable times during normal business hours they will furnish or cause to be furnished to the Lender or its duly authorized representative, agent or attorney such information relating to their operations as the Lender may reasonably request and such books of account shall be open for inspection by the Lender or such representative, agent or attorney, upon reasonable prior notice (unless a Default is continuing, in which case no prior notice shall be required) and during regular business hours in the location of the requested information (unless a Default is continuing, in which case the Lender will be entitled to conduct such inspection at any time);

 

(d) they will (at the Borrower’s cost and expense) provide the Lender and its representatives or any agent or attorney thereof access to all its properties (including the Project), assets and books and records, upon reasonable prior notice and during regular business hours (unless a Default exists and is continuing in which case no prior notice is required and the Lender will have access at any time);

 

(e) they will diligently pursue, in all respects, all mining and related activities in respect of the Project, as contemplated by the most recent Model delivered by the Borrower to the Lender;

 

(f) they will diligently pursue all requisite Authorizations and regulatory approvals to the transactions contemplated herein as and when the same are required in accordance with the Model;

 

 

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(g) the Credit Parties will at all times comply with all reclamation obligations applicable to the Project as required under Applicable Law or pursuant to the written directive of any relevant Government Authority, maintain a mine closure plan and maintain all bonding, security and other financial commitments which is required under Applicable Law or pursuant to the written directive of any relevant Government Authority in connection therewith;

 

(h) from and after the First Tranche Closing Date (unless such Security Document is not entered into until a later date, then from and after such later date), they will ensure that each of the Security Documents will at all times constitute valid and perfected first ranking security on all of the Secured Assets, in accordance with their terms, subject only to Permitted Encumbrances, and at all times take all actions reasonably required by the Lender to create, perfect and maintain the Encumbrances granted pursuant to the Security Documents as perfected first ranking security over the Secured Assets, subject only to Permitted Encumbrances;

 

(i) they will duly and punctually perform and carry out all of the covenants and acts or things to be done by them as provided in this Agreement and each of the other Facility Documents;

 

(j) they will comply, and conduct their business in such a manner so as to comply with all Applicable Law, including all Applicable Securities Legislation, Anti-Corruption Laws, ERISA, Sanctions and all Environmental Laws (including, without limitation, laws relating to the release or threatened release of Hazardous Materials and the manufacture, processing distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials) and Authorizations;

 

(k) the Borrower shall promptly, and in any event no later than three Business Days after the Borrower obtains knowledge thereof, deliver written notice to the Lender of the occurrence of: (i) any material environmental accident or spill affecting any Credit Party or the Project or (ii) any other condition, event or circumstance that results in a material non-compliance by any Credit Party or the Project with any Environmental Law or Authorizations;

 

(l) they will: (i) maintain policies of insurance with carriers and in such amounts and covering such risks as are usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Credit Parties operate and otherwise on terms and in such amounts as may be acceptable to the Lender, and add and maintain the Lender as first loss payee and as an additional insured under all such policies to the extent of its interest; and (ii) on an annual basis and/or at any other time, promptly at the request of the Lender, deliver to the Lender evidence of and all certificates and reports prepared in connection with such insurance;

 

(m) they shall promptly notify the Lender in writing upon becoming aware of: (i) any Default, or (ii) any suit, proceeding or governmental investigation pending or, to any Credit Party’s knowledge, threatened or any notification of any challenge to the validity of any Authorization, relating to the Credit Parties or any of the Secured Assets, or (iii) the occurrence of any ERISA Event;

 

(n) they will maintain, preserve and protect or cause to be maintained, preserved and protected the Secured Assets and the Project in accordance with prudent mining industry standards (and in the case of tangible Secured Assets, in good condition subject to normal wear and tear);

 

(o) from and after the First Tranche Closing Date, no later than 45 days following the end of each Fiscal Quarter, the Borrower shall deliver to the Lender a Compliance Certificate executed by a senior financial officer of the Borrower dated as at the end of the last completed Fiscal Quarter;

 

 

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(p) no later than thirty (30) days following the last day of each calendar month, if requested by the Lender, provide the Lender with unconsolidated monthly financial and operational reports, consisting of each of the Credit Parties’ balance sheet, income statement, statement of accounts payables and accrued liabilities, standard monthly costs and operating reports provided to management or the board of directors, in the form agreed with the Lender from time to time, and such other information with respect to the Credit Parties as the Lender may request;

 

(q) from and after the First Tranche Closing Date, the Borrower will, on a consolidated basis and as determined by reference to the previously filed (or, if applicable pursuant to Section 8.5, delivered) reports and the unconsolidated monthly reports referred to in Section 8.1(p), ensure at all times that:

 

(i) the amount of its Working Capital is in excess of $10,000,000; and

 

(ii) the amount of its Unrestricted Cash is greater than $10,000,000;

 

(r) commencing on the First Tranche Closing Date and every six months thereafter (and within 30 days of any material adverse change to the mine plan or inputs to the Model or upon any written request of the Lender), the Borrower will deliver an updated Model applying Bloomberg consensus gold and USD:CAD FX forward prices, stress tested by less/greater than 5%, 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 (including under each Facility Document) and the Sprott Royalty (the “Project Repayment Covenant”). The updated Model will also be revised to reflect changes in projections, including mine plans, recoveries, production forecasts, capital expenditures, operating costs and financing transactions, including proceeds from any contemplated equity transactions. The Borrower shall remedy to the Lender’s satisfaction any breach or deficiency in meeting the Project Repayment Covenant, in the manner determined by the Lender, within 60 days after the required delivery date of the Model;

 

(s) the Borrower shall continue to employ and retain Randy Buffington in his positions as President, Chief Executive Officer and a director of the Borrower and Steve Jones in his positions as Executive Vice President and Chief Financial Officer of the Borrower, both on a full-time basis, until the earlier of (i) the repayment in full of the Facility Indebtedness and (ii) the date on which the Project has been operating for not less than one year within the operational and performance metrics set out in the Updated Project Feasibility Study;

 

(t) they will timely file all Tax returns as and when required pursuant to Applicable Law and pay and discharge or cause to be paid and discharged, promptly when due, all Taxes imposed upon them or in respect of any of the Secured Assets or upon the income or profits therefrom as well as all claims of any kind (including claims for labour, materials, supplies and rent) which, if unpaid, might become an Encumbrance thereupon except for a Permitted Encumbrance; provided however, that they shall not be required to pay or cause to be paid any such Tax if the amount, applicability or validity thereof shall concurrently be contested in good faith by appropriate proceedings diligently conducted;

 

(u) they will cause all steps necessary or required to be taken diligently to protect and defend the Secured Assets and the proceeds thereof against any adverse claim or demand, including without limitation, the employment or use of counsel for the prosecution or defence of litigation and the contest, settlement, release or discharge of any such claim or demand;

 

 

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(v) if and to the extent that any Credit Party holds or is granted any Encumbrances, it will take all steps necessary or required to ensure that such Encumbrance is attached, enforceable and continuously perfected under the Uniform Commercial Code (or such similar legislation pursuant to which such Encumbrance is granted) until the obligations it secures are satisfied or it is released by the Lender for value;

 

(w) on or before December 31, 2021, the Credit Parties will obtain a final environmental impact statement (the “EIS”) and a record of decision (the “ROD”) from the Bureau of Land Management for the State of Nevada (the “BLM”), approving the EIS submitted by Hycroft Mining Corporation to the BLM, as referred to in the public notice filed by Hycroft Mining Corporation on May 17, 2019;

 

(x) at all times after the First Tranche Closing Date, if any existing or future Subsidiary of a Credit Party other than the Guarantors acquires or holds any assets with a book value greater than $1,000,000 other than Equity Interests disclosed on Schedule C, such Subsidiary shall (and the Borrower will ensure that such Subsidiary shall):

 

(i) promptly (and in any event within fifteen Business Days following demand by the Lender) accede to this Agreement as a Guarantor pursuant to an accession agreement to be agreed between the Lender and the Borrower and such Subsidiary, which accession shall include the delivery of customary conditions precedent documentation, including that Subsidiary’s Constating Documents, appropriate authorizations and confirmations and a legal opinion of counsel to the Credit Parties in the jurisdiction of formation of that Subsidiary and in a form satisfactory to the Lender, acting reasonably, and grant to the Lender an unlimited guarantee and security over all of its properties and assets, granting a first priority Encumbrance (subject to Permitted Encumbrances), in substantially similar form to those provided by the Guarantors; and

 

(ii) promptly (and in any event within fifteen Business Days following demand by the Lender) arrange for a pledge, in a form satisfactory to the Lender, granting a first priority Encumbrance (subject to Permitted Encumbrances) over all of the issued and outstanding Equity Interests of such Subsidiary to and in favour of the Lender to be delivered by the holders of such Equity Interests, together with any necessary or desired registration, perfection, filing, opinions and further assurance steps as the Lender may determine, and together with any other documents reasonably requested by the Lender in order to evidence the validity and enforceability of such share pledge;

 

(y) the Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions;

 

(z) if, after the date hereof, the Lender, through information received from any Governmental Authority or any other Person as a result of a request for information delivered by or on behalf of the Lender or otherwise, identifies any adverse condition or circumstance relating to any Credit Party or the Project, such Credit Party shall take all steps as may be reasonably required by the Lender to remedy any such adverse condition or circumstance to the satisfaction of the Lender, acting reasonably;

 

(aa) the Borrower will ensure that, within 60 days following the date hereof (or such later date as the Lender may otherwise agree (acting reasonably)), the Unrestricted Cash and each account to which the Unrestricted Cash is credited shall be subject to an account control agreement between the Borrower, the Lender and the financial institution with which such cash and account are held, in each case, in form and substance reasonably satisfactory to the Lender‎; and

 

 

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(bb) ‎the Borrower will, within 30 days following the date hereof (or such later date as the ‎Lender may otherwise agree (acting reasonably)), (i) cause MUDS Holdco to ‎issue stock certificates in the name of Borrower evidencing 100% of the Borrower’s ‎equity interests in MUDS Holdco, (ii) cause MUDS Acquisition to issue stock certificates in the name of ‎MUDS Holdco evidencing 100% of MUDS Holdco’s equity interest in MUDS Acquisition, and (iii) ‎to deliver originals of each such certificate to Lender.‎

 

Negative Covenants of the Credit Parties

 

8.2 While any Facility Indebtedness is outstanding or the Facility remains available to the Borrower following the First Tranche Advance, the Credit Parties covenant and agree with the Lender that, except with prior written consent of the Lender, they will not:

 

(a) directly or indirectly issue, incur, assume or otherwise become liable for or in respect of any Indebtedness other than Permitted Indebtedness;

 

(b) directly or indirectly create, incur, assume, permit or suffer to exist any Encumbrance against any of their properties or assets, including, without limitation, any of the Secured Assets or the Material Contracts, other than Permitted Encumbrances;

 

(c) convey, sell, lease, assign, transfer or otherwise dispose of (i) any of their properties or assets other than pursuant to a Permitted Disposal or (ii) directly or indirectly, any interest in the Borrower or any other Credit Party;

 

(d) materially amend, modify, vary or terminate any Material Contract, license, permit or other Authorization held by any of the Credit Parties in a manner which could reasonably be expected to have a Material Adverse Effect on the Credit Parties or the Project;

 

(e) enter into any reorganization, consolidation, amalgamation, merger, arrangement or similar transaction, or any scheme for the reconstruction or reorganization of it or any of its Subsidiaries or for the consolidation, amalgamation, merger, arrangement or similar transaction of it or any of its Subsidiaries with or into any other Person;

 

(f) make any prepayment on, purchase, redeem, or otherwise acquire or retire for value, prior to any scheduled final maturity, any Indebtedness other than (i) the Facility Indebtedness or (ii) the Existing Debt Facilities and any other Indebtedness to be repaid with the proceeds of the First Tranche Advance, as contemplated pursuant to Section 2.6;

 

(g) purchase, redeem, retire, repurchase and cancel or otherwise acquire for cash, any Equity Interest;

 

(h) make any change to their Constating Documents in a manner that adversely affects the interests of the Lender or any Encumbrance granted to the Lender under the Security Documents;

 

(i) change the name of any Credit Party without the prior written approval of the Lender, which approval shall not be unreasonably withheld;

 

(j) transfer or permit the transfer of any Equity Interests of any Credit Party or otherwise allow any Credit Party to cease to be direct or indirect wholly-owned Subsidiary of the Borrower;

 

 

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(k) declare, make, provide for or pay any Distribution;

 

(l) make any payment to any stockholder or Affiliate thereof in relation to any stockholder loan or other indebtedness to any stockholder or to any other non-arm's-length party, except in each case, for any (x) Subordinated Indebtedness made in accordance with the terms of any intercreditor agreement with the Lender or (y) any Indebtedness to be paid in advance of the First Tranche Closing Date or with proceeds of the First Tranche Advance as contemplated herein, or (z) any transaction with any non-arm's-length party entered into in the ordinary course of business at fair market value consistent with past practice and, in each case, provided no Default has occurred;

 

(m) provide any Financial Assistance to any Person, other than (i) Financial Assistance to a Credit Party, and (ii) Financial Assistance that is Permitted Indebtedness;

 

(n) incur any Contingent Liability for the obligations of any other Person other than any Contingent Liability (i) which constitutes Permitted Indebtedness or (ii) contractual indemnifications incurred in the ordinary course of business;

 

(o) enter into or become party or subject to any dissolution, winding-up, reorganization, arrangement or similar transaction or proceeding;

 

(p) engage in the conduct of any business other than the business of such Credit Party as existing on the date of this Agreement, business related to the Project or in businesses reasonably related to the foregoing;

 

(q) create or acquire any Subsidiary except in compliance with Section 8.1(x);

 

(r) maintain, or have any obligation or liability in relation to, any contributory pension plan, other than ongoing obligations pursuant to 401(k) plans;

 

(s) use the proceeds of the Advances, or lend, contribute or otherwise make available such proceeds to any Subsidiary or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Advances, whether as underwriter, advisor, investor, or otherwise); or

 

(t) save and except in accordance with Applicable Law or pursuant to the written directive of any relevant Government Authority, withdraw or direct, authorize, permit or cause the release of any reclamation security, bonding or other financial commitments given by any of the Credit Parties to any applicable Governmental Authority in respect of the Project.

 

Continued Listing

 

8.3 The Borrower shall take all reasonable steps and actions as may be required to maintain the listing of the shares of Common Stock on the Exchange.

 

 

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To Pay Lender’s Fees and Expenses

 

8.4 The Borrower will pay for the Lender's reasonable and documented legal fees (on a solicitor and own-client basis) and all other reasonable and documented costs, charges and expenses (including all reasonable and documented due diligence expenses) of and incidental to the preparation, execution and completion of this Agreement and the other Facility Documents (including notaries’ and translator’s fees where such notarial and translation services are customarily required), and all amendments thereto, and as may be required by the Lender or the Lender’s Counsel to complete or facilitate the transactions contemplated herein and to administer the Facility, including but not limited to technical consulting and other due diligence and ongoing compliance and monitoring costs. In respect of all the Lender’s out-of-pocket costs, charges and expenses incurred prior to the date of the Term Sheet only (including, for avoidance of doubt, all legal fees and fees of any agent of the Lender to the date of the Term Sheet), the Borrower will reimburse the Lender up to a maximum of $60,000. The Borrower further covenants and agrees to pay all of the Lender's legal fees (on a solicitor and own-client basis) and all other costs, charges and expenses of and incidental to the recovery of all amounts owing hereunder, including but not limited to those incurred in connection with any enforcement or realization proceedings under or in connection with this Agreement and/or any of the other Facility Documents, including the Security Documents. All amounts referred to herein will be payable upon demand. If not paid within three Business Days of demand, all such amounts shall accrue interest at the rate set forth in Section 2.7 from the date of demand. On or subsequent to the date of execution of the Term Sheet, the Borrower deposited with the Lender a retainer of $100,000, which amount shall be credited against the Borrower’s obligation to pay the Lender’s legal fees pursuant this Section 8.4 following itemized details and invoices being provided by the Lender to the Borrower.

 

Comply with Applicable Disclosure Obligations

 

8.5 The Borrower shall timely file all documents that must be publicly filed pursuant to Applicable Securities Legislation within the time prescribed by such Applicable Securities Legislation and make such documents available on EDGAR within such prescribed time period. If the Borrower is not at any time subject to Applicable Securities Legislation, the Borrower shall deliver to the Lender: (i) within 90 days after the end of each fiscal year, copies of its annual report and audited annual financial statements, and (ii) within 45 days after the end of each of the first three Fiscal Quarters of each fiscal year, interim financial statements which shall, at a minimum, contain such information required to be provided in quarterly reports by a “reporting issuer” (as such term is defined in such Applicable Securities Legislation) under the Applicable Securities Legislation. Each of such reports will be prepared in accordance with the disclosure requirements of Applicable Securities Legislation.

 

To Pay Additional Amounts

 

8.6 Each Credit Party will, from time to time, promptly pay or make provisions satisfactory to the Lender for the payment of any additional amounts, including Taxes, which may be imposed on such Credit Party by any Applicable Law (except income tax or security transfer tax, if any) which shall be payable with respect to the Facility.

 

8.7 Any and all payments by or on account of any obligation of the Credit Parties hereunder or under any other Facility Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by Applicable Law. If any Credit Party is required by Applicable Law to deduct or withhold any Taxes from such payments, then:

 

(a) the amount payable by the applicable Credit Party shall be increased so that after all such required deductions or withholdings are made (including deductions or withholdings applicable to additional amounts payable under this Section 8.7), the Lender receives an amount equal to the amount it would have received had no such deduction or withholding been made, and

 

(b) such Credit Party shall make such deductions or withholdings and pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law.

 

8.8 The Borrower shall (within three Business Days of demand by the Lender) pay to the Lender an amount equal to the loss, liability or cost which the Lender determines will be or has been (directly or indirectly) suffered for or on account of Tax by the Lender in respect of any Facility Document.

 

 

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8.9 If the Lender is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Facility Document, it shall deliver to the Credit Party, at the time or times reasonably requested by the Credit Party, such properly completed and executed documentation reasonably requested by the Credit Party as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, the Lender, if reasonably requested by the Credit Party, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Credit Party as will enable the Credit Party to determine whether or not the Lender is subject to backup withholding or information reporting requirements.

 

8.10 If the Lender (referred to in this paragraph as an “indemnified party”) determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes in respect of which it has received additional amounts pursuant to Section 8.7 or as to which it has been indemnified pursuant to Section 8.8, it shall promptly pay to the party that paid such additional amounts or indemnity payments, as applicable, (referred to in this paragraph as an “indemnifying party”) an amount equal to such refund (but only to the extent of additional amounts or indemnity payments made under Sections 8.7 and 8.8 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 8.10 (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 8.10, in no event will the Lender be required to pay any amount to an indemnifying party pursuant to this Section 8.10 the payment of which would place the Lender in a less favorable net after-Tax position than the Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 8.10 shall not be construed to require the Lender to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

8.11 The obligation of a Credit Party to pay an amount pursuant to Sections 8.7 and 8.8 hereof to an assignee or participant of the Facility shall be no greater than the obligation of the Credit Party to pay such amounts to the Lender with respect to such Facility, determined as if it had not been assigned or participated.

 

Further Assurances

 

8.12 Each of the Credit Parties shall, from time to time, as may be reasonably required by the Lender, execute and deliver such further and other documents and do all matters and things which are necessary to carry out the intention and provisions of this Agreement.

 

Lender May Perform Covenants

 

8.13 If any of the Credit Parties shall fail to perform any of its respective covenants contained in this Agreement or any of the other Facility Documents, the Lender may, upon becoming aware of such failure and upon providing prior notice to the Borrower, in its discretion, but need not, itself perform any of such covenants capable of being performed by it, but is under no obligation to do so. All reasonable sums so required to be paid in connection with the Lender’s performance of any covenant will be paid by the Credit Parties and all sums so paid shall be payable by the Credit Parties in accordance with the provisions of Section 8.4. No such performance by the Lender of any such covenant or payment or expenditure by any Credit Party of any sums advanced or borrowed by the Lender pursuant to the foregoing provisions shall be deemed to relieve any of the Credit Parties from any default hereunder or their respective continuing obligations hereunder.

 

 

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Article 9

DEFAULT AND ENFORCEMENT

 

Events of Default

 

9.1 The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:

 

(a) if the Borrower fails to make any payment of any principal amount of the Facility or interest payable hereunder, when due;

 

(b) if the Borrower fails to pay any fees, costs, expenses or other amounts or charges payable hereunder when due and such failure shall continue unremedied for a period of three (3) Business Days thereafter;

 

(c) if any Credit Party defaults in observing or performing any covenant or condition set out in Sections 8.1(q), 8.1(r), 8.1(aa), 8.1(bb) or Section 8.2;

 

(d) if any Credit Party defaults in observing or performing any covenant or condition set out in Section 8.1(o) or 8.1(p) and such failure shall continue unremedied for a period of three (3) Business Days thereafter;

 

(e) if any Credit Party defaults in observing or performing any covenant or condition of this Agreement or any other Facility Document, including but not limited to the Sprott Royalty and the Security Documents (other than any covenant or condition referred to in Section 9.1(a), 9.1(b), 9.1(c) or 9.1(d)), on its part to be observed or performed and, with respect to such covenants or conditions which are capable of being cured, if such default continues for a period of 10 Business Days, after the earlier of knowledge thereof by the relevant Credit Party or notice thereof from the Lender;

 

(f) any Facility Document ceases to be in full force and effect or any Security Document ceases to constitute a valid and perfected first priority Encumbrance (subject only to Permitted Encumbrances) upon all the Secured Assets it purports to charge or encumber, in favour of the Lender;

 

(g) the institution by any Credit Party of proceedings to be adjudicated a bankrupt or insolvent or any similar proceedings or the seeking by it of liquidation, reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) or relief under any applicable federal, provincial, state or other law relating to bankruptcy, insolvency, reorganization or relief of debtors, or the filing by it of any such petition or to the appointment under any such law of a receiver, receiver-manager, liquidator, assignee, trustee or other similar official of any Credit Party of all or substantially all of its property, or the making by it of a general assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due;

 

(h) any proceedings are commenced by a Person other than a Credit Party for the bankruptcy, insolvency, reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise), winding-up, liquidation or dissolution or any similar proceedings of such Credit Party;

 

 

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(i) the entry of a decree or order by a court having jurisdiction adjudging any Credit Party to be bankrupt or insolvent or approving as properly filed an application or a petition seeking liquidation, reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise), arrangement or adjustment of or in respect of such Credit Party under any Applicable Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or appointing under any such law a receiver, receiver-manager, liquidator, assignee, trustee or other similar official of such Credit Party or of all or substantially all of its property, or ordering pursuant to any such law the winding-up or liquidation of its affairs and such decree or order continues unstayed and in effect for greater than thirty (30) days after such filing;

 

(j) (i) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower to the Pension Plan, Multiemployer Plan or the PBGC, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under section 4201 of ERISA under a Multiemployer Plan;

 

(k) this Agreement or any other Facility Document is claimed by any Credit Party to cease in whole or in any part to be a legal, valid, binding and enforceable obligation of such Credit Party;

 

(l) this Agreement or any other Facility Document shall for any reason cease in whole or in any part to be a legal, valid, binding and enforceable obligation of the Credit Party;

 

(m) any Credit Party fails to pay the principal of, premium, if any, interest on, or any other amount owing in respect of any of its Indebtedness or obligation which is outstanding in an aggregate principal amount exceeding $1,000,000 when such amount becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure continues after the applicable grace or cure period, if any, specified in the agreement or instrument relating to such Indebtedness or obligation; or any other event occurs or condition exists and continues after the expiry of the applicable grace or cure period, if any, specified in any agreement or instrument relating to any such Indebtedness or obligation, if its effect is to accelerate or permit the acceleration of, such Indebtedness or obligation; or any such Indebtedness or obligation shall be, or may be, declared to be due and payable prior to its stated maturity, in each case in respect of any of its Indebtedness or obligation which is outstanding in an aggregate principal amount exceeding $1,000,000;

 

(n) any representation or warranty at the time given by any Credit Party in this Agreement or any other Facility Document shall prove to be incorrect or misleading;

 

(o) the occurrence or existence of any Material Adverse Effect in the opinion of the Lender, acting reasonably;

 

(p) if either of Randy Buffington or Steve Jones cease to hold any of their respective positions set out in Section 8.1(s) and the Borrower has failed to find suitable replacements for any such positions acceptable to the Lender, acting reasonably after nine (9) months of Randy Buffington or Steve Jones ceasing to hold any such position;

 

(q) any destruction, suspension or abandonment of the Project or any part thereof which destruction, suspension or abandonment causes any material reduction in the value thereof, which is not compensated by insurance of the Credit Parties or material adverse delay of its development or the ability of the Project to achieve of commercial production;

 

(r) if any Credit Party or any of its Subsidiaries ceases or threatens to cease to carry on business;

 

 

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(s) final non-appealable judgments or decrees for the payment of money in excess of $1,000,000 in the aggregate which are not otherwise covered by insurance of a Credit Party, are rendered against any Credit Party by any courts having jurisdiction, and such judgments or decrees have not been paid in full by any Credit Party within 30 days after such judgments or decrees have become final non-appealable judgments or decrees;

 

(t) if the Borrower ceases to own, directly or indirectly, 100% of the common stock and other Equity Interests in the capital of any other Credit Party other than the Borrower;

 

(u) (i) the Borrower is in default of any provision under any Material Contract and that default continues unremedied after the relevant cure period provided for under such Material Contract, such that the result is that the counterparty could reasonably be expected to terminate the Material Contract or (ii) if any Material Contract is terminated or cancelled other than by expiry by its term and is not replaced by a replacement Material Contract which is substantially similar to the Material Contract that it is replacing and otherwise in form and substance satisfactory to the Lender within sixty (60) days, or is amended in any material adverse respect, without the prior written consent of the Lender; or

 

(v) an Event of Default (as defined under the Sprott Royalty or the security therefor) occurs and is continuing under the Sprott Royalty or the security therefor.

 

Acceleration on Default

 

9.2 If any Event of Default shall occur and be continuing, the Lender may, by notice to the Borrower, declare its commitment to advance the Facility or any portion thereof to be terminated, whereupon the same shall forthwith terminate, and may declare the entire unpaid principal amount of the Facility, all interest accrued and unpaid thereon and all other fees, charges, costs and other amounts hereunder to be forthwith due and payable, whereupon the principal amount of the Facility, all such accrued interest and all other fees, charges, costs and other amounts hereunder, including the applicable Prepayment Premium, shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, provided that upon the occurrence of any Event of Default under Sections 9.1(g), 9.1(h) or 9.1(i), the Lender’s commitment to make any Advance or any portion thereof shall immediately terminate and the Facility Indebtedness, including the entire unpaid principal amount of the Facility, all interest accrued and unpaid thereon and all other fees, charges, costs and other amounts owing under any of the Facility Documents shall be immediately due and payable, without presentment, demand, protest or notice of any kind, automatically without the giving of any such notice by the Lender; and thereupon, the Lender may exercise any or all of the Lender’s rights and remedies under the Security Documents, and proceed to enforce all other rights and remedies available to the Lender under this Agreement, the Security Documents, any other Facility Documents and Applicable Law.

 

Waiver of Default

 

9.3 If an Event of Default shall have occurred, the Lender shall have the power to waive such Event of Default if, in the Lender’s opinion, the same shall have been cured or adequate provision made therefor, upon such terms and conditions as the Lender may consider advisable, provided that no delay or omission of the Lender to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein and provided further that no act or omission of the Lender shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default hereunder or the rights resulting therefrom.

 

 

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Enforcement by the Lender

 

9.4 If an Event of Default shall have occurred and be continuing, but subject to Section 9.3:

 

(a) the Lender may in its sole discretion proceed to enforce, and to instruct any other Person to enforce, the rights of the Lender by any action, suit, remedy or proceeding authorized or permitted by this Agreement or any of the Security Documents or any other Facility Document or by law or equity; and may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Lender lodged, filed or otherwise recorded in any bankruptcy, insolvency, winding-up or other judicial proceedings relating to any Credit Party; and

 

(b) no such remedy for the enforcement of the rights of the Lender shall be exclusive of or dependent on any other such remedy but any one or more of such remedies may from time to time be exercised independently or in combination.

 

Application of Moneys

 

9.5 Except as otherwise provided herein, any moneys arising from any enforcement by the Lender under any of the Facility Documents or other proceedings against any Credit Party pursuant to any of the Facility Documents or from any trustee in bankruptcy or liquidation of any of the Credit Parties, shall be held by the Lender and applied by it, together with any moneys then or thereafter in the hands of the Lender available for the purpose of distribution to the Lender, as follows:

 

(a) first, in payment or reimbursement to the Lender of the remuneration, expenses, disbursements, and advances of the Lender earned, incurred or made in the administration or enforcement any of the Facility Documents or otherwise in relation to any of the Facility Documents with interest thereon as herein provided;

 

(b) second (but subject to Section 8.4 and this Section 9.5), in or towards payment of all Amounts Payable; and

 

(c) third, the surplus (if any) of such moneys shall be paid to the Borrower or as it may direct.

 

Persons Dealing with Lender

 

9.6 No Person dealing with the Lender or any of its agents shall be required to enquire whether an Event of Default has occurred, or whether the powers which the Lender is purporting to exercise have become exercisable, or whether any moneys remain due under this Agreement, or to see to the application of any moneys paid to the Lender, and in the absence of fraud on the part of such Person, such dealing shall be deemed to be within the powers hereby conferred and to be valid and effective accordingly.

 

Lender Appointed Attorney

 

9.7 Following an Event of Default, which is continuing, the Credit Parties irrevocably appoint the Lender to be the attorney of the Credit Parties in the name and on behalf of the Credit Parties to execute any instruments and do any things which the Credit Parties ought to execute and do, and has not executed or done, under the covenants and provisions contained in this Agreement and generally to use the name of the Credit Parties in the exercise of all or any of the powers hereby conferred on the Lender with full powers of substitution and revocation. Such power of attorney, being coupled with an interest, is irrevocable.

 

Remedies Cumulative

 

9.8 No remedy herein conferred upon or reserved to the Lender is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under any Facility Document or now or hereafter existing by law or by statute.

 

 

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Article 10

BREAK FEE

 

Break Fee

 

10.1 In accordance with Section 10.2, the Credit Parties shall pay to the Arranger a $4,250,000 break fee (the “Break Fee”) if after the execution and delivery of this Agreement the Borrower does not draw down the First Tranche Advance and agrees to or enters into one or more similar capital raising transactions ‎(debt, equity or otherwise) with other counterparties having an aggregate principal amount or gross proceeds of not less than $175,000,000, on or before July 31, 2020 ‎(a “Damage Event”). For the avoidance of doubt, a capital raising transaction shall not include the issuance of the Exchanged 1.25 Lien Notes subject to the Note Exchange Agreement.

 

10.2 The Break Fee shall be payable within five Business Days of the date of any Damage Event.

 

10.3 The Credit Parties acknowledge and agree that upon the occurrence of any Damage Event, the Arranger will ‎sustain ‎damages as a result the Damage Event by virtue of no longer being entitled to compensation it would otherwise receive from the Lender in connection with the transaction contemplated herein. The Credit Parties acknowledge and agree that it is and will be ‎‎impractical and extremely difficult to ascertain and determine the actual damages which the Arranger will ‎‎sustain in the event of and by reason of the occurrence of any Damage Event. The Credit Parties ‎‎further agree that the Break Fee represents a reasonable and genuine pre-estimate of the Arranger’s ‎actual ‎damages in the event of and by reason of the occurrence of any Damage Event.‎

 

Article 11
NOTICES

 

Notice to the Borrower

 

11.1 Any notice to the Credit Parties under the provisions of this Agreement or any other Facility Document shall be valid and effective if delivered personally, by email or courier transmission to or, if given by registered mail, postage prepaid, addressed to, the relevant Credit Party at c/o Hycroft Mining Holding Corporation, 8181 E. Tufts Ave., Suite 510, Denver, CO 80237, Email: Steve.Jones@hycroftmining.com, Attention: Steve Jones, with a copy to (which copy shall not be deemed to be notice) to Cassels Brock & Blackwell LLP, Suite 2200, HSBC Building, 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8, Email: dbudd@casselsbrock.com, Attention: David Budd and Neal, Gerber & Eisenberg LLP, 2 N. LaSalle Street, Suite 1700 , Chicago, IL 60602-3801, Email: DStone@nge.com, Attention: David Stone and shall be deemed to have been given on the date of personal delivery if on a Business Day and otherwise on the next Business Day, on the date of sending if by courier or by email transmission if so delivered or sent prior to 5:00 p.m. (Toronto time) on a Business Day and otherwise on the next Business Day, or on the fifth Business Day after such letter has been mailed, as the case may be. Any Credit Party may from time to time notify the Lender of a change in address which thereafter, until changed by further notice, shall be the address of the Credit Party for all purposes of this Agreement.

 

Notice to the Lender or the Arranger

 

11.2 Any notice to the Lender or the Arranger under the provisions of this Agreement shall be valid and effective if delivered personally, by email or courier transmission to or, if given by registered mail, postage prepaid, addressed to the Lender at its principal office at Suite 2600, 200 Bay Street, Toronto, ON M5J 2J2, Tel: (416) 977-7222, Email: jgrosdanis@sprott.com, Attention: Chief Financial Officer, and shall be deemed to have been given on the date of personal delivery if on a Business Day and otherwise on the next Business Day, on the date of sending if by courier or by email transmission if so delivered prior to 5:00 p.m. (Toronto time) on a Business Day and otherwise on the next Business Day or on the fifth Business Day after such letter has been mailed, as the case may be. The Lender or the Arranger may from time to time notify the Borrower of a change in address which thereafter, until changed by further notice, shall be the address of the Lender and the Arranger for all purposes of this Agreement.

 

 

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Waiver of Notice

 

11.3 Any notice provided for in this Agreement may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.

 

Article 12

indemnities

 

General Indemnity

 

12.1 Each of the Credit Parties expressly declares and agrees as follows:

 

(a) the Lender, its partners and its and their directors, officers, employees, and agents, and all of their respective representatives, heirs, successors and assigns (collectively the “Indemnified Parties”) will at all times be indemnified and saved harmless by the Credit Parties from and against all claims, demands, losses, actions, causes of action, costs, charges, expenses, damages and liabilities whatsoever arising in connection with this Agreement and the other Facility Documents, including, without limitation, those arising out of or related to actions taken or omitted to be taken by the Lender contemplated hereby, reasonable legal fees and disbursements on a solicitor and own client basis and all reasonable costs and expenses incurred in connection with the enforcement of this indemnity, which the Lender may suffer or incur, whether at law or in equity, in any way caused by or arising, directly or indirectly, in respect of any act, deed, matter or thing whatsoever made, done, acquiesced in or omitted in or about or in relation to the execution of its duties as Lender and including any act, deed, matter or thing in relation to the registration, perfection, release or discharge of security. The foregoing provisions of this subsection do not apply in any circumstances where any Indemnified Party was grossly negligent acted with wilful misconduct or not in good faith in relation to their obligations hereunder. This indemnity shall survive the termination of this Agreement and any transfer and/or assignment by the Lender of any of its rights and/or obligations; and

 

(b) the Lender may act and rely, and shall be protected in acting and relying upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter, telegram, cable, facsimile or other paper or electronic document reasonably believed by it to be genuine and to have been signed, sent or presented by or on behalf of the proper party or parties.

 

Environmental Indemnity

 

12.2 Each of the Credit Parties hereby indemnifies and holds harmless the Indemnified Parties against any loss, expense, claim, proceeding, judgment, liability or asserted liability (including strict liability and including costs and expenses of abatement and remediation of spills or releases of any Hazardous Materials and including liabilities of the Indemnified Parties to third parties (including Governmental Authorities) in respect of bodily injuries, property damage, damage to or impairment of the environment or any other injury or damage and including liabilities of the Indemnified Parties to third parties for the third parties' foreseeable and unforeseeable consequential damages) incurred as a result of or in connection with the administration or enforcement of this Agreement or any other Facility Document, including the exercise by the Lender of any rights hereunder or under any other Facility Document, which result from or relate, directly or indirectly, to:

 

 

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(a) the presence or release of any Hazardous Material, by any means or for any reason, on the Secured Assets, whether or not the release or presence of such Hazardous Material was under the control, care or management of any Credit Party or of a previous owner, or of a tenant; or

 

(b) the breach or alleged breach of any Environmental Laws by the Credit Party.

 

The foregoing provisions of this Section do not apply in any circumstances where any Indemnified Party was grossly negligent or acted with wilful misconduct in relation to their obligations hereunder. For purposes of this Section, “liability” shall include (a) liability of an Indemnified Party for costs and expenses of abatement and remediation of spills and releases of any Hazardous Material, (b) liability of an Indemnified Party to a third party to reimburse the third party for bodily injuries, property damages and other injuries or damages which the third party suffers, including (to the extent, if any, that the Indemnified Party is liable therefor) foreseeable and unforeseeable consequential damages suffered by the third party, (c) liability of the Indemnified Party for damage suffered by the third party, (d) liability of an Indemnified Party for damage to or impairment of the environment and (e) liability of an Indemnified Party for court costs, expenses of alternative dispute resolution proceedings, and fees and disbursements of expert consultants and legal counsel on a solicitor and client basis.

 

Action by Lender to Protect Interests

 

12.3 The Lender shall have the power to institute and maintain all and any such actions, suits or proceedings and to take any other action as it may consider necessary or expedient to preserve, protect or enforce its interests.

 

Article 13
miscellaneous

 

Amendments and Waivers

 

13.1 No amendment to any provision of the Facility Documents shall be effective unless it is in writing and has been signed by the Lender and the Credit Parties who are party to that Facility Document, and no waiver of any provision of any Facility Document, or consent to any departure by the relevant Credit Party therefrom, shall be effective unless it is in writing and has been signed by the Lender. Any such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

No Waiver; Remedies Cumulative

 

13.2 No failure on the part of the Lender to exercise, and no delay in exercising, any right, remedy, power or privilege under any Facility Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies under the Facility Documents are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to the Lender.

 

Survival

 

13.3 All covenants, agreements, representations and warranties made in any of the Facility Documents shall, except to the extent otherwise provided therein, survive the execution and delivery of this Agreement and each Advance, and shall continue in full force and effect so long as any part of the Facility Indebtedness remains outstanding or any other obligation remains unpaid or any obligation to perform any other act hereunder or under any other Facility Document remains unsatisfied.

 

 

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Benefits of Agreement

 

13.4 The Facility Documents are entered into for the sole protection and benefit of the parties hereto and their successors and assigns, and no other Person (other than the Indemnified Parties) shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with, any Facility Document.

 

Binding Effect; Assignment; Syndication

 

13.5 This Agreement shall become effective when it shall have been executed by the parties hereto and thereafter shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.

 

13.6 None of the Credit Parties shall have the right to transfer or assign any of their rights and obligations hereunder or under the other Facility Documents or any interest herein or therein without the prior written consent of the Lender, which may be withheld in the Lender’s sole discretion.

 

13.7 The Lender reserves the right to sell, assign, transfer or grant participations in all or any portion of the Lender’s interests, rights and obligations hereunder and under the other Facility Documents to any Person other than a Restricted Assignee upon notice to, and without the consent of, the Borrower. Notwithstanding the foregoing sentence, if any Default or Event of Default has occurred and is continuing for a period of not less than 30 days, the Lender may sell, assign, transfer or grant participations in all or any portion of the Lender’s interests, rights and obligations hereunder and under the other Facility Documents to any Person, including any Restricted Assignee, upon notice to, and without the consent of, the Borrower. In the event of any sale, assignment or transfer by the Lender of all of its interests, rights and obligations hereunder and under the other Facility Documents, upon notice thereof to the Borrower, the purchaser, assignee or transferee (as the case may be) shall be deemed the “Lender” for all purposes of the Facility Documents with respect to the rights and obligations sold, assigned or transferred (as the case may be) to it, the obligations of the Lender so sold, assigned or transferred (as the case may be) shall thereupon terminate and the selling, assigning or transferring (as the case may be) Lender shall be released from all obligations to the Credit Parties in respect thereof. The Credit Parties shall, from time to time upon request of the Lender at the Lender’s expense, enter into such amendments to the Facility Documents and execute and deliver such other documents as shall be necessary to effect any such sales, assignments or transfers and maintain the first priority perfected Encumbrance (subject to Permitted Encumbrances) created by the Security Documents. The Credit Parties acknowledge and agree that the Lender is authorized to disclose to any purchaser, assignee, transferee or participant and any prospective purchaser, assignee, transferee or participant any and all financial and other information concerning the Credit Parties, their respective properties and assets and the Facility and any other transactions contemplated herein, whether received by the Lender or derivative thereof, in connection with the Lender’s credit evaluation, internal reporting, or other activities reasonably incidental to the management or administration of the Facility, including in connection with the enforcement thereof.

 

Maximum Return

 

13.8 Notwithstanding any other provision of this Agreement or any other Facility Document:

 

(a) in this Section 13.8, “interest” and “credit advanced” have the meanings ascribed to them in section 347 of the Criminal Code (Canada), and “Maximum Rate” means the highest effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles, on the credit advanced under an agreement or arrangement, which is lawfully permitted under section 347 of the Criminal Code (Canada);

 

 

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(b) if, by entering into this Agreement and the other Facility Documents, the Lender has entered into an agreement or arrangement to receive interest, on the credit advanced under this Agreement, in an amount which exceeds the Maximum Rate, then the interest will be reduced to the extent required to eliminate such excess (in the manner specified below);

 

(c) if interest in the aggregate, on the credit advanced under this Agreement, is or is about to be received in an amount which exceeds the Maximum Rate, then the interest will be reduced, with retroactive effect, to the extent required to eliminate such excess (in the manner specified below), and if and to the extent so reduced the Lender will return the same; and

 

(d) any reduction of interest pursuant to Section 13.8(b) or Section 13.8(c) will be made in the following order (in each case, only to the extent required): firstly, a reduction of the amount or rate of interest payable under Section 2.7; secondly, a reduction of the amounts to be paid on account of the Lender’s legal fees and other out-of-pocket expenses; and lastly, a reduction of any other amounts which constitute interest, as the Lender may determine.

 

In the event of a dispute in relation to this Section 13.8, a certificate of a Fellow of the Canadian Institute of Actuaries qualified for a period of at least ten (10) years and appointed by the Lender will be conclusive for the purposes of such determination. A certificate of an authorized signing officer of the Lender as to each amount, rate and/or other component of interest payable hereunder or in connection herewith from time to time shall be conclusive evidence of such amount, rate and/or other component, absent manifest error.

 

Judgment Currency

 

13.9 If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent permitted by Applicable Law, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Lender could purchase Dollars with such other currency at the buying spot rate of exchange in the foreign exchange markets on the Business Day immediately preceding that on which any such judgment, or any relevant part thereof, is given.

 

13.10 The obligations of the Credit Parties in respect of any sum due to the Lender hereunder and under the other Facility Documents shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Lender of any sum adjudged to be so due in such other currency the Lender may, in accordance with normal banking procedures, purchase Dollars with such other currency. If the amount of Dollars so purchased is less than the sum originally due to the Lender in Dollars, each of the Credit Parties agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender against such loss.

 

Entire Agreement

 

13.11 The Facility Documents reflect the entire agreement between the parties hereto with respect to the matters set forth herein and therein and supersede any prior agreements, commitments, drafts, communication, discussions and understandings, oral or written, with respect thereto, including but not limited to the Term Sheet.

 

Joint and Several

 

13.12 The covenants, agreements, representations, warranties, acknowledgments of the Credit Parties in this Agreement shall constitute the joint and several covenants, agreements, representations, warranties, acknowledgments of the Credit Parties and shall be read and construed accordingly.

 

 

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Payments Set Aside

 

13.13 To the extent that any payment by or on behalf of the Borrower is made to the Lender, or the Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Lender in its discretion) to be repaid to a trustee, receiver or any other Person, in connection with any proceeding under the Bankruptcy Code of the United States of America, the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada), the Winding-up and Restructuring Act (Canada), the receivership laws of any Relevant Jurisdiction or other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws, or otherwise, then to the extent of such payment or the proceeds of such set-off, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred.

 

Severability

 

13.14 Whenever possible, each provision of the Facility Documents shall be interpreted in such manner as to be effective and valid under all Applicable Laws. If, however, any provision of any of the Facility Documents shall be prohibited by or invalid under any such Applicable Law in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such Applicable Law, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of such Facility Document, or the validity or effectiveness of such provision in any other jurisdiction.

 

Counterparts and facsimile

 

13.15 This Agreement may be executed in counterparts and such executed counterparts may be delivered by electronic transmission of an authorized signature (including in pdf) and each such counterpart shall be deemed to form part of one and the same document.

 

Confidentiality

 

13.16 The Lender acknowledges the confidential nature of the financial and operational information and data provided and to be provided to it by the Credit Parties pursuant hereto (“Information”). The Lender will only use such Information and data for purposes of the transactions contemplated by this Agreement and will use commercially reasonable efforts to prevent the disclosure thereof by it to any other Person in accordance with its customary procedures for handling confidential information of this nature; provided however, that the Lender may disclose any part of such Information:

 

(a) to its Affiliates, and to its and its Affiliates’ directors, officers, employees, agents, counsel, accountants or other representatives and professional advisors for purposes of the transactions contemplated by the Facility Documents, provided such recipient has been informed of the confidential nature of such Information;

 

(b) to any actual or potential participant or assignee which has agreed in writing to maintain such Information in confidence on terms substantially similar to this Section 13.16;

 

(c) to any Governmental Authority having jurisdiction over the Lender in order to comply with any Applicable Law or as otherwise required by Applicable Law or pursuant to subpoena or other legal process;

 

 

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(d) to the extent requested by any Governmental Authority or other regulatory or self-regulatory authority purporting to have jurisdiction over it or its Affiliates;

 

(e) in connection with any action or proceeding or other exercise of any right or remedy hereunder, under any other Facility Documents or the Sprott Royalty;

 

(f) is available to the Lender or any of their Affiliates on a non-confidential basis from a source other than the Borrower;

 

(g) which at the time it was provided to the Lender was in the public domain;

 

(h) which after it was provided to the Lender is in the public domain other than through a breach by such Lender of this Section 13.16; and

 

(i) to the extent Borrower consents to such disclosure.

 

Accounting.

 

13.17 Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with U.S. GAAP in a manner consistent with that used in preparing the financial statements referred to in Section 7.1(bb); provided, however, that notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made without giving effect to (i) any election under Accounting Standards Codification section 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any of its Subsidiaries at “fair value”, as defined therein, or (ii) any treatment of Indebtedness in respect of convertible debt instruments under Financial Accounting Standards Codification Subtopic 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof. If at any time any change in U.S. GAAP would affect the computation of any financial ratio or requirement set forth in any Facility Document, and the Borrower or the Lender shall so request, the Lender and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in U.S. GAAP; provided, that until so amended, such ratio or requirement shall continue to be computed in accordance with U.S. GAAP prior to such change therein and the Borrower shall provide to the Lender reconciliation statements showing the difference in such calculation, together with the delivery of monthly, quarterly and annual financial statements required hereunder.

 

Amendment and Restatement

 

13.18 This Agreement shall amend and restate and supersede the Original Hycroft Credit Agreement in its entirety and the Original Hycroft Credit Agreement as so amended and restated is hereby ratified and confirmed by the parties hereto. All references to the term “Credit Agreement” as defined and contained in any documents delivered in connection with the Original Hycroft Credit Agreement shall, from and after the date hereof, be deemed to refer to this agreement without the need for any amendment to such documents.

 

[remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF the parties hereto have executed this Agreement under the hands of their proper officers duly authorized in that behalf.

 

 

HYCROFT MINING HOLDING CORPORATION  
     
     
Per: /s/ Glenn Springer  
  Authorized Signatory  
     
     
HYCROFT RESOURCES & DEVELOPMENT, LLC  
     
     
Per: /s/ Stephen M. Jones  
  Stephen M. Jones, as Chief Financial officer  
     
     
ALLIED VGH LLC  
     
     
Per: /s/ Stephen M. Jones  
  Stephen M. Jones, as Chief Financial officer  
     
     
MUDS ACQUISITION SUB, INC.‎  
     
     
Per: /s/ Glenn Springer  
  Authorized Signatory  
     
     
MUDS HOLDCO, INC.  
     
     
Per: /s/ Glenn Springer  
  Authorized Signatory  

 

 

SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP,
by its general partner, SPROTT RESOURCE LENDING CORP.

 

 

Per: /s/ Jim Grosdanis  
  Authorized Signatory  
     
     
Per: /s/ Narinder Nagra  
  Authorized Signatory  
     
     
SPROTT RESOURCE LENDING CORP.  
     
     
Per: /s/ Jim Grosdanis  
  Authorized Signatory  
     
     
Per: /s/ Narinder Nagra  
  Authorized Signatory  

 

 

Exhibit 10.2

 

ROYALTY Agreement

 

Between

 

Hycroft Mining Holding Corporation

 

- and -

 

HYCROFT RESOURCES & DEVELOPMENT, LLC

 

- and -

 

SPROTT PRIVATE RESOURCE LENDING II (CO) INC.

 

 

 

 

May 29, 2020

 

 

 

 

 

Table of Contents

 

1. Definitions 1
     
2. Interpretation. 10
     
3. Royalty 11

 

4. Payment of Cash Consideration 15
     
5. Calculation of Net Smelter Returns 16
     
6. Taxes 17
     
7. Reporting Obligations 19
     
8. Records; Audits; Inspections 20
     
9. Maintenance of Existence and Property 21
     
10. Management of Mining Operations 23
     
11. Insurance Matters 25
     
12. Security 25
     
13. Representations and Warranties of the Hycroft Parties 25
     
14. Indemnities 26
     
15. Guaranteed Obligations 26
     
16. Term 28
     
17. Transfers 28
     
18. Transfer Rights of the Payee 29
     
19. Governing Law 29
     
20. Notices 29
     
21. General Provisions 31

 

-i-

 

 

Table of Contents

(continued)

 

SCHEDULES:

 

SCHEDULE A – DESCRIPTION OF THE PROPERTY

SCHEDULE B – PERMITTED ENCUMBRANCES

SCHEDULE C – REPRESENTATIONS AND WARRANTIES OF THE HYCROFT PARTIES

SCHEDULE D – FORM OF ROYALTY DEED AND MEMORANDUM OF ROYALTY AGREEMENT

 

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ROYALTY AGREEMENT

 

ROYALTY AGREEMENT dated May 29, 2020.

 

BETWEEN:

 

Hycroft Mining Holding Corporation, a corporation existing under the laws of Delaware (“Parent”)

 

- and -

 

HYCROFT RESOURCES & DEVELOPMENT, LLC, a limited liability company existing under the laws of Delaware (formerly known as Hycroft Resources & Development, Inc., a Nevada corporation) (the “Owner”)

 

- and -

 

SPROTT PRIVATE RESOURCE LENDING II (CO) INC., a corporation existing under the laws of Ontario (the “Payee”)

 

WHEREAS:

 

(A) The Owner, which is an indirect wholly-owned Subsidiary of the Parent, owns and has the right to explore, develop, operate and mine 100% of the Property.

 

(B) The Owner has agreed to create, grant and convey the Royalty to the Payee on the terms and conditions described herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1. Definitions

 

For the purposes of this Agreement (including the recitals), unless the context otherwise requires, each of the following terms shall have the meaning given to it, as set out below, and grammatical variations of any such term shall have a corresponding meaning:

 

Abandonment Property” has the meaning set out in Section 9(d).

 

Additional Rights” means all assets located on or at or used in connection with the Property or to mine the Precious Metals from the Property as well as all Precious Metals, Authorizations, Other Rights, tailings, fixtures, mines, facilities, equipment and inventory, existing or to be developed, constructed, and operated at or in respect of the Property with respect to the Project, including infrastructure assets, tailings management facilities and other plants.

 

Affiliate” means, with respect to any Person, any other Person which directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. For the purposes of this definition and the definition of “Subsidiary”, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

 

 

Agreement” means this Royalty Agreement and all attached schedules, as such may be amended, restated, modified or superseded from time to time in accordance with the terms hereof.

 

Allied” means Allied VGH LLC, a Delaware limited liability company (formerly known as Allied VGH Inc., a Nevada corporation).

 

Allowable Deductions” has the meaning set out in Section 5(b).

 

Annual Forecast Report” means a written report, in relation to a fiscal year, with respect to the Project, including with reasonable detail a forecast, based on the current development or mine plan as applicable, of the estimated quantity of Precious Metals expected to be produced during such fiscal year on a monthly basis and over the remaining life of the mine on a year-by-year basis, including:

 

(a) the amount and a description of planned operating and capital expenditures;

 

(b) grade of Precious Metals to be mined; and

 

(c) with respect to the processing facilities, the grade of Precious Metals to be processed; expected recoveries for gold and silver; and doré weight and gold and silver grade.

 

Annual Operational Report” means a written report in relation to a fiscal year with respect to the Project, to be prepared by or on behalf of the Owner, which shall include all of the information pertaining to the construction, commissioning or operations of the Project contained in annual reports prepared and provided to the board of directors of any of the Hycroft Entities and, to the extent not contained in such reports, will also contain, for such year:

 

(a) grade of Precious Metals mined;

 

(b) with respect to the processing facilities, recoveries for gold and silver; and doré weight and gold and silver grade;

 

(c) the number of ounces of Precious Metals contained in the material processed during such year, but not delivered to a Payor by the end of such year;

 

(d) the number of ounces of Precious Metals produced and delivered to and paid for by a Payor, and the names and addresses of each such Payor;

 

(e) the payment to the Payee and/or estimated payment to the Payee with respect to Precious Metals referred to in subsection (b) on account of the Royalty;

 

(f) a reconciliation between any estimated payment specified in an Annual Operational Report pursuant to subsection (e) for a preceding year and the final payment;

 

(g) the amount and a description of operating and capital expenditures;

 

(h) a statement setting out the current estimated mineral reserves and mineral resources balances (by category) with notes on the assumptions used, including cut-off grade, metal prices and metal recoveries;

 

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(i) a review of the development and operating activities, production volumes for the year and a report on any material issues or departures from that contemplated by the Annual Forecast Report, as applicable as of the first day of the fiscal year;

 

(j) variances from projected operating and capital expenditures and any actual or expected adverse impact on development or production or recovery of Precious Metals, whether as to quantity or timing, together with the details of the plans to resolve or mitigate such matters;

 

(k) if applicable, the percentage completion compared to the initial development plan of the major elements of construction and the anticipated date of commencement of commercial production, if it has not yet then occurred; and

 

(l) details of any material health or safety violations and/or material violations of any Applicable Laws (including Environmental Laws).

 

Applicable Law” means any law (including common law and equity), any domestic or foreign constitution or any federal, provincial, territorial, state, municipal, county or local statute, law, ordinance, code, rule, regulation, Order (including any securities laws or requirements of stock exchanges and any consent decree or administrative Order), or Authorization of a Governmental Body in any case applicable to any specified Person, property, transaction or event, or any such Person’s property or assets.

 

Authorization” means any authorization, approval, consent, concession, exemption, license, lease, grant, permit, franchise, right, privilege or no-action letter from any Governmental Body having jurisdiction with respect to any specified Person, property, transaction or event, or with respect to any of such Person’s property or business and affairs (including any zoning approval, mining permit, development permit or building permit) or from any Person in connection with any easements, contractual rights or other matters.

 

Business Day” means any day other than Saturday, Sunday or a statutory holiday when banks are not open in Toronto, Ontario, Winnemucca, Nevada, Salt Lake City, Utah and Denver, Colorado.

 

Cash Consideration” means $30,000,000.

 

Contaminant” means any solid, liquid, gas, odor, heat, sound, vibration, radiation, or combination of any of them, that does or is reasonably expected to:

 

(a) impair the quality of the Environment for any use that can be made of it;

 

(b) injure or damage property or plant or animal life;

 

(c) adversely affect the health of any individual;

 

(d) impair the safety of any individual;

 

(e) render any plant or animal life unfit for use by man; or

 

(f) create a liability under any Environmental Law;

 

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and includes any “contaminant” within the meaning ascribed to such term in any Environmental Law.

 

Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of May 29, 2020 between Parent, the Owner, Allied, the Lender, Sprott Resource Lending Corp., MUDS Holdco Inc., and MUDS Acquisition Sub, Inc., as such may be amended, supplemented, restated, modified or superseded from time to time.

 

Deductions” means any and all smelting, refining, treatment and other charges, penalties, insurance, deductions, transportation, settlement, financing, price participation charges and/or other charges, penalties, deductions, set-offs, Taxes and expenses pertaining to and/or in respect of the operation of the Project, the Property, the Minerals therefrom and the calculation or determination of the payments on account of the Royalty (or payments in lieu thereof).

 

Deed of Trust” means the deed of trust evidencing the Payee’s security interest and first priority lien on the Property, subject to Permitted Encumbrances.

 

Designated Jurisdiction” means Canada, the United States of America or such other location as may be agreed between the Parent and the Payee.

 

‎“Documents” means collectively this Agreement, the Deed of Trust, the Royalty Deed and any ‎other agreements or documents, whether now or hereafter existing, executed or delivered in ‎connection with this Agreement or any amendment thereto, and any amendments, ‎supplements, modifications, renewals or extensions of any of the foregoing documents.‎

 

Effective Date” means the date on which all of the conditions set forth in Section 4(a) have been satisfied or waived by the Payee in writing and the Owner has received the Cash Consideration as contemplated in Section 4(a).

 

Encumbrance” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, security interest, priority or other security agreement, preferential arrangement or encumbrance of any kind or nature whatsoever, including any conditional sale or other title retention agreement or the interest of a lessor under a capital lease or finance obligation (or any similar arrangement) or prior claims or royalties of any nature whatsoever, whether registered or recorded or unregistered or unrecorded.

 

Environment” means the ambient air, all layers of the atmosphere, surface water, underground water, all land (surface and underground), all living organisms and the interacting natural systems that include components of air, land, water, organic and inorganic matter and living organisms, and includes indoor and underground spaces.

 

Environmental Laws” means any Applicable Law relating to the Environment, occupational or mine health or safety, industrial hygiene, product liability or any past, present or future activity, event or circumstance in respect of any Hazardous Materials (including the use, handling, transportation, production, disposal, discharge or storage thereof or the terms of any Authorization issued in connection therewith) or the environmental conditions on, under or about any real property (including soil, groundwater and indoor, underground and ambient air conditions).

 

Excluded Taxes” with respect to the Payee or any other recipient of any Royalty or payment or transfer of property of any kind under this Agreement:

 

-4-

 

 

(a) any Taxes imposed on or measured by such recipient’s net income, net profits, or capital gains, and any branch profits taxes or franchise or capital Taxes imposed in lieu of or in addition to overall net income or profits Taxes, as a result of a present or former connection between such recipient and the jurisdiction (or any political subdivision thereof) of the Governmental Body imposing such Tax (other than any connection arising solely from such recipient having executed, delivered, enforced, become a party to, performed its obligations under, or made or received payments under this Agreement);

 

(b) any Taxes which arise because of a change in the Payee or any other recipient or any change in the jurisdiction in which the Payee or any other recipient is resident or incorporated but only to the extent such Taxes resulting from the change would result in greater payments by the Owner pursuant to Section 6 hereof;

 

(c) any Taxes which arise by reason of the Payee, or any other recipient, receiving the Royalty in a jurisdiction other than a Designated Jurisdiction but only to the extent that such Taxes arising as result of receiving the Royalty in such jurisdiction instead of a Designated Jurisdiction results in greater payments by the Owner pursuant to Section 6 hereof; or

 

(d) any Taxes imposed on amounts payable to the Payee or any other recipient under the United States Foreign Account Tax Compliance Act.

 

Governmental Body” means the government of Canada, the United States of America or any other nation, or of any political subdivision thereof, whether state, provincial or local, and any agency, authority, instrumentality, regulatory body, court, arbitrator or arbitrators, tribunal, central bank or other entity exercising executive, legislative, judicial or arbitral, taxing, regulatory or administrative powers or functions (including any applicable stock exchange).

 

Guaranteed Obligations” has the meaning set out in Section 15(a).

 

Guarantor” has the meaning set out in Section 15(a).

 

Hazardous Materials” means any pollutant or Contaminant, including any hazardous, dangerous, registrable or toxic chemical, material or other substance within the meaning of any Environmental Law.

 

Hedging Activities” means any and all activities by which a Hycroft Entity sells or disposes of Precious Metals by entering into off-take agreements or engaging in any commodity futures trading, options trading, metals trading, or sales or dispositions of Precious Metals, in each case for other than spot market prices for Precious Metals produced from the Property, or any combination thereof, and any other similar hedging transactions or arrangements.

 

Hycroft Entities” means the Parent and the Owner and each of their Affiliates from time to time.

 

Hycroft Parties” means the Parent and the Owner.

 

LBMA” means the London Bullion Market Association.

 

Lender” means Sprott Private Resource Lending II (Collector), LP.

 

Losses” means any and all damages, claims, losses, lost profits, liabilities, fines, injuries, costs, penalties and expenses (including reasonable legal fees).

 

-5-

 

 

Material Adverse Effect” means any change, event, occurrence, condition, circumstance, effect, fact or development that has, or could reasonably be expected to have, a material and adverse effect on:

 

(a) the Property (including the ability of the Hycroft Entities to construct, develop or operate the Project substantially in accordance with the development or mine plan, as applicable, for the Project in effect at the time of the occurrence of the Material Adverse Effect);

 

(b) the ability of any Hycroft Party to perform its obligations under this Agreement; or

 

(c) the legality, validity, binding effect or enforceability of this Agreement or the rights and remedies of the Payee under this Agreement.

 

Minerals” means any and all metals, minerals and mineral rights of every nature and kind, including metals, precious metals, base metals, gems, diamonds, industrial minerals, commercially valuable rock, aggregate, clays, sands and diatomaceous earth, hydrocarbons, oil, gas, coal and other materials in whatever form or state which are mined, excavated, extracted, recovered in soluble solution or otherwise recovered or produced from the Property.

 

Monthly Average Gold Price” means, for any given calendar month, the monthly average of the daily afternoon (PM) per ounce LBMA Gold Price as quoted in United States dollars by LBMA (currently in partnership with ICE Benchmark Administration) for Refined Gold for such month, calculated by dividing the sum of all such quotations during such month by the number of such quotations; provided that, if for any reason the LBMA is no longer in operation or if the price of Refined Gold is not calculated on behalf of or confirmed, acknowledged by, or quoted by the LBMA, the Monthly Average Gold Price shall be determined by reference to the price of Refined Gold determined in the manner endorsed by the LBMA and World Gold Council, failing which the Monthly Average Gold Price will be determined by reference to the price of Refined Gold on a commodity exchange mutually acceptable to the Parent and the Payee, acting reasonably.

 

Monthly Average Silver Price” means, for any given calendar month, the month average of the daily per ounce LBMA Silver Price as quoted in United States dollars by LBMA (currently in partnership with CME Group and Thomson Reuters) for Refined Silver for such month, calculated by dividing the sum of all such quotations during such month by the number of such quotations; provided that, if for any reason the LBMA is no longer in operation or if the price of Refined Silver is not calculated on behalf of or confirmed, acknowledged by, or quoted by the LBMA, the Monthly Average Silver Price shall be determined in the manner endorsed by the LBMA, failing which the Monthly Average Silver Price will be determined by reference to the price of Refined Silver on a commodity exchange mutually acceptable to the Parent and the Payee, acting reasonably.

 

Monthly Operational Report” means a written report in relation to a calendar month (or otherwise, as set forth below) with respect to the Project, to be prepared by or on behalf of the Owner for each month, which shall include all of the information contained in the monthly operating reports for the month prepared and provided to the board of directors of any of the Hycroft Entities and, to the extent not contained in such reports, will also contain, for such month:

 

(a) grade of Precious Metals mined;

 

(b) with respect to the processing facilities, recoveries for gold and silver; and doré weight and gold and silver grade;

 

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(c) the number of ounces of Precious Metals contained in the material processed during such month, but not delivered to a Payor by the end of such month;

 

(d) the number of ounces of Precious Metals produced and delivered to a Payor, and the names and addresses of each such Payor;

 

(e) the payment to the Payee and/or estimated payment to the Payee with respect to Precious Metals referred to in subsection (b) on account of the Royalty;

 

(f) a reconciliation between any estimated payment specified in a Monthly Report pursuant to subsection (e) for a preceding calendar month and the final payment;

 

(g) on a semi- annual (and not monthly basis) any material changes from the most recent production forecasts provided to the Payee;

 

(h) the amount and a description of operating and capital expenditures; and

 

(i) any material changes from the most recent production forecasts provided to the Payee.

 

Monthly Production” means the gross number of payable ounces of Precious Metals in any shipment delivered to and paid for by a Payor during any given calendar month, provided that if delivery and payment are not made in the same calendar month, the Precious Metals shall be deemed to be part of Monthly Production in the calendar month in which the later of (i) delivery and (ii) payment or refiner credit occurs.

 

National Instrument 43-101” means National Instrument 43-101 – Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (or any successor instrument, rule or policy).

 

Net Smelter Returns” has the meaning set out in Section 5(a).

 

Obligations” means any and all obligations, debts, liabilities, indebtedness, covenants, royalty payments and duties owing by the Hycroft Parties to the Payee of any kind and description under the Documents, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.

 

Original Credit Agreement” means that certain Credit Agreement, dated as of October 4, 2019 between Hycroft Mining Corporation, the Owner, Allied, the Lender and Sprott Resource Lending Corp., as assigned by Hycroft Mining Corporation to the Parent, as amended by that certain First Amendment to Credit Agreement dated as of January 8, 2020.

 

Other Rights” means all licenses, approvals, authorizations, consents, rights (including surface rights, access rights and rights of way), privileges, concessions or franchises held by the Hycroft Entities or required to be obtained from any Person (other than a Governmental Body), for the construction, development and operation of the Project, as such construction, development and operation is contemplated by the current or then applicable development or mine plan, as the case may be.

 

Order” means any order, directive, decree, judgment, ruling, award, injunction, direction or request of any Governmental Body or other decision-making authority of competent jurisdiction.

 

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Owner” has the meaning set out on the first page of this Agreement.

 

Parent” has the meaning set out on the first page of this Agreement.

 

Parent Securities Documents” has the meaning set out in Section 16 of Schedule C.

 

Parties” means the parties to this Agreement and “Party” means any one of the Parties.

 

Payee” has the meaning set out on the first page of this Agreement.

 

Payor” means the smelter, refiner, processor, purchaser or other recipient of Monthly Production, provided such entity is not a Hycroft Entity.

 

Permitted Encumbrances” means the Encumbrances set out in Schedule B.

 

Person” means and includes individuals, corporations, bodies corporate, limited or general partnerships, joint stock companies, limited liability companies, joint ventures, associations, companies, trusts, banks, trust companies, Governmental Bodies or any other type of organization or entity, whether or not a legal entity.

 

Precious Metals” means gold and silver in whatever form or state, which are mined, excavated, extracted, recovered in soluble solution or otherwise recovered or produced from the Property.

 

Project” means the Hycroft gold mine project located at the Property in Humboldt County and Pershing County in the State of Nevada, U.S.A., including mining, development, production, processing, recovery, sale, transportation, storage and delivery operations.

 

Property” means all right, title and interest of any of the Hycroft Entities to:

 

(a) patented claims, fee title, mineral or mining leases, and unpatented mining and millsite claims and all accessions and successions thereto, whether created privately or through government action, mineral rights and surface rights, whether owned or leased, easements, surface use agreements and any other right, title or interest to use the surface estate, all as more particularly described as well as depicted on the map in Schedule A;

 

(b) to the extent not included in subparagraph (a) above, patented claims, fee title, mineral or mining leases, and unpatented mining and millsite claims and all accessions and successions thereto, whether created privately or through government action, mineral rights and surface rights, whether owned or leased, easements, surface use agreements and any other right, title or interest to use the surface estate, in each case situated within the exterior boundary of the block of claims, accessions and successions referred to in subparagraph (a) above, as more particularly shown as the Hycroft unpatented claims and the Hycroft patented claims depicted in the map in Schedule A;

 

(c) all water, water rights, ditches and ditch rights, reservoirs and storage rights, wells and groundwater rights (whether tributary or nontributary), permits and other evidence of authority, water shares, water contracts, water allotments, and other rights in and to the use of water of any kind or nature, whether like or unlike the foregoing, decreed or undecreed, appurtenant to or historically used on or in connection with the properties and rights referred to in subparts (a) and (b) above, including the water rights described in Schedule A, and all ditches, headgates, outlet structures, measuring devices, pumps, pipelines, sprinkler systems, and other equipment or devices associated with the historical and beneficial use of or otherwise appurtenant to or used in connection with the water rights, and all easements, rights of way, permissions, licenses or other rights associated with the historical and beneficial use of or otherwise appurtenant to or used in connection with any of the water rights or water facilities described herein; and

 

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(d) all Minerals, Authorizations and Other Rights, all other property, stockpiles, tailings, buildings, structures, facilities and fixtures used, affixed or situated thereon, Utility Commitments and other rights or assets in each case relating to the interests referred to in (a), (b) and (c) above.

 

Records” means all of the Hycroft Parties’ present and future books, records and data of every kind or nature, including books of account, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files, electronically stored data and other data, together with the tapes, disks, diskettes, drives and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of a Hycroft Party with respect to the foregoing maintained with or by any other Person).

 

Refined Gold” means marketable metal bearing material in the form of gold bars or coins that is refined to a minimum 995 parts per 1,000 fine gold.

 

Refined Silver” means marketable metal bearing material in the form of silver bars or coins that is refined to a minimum 999 parts per 1,000 fine silver.

 

Reduction Right” has the meaning set out in Section 3(b).

 

Royalty” has the meaning set out in Section 3(a).

 

Royalty Deed” has the meaning set out in Section 3(a)(i).

 

SEC Regulations” means the U.S. Securities and Exchange Commission’s Industry Guide 7 or Regulation S-K Subpart 1300 (in effect at such time), as amended or replaced, relating to disclosures for mining registrants.

 

Securities Regulatory Authorities” has the meaning set out in Schedule C.

 

Solvent” means, when used with respect to a Person, that:

 

(a) the fair saleable value of the assets of such Person is in excess of the total amount of the current value of its liabilities (including for purposes of this definition all liabilities (including loss reserves), whether or not reflected on a balance sheet prepared in accordance with U.S GAAP and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed);

 

(b) such Person is able to pay its debts or obligations in the ordinary course as they mature;

 

(c) such Person has capital sufficient to carry on its business; and

 

(d) such Person is not otherwise insolvent as defined by any Applicable Law;

 

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and “Insolvent” shall have a correlative meaning.

 

Subsidiary” means with respect to any Person, any other Person which is controlled directly or indirectly by that Person.

 

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 Body (of any jurisdiction), and whether disputed or not.

 

Transfer”, when used as a verb, means to sell, grant, assign, encumber, hypothecate, pledge or otherwise dispose of or commit to dispose of, directly or indirectly, including through mergers, arrangements, amalgamations, consolidations, asset sales or spin out transactions. When used as a noun, “Transfer” means a sale, grant, assignment, pledge or disposal or the commitment to do any of the foregoing, directly or indirectly, including through mergers, arrangements, amalgamations, consolidations, asset sales or spin out transactions.

 

U.S. GAAP” means generally accepted accounting principles in the United States from time to time consistently applied, as recommended by the American Institute of Certified Public Accountants.

 

2. Interpretation.

 

(a) Interpretation of Certain Matters. In this Agreement, unless otherwise specifically provided or unless the context otherwise requires:

 

(i) the terms “Agreement”, “this Agreement”, “the Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof;

 

(ii) references to a “Section” or “Schedule” followed by a number or letter refer to the specified Section of or Schedule to this Agreement;

 

(iii) references to a Party in this Agreement mean the Party or its successors or permitted assigns;

 

(iv) the division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

 

(v) the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”;

 

(vi) any time period within which a payment is to be made or any other action is to be taken hereunder shall be calculated excluding the day on which the period commences and including the day on which the period ends;

 

(vii) whenever any payment is required to be made, action is required to be taken or period of time is to expire on a day other than a Business Day, such payment shall be made, action shall be taken or period shall expire on the next following Business Day;

 

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(viii) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not specifically prohibited by the terms of this Agreement; and

 

(ix) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending, supplementing, interpreting or replacing the statute or regulation referred to.

 

(b) Currency. All references in this Agreement to currency or to “$”, unless otherwise expressly indicated, shall be to United States dollars.

 

(c) Accounting Principles. Where any computation is required to be made, for the purposes of this Agreement, including the contents of any certificate to be delivered hereunder, such computation shall, unless the Parties otherwise agree or the context otherwise requires, be made in accordance with U.S. GAAP applied on a consistent basis.

 

(d) Time of Essence. Time shall be of the essence of this Agreement.

 

3. Royalty

 

(a) Grant of Royalty.

 

(i) Effective as of the Effective Date, the Owner hereby creates, grants and conveys to the Payee, and agrees to pay to the Payee, a perpetual royalty (the “Royalty”) in the amount of 1.50% of Net Smelter Returns, payable on a monthly basis determined in accordance with the provisions set forth in this Agreement, in consideration of the Cash Consideration which shall be paid by the Payee to the Owner by wire transfer to the same account specified in the Borrowing Notice for the First Tranche Advance (as defined in the Credit Agreement) delivered pursuant to the Credit Agreement. The Owner shall evidence the grant of the Royalty to the Payee through a form of deed substantially in the form attached hereto as Schedule D and satisfactory to the Payee, acting reasonably (the “Royalty Deed”), which deed shall be recorded against the Property senior to any and all other Encumbrances, including those then existing, other than the Permitted Encumbrances.

 

(b) Royalty Reduction Right. The Owner, in its sole discretion, shall have the right to repurchase a portion of the Royalty (the “Reduction Right”) on the following dates and pursuant to the following terms:

 

(i) On the first anniversary of the Effective Date, the Owner may purchase up to 33.3% of the Royalty at a price calculated as follows:

 

First Royalty Repurchase Price = (A x B x C) – (A x D)

 

where

 

A = The portion of the Royalty being repurchased on the first anniversary of the Effective Date, up to 33.3%

 

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B = $30,000,000, the amount of the Cash Consideration

 

C = 1.2

 

D = The total of all Royalty payments made by the Owner to the Payee hereunder on or before the first anniversary of the Effective Date, including as a result of insurance proceeds received by the Payee pursuant to Section 3(f), in respect of the portion of the Royalty being repurchased on the first anniversary

 

If the Owner desires to exercise the Reduction Right provided in this Section 3(b)(i), the Owner shall deliver to the Payee written notice of the portion of the Royalty to be repurchased (item A above) and the estimated First Royalty Repurchase Price as calculated hereunder and subject to adjustment for any Royalty payments made by the Owner to the Payee between the date of such notice by the Owner and the first anniversary of the Effective Date, such notice to be delivered to Payee no later than 45 days prior to the first anniversary of the Effective Date. Following receipt of such notice, on the first anniversary of the Effective Date Owner shall pay to Payee the First Royalty Repurchase Price (adjusted as contemplated above) by wire transfer to an account to be designated by the Payee and notified to the Owner in writing at least one Business Day prior to the first anniversary of the Effective Date, the Royalty under this Agreement shall be reduced accordingly and Owner and Payee shall sign an amendment to the Royalty Deed reducing the amount of the Royalty as provided in this Section 3(b)(i), which amendment shall be recorded against the Property.

 

(ii) On the second anniversary of the Effective Date, the Owner may purchase any remaining portion of the Royalty the Owner could have purchased pursuant to Section 3(b)(i), at a price calculated as follows:

 

Second Royalty Repurchase Price =

 

(A x B x C) – (A x D)

 

where

 

A = The portion of the Royalty being repurchased on the second anniversary of the Effective Date, not previously repurchased pursuant to Section 3(b)(i)

 

B = $30,000,000, the amount of the Cash Consideration

 

C = 1.4, the repurchase premium on the second anniversary of the Effective Date

 

D = The total of all Royalty payments made by the Owner to the Payee hereunder on or before the second anniversary of the Effective Date, including as a result of insurance proceeds received by the Payee pursuant to Section 3(f), in respect of the portion of the Royalty being repurchased on the second anniversary

 

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In the event Owner desires to exercise the Reduction Right provided in this Section 3(b)(ii), then Owner shall deliver to the Payee written notice of the portion of the Royalty to be repurchased (item A above) and the estimated Second Royalty Repurchase Price as calculated hereunder and subject to adjustment for any Royalty payments made by the Owner to the Payee between the date of such notice by the Owner and the second anniversary of the Effective Date, such notice to be delivered to Payee no later than 45 days prior to the second anniversary of the Effective Date. Following receipt of such notice, on the second anniversary of the Effective Date Owner shall pay to Payee the Second Royalty Repurchase Price by wire transfer to an account to be designated by the Payee and notified to the Owner in writing at least one Business Day prior to the second anniversary of the Effective Date, the Royalty shall be reduced accordingly and Owner and Payee shall sign an amendment to the Royalty Deed reducing the amount of the Royalty as provided in this Section 3(b)(ii), which amendment shall be recorded against the Property.

 

(c) Time and Manner of Payment. The Payee shall receive payments of the Royalty as a cash payment. The Owner shall pay the Royalty, or the applicable portion thereof, in cash within 10 days of the last day of such month. Payments shall be made by wire transfer to an account to be designated by the Payee and notified to the Owner at least one Business Day prior to the payment date. For greater certainty, the Payee shall not be responsible for, and all Royalty payments shall be made free of, any Deductions, all of which shall be for the account of the Owner, except as specifically provided for in Sections 3 and 5.

 

(d) Late Charge. If the payment of the Royalty in respect of Monthly Production in a particular month is not made within 30 days after the last day of such month, the Payee may give the Owner written notice of such default. Unless the Payee shall have received such payment within five days of receipt of such notice an additional cash sum equal to 10% of the amount of the delinquent payment (the “late charge”) shall be payable to the Payee, plus interest on the delinquent payment and the late charge at the rate of 10% per annum, which shall accrue from the day the delinquent payment was due to the date of payment of the Royalty, late charge and accrued interest in full.

 

(e) Royalty Statements. Each payment of the Royalty shall be accompanied by a detailed statement explaining the manner in which the payment was calculated and shall also include the following information:

 

(i) settlement ounces of all Monthly Production;

 

(ii) the prices used for the calculation of the Royalty;

 

(iii) any Allowable Deductions applied to the Royalty;

 

(i) other Deductions, if any, by a Payor;

 

(ii) any other pertinent information in sufficient detail to explain the calculation of the payment; and

 

(iii) such other information as the Payee may reasonably request.

 

Such statement shall be accompanied by copies of the relevant settlement sheets from a Payor and invoices for all Allowable Deductions applied to the Royalty. Such statement shall be deemed conclusively correct if the Payee has not objected to it in writing within 24 months after receipt thereof.

 

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(f) Insurance Proceeds. Notwithstanding any other provisions of this Agreement, if the Hycroft Entities receive insurance proceeds for any Precious Metals that are lost or damaged, the Owner shall pay to the Payee, in lieu of the payment of the Royalty in respect of such Precious Metals that were lost or damaged, a percentage, equal to the amount of the Royalty on the date such insurance proceeds are received, of the gross insurance proceeds which are received by the Hycroft Entities for such Precious Metals. The Owner shall pay such amount in cash within 10 days of any Hycroft Entity receiving such insurance proceeds in cash by wire transfer to an account to be designated by the Payee and notified to the Owner in writing at least three Business Days prior to the payment date. The amount of gross proceeds received by the Hycroft Entities on account of the lost or damaged Precious Metals shall be conclusively determined by the insurance settlement documents.

 

(g) Hedging Activities. All profits and losses resulting from the Hycroft Parties entering into any Hedging Activities are specifically excluded from calculations of the Royalty pursuant to this Agreement. All Hedging Activities entered into by the Hycroft Entities and all profits or losses associated therewith, if any, shall be solely for the account of the Hycroft Parties. The Royalty payable on Precious Metals subject to Hedging Activities shall be determined in the same manner as provided in Sections 3 and 5, with the understanding that the Precious Metals subject to Hedging Activities shall be deemed to be part of Monthly Production, with the Monthly Average Gold Price or Monthly Average Silver Price, as applicable, for such month being used in the calculation of the Royalty.

 

(h) Nature of Interest. The Parties further agree as follows:

 

(i) the Parties agree that the Royalty is intended to be an interest in real property and constitutes the grant of a vested present interest in the Property and a covenant running with the land and all successions thereof, whether created privately or through government action. The Royalty shall be applicable to the Property and binding upon the Owner and the successors and assigns of the Property;

 

(i) the Payee shall have all of the rights and incidents of ownership of a non-participating royalty owner, which incidents are covenants running with the Property and include: (a) the ownership of the non-participating royalty interests which are interests in real property; (b) the right to receive, free of expenses other than those deductible in the calculation of Net Smelter Returns, the Royalty payments; and (c) the obligation of the Owner, its successors or assigns, to make the Royalty payments, which obligation shall run with the land. The Payee, however, shall not have or claim any incidents of the fee simple ownership in the Property, which incidents include: (a) the right to enter, explore, develop or mine the claims; (b) the right to execute leases, operating agreements, or similar instruments with respect to the Property; (c) the right to share in bonus payments made as the consideration for the execution of leases or other instruments; and (d) except as expressly provided herein, the right to participate in any manner in the decisions concerning, or the conduct of, operations on the Property;

 

(ii) the Royalty shall attach to any amendments, relocations or conversions of any mining claim, license, lease, concession, permit, patent or other tenure comprising the Property, or to any renewals or extensions thereof. If the United States establishes a leasing system or other system of tenure for lands or minerals now subject to location under applicable mining laws, and if the new system gives the Owner an election to acquire rights under the new system in exchange for or in modification of property rights comprising part of the Property, this Agreement and the Royalty shall extend to the lease or other rights granted by the new system in exchange for such property rights included in the Property; and

 

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(i) the Payee’s interest in Precious Metals on account of the Royalty shall become the property of the Payee at the time of production of Precious Metals and shall be held by the Owner in trust for the Payee until paid to the Payee.

 

4. Payment of Cash Consideration

 

(a) Subject to the conditions set forth in this Section 4, in consideration for the creation, grant and conveyance of the Royalty under and pursuant to Section 3(a)(i) of this Agreement, the Payee hereby agrees to pay and deliver to the Owner on the Effective Date, the Cash Consideration.

 

(b) Conditions to Payment of the Cash Consideration. The obligation of the Payee to pay the Cash Consideration to the Owner shall be subject to the following:

 

(i) all conditions precedent to the funding of the First Tranche Advance under the Credit Agreement shall have been satisfied or waived by the Lender in writing;

 

(ii) the Payee shall have received an original copy of the Documents, duly executed by each applicable Hycroft Party;

 

(iii) all of the representations and warranties made by the Hycroft Parties pursuant to Schedule C shall be true and accurate in all respects as if made on and as of the Effective Date;

 

(iv) no Material Adverse Effect shall have occurred and be continuing;

 

(v) the Hycroft Parties shall have completed to the satisfaction of the Payee the registration or recording of the Royalty Deed and Deed of Trust in the recorder’s offices in Humboldt County, Nevada and Pershing County, Nevada;

 

(vi) The Parent shall have delivered to the Payee:

 

(A) an up to date corporate structure chart and business description for the Hycroft Entities;

 

(B) a favorable legal opinion, in form, substance and detail satisfactory to the Payee, acting reasonably, pertaining to the (1) legal status of the Hycroft Parties, (2) power and authority of the Hycroft Parties to execute, deliver and perform under the Documents, (3) authorization, execution and delivery of the Documents, and (4) enforceability of the Documents; and

 

(C) a favorable title opinion, in form, substance and detail satisfactory to the Payee, confirming the Owner’s title in and to the Property and that there are no Encumbrances except for Permitted Encumbrances with respect to the Property;

 

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(vii) The Parent shall have provided to the Payee releases, discharges and postponements (in registrable form where appropriate) in respect of Encumbrances affecting the Property that are not Permitted Encumbrances;

 

(viii) no provision of Applicable Laws or any Governmental Body having competent jurisdiction shall prohibit the closing for the Royalty or adversely affect in any material respect the Payee’s rights or benefits under this Agreement, and no judgment, injunction, order or decree issued by any Governmental Body having competent jurisdiction shall prohibit the closing or adversely affect in any material respect the Payee’s rights or benefits under this Agreement or the other Documents;

 

(ix) the Owner shall have delivered or paid to the Payee any and all amounts owing pursuant to this Agreement at such time; and

 

(x) the Payee shall have received a certificate signed by an authorized senior officer of the Parent confirming the matters set forth in clauses (iii) through (ix) above.

 

(c) Obligation to Satisfy Conditions. The Hycroft Parties shall use all commercially reasonable efforts and take all commercially reasonable action as may be necessary or advisable to satisfy and fulfill all the conditions set forth in this Section 4 as soon as practicable. The Payee shall co-operate with the Hycroft Parties in exchanging such information and providing such assistance as may be reasonably required in connection with the foregoing.

 

(d) Waiver of Conditions. Each of the conditions set forth in Section 4(b) is for the exclusive benefit of the Payee, and may be waived by the Payee in writing, in its sole discretion in whole or in part.

 

5. Calculation of Net Smelter Returns

 

(a) Net Smelter Returns. “Net Smelter Returns” for any given calendar month means the amount determined by the following formula:

 

(A x B) – C

 

where

 

“A” is the Monthly Production;

 

“B” is (i) in the case of gold, the Monthly Average Gold Price; or (ii) in the case of silver, the Monthly Average Silver Price; and

 

“C” is Allowable Deductions.

 

(b) Allowable Deductions. For the purposes of calculating Net Smelter Returns, “Allowable Deductions” shall mean the following Deductions (without duplication), but only if and to the extent actually incurred and paid by the Hycroft Entities in respect of the Monthly Production:

 

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(i) in the case of Precious Metals shipped from the Property in the form of doré, slag and loaded carbon:

 

(A) charges and costs, if any, for transportation and insurance of doré from the Project’s final mill or other final processing plant to places where such doré is refined (including loading, freight, insurance, security, surveyor fees, handling fees, port fees, demurrage, and forwarding expenses incurred by reason of or in the course of transportation); and

 

(B) charges imposed by the refiner for refining doré into Refined Gold or Refined Silver, as applicable;

 

and, for greater certainty, no deductions of the type referred to in (A) or (B) in this clause (i) shall be applicable in the case of Precious Metals which are shipped from the Property other than in the form of doré, slag and loaded carbon; and

 

(ii) in the case of cash payments pursuant to Section 3(c), actual selling, marketing and brokerage costs of Refined Gold and Refined Silver, as applicable,

 

provided that if Precious Metals are processed on or off the Property in facilities owned or controlled, in whole or in part, by a Hycroft Entity, Allowable Deductions will not include any Deductions that are in excess of those that would have been incurred and have been deductible under this Agreement had such processing been carried out at facilities not owned or controlled by a Hycroft Entity then offering comparable services for comparable products on prevailing terms.

 

(c) Processing Prior to Final Treatment. For greater certainty, if the Hycroft Entities ship Precious Metals for processing or beneficiation at a facility prior to final treatment, no deductions for transportation of the Precious Metals to or the processing of the Precious Metals at the facility will apply (including any deduction for toll milling).

 

(d) Provisional Settlement. Where the Hycroft Entities receive any payment for Monthly Production from a Payor on a provisional basis, the amount of the Royalty payable shall be based on the gross number of ounces of Precious Metals credited by such provisional settlement, but shall be adjusted as between the Owner and the Payee to account for the quantity of Precious Metals established by final settlement with a Payor.

 

6. Taxes

 

(a) Taxes Payable by Hycroft Parties. Except as required by Applicable Law or expressly contemplated herein, all payments on account of the Royalty and any other payment or transfer of property of any kind made under this Agreement to the Payee shall be made free and clear and without any present or future deduction, withholding, charge or levy on account of Taxes, except Excluded Taxes, without setoff or counterclaim. The Owner shall be liable for all such Taxes directly or indirectly imposed on the Payee, except Excluded Taxes, and shall indemnify and save the Payee harmless from any such Taxes imposed on the Payee.

 

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(b) Gross-up. All Taxes, if any, except Excluded Taxes, as are required by Applicable Law to be so deducted, withheld, charged or levied by the Owner on any such payment, shall be paid by the Owner paying to the Payee or on its behalf, in addition to such payment, such additional payments as are necessary to ensure that the net payment received by the Payee (net of any such Taxes, including any Taxes required to be deducted, withheld, charged or levied on any such additional amount) equals the full payment that the Payee would have received had no such deduction, withholding, charge or levy been required.

 

(c) Withholding by Payee. To the extent required by Applicable Law, the Payee may deduct, withhold, charge or levy, any Taxes imposed by any Governmental Body on the Payee or any of its Affiliates or otherwise required to be withheld by the Payee or any of its Affiliates, in respect of any payment made by the Payee to the Owner or any of its Affiliates under this Agreement. The Payee shall pay the full amount deducted or withheld to the relevant Governmental Body in accordance with Applicable Law.

 

(d) Documentation. The Payee shall deliver to the Owner, at the time or times reasonably requested by the Owner, such properly completed and executed documentation reasonably requested by the Owner as will permit the Owner to determine whether payments to be made under this Agreement may be made without withholding or at a reduced rate of withholding. In addition, the Payee, if reasonably requested by the Owner, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Owner as will enable the Owner to determine whether or not the Payee is subject to backup withholding or information reporting requirements.

 

(e) Application to Guarantor. The provisions of Sections 6(a) and 6(b) shall also apply to all payments made by the Guarantor to the Payee, whether made pursuant to its guarantee obligations set out in Section 15 or otherwise.

 

(f) Cooperation. The Parties agree to reasonably cooperate to: (i) facilitate tax planning with respect to payments on account of the Royalty; (ii) ensure that no more Taxes, duties or other charges are payable with respect to the Royalty than is required under Applicable Law; and (iii) obtain a refund or credit of any Taxes with respect to the Royalty which have been overpaid.

 

(g) Overpayment or Credit. If the Payee or any other recipient of any Royalty or payment or transfer of property of any kind under this Agreement‎ (referred to in this paragraph as an “indemnified party”) determines, in good faith, that it has received a refund or credit of any Taxes in respect of which it has received additional amounts pursuant to Section 6(b), it shall promptly pay to the party that paid such additional amounts (referred to in this paragraph as an “indemnifying party”) an amount equal to such refund or credit (but only to the extent of additional amounts paid under Section 6(b) with respect to the Taxes giving rise to such refund or credit and only to the extent such credit results in a reduction of Taxes otherwise payable by the Payee or such recipient in the taxation year the additional amounts are received), net of all out of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Body with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 6(g) in the event that such indemnified party is required to repay such refund to such Governmental Body. The Parties intend that this Section 6(g) shall prevent the indemnified party from obtaining a windfall as a result of a payment of, or reimbursement for, the indemnified party’s Taxes by the indemnifying party where such Taxes are not ultimately payable by the indemnified party. Notwithstanding anything to the contrary in this Section 6(g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 6(g), the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 6(g) shall not be construed to require the Payee to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

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7. Reporting Obligations

 

(a) Reports. The Owner shall deliver or cause to be delivered to the Payee:

 

(i) within 15 days after the end of each calendar month, a Monthly Operational Report in respect of the Project;

 

(ii) within 45 days after the end of each fiscal year, an Annual Operational Report; and

 

(iii) at least 45 days after the beginning of each fiscal year, an Annual Forecast Report.

 

(b) Geological Reports. Promptly after they become available, the Owner shall promptly deliver to the Payee a copy any technical reports or any updated mineral reserve and mineral resource estimates produced that pertain to the Property.

 

(c) Claims Fee Filings and Payment Receipts. By no later than the earlier of 9:00 am (Toronto time) (i) five days following payment by the Owner of the annual maintenance fee for all unpatented mining claims within the Property and (ii) on August 27, in each calendar year, the Owner shall deliver to the Payee documentation of acknowledgement by the United States Bureau of Land Management that the annual maintenance fee for all unpatented mining claims within the Property have been paid, and copies of the Affidavit and Notice of Intent to Hold Claims recorded in the State of Nevada with respect to the Property.

 

(d) Development and Mine Plans. The Owner shall promptly deliver to the Payee a copy of the current development plan or mine plan, as applicable, for the Project and a new copy thereof promptly upon any material amendment thereto.

 

(e) Other Notices. The Owner shall deliver to the Payee:

 

(i) promptly after the Owner has knowledge or becomes aware thereof, written notice of all material actions, suits and proceedings before any Governmental Body or arbitrator, pending or threatened, against or directly affecting the Project, the Property and the Additional Rights including any actions, suits, claims, notices of violation, hearings, investigations or proceedings with respect to the ownership, use, maintenance and operation of the Property and the Additional Rights, including those relating to Environmental Laws;

 

(ii) promptly after the Owner has knowledge or becomes aware thereof, written notice of any other condition or event which has resulted, or that could reasonably be expected to result, in a Material Adverse Effect; and

 

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(iii) such other statements, lists of property and accounts, budgets, forecasts, projections, reports, or other information respecting the Project as the Payee may from time to time reasonably request.

 

Each notice pursuant to clauses (i) and (ii) above shall be accompanied by a written statement by an authorized senior officer of the Owner setting forth all material information relating to the occurrence referred to therein, including any action which the Hycroft Entities have taken or propose to take with respect thereto.

 

8. Records; Audits; Inspections

 

(a) Records. The Owner shall ensure that the Hycroft Entities each keep true, complete and accurate Records of all material operations and activities with respect to the Property, including the mining, treatment, processing, refining, transportation and sale of Minerals and in which complete entries will be made, in accordance with U.S. GAAP applied on a consistent basis.

 

(b) Audits. Upon not less than three Business Days’ notice, the Payee and its authorized representatives shall be entitled, at their own cost and expense, to perform in any 12 month period, one audit or other review and examination of the Records of the Hycroft Parties relevant to the payment of the Royalty pursuant to this Agreement and to otherwise confirm compliance by the Hycroft Parties with the terms of this Agreement. The Owner shall ensure that the Hycroft Parties each provide the Payee with complete access to all the Hycroft Parties’ Records pertaining to the calculation of the Royalty at the Hycroft Parties’ offices during usual business hours. If any such audits reveal a material breach of any provision of this Agreement or that payments on account of the Royalty for any 12 month period have been underpaid by more than 3%, then: (i) the restriction as to only one audit or other review per 12 month period shall be deemed deleted thereafter for a period of two years; and (ii) the Owner shall reimburse the Payee for its costs and expenses incurred in such audit, otherwise all costs and expenses incurred in connection with such audit shall be for the account of the Payee.

 

(c) Inspections. At reasonable times and with the prior consent of the Owner (not to be unreasonably withheld or delayed), one time per 12 month period the Payee and its authorized representatives shall have a right of access to all surface and subsurface portions of the Property, to any mill, smelter, concentrator or other processing facility owned or operated by any Hycroft Entity that is used to process Precious Metals and to any related operations of the Hycroft Entities for the purpose of enabling the Payee to monitor compliance by the Hycroft Parties with the terms of this Agreement, as determined by the Payee acting reasonably. The Payee and its authorized representatives shall have the further right to: (i) inspect and take copies of all records and data, whether maintained physically or electronically, pertaining to the Property, mill, smelter, concentrator, other processing facilities and related operations; (ii) take samples from the Property or any stockpile of Precious Metals, any mill, smelter, concentrator or other processing facility and any Payor for purposes of assay verification; and (iii) weigh, or to cause the Hycroft Entities to weigh, all trucks transporting Minerals from the Property to any mill, smelter, concentrator or other processing facility that is used to process Minerals prior to dumping of such ore and immediately following such dumping. If any such inspections reveal a material breach of any provision of this Agreement or that payments on account of the Royalty for any 12 month period have been underpaid by more than 3%, then the restriction as to only one inspection per 12 month period shall be deemed deleted thereafter for a period of two years.

 

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(d) Investor Tours. Upon not less than 10 Business Days’ notice to the Owner, and up to two times in any fiscal year, the Payee shall have the right to request, and if approved by the Owner (not to be unreasonably withheld or delayed), conduct an investors tour on the Property and any facilities associated therewith, the cost of which will be for the sole account of the Payee.

 

(e) Technical Reports. If any Hycroft Entity prepares a technical report under National Instrument 43-101 or SEC Regulations (or similar report) in respect of the Property, upon the request of the Payee, the Owner shall use commercially reasonable efforts to cause the author(s) of such report to provide, at the sole cost and expense of the Payee, (i) a copy of such report to be addressed to the Payee or any of its Affiliates, (ii) the relevant certificates and consents of the author(s) required in connection with the filing of and reference to such report to be provided to the Payee or any of its Affiliates, and (iii) such other consents in connection with the use of or reliance upon such report by the Payee or any of its Affiliates from time to time in its public disclosure as may be required by the Payee. Notwithstanding the foregoing, if the Payee or any of its Affiliates is required by Applicable Law to prepare a technical report under National Instrument 43-101 or SEC Regulations ‎ (or similar report) in respect of the Property and chooses to prepare its own technical report (or similar report), the Owner shall cooperate with and allow the Payee and its authorized representatives to access technical information pertaining to the Property and complete a site visit at the Property so as to enable the Payee or its Affiliates, as the case may be, to prepare a technical report (or similar report), at the sole cost and expense of the Payee.

 

(f) Additional Requirements. Access to the Property and associated facilities pursuant to Sections 8(c), (d) and (e) shall be subject to the following: (i) any such access shall be at the sole risk and expense of the Payee, its representatives and its invitees; (ii) any such access shall not unreasonably interfere with the Hycroft Entities’ activities and operations; (iii) the Payee shall comply, and request that its representatives and invitees comply, with the policies and procedures that the Hycroft Entities apply to their own representatives and invitees; (iv) the Payee shall give the relevant Hycroft Entities prompt notice of any injuries, property damage or environmental harm that may occur during such tour; and (v) the Payee shall indemnify the Hycroft Entities from any Losses (excluding loss of profit and consequential or punitive damages) suffered or incurred by any Hycroft Entity as a consequence of injury to the Payee, its representatives or its invitees incurred during such access, provided that the foregoing shall not apply to any Losses to the extent they arise primarily from the gross negligence or willful misconduct of any Hycroft Entity.

 

9. Maintenance of Existence and Property

 

(a) Maintenance of Existence. The Owner shall at all times do or cause to be done all things necessary to maintain its corporate or other entity existence, including without limitation, as and by way of conversion to a limited liability company and to obtain and, once obtained, maintain all Authorizations necessary to carry on its business and own its assets in each jurisdiction in which it carries on business or in which its assets are located.

 

(b) Maintenance of Property. Subject to Section 9(d), the Owner shall at all times do or cause to be done all things necessary to maintain the Property in good standing, including paying or causing to be paid all Taxes owing in respect thereof, performing or causing to be performed all required assessment work thereon, paying or causing to be paid all claim, permit and license maintenances fees in respect thereof, paying or causing to be paid all rents and other payments in respect of leased properties forming a part thereof and otherwise maintaining the Property in accordance with Applicable Laws.

 

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(c) Encumbrances. The Owner shall not cause or allow to be registered or otherwise permit to exist any Encumbrance on the Property ranking senior to or equally with the Royalty, Royalty Deed or Deed of Trust other than the Permitted Encumbrances. Notwithstanding the foregoing, if any Encumbrance ranking senior to or equally with the Royalty, Royalty Deed or Deed of Trust, other than a Permitted Encumbrance, is asserted against the Property, Owner shall promptly, and at its expense, take such reasonable action so as to cause such Encumbrance to be released.

 

(d) Abandonment. The Owner shall not abandon any unpatented claims comprising part of the Property or any other interest in the Property unless it first complies with this Section 9(d) (provided that in the case of leased properties, the Owner shall only be required to comply with this Section 9(d) to the extent permitted under the applicable lease or sublease). If the Owner wishes to abandon any of the unpatented claims comprising part of the Property or any other interest in the Property (“Abandonment Property”), the Owner shall first give notice of such intention to the Payee at least 60 days in advance of the proposed date of abandonment. If, not less than 15 days before the proposed date of abandonment, the Owner receives from the Payee written notice that the Payee wishes to acquire the Abandonment Property, the Owner shall, without additional consideration, use all reasonable commercial efforts to convey the Abandonment Property in good standing by quit claim deed, without warranty, to the Payee or an assignee thereof, and shall thereafter have no further obligation to maintain title to the Abandonment Property. Payee shall assume all liabilities and obligations with respect to the Abandonment Property. The Owner shall not be liable to the Payee if for any reason the quitclaim cannot be effected pursuant to applicable law or requirements of Governmental Bodies. If the Payee does not give such notice to the Owner within the prescribed period of time, the Owner may abandon the Abandonment Property and shall thereafter have no further obligation to maintain title to the Abandonment Property; provided, however, that if any Hycroft Entity reacquires a direct or indirect interest in any of the Abandonment Property within ten years following such abandonment, the production of Precious Metals from such property shall be subject to the Royalty and this Agreement. The Owner shall give prompt written notice to the Payee of any such reacquisition.

 

(e) Title Opinions. If any Hycroft Entity prepares, or causes to be prepared, any title opinion or report in respect of all or any portion of the Property, the Owner shall promptly deliver a copy of such opinion or report to the Payee.

 

(f) Right of Payee to Cure Defects. The Payee may undertake such investigation of the title and status of the Property as it shall deem necessary. If that investigation should reveal defects in the title, the Owner shall forthwith proceed to cure such title defects to the satisfaction of the Payee. If the Owner fails to do so: (i) the Payee may proceed to cure such title defects; and (ii) any costs and expenses incurred (including attorney’s fees and costs) by the Payee shall be promptly reimbursed by the Owner.

 

10. Management of Mining Operations

 

(a) Operational Decisions. Subject to the provisions of this Section 10, all decisions concerning methods, the extent, times, procedures and techniques of any exploration, construction, development and mining operations related to the Property shall be made by the Owner in its sole and absolute discretion.

 

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(b) Performance of Mining Operations. The Owner shall ensure that all exploration, construction, development and mining operations and other activities in respect of the Property will be performed in a commercially reasonable manner in compliance with Applicable Laws, Authorizations and Other Rights, and in accordance with good mining, processing, engineering and environmental practices prevailing in the industry and on the same basis as if the Owner retained full economic interest in the Precious Metals. The Owner shall use all commercially reasonable and lawful efforts to obtain and, once obtained, maintain all Authorizations necessary to commence and continue development and mining operations on the Property. The Owner shall use all commercially reasonable efforts to ensure that all Precious Metals from the Property will be processed in a prompt and timely manner.

 

(c) Maintenance of Mining Rights. Subject to Section 9(d), the Owner shall use all commercially reasonable and lawful efforts to maintain and apply for and obtain any and all available renewals and extensions of the Property, Authorizations, Other Rights and any and all other necessary rights in respect of the Project and, other than as expressly permitted by this Agreement, not abandon any of the Project (including Utility Commitments) or allow or permit any of the Property, Authorizations, Other Rights or such other necessary rights referred to above to terminate or lapse.

 

(d) Compliance with Applicable Laws. The Owner shall comply, and shall cause all operations and activities conducted at, on or in respect of the Project to comply, with all Applicable Laws, all Authorizations and the terms and conditions of Other Rights.

 

(e) Reclamation Obligations. The Owner shall timely and fully perform, pay and observe, or cause to be performed, observed and paid, any and all liabilities and obligations required by any Applicable Laws, Authorizations or the terms and conditions of Other Rights or by any Governmental Body for the reclamation, restoration or closure of any facility or land used in connection with the Hycroft Entities’ operations or activities at, on or in respect of the Property or required under this Agreement.

 

(f) Stockpiling off Property. The Hycroft Entities may temporarily stockpile, store or place Minerals in locations other than the Property provided that the Owner shall at all times do or cause to be done all things necessary to ensure that:

 

(i) such Minerals are appropriately identified as to ownership and origin;

 

(ii) such Minerals are secured from loss, theft, tampering and contamination;

 

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(iii) prior to stockpiling, storing or placing such Minerals in locations other than the Property, the applicable Hycroft Entities shall have entered into and recorded in the applicable County a written agreement in recordable form with the property owner where such stockpiling, storage or placement is to occur providing, among other things, that: (i) the Payee’s rights in and to such Minerals pursuant to the Royalty and this Agreement, insofar as they are applicable, shall continue in full force and effect notwithstanding their removal from the Property; (ii) the Payee’s rights in and to such Minerals shall be the same as if the Minerals had never been removed from the Property; (iii) the Payee’s rights in and to such Minerals shall have precedence over the rights to the Minerals of said property owner, as well as the creditors of said property owner; (iv) the agreement shall be irrevocable as long as the Minerals, or any part thereof, remain on said property; (v) the Payee shall have substantially similar access rights to said property as provided for in respect of the Property under this Agreement; and (vi) the Payee’s rights in and to the Minerals pursuant to the Royalty and this Agreement shall otherwise be preserved; and

 

(iv) a security interest in such Minerals shall have been granted to the Payee and recorded, in form and substance satisfactory to the Payee.

 

(g) Commingling. The Owner shall ensure that the Hycroft Entities do not process other minerals through their processing plants, or commingle such other minerals with, Minerals mined, produced, extracted or otherwise recovered from the Property, unless (i) the applicable Hycroft Entity has adopted and employs reasonable practices and procedures for weighing, determining moisture content, sampling and assaying and determining recovery factors (a “Commingling Plan”), such Commingling Plan to ensure the division of other minerals and Minerals for the purpose of determining the quantum of Minerals; (ii) the Payee shall not be disadvantaged as a result of the processing of other minerals in priority to, or concurrently with, Minerals, or the parties, acting reasonably, shall have entered into an agreement to compensate the Payee for any such disadvantage providing for a commensurate royalty or stream interest in such other minerals or another form of compensation (a “Compensation Agreement”); (iii) the Payee has approved the Commingling Plan and, if applicable, the Compensation Agreement, such approval not to be unreasonably withheld; and (iv) the Hycroft Entities keep all books, records, data, information and samples required by the Commingling Plan. The Owner agrees to revisit the Commingling Plan and the Compensation Agreement if the Payee determines that circumstances have changed, in order to ensure that the Commingling Plan continues to provide for the accurate measurement of Minerals and the Compensation Agreement reasonably compensates the Payee for any disadvantage.

 

(h) Waste Materials. All tailings, residues, waste rock, spoiled leach materials, and other waste materials (collectively, “waste materials”) resulting from the Hycroft Entities’ operations and activities at and on the Property shall be the sole property of the Hycroft Entities, but shall remain subject to the Royalty should the same be processed or reprocessed, as the case may be, in the future and result in the production of Precious Metals. Notwithstanding the foregoing, the Hycroft Entities shall have the right to dispose of waste materials from the Property within or at locations other than the Property and to commingle the same with waste materials from other properties (provided in any case that any sale of waste materials shall be subject to the Royalty). In the event waste materials from the Property are processed or reprocessed, as the case may be, the Royalty payable thereon shall be determined using the best engineering and technical practices then available.

 

(i) Taxes. The Hycroft Entities shall pay, or cause to be paid, all taxes levied, assessed or imposed upon or with respect to the Property or any part thereof; provided, however, the Hycroft Entities shall not be required to pay any such tax if the validity and/or amount thereof is being contested in good faith and by appropriate and lawful proceedings promptly initiated and diligently conducted of which the Hycroft Entities have given prior notice to the Payee and for which appropriate reserves have been established and so long as levy and execution have been and continue to be stayed. If the Hycroft Entities fail to pay or so contest and reserve for such taxes, the Payee may (but shall not be required to) pay the same and invoice the amounts of such payments to the Hycroft Entities for immediate reimbursement.

 

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11. Insurance Matters

 

(a) Maintenance of Insurance. The Owner shall ensure that insurance is maintained with reputable insurance companies with respect to Precious Metals that are shipped of such types and in such amounts as is customary in the case of similar operations in the United States of America.

 

(b) Shipment of Minerals. The Owner shall ensure that each shipment of Precious Metals is adequately insured in such amounts and with such coverage as is customary in the mining industry, until the time that risk of loss and damage for such Precious Metals is transferred to a Payor.

 

12. Security

 

(a) Grant of Security Interest; Deed of Trust. Subject to the Permitted Encumbrances, the Hycroft Parties shall grant to the Payee, on the Effective Date a continuing security interest and a first priority lien on the Property, including all proceeds and products thereof, in order to secure prompt payment of the Obligations and prompt performance by the Hycroft Parties of each and all of their covenants and obligations under the Documents. The Payee’s security interest and first priority lien on the Property shall rank in priority to any security interest or lien granted pursuant to the Credit Agreement or any Facility Document (as defined in the Credit Agreement) and shall be evidenced by the execution and delivery of the Deed of Trust by the Owner, and such other security documents as Payee may reasonably require to give effect to the foregoing. The Owner shall promptly register or record the duly executed Deed of Trust and such other security documents as Payee may reasonably require with all applicable registries or recording offices.

 

(b) Perfection. The Hycroft Parties shall perform all steps reasonably requested by the Payee to perfect, maintain and protect the Payee’s security interest in the Property from and after the Effective Date.

 

(c) Default. All of the Obligations, including those created by this Agreement shall be secured by all the Property.

 

13. Representations and Warranties of the Hycroft Parties

 

Each of the Hycroft Parties, jointly and severally, acknowledging that the Payee is entering into this Agreement in reliance thereon, hereby makes the representations and warranties to the Payee as set out in Schedule C.

 

14. Indemnities

 

(a) The Hycroft Parties jointly and severally agree to indemnify and save the Payee and its Affiliates and the directors, officers, employees and agents of the foregoing harmless from and against any and all Losses suffered or incurred by any of them as a result of, in respect of, or arising as a consequence of:

 

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(i) any breach or inaccuracy of any representation or warranty of the Hycroft Parties contained in this Agreement, including the representations and warranties set forth in Schedule C hereto, or in any document, instrument or agreement delivered pursuant hereto or thereto;

 

(ii) any breach, including breach due to non-performance, by the Hycroft Parties of any covenant or agreement to be performed by any of the Hycroft Parties contained in this Agreement or in any document, instrument or agreement delivered pursuant hereto or thereto; and

 

(iii) claims brought by third parties against the Payee and its Affiliates and the directors, officers, employees and agents of the foregoing relating to any work, operation, activities or event on, in or under the Property or the Project or related thereto,

 

provided that the foregoing shall not apply to any Losses to the extent they arise from the gross negligence or willful misconduct of such indemnified persons.

 

(b) This Section 14 shall survive the termination of this Agreement.

 

15. Guaranteed Obligations

 

(a) Guarantee. The Parent (in such capacity, the “Guarantor”) does hereby absolutely, unconditionally and irrevocably guarantee the prompt and complete observance and performance of each and all the terms, covenants, conditions and provisions to be observed or performed by the Owner pursuant to this Agreement (the “Guaranteed Obligations”). The Guarantor shall perform all of the Guaranteed Obligations upon the default or non-performance thereof by the Owner.

 

(b) Continuing Guarantee. The obligations of the Guarantor under this Section 15 are continuing, unconditional and absolute and without limitation, will not be released, discharged, limited or otherwise affected by (and the Guarantor hereby consents to or waives, as applicable, to the fullest extent permitted by Applicable Law):

 

(i) any extension, other indulgence, renewal, settlement, discharge, compromise, waiver, subordination or release in respect of any of the Guaranteed Obligations, security, person or otherwise;

 

(ii) any modification or amendment of or supplement to the Guaranteed Obligations, including any increase or decrease in the amounts payable thereunder;

 

(iii) any release, non-perfection or invalidity of any direct or indirect security for any of the Guaranteed Obligations;

 

(iv) any winding-up, dissolution, insolvency, bankruptcy, reorganization or other similar proceeding affecting the Owner;

 

(v) the existence of any claim, set-off or other rights which the Guarantor or the Owner may have at any time against the Payee;

 

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(vi) any invalidity, illegality or unenforceability relating to or against the Owner or any provision of Applicable Law or regulation purporting to prohibit the payment by the Owner of any amount in respect of the Guaranteed Obligations;

 

(vii) any limitation, postponement, prohibition, subordination or other restriction on the rights of the Payee to payment or performance of the Guaranteed Obligations;

 

(viii) any addition of any co-signer, endorser or other guarantor of the Guaranteed Obligations;

 

(ix) any defense arising by reason of any failure of the Payee to make any presentment, demand for performance, notice of non-performance, protest or any other notice, including notice of acceptance of this Agreement, partial payment or non-payment of any of the Guaranteed Obligations or the existence, creation or incurring of new or additional Guaranteed Obligations;

 

(x) any defense arising by reason of any failure of the Payee to proceed against the Owner or any other Person, to proceed against, apply or exhaust any security held from the Owner or any other Person for the Guaranteed Obligations, to proceed against, apply or exhaust any security held from the Owner or any other Person for the Guaranteed Obligations or to pursue any other remedy in the power of the Payee whatsoever;

 

(xi) any law which provides that the obligation of a guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal obligation or which reduces a guarantor’s obligation in proportion to the principal obligation;

 

(xii) any defense arising by reason of any incapacity, lack of authority or other defense of the Owner or any other Person, or by reason of the cessation from any cause whatsoever of the liability of the Owner or any other Person in respect of any of the Guaranteed Obligations, except as a result of the payment or fulfillment in full of the Guaranteed Obligations, whether by contract, operation of law or otherwise;

 

(xiii) any defense arising by reason of any failure by the Payee to obtain, perfect or maintain a perfected or prior (or any) Encumbrance upon any property of the Owner or any other Person, or by reason of any interest of the Payee in any property, whether as owner thereof or the holder of an Encumbrance thereon, being invalidated, voided, declared fraudulent or preferential or otherwise set aside, or by reason of any impairment by the Payee of any right to recourse or collateral;

 

(xiv) any defense arising by reason of the failure of the Payee to marshal any properties;

 

 

(xv) any defense based upon or arising out of any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against the Owner or any other Person, including any discharge of, or bar against collecting, any of the Guaranteed Obligations, in or as a result of any such proceeding; or

 

(xvi) any other act or omission to act or delay of any kind by the Owner, the Payee or any other circumstance whatsoever, whether similar or dissimilar to the foregoing, which might, but for the provisions of this Section 15(b), constitute a legal or equitable discharge, limitation or reduction of the obligations of the Owner or the Guarantor hereunder (other than the payment or performance in full of all of the Guaranteed Obligations).

 

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To the extent permitted by Applicable Law, the foregoing provisions of this Section 15(b) apply (and the waivers set out therein will be effective) even if the effect of any action (or failure to take action) by the Owner is to destroy or diminish any subrogation rights of the Guarantor or any rights of the Owner and the Guarantor to proceed against the Payee for reimbursement or to recover any contribution from any other Person.

 

(c) Recourse Need Not be Exhausted. The Payee shall not be bound to exhaust its recourse against the Owner or any other Persons or to realize on any securities it may hold in respect of the Guaranteed Obligations before being entitled to payment or performance from the Guarantor under this Section 15 and the Guarantor hereby renounces all benefits of discussion and division.

 

(d) Transfers of Guarantor Obligations. The Guarantor may only Transfer all or any part of its obligations set forth in this Section 15 pursuant to the provisions of Section 17.

 

16. Term

 

Subject to Section 21(g), the term of this Agreement shall commence on the Effective Date and shall be perpetual.

 

17. Transfers

 

(a) Each of the Hycroft Parties may only Transfer their rights and obligations under this Agreement (including the Royalty Deed and Deed of Trust) or in and to the Property, if as a condition to completion of the Transfer (and the release of the Guaranteed Obligations in respect of the transferred obligations), any transferee and its Affiliates shall have first entered into an agreement, in form and substance satisfactory to the Payee, acting reasonably, to be bound by this Agreement and the Royalty Deed (including the provision of a comparable guarantee to that provided by the Parent in this Agreement by any such Affiliates of the transferee). For greater certainty, the Parent shall cause each of the Hycroft Entities that are not parties to this Agreement to comply with the terms of this Section 17. The Payee shall promptly negotiate in good faith and settle the form of agreement referenced in this Section 17(a) upon the written request of any of the Hycroft Parties.

 

(b) Transfers of Interests in the Parent. For greater certainty, (i) an amalgamation, merger or consolidation of the Parent with or into another body corporate, including by way of a plan of arrangement, or (ii) a transfer of shares of the Parent, including a transfer of all of the shares pursuant to a takeover bid and subsequent acquisition transaction (including a compulsory acquisition) or a plan of arrangement, is not prohibited; provided, however, that in the case of clause (i) any successor entity to the Parent shall have acknowledged in writing to the Payee that it is bound by this Agreement.

 

(c) Effect of Prohibited Transfer. Any Transfer made in violation of this Section 17 shall be null and void and of no force or effect whatsoever. Any Hycroft Party that Transfers its Obligations in accordance with Section 17(a) shall be released by the Payee from its respective Obligations hereunder, except for any Obligations that remain outstanding or for any rights that have accrued to the Payee prior to such Transfer.

 

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18. Transfer Rights of the Payee

 

(a) Transfers. The Payee shall have the right to Transfer or encumber, in whole or in part, its rights and obligations under this Agreement (including the Royalty Deed and Deed of Trust) to any Person, without the consent of any Hycroft Party, upon the delivery of notice of such Transfer to the Hycroft Parties. In such a case, provided that such Person has agreed to be bound by such Transferred obligations under this Agreement, the Payee, as applicable, shall be released from such Transferred obligations under this Agreement.

 

(b) Encumbrances. Notwithstanding anything in this Agreement, the Payee shall have the right to Transfer by way of Encumbrance, in whole or in part, its rights and obligations under this Agreement to one or more lenders providing financing to the Payee or any of its Affiliates without notice to, or the consent of, any Hycroft Party. If such transferee enforces such Encumbrance, it will provide notice to the Hycroft Parties and upon delivery of such notice, which notice shall confirm that such transferee agrees to be bound by such transferred obligations under this Agreement, such Transferee shall become a party to this Agreement with all of the rights and obligations of the Payee.

 

19. Governing Law

 

This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Nevada. Each of the Parties hereby irrevocably attorns to the non-exclusive jurisdiction of the Courts of the State of Nevada. Each Hycroft 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 State of Nevada. Each of the Hycroft Parties hereby irrevocably waives, to the fullest extent permitted by law, any forum non conveniens defense to the maintenance of such action or proceeding in any such court. Each Hycroft Party irrevocably consents to service of process in the State of Nevada. Nothing in this Agreement will affect the right of the Payee 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.

 

20. Notices

 

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be sent or delivered to the respective Parties at their respective addresses, or e-mail addresses set forth below (or at or to such other address, or e-mail address as shall be designated by any Party in a written notice to the other Parties):

 

If to any of the Hycroft Parties:

 

c/o Hycroft Mining Holding Corporation 

8181 E. Tufts Ave.

Suite 510 

Denver, CO 80237

Email: Steve.Jones@hycroftmining.com

Attention: Steve Jones,

 

with a copy to (which copy shall not be deemed to be notice) to:

 

Cassels Brock & Blackwell LLP,

Suite 2200 

HSBC Building

885 West Georgia Street Vancouver, BC V6C 3E8

Email: dbudd@casselsbrock.com

Attention: David Budd

 

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and

 

Neal, Gerber & Eisenberg LLP

2 N. LaSalle Street

Suite 1700 

Chicago, IL 

60602-3801

Email: DStone@nge.com

Attention: David Stone

 

If to the Payee:

 

Sprott Private Resource Lending II (CO) Inc.

200 Bay Street, Suite 2600
Toronto, ON M5J 2J2

 

Attention:   Chief Financial Officer
Email:   jgrosdanis@sprott.com

 

with a copy (which shall not constitute notice) to:

 

DLA Piper (Canada) LLP
666 Burrard Street, Suite 2800
Vancouver, BC V6C 2Z7

 

Attention:   Douglas G. Shields
Email:   doug.shields@dlapiper.com

 

Any notice and communications shall be effective:

 

(a) if delivered by hand, sent by certified or registered mail or sent by an overnight courier service, when received; and, provided that if such date is a day other than a Business Day, where the recipient Party is located, then such notice shall be deemed to have been given and received on the first Business Day, where the recipient Party is located, following the date of such delivery; and

 

(b) if sent by e-mail transmission and successfully transmitted before 5:00 p.m. on a Business Day, where the recipient Party is located, then on that Business Day, and if transmitted after 5:00 p.m. on that day or on a day that is not a Business Day, then on the first Business Day, where the recipient Party is located, following the date of transmission.

 

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21. General Provisions

 

(a) Further Assurances. Each Party shall execute all such further instruments and documents and shall take all such further actions as may be necessary to effect the transactions contemplated herein, in each case at the cost and expense of the Party requesting such further instrument, document or action, unless expressly indicated otherwise.

 

(b) Obligations of Hycroft Entities. Each Hycroft Party agrees to take all action necessary to cause each and every other Hycroft Entity that is a Subsidiary of such Hycroft Party to observe, comply with and perform its covenants and obligations in this Agreement.

 

(c) Memorandum for Recording. The Parties agree that no Party shall record this Agreement in any land records. The Parties agree that the Royalty Deed shall instead be recorded. The costs of preparing and recording the Royalty Deed and Deed of Trust shall be at the Owner’s cost and expense.

 

(d) Confidentiality. The Payee shall not, without the express written consent of the Owner, which consent shall not be unreasonably withheld, disclose any data or information concerning the operations of the Hycroft Entities obtained in connection with this Agreement which is not already in the public domain (the “Confidential Information”); provided, however, the Payee may disclose Confidential Information without the consent of the Owner: (i) if required by Applicable Law or requested by a Government Body having jurisdiction over the Payee or its Affiliates; (ii) to the Payee’s Affiliates and to any representatives, consultants or advisers of the Payee or its Affiliates for the purpose of providing services to the Payee or its Affiliates; and (iii) to any Person to whom the Payee, in good faith, anticipates Transferring an interest in this Agreement as contemplated by Section 18(a) or 18(b) and such Person’s Affiliates and the representatives, consultants and advisers of such Person or its Affiliates. In the case of disclosure pursuant to clause (ii) or (iii), the Payee shall be responsible to ensure that the recipient of the Confidential Information does not disclose the Confidential Information to the same extent as if it were bound by the same non-disclosure obligations of the Payee hereunder. Notwithstanding the foregoing, the Payee shall not be restricted from disclosing the terms of this Agreement or payments on account of the Royalty. For greater certainty, the Payee shall be entitled to disclose publicly data or information concerning the operations of the Hycroft Entities, without the consent of the Owner, once such information has been publicly disclosed by any of the Hycroft Entities.

 

(e) No Partnership. Nothing herein shall be construed to create, expressly or by implication, a joint venture, agency relationship, fiduciary relationship, mining partnership, commercial partnership or other partnership relationship between the Payee and the Hycroft Entities.

 

(f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all Applicable Laws. If, however, any provision of this Agreement shall be prohibited by or invalid under any such Applicable Law in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such Applicable Law, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction.

 

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(g) Rule Against Perpetuities. If an arbitrator, court or tribunal of competent jurisdiction determines that the term of this Agreement violates the rule against perpetuities, the rule against unreasonable restraints on the alienation of property or any other similar rule, then the term of this Agreement shall automatically be amended to coincide with the maximum term permitted by the rule against perpetuities, the rule against unreasonable restraints on the alienation of property or any other similar rule, as applicable, and this Agreement shall not be terminated solely as a result of such violation. To the extent permitted by Applicable Laws, the Parties irrevocably release and waive the applicability of the rule against perpetuities to the Royalty. Each of the Owner and the Payee agrees and covenants, for itself and its successors and assigns, that it will not commence any action or arbitration proceeding to declare the Royalty ineffective, invalid or void based on the rule against perpetuities, and that it will not in any action or arbitration proceeding commenced by the other Party, or its successors and assigns, as applicable, assert as an affirmative defense against any claim for relief for enforcement of this Agreement that this Agreement is ineffective, invalid or void based on the rule against perpetuities.

 

(h) Entire Agreement. This Agreement together with the Royalty Deed and Deed of Trust reflects the entire agreement between the parties hereto with respect to the matters set forth herein and supersedes any prior agreements, commitments, drafts, communication, discussions and understandings, oral or written, with respect thereto, including but not limited to the indicative term sheet dated April 15, 2019 issued by Payee to and accepted by the Parent, as amended, modified, supplemented, restated or replaced from time to time, and any relevant provisions of the Original Credit Agreement.

 

(i) Joint and Several. The covenants, agreements, representations, warranties, and acknowledgments of the Hycroft Parties in this Agreement shall constitute the joint and several covenants, agreements, representations, warranties, and acknowledgments of the Hycroft Parties and shall be read and construed accordingly.

 

(j) Amendments. No amendment to any provision of this Agreement shall be effective unless it is in writing and has been signed by the all of the Parties. Any such amendment shall be effective only in the specific instance and for the specific purpose for which given.

 

(k) Waiver. No waiver of any provision of this Agreement, or consent to any departure by any Hycroft Party therefrom, shall be effective unless it is in writing and has been signed by Payee. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of Payee to exercise, and no delay in exercising, any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

(l) Specific Performance. Each of the Hycroft Parties acknowledges that any breach of this Agreement may cause the Payee irreparable harm for which damages are not an adequate remedy. The Hycroft Parties agree that, in the event of any such breach, in addition to other remedies at law or in equity that the Payee may have, the Payee shall be entitled to seek specific performance.

 

(m) Binding Effect; No Beneficiaries. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Payee. This Agreement is entered into for the sole protection and benefit of the Parties hereto and their successors and assigns, and no other Person (other than the indemnified Persons referred to in Section 14) shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with, this Agreement.

 

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(n) Costs and Expenses. Each of the Parties shall be responsible for paying all costs and expenses incurred by them, respectively, in connection with the negotiation and preparation of this Agreement.

 

(o) Counterparts. This Agreement may be executed in counterparts and such executed counterparts may be delivered by electronic transmission of an authorized signature (including in pdf) and each such counterpart shall be deemed to form part of one and the same document.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF the parties hereto have executed this Royalty Agreement as of the date and year first above written.

 

  Hycroft Mining Holding Corporation
   
   
  By: /s/ Glen Springer
  Name: Glenn Springer
  Title: Chief Financial Officer

 

  HYCROFT RESOURCES & DEVELOPMENT, LLC
   
   
  By: /s/ Sthepen M. Jones                           
  Name: Stephen M. Jones
  Title: Chief Financial Officer

 

  SPROTT PRIVATE RESOURCE LENDING II (CO) INC.
   
   
  By: /s/ Narinder Nagra 
  Name: Narinder Nagra
  Title: Managing Partner

 

  By: /s/ Jim Grosdanis
  Name: Jim Grosdanis
  Title: Managing Partner

 

Royalty Agreement Signature Page

 

 

Schedule C

 

REPRESENTATIONS AND WARRANTIES OF THE Hycroft Parties

 

No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty.

 

1. Organization and Powers. Each Hycroft Party is:

 

(a) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to execute and deliver, and perform its obligations under this Agreement;

 

(b) qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the nature and location of its assets requires such qualification or licensing except where such failure to qualify or be licensed or in good standing would not have a Material Adverse Effect; and

 

(c) has all requisite power and authority to own and lease its assets and carry on its business.

 

2. Authorization; No Conflict. The execution and delivery by each Hycroft Party of, the performance of its obligations under, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary corporate or other action of such Hycroft Party and do not and will not:

 

(a) violate the terms of the constating documents of such Hycroft Party;

 

(b) conflict with, result in a breach of, or constitute a default or an event creating rights of acceleration, termination, modification or cancellation or a loss of rights under (with or without the giving notice or lapse of time or both), any written or oral contract, agreement, license, concession, indenture, mortgage, debenture, note or other instrument to which any Hycroft Entity is a party, subject or otherwise bound (including with respect to its assets) in each case except as would not have a Material Adverse Effect;

 

(c) violate in any material respect any Applicable Law to which any Hycroft Entity is subject or otherwise bound (including with respect to its assets); or

 

(d) except as contemplated by this Agreement, result in, or require, the creation or imposition of any Encumbrance upon or with respect to any of the assets or properties that comprise the Project.

 

3. Solvency. Each Hycroft Party is Solvent and no Hycroft Party will be rendered Insolvent by the execution and delivery of this Agreement.

 

4. Execution; Binding Obligation. This Agreement has been duly and validly executed and delivered by each Hycroft Party. This Agreement constitutes a legal, valid and binding obligation of each Hycroft Party, enforceable against such Hycroft Party in accordance with its terms, except to the extent enforcement may be affected by Applicable Laws and regulations relating to bankruptcy, reorganization, insolvency and creditors’ rights and by the availability of injunctive relief, specific performance and other equitable remedies.

 

Schedule C - Page 1

 

 

5. Consents. No Hycroft Entity is required to give any notice to, make any filing with or obtain any authorization, consent, Order or approval of any Person in connection with the execution, delivery or performance of the obligations of the Hycroft Parties under this Agreement or the consummation of the transactions contemplated herein, except for recordings or filings in connection with the perfection of the Royalty Deed and Deed of Trust in favor of the Payee.

 

6. No Defaults. No event has occurred or circumstance exists that (with or without the giving of notice or lapse of time or both) has contravened, conflicted with or resulted in, or may contravene, conflict with or result in, a violation or breach of, or give any Hycroft Entity or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any contract, lease, license, concession, Authorization, agreement, indenture, mortgage, debenture, note, instrument, or Order to which it is a party or by which it or its properties and assets may be bound, and, to the knowledge of each of the Hycroft Parties, each other Person that is party thereto is in compliance in all material respects with the terms and requirements thereof, in each case, except as would not have a Material Adverse Effect.

 

7. Litigation. Save and except for the class action disclosed to the Payee in the Credit Agreement, there are no material actions, suits, investigations, claims or proceedings pending or, to the knowledge of each of the Hycroft Parties, threatened against or directly affecting the Owner or the Project by or before any Governmental Body.

 

8. Insurance. The properties, assets and operations of the Owner are insured with reputable insurance companies (not Affiliates of any Hycroft Entity), in such amounts, with such deductibles and covering such risks as is customarily carried by companies engaged in similar businesses and owning similar properties in the localities where the Owner operates.

 

9. Title to Property; Liens. The Owner (i) has good and marketable leasehold title to all leases of real property included within the Property (ii) has good and marketable possessory and record title to all unpatented mining claims and millsite claims included within the Property, except for such claims that are leased to the Owner and are covered under part (i) of this paragraph, (iii) has good and marketable title to such other real property interests included within the Property and not otherwise included under parts (i) and (ii) of this paragraph, and (iv) has good and marketable title to or hold a good and marketable leasehold interest in such properties and assets, which are not real property interests, and comprise part of the Project. Except for Permitted Encumbrances, there are no Encumbrances upon or with respect to any of the properties and assets included in the Property. Without limiting the foregoing:

 

(a) save and except for the Permitted Encumbrances listed in Sections 9 and 10 of Schedule B, no Person other than the Owner has any rights to participate in or operate the Property and the Project;

 

(b) the Property comprises all of the real property, mineral and surface interests held by the Owner in respect of the Project;

 

(c) the Property constitutes all real property, mineral, surface interests and ancillary rights necessary for, as applicable, the construction, development and mining operations of the Project, as currently operated and substantially in accordance with the current development or mine plan; and

 

Schedule C - Page 2

 

 

(d) save and except for the Permitted Encumbrances listed in Sections 9 and 10 of Schedule B, none of the Property or Minerals therefrom are subject to an option, right of first refusal or right, title, interest, reservation, claim, rent, royalty, or payment in the nature of rent or royalty, or right capable of becoming an agreement, option, right of first refusal or right, title, interest, reservation, claim, rent, royalty, or payment in the nature of rent or royalty.

 

10. Maintenance of Property. All mining claim maintenance fees, rentals, royalties, recording fees, taxes and all other amounts have been paid when due and payable and all other actions and all other obligations as are required to maintain the Property have been taken and complied with in all material respects.

 

11. Authorizations. The Owner has obtained or been issued all Authorizations (including environmental Authorizations) and Other Rights (A) which are necessary for the conduct of exploration, development and operating activities as such activities are currently being conducted at or on the Property or in connection with the Project, or (B) the failure of which to be obtained would not have a Material Adverse Effect. There are no facts or circumstances that might reasonably be expected to adversely affect the issuance or obtaining of any Authorizations (including environmental Authorizations) or Other Rights in the ordinary course of business by the time they are necessary for the conduct of exploration and development activities and the eventual commencement and ongoing commercial production at or on the Property or in connection with the Project, as applicable.

 

12. Compliance with Applicable Laws. The Owner and the Property (as and when owned by Owner) are and have been in compliance in all material respects with all Applicable Laws. Without limiting the generality of the foregoing, the Owner and the Property (as and when owned by Owner) are and have been in compliance in all material respects with all applicable Environmental Laws, and there are no actions, suits, claims, notices of violation, hearings, investigations or proceedings pending or, to the knowledge of each of the Hycroft Parties, threatened against or affecting any Hycroft Entity with respect to the ownership, use, maintenance and operation of the Property, relating to any applicable Environmental Laws, where any adverse determination with respect thereto or liability imposed therein could have a Material Adverse Effect.

 

13. Subsidiaries. The Owner is a direct, wholly owned Subsidiary of Allied. Allied is a direct, wholly-owned Subsidiary of the Parent.

 

14. No Subordination. There is no agreement, indenture, contract or instrument to which any Hycroft Entity is a party or by which it or any of its properties or assets may be bound that requires the Royalty Deed and Deed of Trust to be subordinate to any other Encumbrance on the Property. Upon recording the Royalty Deed and Deed of Trust against the Property, the Royalty Deed and Deed of Trust shall be senior to any and all other Encumbrances other than the Permitted Encumbrances.

 

15. Mineral Reserves and Resources. The most recent estimated measured, indicated and inferred mineral resources and proven and probable mineral reserves, if any, and technical reports disclosed by the Parent for the Project have been prepared and disclosed in accordance with accepted mining industry practices and in accordance with the requirements prescribed by National Instrument 43-101 or SEC Regulations and the companion policy thereto (as in effect on the date of publication of the relevant report or information); neither of the Hycroft Parties has any knowledge that the mineral resources or mineral reserves (or any other material aspect of any technical reports) as disclosed are inaccurate in any material respect; there are no outstanding unresolved comments of any securities commission or other securities regulatory authority in each province and territory of Canada or the United States, in which the Parent is a reporting issuer (the “Securities Regulatory Authorities”) in respect of the technical disclosure made by the Parent; and, to the knowledge of each of the Hycroft Parties, there has been no material reduction in the aggregate amount of estimated mineral resources and reserves, if any, for the Property, from the amounts last disclosed by Parent.

 

Schedule C - Page 3

 

 

16. Regulatory Compliance. The Parent has filed, on a timely basis, all required reports, schedules, financial statements, forms, registrations, certifications and other documents together with any amendments required to be made with respect thereto with the applicable Securities Regulatory Authorities (together with the exhibits and other information incorporated therein, the “Parent Securities Documents”) and paid all fees and assessments due and payable in connection therewith; as of their respective dates of filing (or, if amended or superseded by a filing prior to the date hereof, as of the date of such filing), the Parent Securities Documents complied in all material respects with the requirements of Applicable Laws and none of the Parent Securities Documents contained any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they are made, not misleading; the Parent has not filed any confidential material change reports which continue to be confidential.

 

17. Brokers and Finders. No Hycroft Party has employed any broker or finder or incurred any liability for any brokerage fee, commission, finders’ fee or any other similar payment in connection with the transactions contemplated by this Agreement that could give rise to any claim against the Payee for brokerage fees, commissions, finders’ fees or any other similar payments.

 

18. Disclosure. All information relating to the Property provided to the Payee or any of its representatives or advisors, or made available to the Payee or any its representatives or advisors, is true, accurate and complete in all material respects.

 

Schedule C - Page 4

  

Exhibit 10.4

 

Amendment to Subscription Agreement

 

This Amendment (this “Amendment”), dated as of May 28, 2020, to that certain Subscription/Backstop Agreement, made and entered into as of January 13, 2010 (the “Subscription Agreement”), is by and between Mudrick Capital Acquisition Corporation, a Delaware corporation (the “Company”), and the undersigned (“Subscriber”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Subscription Agreement.

 

WHEREAS, the parties hereto desire to amend the Subscription Agreement to, among other things, increase the Total Subscription and, correspondingly, increase the applicable purchase price for the Subscription; and

 

WHEREAS, Section 5.4 of the Subscription Agreement provides that the Subscription Agreement may not be modified, waived or terminated except by an instrument in writing, signed by the party against whom enforcement of such modification, waiver, or termination is sought.

 

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.            The Total Subscription under the terms of the Subscription Agreement shall be [●].

 

2.            Section 1.1 of the Subscription Agreement is hereby amended by adding the following to the end of such provision: “; provided, that to the extent the applicable purchase price (after giving effect to the adjustment as described above) would result in the purchase of a fractional Share, then (x) the number of Shares to be purchased by Subscriber shall be rounded up to the nearest whole number and (y) the applicable purchase price shall be correspondingly increased; provided, further, that to the extent Subscriber would be entitled to a cash payment in lieu of fractional shares under Section 8.p. of that certain Exchange Agreement, dated as of January 13, 2020, by and among the Corporation, Subscriber and the other signatories party thereto (the “Exchange Agreement”), then (I) the applicable purchase price under the Subscription Agreement shall be reduced by the amount of such cash payment in lieu of fractional shares and (II) Subscriber hereby waives the right to receive any such cash payment in lieu of fractional shares thereunder.”

 

3.            Section 1.2 of the Subscription Agreement is hereby amended by adding the following to the end of the first sentence of such provision: “; provided, that in the event the foregoing would result in the issuance of fractional Warrants to Subscriber, the number of Warrants to be issued to Subscriber hereunder shall be rounded up to the nearest whole Warrant if such fraction is greater than or equal to 0.5 and rounded down to the nearest whole number if such fraction is less than 0.5.”

 

4.            Subscriber hereby (a) acknowledges and agrees that this Amendment shall be deemed to comply with the requirements regarding the delivery of the Closing Notice as set forth in Section 3.1 of the Subscription Agreement and (b) waives any of the Company’s obligations to the contrary. As such, on or prior to 9:30 a.m. Eastern Time on May 29, 2020, Subscriber shall deliver to the Company $[●], representing payment for (i) [●] Shares and [●] Warrants, by wire transfer of United States dollars in immediately available funds to the account specified in Annex A attached hereto. Following receipt of such funds and in connection with the consummation of the Transaction, the Company shall deliver to the Subscriber the Shares and the Warrants in book-entry form.

 

 

 

5.            The Subscription Agreement as revised by this Amendment, together with the Exchange Agreement, as applicable, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all other prior and contemporaneous agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

6.            This Amendment, and any claim or cause of action hereunder based upon, arising out of or related to this Amendment (whether based on law, in equity, in contract, in tort or any other theory) or the negotiation, execution, performance or enforcement of this Amendment Agreement, shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof.

 

7.            Sections 5.1, 5.2, 5.4, 5.5, 5.6, 5.7, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 6 and 7 of the Subscription Agreement shall apply to this Amendment, mutatis mutandis, as if set out herein.

 

8.            Except as otherwise expressly amended or modified hereby, all of the terms and conditions of the Subscription Agreement shall continue in full force and effect. Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each similar reference contained in the Subscription Agreement shall refer to the Subscription Agreement, as amended hereby.

 

[Signature page follows]

 

 

 

IN WITNESS WHEREOF, each party hereto has caused this Amendment to be signed as of the date first written above.

 

  MUDRICK CAPITAL ACQUISITION CORPORATION
 
  By:  
 
      Name:
 
      Title:

 

[SIGNATURE PAGE TO AMENDMENT TO SUBSCRIPTION AGREEMENT]

 

 

 

  SUBSCRIBER
 
  By:  
 
      Name:
 
      Title:

 

 

Exhibit 10.5

 

Final Form

 

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of May 29, 2020, is made and entered into by and among Mudrick Capital Acquisition Corporation, a Delaware corporation (the “Company”), Mudrick Capital Acquisition Holdings LLC, a Delaware limited liability company (the “Sponsor”), Cantor Fitzgerald & Co. (“Cantor”), the undersigned parties listed under Existing Holders on the signature page hereto (each such party, together with the Sponsor and Cantor and any person or entity deemed an “Existing Holder” who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, an “Existing Holder” and collectively the “Existing Holders”) and the undersigned parties listed under New Holders on the signature page hereto (each such party, together with any person or entity deemed a “New Holder” who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, a “New Holder” and collectively the “New Holders”). Capitalized terms used but not otherwise defined in this Agreement shall have the meaning ascribed to such term in the Purchase Agreement (as defined below) at the time such agreement was executed on January 13, 2020.

 

RECITALS

 

WHEREAS, on February 7, 2018, the Company and the Existing Holders entered into that certain Registration Rights Agreement (the “Existing Registration Rights Agreement”), pursuant to which the Company granted the Existing Holders certain registration rights with respect to certain securities of the Company;

 

WHEREAS, the Company has entered into that certain Purchase Agreement (the “Purchase Agreement”), dated as of January 13, 2020, by and among the Company, MUDS Acquisition Sub, Inc., a Delaware corporation, and Hycroft Mining Corporation, a Delaware corporation;

 

WHEREAS, upon the closing of the transactions contemplated by the Purchase Agreement and subject to the terms and conditions set forth therein, the Existing Holders and New Holders will hold shares of Class A common stock, par value $0.0001, of the Company (“Class A Common Stock”), in each case, in such amounts and subject to such terms and conditions as set forth in the Purchase Agreement;

 

WHEREAS, pursuant to Section 5.5 of the Existing Registration Rights Agreement, the provisions, covenants and conditions set forth therein may be amended or modified upon the written consent of the Company and the Existing Holders of a majority-in-interest of the “Registrable Securities” (as such term was defined in the Existing Registration Rights Agreement) at the time in question; and

 

WHEREAS, the Company and all of the Existing Holders desire to amend and restate the Existing Registration Rights Agreement in order to provide the Existing Holders and the New Holders certain registration rights with respect to certain securities of the Company, as set forth in this Agreement.

 

 

 

 

NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:

 

Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.

 

Agreement” shall have the meaning given in the Preamble.

 

Board” shall mean the Board of Directors of the Company.

 

Cantor” shall have the meaning given in the Preamble.

 

Cantor Private Placement Warrants” means the warrants purchased by Cantor pursuant to the Cantor Private Placement Warrants Purchase Agreement.

 

Cantor Private Placement Warrants Purchase Agreement” means that certain Private Placement Warrants Purchase Agreement between the Company and Cantor, dated as of January 16, 2018.

 

Class A Common Stock” shall have the meaning given in the Recitals hereto.

 

Class B Common Stock” shall mean Class B common stock, par value $0.0001 per share, of the Company.

 

Commission” shall mean the Securities and Exchange Commission.

 

Company” shall have the meaning given in the Preamble.

 

Company Shelf Takedown Notice” shall have the meaning given in subsection 2.1.3.

 

Demand Registration” shall have the meaning given in subsection 2.2.1.

 

  2  

 

 

Demanding Holder” shall have the meaning given in subsection 2.2.1.

 

Effectiveness Deadline” shall have the meaning given in subsection 2.1.1.

 

Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.

 

Existing Holders” shall have the meaning in the Preamble.

 

Existing Registration Rights Agreement” shall have the meaning given in the Recitals hereto.

 

Form S-1 Shelf” shall have the meaning given in subsection 2.1.1.

 

Form S-3 Shelf” shall have the meaning given in subsection 2.1.1.

 

Forward Purchase Units” shall mean the shares of Class A Common Stock and units purchased by the Sponsor pursuant to a Forward Purchase Contract between the Company and the Sponsor, dated as of January 24, 2018, where each unit is comprised of one share of Class A Common Stock and one warrant.

 

Founder Lock-Up Period” shall mean, with respect to the Founder Shares held by the Existing Holders or their Permitted Transferees, the period ending on the earlier of (A) one year after the date hereof or (B) the first date the closing price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any 30-trading day period commencing at least one hundred and fifty (150) days after the date hereof, but in no event prior to the expiration of the New Holder Lock-Up Period, or (C) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property.

 

Founder Shares” shall mean all shares of Class B Common Stock that are issued and outstanding as of the date hereof and all shares of Class A Common Stock issued upon conversion of shares of Class B Common Stock.

 

Holders” shall mean the Existing Holders and the New Holders and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2.

 

Insider Letter” shall mean that certain letter agreement, dated as of February 7, 2018, by and among the Company, the Sponsor and each of the Company’s officers, directors and director nominees.

 

Lock-Up Period” shall mean the Founder Lock-Up Period, the New Holder Lock-Up Period and the Private Placement Lock-Up Period.

 

  3  

 

 

Maximum Number of Securities” shall have the meaning given in subsection 2.2.4.

 

Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus (in the light of the circumstances under which they were made) not misleading.

 

New Holders” shall have the meaning given in the Preamble.

 

New Holder Lock-Up Period” shall mean with respect to the Class A Common Stock (other than Founder Shares, the Forward Purchase Units, shares of Class A Common Stock acquired pursuant to the Private Investment, shares of Class A Common Stock issuable upon the exercise or conversion of the New Holder Private Placement Warrants, any shares of Class A Common Stock issued to any member of the Sprott Group, and any shares of Class A Common Stock acquired in the open market prior to the date hereof) held by the New Holders or their Permitted Transferees, the period ending six (6) months after the date hereof.

 

New Holder Private Placement Warrants” means the warrants purchased by the New Holders pursuant to those certain Subscription/Backstop Agreements dated as of January 13, 2020.

 

Permitted Transferees” shall mean any person or entity to whom a Holder of Registrable Securities is permitted to transfer such Registrable Securities prior to the expiration of the Founder Lock-Up Period, Private Placement Lock-Up Period or New Holder Lock-Up Period, as the case may be, (a) under the Insider Letter, the Cantor Private Placement Warrants Purchase Agreement, this Agreement and any other applicable agreement between such Holder and the Company, and to any transferee thereafter and (b) with respect to a New Holder, provided that such transferee enters into a written agreement with the Company agreeing to be bound by the restrictions herein, to any of such New Holder’s affiliates or subsidiaries or to any fund or investment account managed by such New Holder, the same management company that manages such New Holder or any affiliate of such New Holder or the management company that manages such New Holder.

 

Piggyback Registration” shall have the meaning given in subsection 2.3.1.

 

Private Placement Lock-Up Period” shall mean, with respect to Private Placement Warrants that are held by the initial purchasers of such Private Placement Warrants or their Permitted Transferees, and any of the Class A Common Stock issued or issuable upon the exercise or conversion of the Private Placement Warrants and that are held by the initial purchasers of the Private Placement Warrants or their Permitted Transferees, the period ending thirty (30) days after the date hereof.

 

Private Placement Warrants” shall mean the Cantor Private Placement Warrants, the Sponsor Private Placement Warrants and the New Holder Private Placement Warrants.

 

Pro Rata” shall have the meaning given in subsection 2.2.4.

 

  4  

 

 

Prospectus” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.

 

Registrable Security” shall mean (a) the shares of Class A Common Stock issued or issuable upon the conversion of any Founder Shares, (b) the Private Placement Warrants (including any shares of the Class A Common Stock issued or issuable upon the exercise of any such Private Placement Warrants), (c) the Forward Purchase Units (including any shares of Class A Common Stock included in such Forward Purchase Units, any warrants included in such Forward Purchase Units and any shares of Class A Common Stock issued or issuable upon the exercise of the warrants included in such Forward Purchase Units), (d) any issued and outstanding share of Class A Common Stock or any other equity security (including the shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by an Existing Holder as of the date of this Agreement, (e) any equity securities (including the shares of Class A Common Stock issued or issuable upon the exercise of any such equity security) of the Company issuable upon conversion of any working capital loans in an amount up to $1,500,000 made to the Company by a Holder, (f) any outstanding shares of Class A Common Stock or any other equity security of the Company held by a New Holder as of the date of this Agreement (including the shares of Class A Common Stock issued or issuable upon the exercise of any such other equity security) and (g) any other equity security of the Company issued or issuable with respect to any such share of Class A Common Stock described in the foregoing clauses (a) through (f) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; or (D) such securities may be sold without registration pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission) (“Rule 144”) (but with no volume or other restrictions or limitations); provided, further, that any security that ceases to be a Registrable Security pursuant to clause (D) above shall again be treated as a Registrable Security if at any point such security may no longer be sold without registration pursuant to Rule 144 without any volume or other restrictions or limitations.

 

Registration” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

  5  

 

 

Registration Expenses” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:

 

(A) all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Class A Common Stock is then listed;

 

(B) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);

 

(C) printing, messenger, telephone and delivery expenses;

 

(D) reasonable fees and disbursements of counsel for the Company;

 

(E) reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration; and

 

(F) reasonable fees and expenses of one (1) legal counsel selected by the majority-in-interest of the Demanding Holders initiating a Demand Registration to be registered for offer and sale in the applicable Registration not to exceed $25,000 per Demand Registration.

 

Registration Statement” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.

 

Requesting Holder” shall have the meaning given in subsection 2.2.1.

 

Restricted Shares” shall have the meaning given in subsection 3.7.1.

 

Rule 144” shall have the meaning given in the definition of “Registrable Securities.”

 

Rule 415” shall have the meaning given in subsection 2.1.1.

 

Securities Act” shall mean the Securities Act of 1933, as amended from time to time.

 

Shelf Takedown Notice” shall have the meaning given in subsection 2.1.3.

 

Shelf Underwritten Offering” shall have the meaning given in subsection 2.1.3.

 

Sponsor” shall have the meaning given in the Preamble.

 

  6  

 

 

Sponsor Private Placement Warrants” means the warrants purchased by the Sponsor pursuant to that certain Private Placement Warrants Purchase Agreement between the Company and the Sponsor, dated as of January 15, 2018.

 

Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.

 

Underwritten Registration” or “Underwritten Offering” shall mean a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.

 

ARTICLE II

REGISTRATIONS

 

2.1 Shelf Registration.

 

2.1.1 Initial Registration. The Company shall, as soon as practicable, but in any event within fifteen (15) business days after the consummation of the transactions contemplated by the Purchase Agreement, file a Registration Statement under the Securities Act to permit the public resale of all the Registrable Securities held by the Holders from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) (“Rule 415”) on the terms and conditions specified in this subsection 2.1.1 and shall use its reasonable best efforts to cause such Registration Statement to be declared effective as soon as practicable after the filing thereof, but in no event later than sixty (60) days following the filing deadline (the “Effectiveness Deadline”); provided, that the Effectiveness Deadline shall be extended to ninety (90) days after the filing deadline if the Registration Statement is reviewed by, and receives comments from, the Commission. The Registration Statement filed with the Commission pursuant to this subsection 2.1.1 shall be a shelf registration statement on Form S-3 (a “Form S-3 Shelf”) or, if Form S-3 is not then available to the Company, on Form S-1 (a “Form S-1 Shelf”) or such other form of registration statement as is then available to effect a registration for resale of such Registrable Securities, covering such Registrable Securities, and shall contain a Prospectus in such form as to permit any Holder to sell such Registrable Securities pursuant to Rule 415 at any time beginning on the effective date for such Registration Statement. A Registration Statement filed pursuant to this subsection 2.1.1 shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders. The Company shall use its reasonable best efforts to cause a Registration Statement filed pursuant to this subsection 2.1.1 to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another Registration Statement is available, for the resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. As soon as practicable following the effective date of a Registration Statement filed pursuant to this subsection 2.1.1, but in any event within one (1) business day of such date, the Company shall notify the Holders of the effectiveness of such Registration Statement. When effective, a Registration Statement filed pursuant to this subsection 2.1.1 (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any Prospectus contained in such Registration Statement, in the light of the circumstances under which such statement is made).

 

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2.1.2 Form S-3 Shelf. If the Company files a Form S-3 Shelf and thereafter the Company becomes ineligible to use Form S-3 for secondary sales, the Company shall use its reasonable best efforts to file a Form S-1 Shelf as promptly as practicable to replace the shelf registration statement that is a Form S-3 Shelf and have the Form S-1 Shelf declared effective as promptly as practicable and to cause such Form S-1 Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another Registration Statement is available, for the resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities.

 

2.1.3 Shelf Takedown. At any time and from time to time following the effectiveness of the shelf registration statement required by subsection 2.1.1 or 2.1.2, any Holder may request to sell all or a portion of their Registrable Securities in an underwritten offering that is registered pursuant to such shelf registration statement, (a “Shelf Underwritten Offering”) provided that such Holder(s) (a) reasonably expect aggregate gross proceeds in excess of $50,000,000 from such Shelf Underwritten Offering or (b) reasonably expects to sell all of the Registrable Securities held by such Holder in such Shelf Underwritten Offering but in no event less than $10,000,000. All requests for a Shelf Underwritten Offering shall be made by giving written notice to the Company (the “Shelf Takedown Notice”). Each Shelf Takedown Notice shall specify the approximate number of Registrable Securities proposed to be sold in the Shelf Underwritten Offering and the expected price range (net of underwriting discounts and commissions) of such Shelf Underwritten Offering. Except with respect to any Registrable Securities distributed by the Sponsor to its members following the expiration of the Founder Lock-Up Period or the Private Placement Lock-Up Period, as applicable, within five (5) business days after receipt of any Shelf Takedown Notice, the Company shall give written notice of such requested Shelf Underwritten Offering to all other Holders of Registrable Securities (the “Company Shelf Takedown Notice”) and, subject to the provisions of Section 2.2.4, shall include in such Shelf Underwritten Offering all Registrable Securities with respect to which the Company has received written requests for inclusion therein, within five (5) days after sending the Company Shelf Takedown Notice. The Company shall enter into an underwriting agreement in a form as is customary in Underwritten Offerings of securities by the Company with the managing Underwriter or Underwriters selected by the Holders after consultation with the Company and shall take all such other reasonable actions as are requested by the managing Underwriter or Underwriters in order to expedite or facilitate the disposition of such Registrable Securities. In connection with any Shelf Underwritten Offering contemplated by this subsection 2.1.3, subject to Section 3.3 and Article IV, the underwriting agreement into which each Holder and the Company shall enter shall contain such representations, covenants, indemnities and other rights and obligations of the Company and the selling stockholders as are customary in underwritten offerings of securities by the Company.

 

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2.1.4 Holder Information Required for Participation in Shelf Registration. At least ten (10) business days prior to the first anticipated filing date of a Registration Statement pursuant to this Article II, the Company shall use reasonable efforts to notify each Holder in writing (which may be by email) of the information reasonably necessary about the Holder to include such Holder’s Registrable Securities in such Registration Statement. Notwithstanding anything else in this Agreement, the Company shall not be obligated to include such Holder’s Registrable Securities to the extent the Company has not received such information, and received any other reasonably requested agreements or certificates, on or prior to the fifth business day prior to the first anticipated filing date of a Registration Statement pursuant to this Article II.

 

2.2 Demand Registration.

 

2.2.1 Request for Registration. Subject to the provisions of subsection 2.2.4 hereof and provided that the Company does not have an effective Registration Statement pursuant to subsection 2.1.1 outstanding covering Registrable Securities, (a) the Existing Holders of at least a majority in interest of the then-outstanding number of Registrable Securities held by the Existing Holders or (b) the New Holders of at least a majority-in-interest of the then-outstanding number of Registrable Securities held by the New Holders (the “Demanding Holders”), in each case, may make a written demand for Registration of all or part of their Registrable Securities, provided that such Existing Holders or New Holders, as the case may be, (a) reasonably expect aggregate gross proceeds in excess of $50,000,000 from such offering or (b) reasonably expects to sell all of the Registrable Securities held by such Existing Holders or New Holders, as the case may be, in such offering but in no event less than $30,000,000, which written demand shall describe the amount and type of securities to be included in such Registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”). The Company shall, within ten (10) days of the Company’s receipt of the Demand Registration, notify, in writing, all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a Registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such Registration, a “Requesting Holder”) shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration pursuant to a Demand Registration and the Company shall effect, as soon thereafter as practicable, but not more than sixty (60) days immediately after the Company’s receipt of the Demand Registration, the Registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall the Company be obligated to effect more than (x) an aggregate of three (3) Registrations pursuant to a Demand Registration by the Existing Holders under this subsection 2.2.1 with respect to any or all Registrable Securities held by such Existing Holders and (y) an aggregate of three (3) Registrations pursuant to a Demand Registration by the New Holders under this subsection 2.2.1 with respect to any or all Registrable Securities held by such New Holders. Notwithstanding the foregoing, (i) the Company shall not be required to give effect to a Demand Registration from a Demanding Holder if the Company has registered Registrable Securities pursuant to a Demand Registration from such Demanding Holder in the preceding 180 days, or (ii) the Company’s obligations with respect to any Demand Registration shall be deemed satisfied so long as the Registration Statement filed pursuant to subsection 2.1.1 includes all of such Demanding Holder’s Registrable Securities and is effective.

 

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2.2.2 Effective Registration. Notwithstanding the provisions of subsection 2.2.1 above or any other part of this Agreement, a Registration pursuant to a Demand Registration shall not count as a Registration unless and until (i) the Registration Statement filed with the Commission with respect to a Registration pursuant to a Demand Registration has been declared effective by the Commission and (ii) the Company has complied with all of its obligations under this Agreement with respect thereto; providedfurther, that if, after such Registration Statement has been declared effective, an offering of Registrable Securities in a Registration pursuant to a Demand Registration is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or any other governmental agency, the Registration Statement with respect to such Registration shall be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders initiating such Demand Registration thereafter affirmatively elect to continue with such Registration and accordingly notify the Company in writing, but in no event later than five (5) days, of such election; and providedfurther, that the Company shall not be obligated or required to file another Registration Statement until the Registration Statement that has been previously filed with respect to a Registration pursuant to a Demand Registration becomes effective or is subsequently terminated.

 

2.2.3 Underwritten Offering. Subject to the provisions of subsection 2.2.4, if a majority-in-interest of the Demanding Holders so advise the Company as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an Underwritten Offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such Underwritten Offering and the inclusion of such Holder’s Registrable Securities in such Underwritten Offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.2.3 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the majority-in-interest of the Demanding Holders initiating the Demand Registration, which Underwriter(s) shall be reasonably satisfactory to the Company.

 

2.2.4 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Registration pursuant to a Demand Registration, in good faith, advises the Company, the Demanding Holders and the Requesting Holders (if any) in writing that the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Class A Common Stock or other equity securities that the Company desires to sell and the Class A Common Stock, if any, as to which a Registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, as follows: (i) first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (in each case pro rata based on the respective number of Registrable Securities that such Demanding Holder and Requesting Holder (if any) has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities that such Demanding Holders and Requesting Holders have requested be included in such Underwritten Registration (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Registrable Securities of Holders (Pro Rata, based on the respective number of Registrable Securities that each Holder has so requested) exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof, without exceeding the Maximum Number of Securities; and (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (iv) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other equity securities of other persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Securities.

 

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2.2.5 Demand Registration Withdrawal. Any of the Demanding Holders initiating a Demand Registration or any of the Requesting Holders (if any), pursuant to a Registration under subsection 2.2.1, shall have the right to withdraw from a Registration pursuant to such Demand Registration or a Shelf Underwritten Offering pursuant to subsection 2.1.3 for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of their intention to withdraw from such Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to the Registration of their Registrable Securities pursuant to such Demand Registration (or in the case of an Underwritten Registration pursuant to Rule 415, at least five (5) business days prior to the time of pricing of the applicable offering). Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Registration pursuant to a Demand Registration or a Shelf Underwritten Offering prior to its withdrawal under this subsection 2.2.5.

 

2.3 Piggyback Registration.

 

2.3.1 Piggyback Rights. If the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to subsection 2.1.1 or 2.1.2  hereof), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution and the name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (such Registration a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.3.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.3.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.

 

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2.3.2 Reduction of Piggyback Registration. If the managing Underwriter or Underwriters in an Underwritten Registration that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of the Class A Common Stock that the Company desires to sell, taken together with (i) the Class A Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2.3 hereof, and (iii) the Class A Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggyback registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:

 

(a) If the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (A) first, the Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.3.1 hereof, Pro Rata, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the Class A Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggyback registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities;

 

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(b) If the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration (A) first, the Class A Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.3.1, Pro Rata based on the respective number of Registrable Securities that each Holder has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities that the Holders have requested to be included in such Underwritten Registration, which can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), the Class A Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.

 

2.3.3 Piggyback Registration Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration (or in the case of an Underwritten Registration pursuant to Rule 415, at least five (5) business days prior to the time of pricing of the applicable offering). The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this subsection 2.3.3.

 

2.3.4 Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.3 hereof shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.2 hereof or a Shelf Underwritten Offering effected under subsection 2.1.3.

 

2.4 Restrictions on Registration Rights. If (A) during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Company initiated Registration and provided that the Company has delivered written notice to the Holders prior to receipt of a Demand Registration pursuant to subsection 2.2.1 and it continues to actively employ, in good faith, all reasonable efforts to cause the applicable Registration Statement to become effective; (B) the Holders have requested an Underwritten Registration and the Company and the Holders are unable to obtain the commitment of an Underwriter or Underwriters to firmly underwrite the offer; or (C) in the good faith judgment of the Board such Registration would be seriously detrimental to the Company and the Board concludes as a result that it is essential to defer the filing of such Registration Statement at such time, then in each case the Company shall furnish to such Holders a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board it would be seriously detrimental to the Company for such Registration Statement to be filed in the near future and that it is therefore essential to defer the filing of such Registration Statement. In such event, the Company shall have the right to defer such filing for a period of not more than sixty (60) days; provided, however, that the Company shall not defer its obligation in this manner more than once in any 12-month period.

 

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ARTICLE III

COMPANY PROCEDURES

 

3.1 General Procedures. If the Company is required to effect the Registration of Registrable Securities, the Company shall use its reasonable best efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously as possible:

 

3.1.1 prepare and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration Statement have been sold;

 

3.1.2 prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by any majority-in-interest of the Holders with Registerable Securities registered on such Registration Statement or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;

 

3.1.3 prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriter(s), if any, and each Holder of Registrable Securities included in such Registration, and each such Holder’s legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriter(s) and each Holder of Registrable Securities included in such Registration or the legal counsel for any such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders;

 

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3.1.4 prior to any public offering of Registrable Securities, use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as any Holder of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; providedhowever, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;

 

3.1.5 cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;

 

3.1.6 provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;

 

3.1.7 advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

 

3.1.8 at least three (3) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities and its counsel, including, without limitation, providing copies promptly upon receipt of any comment letters received with respect to any such Registration Statement or Prospectus;

 

3.1.9 notify the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 3.4 hereof;

 

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3.1.10 permit a representative of the Holders (such representative to be selected by a majority of the participating Holders), the Underwriter(s), if any, and any attorney or accountant retained by such Holders or Underwriter(s) to participate, at each such person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; providedhowever, that such representative or Underwriter enters into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information; and provided further, the Company may not include the name of any Holder or Underwriter or any information regarding any Holder or Underwriter in any Registration Statement or Prospectus, any amendment or supplement to such Registration Statement or Prospectus, any document that is to be incorporated by reference into such Registration Statement or Prospectus, or any response to any comment letter, without the prior written consent of such Holder or Underwriter and providing each such Holder or Underwriter a reasonable amount of time to review and comment on such applicable document, which comments the Company shall include unless contrary to applicable law;

 

3.1.11 obtain a “comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Registration which the participating Holders may rely on, in customary form and covering such matters of the type customarily covered by “comfort” letters as the managing Underwriter(s) may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders;

 

3.1.12 on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriter(s), if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Underwriter(s) may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders;

 

3.1.13 in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriter of such offering;

 

3.1.14 make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);

 

3.1.15 if the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter(s) in any Underwritten Offering; and

 

3.1.16 otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders, in connection with such Registration.

 

3.2 Registration Expenses. Except as otherwise provided herein, the Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.

 

3.3 Requirements for Participation in Underwritten Offerings. No person may participate in any Underwritten Offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.

 

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3.4 Suspension of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the Prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than thirty (30) days, determined in good faith by the Company to be necessary for such purpose; provided, however, that the Company shall not defer its obligations in this manner more than three times in any 12-month period. In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.4.

 

3.5 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act. The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of the Class A Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144, including providing any legal opinions.

 

3.6 Limitations on Registration Rights. Notwithstanding anything herein to the contrary, (i) Cantor may not exercise its rights under Sections 2.1 and 2.2 hereunder after five (5) and seven (7) years after the effective date of the Registration Statement relating to the Company’s initial public offering, respectively, and (ii) Cantor may not exercise its rights under Section 2.1 more than one time.

 

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3.7 Transfer Restrictions.

 

3.7.1 During their respective Lock-Up Periods, no Existing Holder or New Holder shall offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of or distribute any shares of Class A Common Stock or any securities convertible into, exercisable for, exchangeable for or that represent the right to receive shares of Class A Common Stock, whether now owned or hereinafter acquired, that is owned directly by such Existing Holder or New Holder (including securities held as a custodian) or with respect to which such Existing Holder or New Holder has beneficial ownership within the rules and regulations of the Commission (collectively, the “Restricted Shares”). The foregoing restriction is expressly agreed to preclude each Existing Holder or New Holder, as applicable, from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Restricted Shares even if such Restricted Shares would be disposed of by someone other than such Existing Holder or New Holder. Such prohibited hedging or other transactions include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to any of the Restricted Shares of the applicable Existing Holder or New Holder, or with respect to any security that includes, relates to, or derives any significant part of its value from such Restricted Shares, provided, however, that the foregoing restrictions are not intended to cover liens established in the ordinary course in favor of a broker-dealer over property held in an account with such broker-dealer generally.

 

3.7.2 Each Existing Holder and New Holder hereby represents and warrants that it now has and, except as contemplated by this subsection 3.7.2 for the duration of the Lock-Up Period, will have good and marketable title to its Restricted Shares, free and clear of all liens, encumbrances, and claims that could impact the ability of such Existing Holder or New Holder to comply with the foregoing restrictions. For the avoidance of doubt, liens established in the ordinary course in favor of a broker-dealer over property held in an account with such broker-dealer generally would not be deemed to impact the ability of such Existing Holder or New Holder to comply with the foregoing restrictions. Each Existing Holder and New Holder agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of any Restricted Shares during the Lock-Up Period.

 

ARTICLE IV

INDEMNIFICATION AND CONTRIBUTION

 

4.1 Indemnification.

 

4.1.1 The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and agents and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.

 

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4.1.2 In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein; providedhowever, that the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and the liability of each such Holder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Holder from the sale of Registrable Securities in such offering giving rise to such liability. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.

 

4.1.3 Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

  20  

 

 

4.1.4 The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable for any reason.

 

4.1.5 If the indemnification provided under Section 4.1 hereof from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action and the benefits received by the such indemnifying party or indemnified party; providedhowever, that the liability of any Holder under this subsection 4.1.5 shall be limited to the amount of the net proceeds received by such Holder from the sale of Registrable Securities in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.14.1.2 and 4.1.3 above, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined by Pro Rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this subsection 4.1.5. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5 from any person who was not guilty of such fraudulent misrepresentation.

 

ARTICLE V

MISCELLANEOUS

 

5.1 Notices. Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail or facsimile. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of notices delivered by courier service, hand delivery, electronic mail or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to: 8181 E. Tufts Avenue, Suite 510, Denver, CO 80237, and, if to any Holder, at such Holder’s address or contact information as set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 5.1.

 

21

 

 

5.2 Assignment; No Third Party Beneficiaries.

 

5.2.1 Subject to Section 5.2.3, this Agreement and the rights, duties and obligations of the Company and the Holders of Registrable Shares, as the case may be, hereunder may not be assigned or delegated by the Company or the Holders of Registrable Securities, as the case may be, in whole or in part.

 

5.2.2 Prior to the expiration of the Founder Lock-Up Period, the Private Placement Lock-Up Period or the New Holder Lock-Up Period, as the case may be, no Holder who is subject to any such lock-up period may assign or delegate such Holder’s rights, duties or obligations under this Agreement, in whole or in part, in violation of the applicable lock-up period, except in connection with a transfer of Registrable Securities by such Holder to a Permitted Transferee but only if such Permitted Transferee agrees to become bound by the transfer restrictions set forth in this Agreement; provided, that the Company, in its sole discretion, may waive the New Holder Lock-Up Period with respect to shares of Class A Common Stock, on a pro rata basis across all New Holders, solely as required in order to comply with listing requirements of the NASDAQ Capital Market.

 

5.2.3 This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holders, which shall include Permitted Transferees.

 

5.2.4 This Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and Section 5.2 hereof.

 

5.2.5 No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.1 hereof and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided in this Section 5.2 shall be null and void.

 

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5.3 Counterparts. This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced.

 

5.4 Governing Law; Venue. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT (I) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION AND (II) THE VENUE FOR ANY ACTION TAKEN WITH RESPECT TO THIS AGREEMENT SHALL BE ANY STATE OR FEDERAL COURT IN NEW YORK COUNTY IN THE STATE OF NEW YORK.

 

5.5 Amendments and Modifications. Upon the written consent of the Company and the Holders of at least a majority in interest of the Registrable Securities at the time in question (which majority interest must include Cantor if such amendment or modification affects in any way the rights of Cantor hereunder), compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; providedhowever, that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects either the Existing Holders as a group or the New Holders as a group, respectively, in a manner that is materially adversely different from Existing Holders or New Holders, as applicable, shall require the consent of at least a majority-in-interest of the Registrable Securities held by such Existing Holders, a majority-in-interest of the Registrable Securities held by such New Holders, as applicable, at the time in question so affected; provided, further, that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected; provided, further, that notwithstanding the foregoing, no amendment hereto or waiver hereof that has the effect of extending the Lock-Up Period applicable to any particular Holder shall be enforceable against, or effective with respect to, such Holder without such Holder’s written consent. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.

 

5.6 Other Registration Rights. The Company represents and warrants that no person, other than a Holder of Registrable Securities, has any right to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the Company for the sale of securities for its own account or for the account of any other person. Further, the Company represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.

 

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5.7 Term. This Agreement shall terminate upon the earlier of (a) the tenth anniversary of the date of this Agreement or (b) the date as of which all of the Registrable Securities have been sold pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)) or (c) with respect to a particular Holder, the date as of which all Registerable Securities held by such Holder have been sold (x) pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission) or (y) under Rule 144 or another exemption from registration under the Securities Act; provided that, for purposes of this Section 5.7, securities constituting Registrable Securities shall be determined without regard and without giving effect to clause (D) contained in the definition of Registrable Securities. The provisions of Section 3.5 and Article IV shall survive any termination.

 

[Signature Page Follows]

 

  24  

 

 

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

 

  COMPANY:
   
  MUDRICK CAPITAL ACQUISITION CORPORATION,
a Delaware corporation
     
  By: /s/ Glenn Springer
    Name:   Glenn Springer
    Title:   Chief Financial Officer
     
  EXISTING HOLDERS:
   
  MUDRICK CAPITAL ACQUISTION HOLDINGS LLC, 
a Delaware limited liability company
     
  By:   /s/ Jason Mudrick
    Name:  Jason Mudrick
    Title:  Manager
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   

 

[Signature Page to Amended and Restated Registration Rights Agreement]

 

 

 

  CANTOR FITZGERALD & CO.
     
  By:  /s/ Sage Kelly
    Name: Sage Kelly
    Title:  Head of Investment Banking
     
  BOSTON PATRIOT BATTERYMARCH ST LLC, as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
  MERCER QIF FUND PLC, as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
  MUDRICK DISTRESSED OPPORTUNITY SPECIALTY FUND, L.P., as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   

 

[Signature Page to Amended and Restated Registration Rights Agreement]

 

 

 

   
  MUDRICK DISTRESSED OPPORTUNITY FUND GLOBAL, L.P.,, as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
   
  MUDRICK DISTRESSED OPPORTUNITY DRAWDOWN FUND, L.P., as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
  BLACKWELL PARTNERS LLC – SERIES A, as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
  BOSTON PATRIOT NEWBURY ST LLC, as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   

 

[Signature Page to Amended and Restated Registration Rights Agreement]

 

 

 

  MUDRICK DISTRESSED SENIOR SECURED FUND GLOBAL, L.P.,, as a New
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
   
  MUDRICK DISTRESSED OPPORTUNITY DRAWDOWN FUND II, LP, as a New Holder
   
  By: Mudrick Capital management, L.P., its investment manager
   
  By: /s/ Glenn Springer
  Name: Glenn Springer
  Title:  Chief Financial Officer
   
   
  HIGHBRIDGE TACTICAL CREDIT MASTER FUND, L.P., as a New Holder
   
  By: Highbridge Capital Management, LLC, its Trading Manager
   
  By: /s/ Jonathan Segal
  Name: Jonathan Segal
  Title:  Managing Director
   
   
  HIGHBRIDGE MSF INTERNATIONAL LTD., as a New Holder
   
  By: Highbridge Capital Management, LLC, its Trading Manager
   
  By: /s/ Jonathan Segal
  Name: Jonathan Segal
  Title:  Managing Director
   

 

[Signature Page to Amended and Restated Registration Rights Agreement]

 

 

 

   
  WOLVERINE FLAGSHIP FUND TRADING LIMITED., as a New Holder
   
  By: Wolverine Asset management, LLC, its investment manager
   
  By: /s/ Kenneth L. Nadel
  Name: Kenneth L. Nadel
  Title:  Chief Operating Officer
   
  WBOX 2015-5 LTD., as a New Holder
   
  By: /s/ Mark M. Strefling
  Name: Mark M. Strefling
  Title:  Director
   
   
  ALSV LIMITED., as a New Holder
   
  By: /s/ Robert H. Lynch, Jr.
  Name: Robert H. Lynch, Jr.
  Title:  Managing Member
   
  By: /s/ Andrew David
  Name: Andrew David
  Title:  Chief Operating Officer
   
  APSV, L.L.C., as a New Holder
   
  By: /s/ Robert H. Lynch, Jr.
  Name: Robert H. Lynch, Jr.
  Title:  Managing Member
   
  By: /s/ Andrew David
  Name: Andrew David
  Title:  Chief Operating Officer
   
   
  SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP., as a New Holder
   
  By: /s/ Jim Grosdanis
  Name: Jim Grosdanis
  Title:  Managing Parnter

 

[Signature Page to Amended and Restated Registration Rights Agreement]

 

 

Exhibit 10.6

 

 

 

INDEMNIFICATION AGREEMENT

 

by and between

 

HYCROFT MINING HOLDING CORPORATION

 

and

 

[____]

 

 

 

 

 

 

 

 

Dated as of May 29, 2020

 

 

 

 

 

INDEMNIFICATION AGREEMENT

 

INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of May 29, 2020, by and between Hycroft Mining Holding Corporation, a Delaware corporation (the “Company”), and [___], a natural person (“Indemnitee”).

 

R E C I T A L S

 

WHEREAS, highly competent individuals have become more reluctant to serve corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their services to and activities on behalf of such corporations;

 

WHEREAS, directors and officers are increasingly being subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the corporation itself;

 

WHEREAS, the Board of Directors of the Company (the “Board”) recognizes the limitations on the protection provided by liability insurance and the uncertainties as to the scope and level of such coverage that may be available in the future;

 

WHEREAS, the Board recognizes the limitations on the protection provided by existing indemnification arrangements pursuant to the Company’s second amended and restated certificate of incorporation (the “Charter”) and amended and restated bylaws (the “Bylaws”) and the uncertainties as to its availability in any particular situation;

 

WHEREAS, the Board believes that, in light of the limitations and uncertainties in respect of the protection provided by the Company’s liability insurance and existing indemnification arrangements and the impact these uncertainties may have on the Company’s ability to attract and retain qualified individuals to serve or continue to serve the Company as directors, officers or in other capacities, the Company should act to assure such individuals that there will be increased certainty with respect to such protection in the future;

 

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, hold harmless and exonerate and to advance expenses on behalf of, such individuals to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they may not be adequately protected;

 

WHEREAS, Indemnitee is concerned that the protection provided under the Company’s liability insurance and existing indemnification arrangements may not be adequate and may not be willing to serve or continue to serve the Company as a director, an officer or in any other capacity without greater certainty concerning such protection, and the Company desires Indemnitee to serve or continue to serve the Company as a director, an officer or in another capacity and is willing to provide such greater certainty; and

 

 

 

WHEREAS, this Agreement is a supplement to, and in furtherance of, the Charter and the Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

A G R E E M E N T S

 

NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and Indemnitee covenant and agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1            For purposes of this Agreement:

 

(a)            The term “agent” shall mean any person who is or was a director, an officer or an employee of the Company or a subsidiary of the Company or any other person authorized by the Company to act for or on behalf of the Company, including any person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

 

(b)            Agreement” shall have the meaning ascribed to such term in the Preamble.

 

(c)            Beneficial Owner” and “Beneficial Ownership” shall have the meanings ascribed to such terms in Rule 13d-3 promulgated under the Exchange Act as in effect on the date hereof.

 

(d)            Board” shall have the meaning ascribed to such term in the Recitals.

 

(e)            Bylaws” shall have the meaning ascribed to such term in the Recitals.

 

(f)            Change in Control” shall mean the occurrence of any of the following events, each of which shall be determined independently of the others:

 

(i)           any Person, other than a holder of at least 10% of the outstanding voting power of the Company as of the date hereof, becomes the Beneficial Owner of a majority of the stock of the Company entitled to vote in the election of directors of the Company;

 

(ii)          Continuing Directors cease to constitute a majority of the members of the Board;

 

(iii)          the stockholders of the Company adopt and consummate a plan of complete or substantial liquidation or an agreement providing for the distribution of all or substantially all of the assets of the Company is entered into;

 

-2-

 

 

(iv)            the Company is a party to a merger, consolidation, other form of business combination or a sale of all or substantially all of its assets, with an unaffiliated third party, unless the business of the Company following consummation of such merger, consolidation or other business combination is continued following any such transaction by a resulting entity (which may be, but need not be, the Company) and the stockholders of the Company immediately prior to such transaction hold, directly or indirectly, at least a majority of the voting power of the resulting entity; provided, however, that a merger or consolidation effected to implement a recapitalization or similar transaction of the Company shall not constitute a Change in Control; or

 

(v)            there is a Change in Control of the Company of a nature that is reported in response to item 5.01 of Current Report on Form 8-K or any similar item, schedule or form under the Exchange Act, as in effect at the time of such change, whether or not the Company is then subject to such reporting requirements;

 

provided, however, that for purposes of this Agreement a Change in Control shall not be deemed to occur if the Person or Persons deemed to have acquired control is or are a holder of at least 10% of the outstanding voting power of the Company as of the date hereof.

 

(g)            Charter” shall have the meaning ascribed to such term in the Recitals.

 

(h)            Company” shall have the meaning ascribed to such term in the Preamble.

 

(i)            Continuing Directors” shall mean the members of the Board on the date hereof, provided, that any individual becoming a member of the Board subsequent to the date hereof whose election or nomination for election was supported by at least a majority of the directors who then comprised the Continuing Directors shall be considered to be a Continuing Director.

 

(j)            Corporate Status” describes the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any other Enterprise which such person is or was serving at the request of the Company.

 

(k)            D&O Liability Insurance” shall have the meaning ascribed to such term in Section 15.1.

 

(l)            Delaware Court” shall mean the Court of Chancery of the State of Delaware.

 

(m)            DGCL” shall mean the General Corporation Law of the State of Delaware.

 

(n)            Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification or advancement of Expenses is sought by Indemnitee.

 

(o)            Enterprise” shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.

 

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(p)            Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(q)            Expenses” shall mean all direct and indirect costs, fees and expenses (including, without limitation, fees and expenses of legal counsel (including Independent Counsel), retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage and delivery service fees and all other disbursements or expenses) incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. For avoidance of doubt, Expenses shall include expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent; provided, however, that Expenses shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

(r)            Indemnification Arrangements” shall have the meaning ascribed to such term in Section 16.2.

 

(s)            Indemnitee” shall have the meaning ascribed to such term in the Preamble.

 

(t)            Independent Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the three years preceding its selection or appointment hereunder has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (provided, that acting as an Independent Counsel under this Agreement or in a similar capacity with respect to any other indemnification arrangements between the Company and its present or former directors or officers shall not be deemed a representation of the Company or Indemnitee) or (ii) any other party to the Proceeding giving rise to a claim for indemnification or advancement of expenses hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

(u)            The “Nominating and Governance Committee” shall mean the Nominating and Governance committee of the Board.

 

(v)            The term “Person” shall have the meaning ascribed to such term in Sections 13(d) and 14(d) of the Exchange Act as in effect on the date hereof; provided, however, that the term “Person” shall exclude: (i) the Company; (ii) any Subsidiaries of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary of the Company or of any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary of the Company or of a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

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(w)            Proceeding” shall include any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise, and whether of a civil, criminal, administrative or investigative nature (including any appeal therefrom), in which Indemnitee was, is or may be involved as a party or otherwise by reason of the fact of his or her Corporate Status or by reason of any action (or failure to act) taken by him or her or of any action (or failure to act) on his or her part while serving in any Corporate Status (in each case, regardless of whether serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses can be provided under this Agreement), or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or other proceeding.

 

(x)            References to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company or any other Enterprise which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

(y)            The term “Subsidiary”, with respect to any Person, shall mean any corporation, limited liability company, partnership, joint venture, trust or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

 

(z)            The phrase “to the fullest extent permitted by applicable law” shall mean (i) to the fullest extent permitted by the DGCL as in effect on the date of this Agreement and (ii) to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its directors and officers.

 

ARTICLE II

 

SERVICES BY INDEMNITEE

 

2.1            Indemnitee agrees to serve or continue to serve in his or her current capacity or capacities as a director, officer, employee, agent or fiduciary of the Company. Indemnitee may also serve, as the Company may reasonably request from time to time, as a director, officer, employee, agent or fiduciary of any other corporation, partnership, limited liability company, association, joint venture, trust, employee benefit plan or other Enterprise in which the Company has an interest. Indemnitee and the Company each acknowledge that they have entered into this Agreement as a means of inducing Indemnitee to serve or continue to serve the Company in such capacities. Indemnitee may at any time and for any reason resign from such position or positions (subject to any other contractual obligation or any obligation imposed by operation of law). The Company shall have no obligation under this Agreement to continue Indemnitee in any such position for any period of time and shall not be precluded by the provisions of this Agreement from removing Indemnitee from any such position at any time.

 

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ARTICLE III

 

THIRD-PARTY PROCEEDINGS

 

3.1            The Company shall indemnify, hold Indemnitee harmless and exonerate Indemnitee in accordance with the provisions of this Section 3.1 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3.1, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal action or Proceeding, had no reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

ARTICLE IV

 

INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY

 

4.1            To the fullest extent permitted by applicable law, the Company shall indemnify, hold Indemnitee harmless and exonerate Indemnitee in accordance with the provisions of this Section 4.1 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4.1, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall be made under this Section 4.1 in respect of any Proceeding, claim, issue or matter as to which Indemnitee shall have been finally adjudged, in a final non-appealable adjudication, by a court to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court (or any court hearing appeals therefrom) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification, to be held harmless or to exoneration.

 

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ARTICLE V

 

INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL

 

5.1            Any other provisions of this Agreement notwithstanding, to the extent that Indemnitee was or is, by reason of Indemnitee’s Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in the defense of any Proceeding or any claim, issue or matter therein, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold Indemnitee harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in any Proceeding, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold Indemnitee harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 5.1 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. If Indemnitee is not wholly successful in such Proceeding, the Company also shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred in connection with each successfully resolved claim, issue or matter.

 

ARTICLE VI

 

INDEMNIFICATION FOR EXPENSES OF A WITNESS

 

6.1            Any other provision of this Agreement notwithstanding, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness in any Proceeding to which Indemnitee was or is not a party, Indemnitee shall, to the fullest extent permitted by applicable law, be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

 

ARTICLE VII

 

ADDITIONAL INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS

 

7.1            In addition to, and without regard to any limitations on, the indemnification provided for in Sections 3.1, 4.1 or 5.1, the Company shall indemnify, hold Indemnitee harmless and exonerate Indemnitee if Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding. The only limitations that shall exist upon the Company’s obligations pursuant to this Agreement shall be those exclusions set forth in Section 9.1, and that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Articles XII and XIII) to be unlawful.

 

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ARTICLE VIII

 

CONTRIBUTION IN THE EVENT OF JOINT LIABILITY

 

8.1            Whether or not the indemnification provided in Sections 3.1, 4.1, 5.1 and 7.1 hereof is available, if, for any reason, Indemnitee shall be required to pay, in connection with any Proceeding in which the Company is jointly liable with Indemnitee, all or any portion of any judgments, liabilities, fines, penalties, amounts to be paid in settlement and/or for Expenses, the Company shall contribute to the amount actually and reasonably incurred and paid or payable by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses in proportion to the relative benefits received by the Company and all agents of the Company, other than Indemnitee, who are jointly liable with Indemnitee, on the one hand, and Indemnitee, on the other hand, from the transaction or transactions from which such Proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all agents of the Company other than Indemnitee who are jointly liable with Indemnitee, on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all agents of the Company, other than Indemnitee, who are jointly liable with Indemnitee, on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive. The Company shall not enter into any settlement in respect of any Proceeding in which the Company is jointly liable with Indemnitee unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

 

8.2            The Company shall indemnify, hold Indemnitee harmless or exonerate Indemnitee from any claims of contribution which may be brought by agents of the Company, other than Indemnitee, who may be jointly liable with Indemnitee in respect of any Proceeding.

 

8.3            To the fullest extent permissible by applicable law, if the indemnification, hold harmless or exoneration rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying and holding Indemnitee harmless, shall contribute to the amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding, claim, matter or issue relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its agents, other than Indemnitee) and Indemnitee in connection with such event(s) and/or transaction(s).

 

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ARTICLE IX

 

EXCLUSIONS

 

9.1            Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification, advance, hold harmless or exoneration payment in connection with any claim made against Indemnitee:

 

(a)            for which payment has actually been received by or on behalf of Indemnitee under any insurance policy, contract, agreement, indemnity provision or otherwise, except with respect to any excess beyond the amount actually received under such insurance policy, contract, agreement, indemnity or advancement provision or otherwise;

 

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

 

(c)            except as otherwise provided in Section 14.5 hereof, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of such Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized such Proceeding (or any part of such Proceeding) prior to its initiation or (ii) the Company provides the indemnification, hold harmless or exoneration payment, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

 

ARTICLE X

 

ADVANCES OF EXPENSES; DEFENSE OF CLAIMS

 

10.1            Notwithstanding any provision of this Agreement to the contrary, and to the fullest extent permitted by applicable law, the Company shall advance any Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with a Proceeding within thirty (30) days after receipt by the Company of a written statement requesting such advance, which statement may be delivered to the Company at such time and from time to time as Indemnitee deems appropriate in Indemnitee’s sole discretion (whether prior to or after final disposition of any such Proceeding). Advances shall, to the fullest extent permitted by applicable law, be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to be indemnified, held harmless or exonerated under this Agreement or otherwise. Any such advances shall be made on an unsecured basis and be interest free. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce the right of advancement provided herein, including Expenses incurred preparing and forwarding a statement or statements to the Company to support the advances requested. Indemnitee shall qualify for advances, to the fullest extent permitted by applicable law, solely upon the execution and delivery to the Company of an undertaking providing that Indemnitee shall repay any and all advances to the extent that it is ultimately determined, in a final non-appealable adjudication, that Indemnitee is not entitled to be indemnified, held harmless or exonerated by the Company under either of the provisions of this Agreement, the Charter, the Bylaws, applicable law or otherwise. This Section 10.1 shall not apply to any claim made by Indemnitee for which an indemnification, hold harmless or exoneration payment is excluded pursuant to Section 9.1.

 

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10.2            Indemnitee shall reimburse the Company for all amounts advanced by the Company pursuant to Section 10.1 if it is ultimately determined, in a final non-appealable adjudication, that Indemnitee is not entitled to be indemnified by the Company for such Expenses. Notwithstanding the foregoing, if Indemnitee seeks a judicial adjudication pursuant to Section 14.1, Indemnitee shall not be required to reimburse the Company pursuant to this Section 10.2 until a final determination (as to which all rights of appeal have been exhausted or lapsed) has been made.

 

10.3            The Company shall be entitled to participate in any Proceeding at its own expense. Neither party shall settle a Proceeding (in whole or in part) which settlement would impose any Expense, liability or limitation on the other party hereto without such party’s prior written consent, which consent shall not be unreasonably withheld.

 

ARTICLE XI

 

PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION

 

11.1            Indemnitee shall notify the Company in writing as soon as reasonably practicable (a) after being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or (b) if the Company has not been previously notified, after receipt of written notice of any other matter with respect to which Indemnitee intends to seek indemnification, hold harmless or exoneration rights under Sections 3.1, 4.1 or 6.1 or advancement of Expenses under Section 10.1. The omission by Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee (i) under this Agreement except and only to the extent the Company can establish that such omission to notify resulted in actual material prejudice to the Company or (ii) otherwise than under this Agreement.

 

11.2            Indemnitee may thereafter deliver to the Company a written request for indemnification pursuant to this Agreement at such time and from time to time as Indemnitee deems appropriate in Indemnitee’s sole discretion, which request shall also be deemed a request for advancement of expenses under Section 10.1. Following such a written request, Indemnitee’s entitlement to indemnification shall be determined according to Section 12.1.

 

ARTICLE XII

 

PROCEDURE UPON APPLICATION FOR INDEMNIFICATION

 

12.1            (a)  Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 11.2 hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following methods:

 

(i)            if Indemnitee is not a member of the Nominating and Governance Committee and the members of such committee are all Disinterested Directors, then the Nominating and Governance Committee shall promptly consider the request for indemnification and make a recommendation to the Board action in respect of such request for indemnification (which may include granting such request, denying it or any other action such committee deems to be appropriate and in the best interests of the Company);

 

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(ii)            If Indemnitee is a member of the Nominating and Governance Committee, then if there are at least three members of the Board who are Disinterested Directors, such Disinterested Directors will appoint a Board committee amongst themselves, which committee may, but shall not be required to, include all Disinterested Directors, solely for the purpose of considering the request for indemnification by Indemnitee and shall promptly consider the request for indemnification and make the determination on behalf of the Board and take such action in respect thereof (which may include granting such request, denying it or any other action such committee deems to be appropriate and in the best interests of the Company);

 

(iii)            If there are less than three Disinterested Directors, then such determination with respect to Indemnitee’s request for indemnification shall be made by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.

 

(b)  The Company shall promptly advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied. If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) business days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, which cooperation shall include providing to such person, persons or entity, upon such person’s, persons’ or entity’s reasonable advance request, any documentation or information which is (i) reasonably available to Indemnitee and reasonably necessary to such determination and (ii) not privileged or otherwise protected from disclosure. Any costs or Expenses (including reasonable attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (regardless of what the outcome of the determination as to Indemnitee’s entitlement to indemnification is) and the Company shall indemnify and hold Indemnitee harmless therefrom.

 

12.2            If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12.1(a)(iii) hereof, the Independent Counsel shall be selected by the Nominating and Governance Committee or, if all members thereof are not Disinterested Directors, by an affirmative vote of a majority of the Board. The Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. Indemnitee may, within ten (10) days of its receipt of such written notice of selection, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1.1(t), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected by the Nominating and Governance Committee shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 11.2 hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court or by such other person as the Delaware Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12.1 hereof. Upon the due commencement of any judicial proceeding pursuant to Section 14.1, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

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12.3            The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 12.1 hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of Section 12.2, regardless of the manner in which such Independent Counsel was selected or appointed.

 

ARTICLE XIII

 

PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS

 

13.1            In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11.2 of this Agreement, and the Company shall have the burdens of coming forward with evidence and of persuasion to overcome that presumption. Neither the failure of the Company to have made a determination prior to the commencement of any action pursuant to this Agreement as to whether indemnification is proper under the circumstances nor an actual determination made pursuant to Section 12.1 hereof that Indemnitee has not met the applicable standard of conduct shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

13.2            If the person, persons or entity empowered or selected under Section 12.1 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent permitted by applicable law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such sixty (60)-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time to obtain and evaluate documentation and/or information relating thereto.

 

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13.3            The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

  

13.4            For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise. The provisions of this Section 13.4 shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failure to act, of any other director, other officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 13.4 are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

ARTICLE XIV

 

REMEDIES OF INDEMNITEE

 

14.1            In the event that (i) a determination is made pursuant to Section 12.1 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 10.1 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12.1 of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification (subject to any extension as provided in Section 13.2), (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) business days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Article VIII of this Agreement, (vi) payment of indemnification pursuant to this Agreement is not made within ten (10) business days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 13.2, or (vii) payment to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement or otherwise is not made within ten (10) business days after receipt by the Company of a written request therefor, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, hold harmless, exoneration, contribution or advancement rights.

 

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14.2            In the event that a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Article XIV shall be conducted in all respects as a de novo trial on the merits and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 12.1. In any judicial proceeding commenced pursuant to this Article XIV, Indemnitee shall be presumed to be entitled to be indemnified, held harmless, exonerated and to receive advances of Expenses under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to be indemnified, held harmless, exonerated and to receive advances of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12.1 of this Agreement adverse to Indemnitee for any purpose.

 

14.3            If a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Article XIV, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

14.4            The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Article XIV that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.

 

14.5            Unless and until a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is not entitled to indemnification, the Company shall indemnify and hold Indemnitee harmless to the fullest extent permitted by applicable law against all Expenses and, if requested by Indemnitee, shall (within ten (10) business days after the Company’s receipt of such written request) advance to Indemnitee, to the fullest extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial proceeding brought by Indemnitee (i) to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreement or any other indemnification, hold harmless, exoneration, advancement or contribution arrangement or provision of the Charter or the Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, hold harmless or exoneration right, advance, contribution or insurance recovery, as the case may be.

 

ARTICLE XV

 

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

 

15.1            The Company shall use commercially reasonable efforts to obtain and maintain a policy or policies of insurance (the “D&O Liability Insurance”) at commercially reasonable rates with reputable insurance companies providing liability insurance for directors and officers of the Company in their capacities as such (and for any capacity in which any director or officer of the Company serves any other Enterprise at the request of the Company), in respect of acts or omissions occurring while serving in such capacity.

 

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15.2            To the extent D&O Liability Insurance is obtained and maintained by the Company, Indemnitee shall be covered by the Company’s D&O Liability Insurance policy or policies as in effect from time to time in accordance with the applicable terms to the maximum extent of the coverage available under such policy or policies. The Company shall, promptly after receiving notice of a Proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), give notice of such Proceeding to the insurers under the Company’s D&O Liability Insurance policies in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable actions to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. The failure or refusal of any such insurer to pay any such amount shall not affect or impair the obligations of the Company under this Agreement.

 

15.3            Upon request by Indemnitee, the Company shall provide to Indemnitee copies of the D&O Liability Insurance policies as in effect from time to time. The Company shall promptly notify Indemnitee of any material changes in such insurance coverage.

 

ARTICLE XVI

 

NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION

 

16.1            The rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any Proceeding (regardless of when such Proceeding is first threatened, commenced or completed) or claim, issue or matter therein arising out of, or related to, any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, hold harmless or exoneration rights or advancement of Expenses than would be afforded currently under the Charter, the Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

16.2            The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses, and/or insurance provided by one or more third parties (collectively, the “Third-Party Indemnitors”). The Company hereby agrees and acknowledges (i) the Company is the indemnitor of first resort (i.e., the Company’s obligations to Indemnitee hereunder are primary and any obligation of any Third-Party Indemnitor to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) the Company shall be required to advance the full amount of Expenses incurred by Indemnitee 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 Agreement, Charter, Bylaws (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against any Third-Party Indemnitor, and (iii) the Company irrevocably waives, relinquishes and releases all Third-Party Indemnitors from any and all claims against any such Third-Party Indemnitor for contribution, subrogation or any other recovery of any kind in respect thereof. Notwithstanding the foregoing, in the event that Indemnitee shall have received an advancement of expenses from or payment by any Third-Party Indemnitor on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company, then such Third-Party Indemnitor shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. To the extent that advances or payments are actually made by a Third-Party Indemnitor to or on behalf of Indemnitee with respect to any claim, the Company and Indemnitee agree that the Third-Party Indemnitor that or who made such advance or payment is an express third party beneficiary of the terms of this Section 16.2. Except as provided in this Section 16.2, the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise from a Third-Party Indemnitor.

 

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16.3            The DGCL permits the Company to purchase and maintain insurance or furnish similar protection or make other arrangements including, but not limited to, providing a letter of credit or surety bond (“Indemnification Arrangements”) on behalf of Indemnitee against any liability asserted against Indemnitee or incurred by or on behalf of Indemnitee or in such capacity as a director, officer, employee or agent of the Company, or arising out of Indemnitee’s status as such, whether or not the Company would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such Indemnification Arrangement.

 

16.4            In the event of any payment under this Agreement, the Company, to the fullest extent permitted by applicable law, shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

16.5            The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or exoneration payments or advancement of expenses from such Enterprise.

 

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ARTICLE XVII

 

DURATION OF AGREEMENT

 

17.1            All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Article XIV of this Agreement) by reason of Indemnitee’s Corporate Status, whether or not he or she is acting in any such capacity at the time any liability or expense is incurred for which indemnification or advancement can be provided under this Agreement.

 

ARTICLE XVIII

 

SEVERABILITY

 

18.1            If any provision or provisions of this Agreement 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 Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by applicable law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

ARTICLE XIX

 

ENFORCEMENT AND BINDING EFFECT

 

19.1            The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve or to continue to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the Company.

 

19.2            Without limiting any of the rights of Indemnitee under the Charter or Bylaws of the Company, as they may be amended from time to time, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

 

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19.3            The indemnification, hold harmless, exoneration and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

19.4            The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

19.5            The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may, to the fullest extent permitted by applicable law, enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled. The Company and Indemnitee further agree that Indemnitee shall, to the fullest extent permitted by applicable law, be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of such a bond or undertaking to the fullest extent permitted by applicable law.

 

ARTICLE XX

 

MODIFICATION AND WAIVER

 

20.1            No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

 

ARTICLE XXI

 

NOTICES

 

21.1            All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered (i) in person, (ii) by Federal Express or other nationally recognized overnight carrier service which issues confirmation of delivery or (iii) by certified or registered mail with postage prepaid. Any such notice shall be deemed to be duly given (i) when delivered, if delivered personally or by Federal Express or other nationally recognized overnight carrier service or (ii) on the third (3rd) business day after the date on which such notice is mailed by certified or registered mail with postage prepaid:

 

-18-

 

 

(a)            if to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company in accordance with the terms hereof.

 

(b)            if to the Company, to:

 

Hycroft Mining Holding Corporation

8181 E. Tufts Ave., Suite 510

Denver, CO 80237

Attention: CFO

 

with a copy (which shall not constitute notice) to:

 

Neal, Gerber & Eisenberg LLP

2 North LaSalle, Suite 2200

Chicago, Illinois 60602

Attention: David S. Stone

 

or to any other address as may have been furnished to Indemnitee in writing by the Company.

 

ARTICLE XXII

 

APPLICABLE LAW AND CONSENT TO JURISDICTION

 

22.1            This Agreement and the legal relations among the parties hereto shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (c) appoint irrevocably, to the extent such party is not a resident of the State of Delaware, CT Corporation, as its agent in the State of Delaware or any other such agent as designated by the Company and reasonably acceptable to Indemnitee as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware; (d) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (e) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial. To the fullest extent permitted by applicable law, the parties hereby agree that the mailing of process and other papers in connection with any such action or proceeding in the manner provided by Section 21 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.

 

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ARTICLE XXIII

 

IDENTICAL COUNTERPARTS

 

23.1            This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

ARTICLE XXIV

 

MISCELLANEOUS

 

24.1            Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

24.2            ADDITIONAL ACTS. If for the validation of any of the provisions in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause such act, resolution, approval or other procedure to be effectuated or adopted in a manner that will enable the Company to fulfill its obligations under this Agreement.

 

[Remainder of Page Intentionally Left Blank – Signature Page Follows]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties hereto on the date and year first above written.

 

  HYCROFT MINING HOLDING CORPORATION
   
   
  By:  
    Name:  
    Title:    
   
   
  INDEMNITEE
   
     
    Name:
    Title:

 

[SIGNATURE PAGE TO [___] INDEMNIFICATION AGREEMENT]

 

 

Exhibit 10.7

 

 

 

 

 

 

 

 

 

HYMC 2020 PERFORMANCE AND INCENTIVE PAY PLAN

 

 

 

 

 

 

 

 

 

 

 

Effective May 29, 2020

 

     

 

 

TABLE OF CONTENTS

 

      Page
1. PURPOSE OF PLAN 1
2. DEFINITIONS 1
3. EFFECTIVE DATE AND TERM OF PLAN 6
  3.1. Term of Plan; Amendment and Restatement 6
  3.2. Effect on Awards 6
  3.3. Stockholder Approval 6
4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS 6
  4.1. Number of Shares Available for Awards 6
  4.2. Annual Award Limits 6
  4.3. Adjustments in Authorized Shares 7
5. ADMINISTRATION 7
  5.1. General 7
  5.2. Authority of the Committee 7
  5.3. Delegation 8
  5.4. No Liability 8
6. ELIGIBILITY 8
7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS 8
  7.1. Grant of Restricted  Stock and Restricted  Stock Units 8
  7.2. Restricted Stock or Restricted Stock Unit Award Agreement 8
  7.3. Other Restrictions 8
  7.4. Certificate Retention or Legend 9
  7.5. Voting 9
  7.6. Dividends and Dividend Equivalents 9
  7.7. Section 83(b) 9
  7.8. Deferred Payment Date 9
8. STOCK OPTIONS 9
  8.1. Grant of Stock Options 9
  8.2. Stock Option Award Agreements 9
  8.3. Exercise of Options 10
  8.4. Special Provisions for Incentive Stock Options 11
9. STOCK APPRECIATION RIGHTS 11
  9.1. Grant of Stock Appreciation Rights 11
  9.2. SAR Award Agreement 11
10. PERFORMANCE SHARES  AND PERFORMANCE UNITS     12
  10.1. Grant of Performance Shares and Performance Units 12
  10.2. Performance Share or Performance Unit Award Agreement 12
  10.3. Value of Performance Shares and Performance Units 12
  10.4. Earning of Performance Shares and Performance Units 12
  10.5. Form and Timing of Payment of Performance Shares and Performance Units 12
  10.6. No Dividends Payable 13
11. OTHER STOCK-BASED AWARDS   13

  

  i  

 

 

      Page
12. CASH-BASED INCENTIVE AWARDS 13
  12.1. Eligibility 13
  12.2. Annual Awards 13
  12.3. Payment of Awards 13
  12.4. Guidelines 13
13. FORFEITURE AND TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR OR CONSULTANT 13
  13.1. Terms Provided in Award Agreements  13
  13.2. Effect of Termination of Employment on Awards — Employees Only 13
  13.3. Effect of Termination of Engagement on Awards — Non-Employees Only 14
14. REORGANIZATIONS 15
  14.1. Corporate Transactions Not Involving a Change in Control 15
  14.2. Corporate Transactions Involving a Change in Control 15
15. TRANSFERABILITY OF AWARDS 16
  15.1. Transferability 16
  15.2. Domestic Relations Orders 16
16. ARBITRATION 16
17. COMPLIANCE WITH SECTION 409A 16
  17.1. Compliance 16
  17.2. Deferrals 17
18. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION 17
  18.1. Amendment, Modification, Suspension, and Termination 17
  18.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events 17
  18.3. Awards Previously Granted 18
19. WITHHOLDING 18
  19.1. Tax Withholding 18
  19.2. Share Withholding 18
  19.3. Option or SAR Withholding 18
20. SUCCESSORS 19
21. GENERAL PROVISIONS 19
  21.1. Gender and Number 19
  21.2. Severability 19
  21.3. Requirements of Law 19
  21.4. Delivery of Title 19
  21.5. Inability to Obtain Authority 19
  21.6. Investment Representations 19
  21.7. Unfunded Plan 19
  21.8. No Fractional Shares 19
  21.9. Non-Exclusivity of the Plan 20
  21.10. No Constraint on Corporate Action 20
  21.11. Non-Uniform Treatment 20
  21.12. No Employment or Other Continuing Rights 20
  21.13. References to Successor Statutes, Regulations and Rules   20
  21.14. Conflicts   20
  21.15. Governing Law    20

 

  ii  

 

 

HYMC 2020 PERFORMANCE AND INCENTIVE PAY PLAN

 

1. PURPOSE OF PLAN

 

The Corporation has adopted this Plan to promote the interests of the Corporation, its Affiliated Entities and its stockholders by using stock-based and cash-based incentives to attract, retain and motivate its management and other persons, including officers, Directors, key employees and certain Consultants, to encourage and reward such persons’ contributions to the performance of the Corporation and to align their interests with the interests of the Corporation’s stockholders.

 

2. DEFINITIONS

 

Capitalized terms used in the Plan and not otherwise defined shall have the meanings set forth below: “Affiliated Entity” means any corporation or other entity controlled by the Corporation and designated by the Committee as such.

 

Award” or “Awards,” except where referring to a particular category or grant under the Plan, shall include Restricted Stock, Restricted Stock Units, Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights, Performance Shares, Performance Units, Other Stock-Based Awards and Cash-Based Incentive Awards.

 

Award Agreement” means either one of the following, in such form as the Committee shall from time to time approve: (i) an agreement entered into by the Corporation and a Participant setting forth the terms and provisions applicable to an Award; or (ii) a written or electronic statement issued by the Corporation to a Participant describing the terms and provisions of an Award. The Committee may provide for the use of non-paper Award Agreement(s) and acceptance and other actions related thereto that involve the use of electronic, internet, intranet or other non-paper means.

 

Board” or “Board of Directors” means the board of directors of the Corporation.

 

Canadian Taxpayer” means (i) a Participant who is a resident of Canada for purposes of the Tax Act or (ii) a Participant who has exercised employment duties in Canada and whose Award is subject to tax under the Tax Act.

 

Cash-Based Incentive Award” means an Award payable in cash as provided pursuant to Article 12.

 

Cause” shall mean, with respect to any Participant, (i) any material breach of any agreement with the Corporation, any Subsidiary of the Corporation or an Affiliated Entity, including any restrictive covenant set forth therein, that, if curable, remains uncured for thirty (30) days following written notice from the Corporation; (ii) any act of dishonesty, fraud, theft, embezzlement, fraud or misappropriation of funds with respect to the Corporation, any Subsidiary of the Corporation or an Affiliated Entity (including acceptance of any bribes or kickbacks or other acts of self-dealing); (iii) the commission of a felony or a crime involving moral turpitude; (iv) any intentional, grossly negligent or unlawful misconduct or other willful act or omission that causes material harm to the standing, business or reputation of the Corporation, any Subsidiary of the Corporation or an Affiliated Entity; (v) such Participant’s repeated failure to perform his or her duties to, or to comply with lawful directives, rules or policies, of the Corporation, any Subsidiary of the Corporation or an Affiliated Entity; (vi) the violation of any law regarding employment discrimination or sexual harassment; (vii) the unauthorized dissemination of confidential information of the Corporation or any Subsidiary of the Corporation; (viii) any material misrepresentation or materially misleading omission in any resume or other information regarding such Participant (including such Participant’s work experience, academic credentials, professional affiliations or absence of criminal record) provided by or on behalf of such Participant when applying for employment with the Corporation, any Subsidiary of the Corporation or an Affiliated Entity; (ix) the Participant’s repeated and consistent underperformance based on formal feedback; (x) the Participant’s insubordination and/or breach of Corporation ethics; or (xi) the Participant’s refusal or failure to perform specific directives of the Board or any officer or employee to whom such Participant reports to the extent that such directives are lawful and consistent with the scope and nature of the Participant’s duties and responsibilities as an employee or contractor of the Corporation. A Participant’s employment or engagement with the Corporation also shall be deemed terminated for Cause if the Participant resigns from the Corporation and the Board or the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events described above existed as of the time of such resignation. Notwithstanding the foregoing, if the Participant and the Corporation or the Affiliated Entity have entered into an employment or services agreement that defines the term “Cause” (or a similar term), such definition shall govern for purposes of determining whether such Participant has been terminated for Cause for purposes of the Plan.

 

  1  

 

 

 

Change in Control” shall mean the occurrence of any of the following events, each of which shall be determined independently of the others:

 

(i) any Person (as defined herein) becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of at least 30% of the stock of the Corporation entitled to vote in the election of directors of the Corporation. For purposes of this definition, the term “Person” is used as such term is used in Sections 13(d) and 14(d) of the Exchange Act;

 

(ii) the individuals who are Continuing Directors (as hereinafter defined) of the Corporation cease to constitute a majority of the members of the Board of Directors. For purposes of this definition, “Continuing Directors” shall mean the members of the Board on the Effective Date, provided that any person becoming a member of the Board of Directors subsequent to the Effective Date whose election or nomination for election was supported by at least a majority of the directors who then comprised the Continuing Directors shall be considered to be a Continuing Director;

 

(iii) the stockholders of the Corporation adopt and consummate a plan of complete or substantial liquidation or an agreement providing for the distribution of all or substantially all of the assets of the Corporation;

 

(iv) the Corporation is a party to a merger, consolidation, amalgamation, plan of arrangement, other form of business combination or a sale of all or substantially all of its assets, with an unaffiliated third party, unless the business of the Corporation following consummation of such merger, consolidation, amalgamation, plan of arrangement or other business combination is continued following any such transaction by a resulting entity (which may be, but need not be, the Corporation) and the stockholders of the Corporation immediately prior to such transaction hold, directly or indirectly, at least 30% of the voting power of the resulting entity; provided, however, that a merger, consolidation, amalgamation, plan of arrangement or other business combination effected to implement a recapitalization of the Corporation (or similar transaction) shall not constitute a Change in Control; or

 

(v) there is a change in control of the Corporation of a nature that is reported in response to item 5.01 of Current Report on Form 8-K or any similar item, schedule or form under the Exchange Act, as in effect at the time of the change, whether or not the Corporation, is then subject to such reporting requirements.

 

Change in Control Price” means, if the Change in Control is the result of a tender or exchange offer, merger or other corporate transaction, the highest price per share of Common Stock paid in such tender or exchange offer, merger or other corporate transaction. Otherwise, “Change in Control Price” means the Fair Market Value of a share of Common Stock upon the Change in Control. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non-cash consideration, the value of such securities or other non-cash consideration shall be determined in the sole discretion of the Committee.

 

Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

Committee” means the Compensation Committee consisting of two or more members of the Board, each of who shall meet the requirements for (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) an “independent director” under the NYSE American and other applicable listing rules and any other required independence standards.

 

Common Stock” means the Class A common stock of the Corporation.

 

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Corporation” means Hycroft Mining Holding Corporation, a Delaware corporation.

 

Consultant” means any consultant or advisor if:

 

(a) the consultant or advisor renders bona fide services to the Corporation or any Affiliated Entity for a period of at least 12 months and, in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or an Affiliated Entity;

 

(b) the services rendered by the consultant or advisor are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Corporation’s securities; and

 

(c) the consultant or advisor is a natural person who has contracted directly with the Corporation, any Subsidiary of the Corporation or an Affiliated Entity to render such services under a written contract.

 

Deferred Payment Date” means, for a Participant, the date after the Period of Restriction to which the Participant has elected to defer payment with respect to a Restricted Stock Unit Award.

 

Director” means a member of the Board of Directors who is not an Employee (including any director who has retired as an Employee).

 

Effective Date” means May 29, 2020.

 

Eligible Person” means any Employee, Director or Consultant of the Corporation, any Subsidiary of the Corporation or of any Affiliated Entity.

 

Employee” means any officer or other employee of the Corporation, any Subsidiary of the Corporation or any Affiliated Entity.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Exercise Price” means the price at which the shares of Common Stock underlying an Option or SAR may be purchased upon exercise thereof.

 

Expiration Date” means the tenth (10th) anniversary of the Effective Date.

 

Fair Market Value” means, as applied to a specific date, the price of a share of HYMC Class Common A Stock that is based on the opening, closing, actual, high, low or average selling prices of a share of HYMC Class Common A Stock reported on any established stock exchange or national market system including without limitation the New York Stock Exchange and the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Compensation Committee in its discretion. Unless the Compensation Committee determines otherwise or unless otherwise specified in an award agreement, Fair Market Value shall be deemed to be equal to the closing price of a share of HYMC Class Common A Stock on the most recent date on which shares of HYMC Class Common A Stock were publicly traded. Notwithstanding the foregoing, if the HYMC Class Common A Stock is not traded on any established stock exchange or national market system, the Fair Market Value means the price of a share of HYMC Class Common A Stock as established by the Compensation Committee acting in good faith based on a reasonable valuation method that is consistent with the requirements of Section 409A of the Code and the regulations thereunder.

 

Incentive Stock Option” or “ISO” means a Stock Option that qualifies as an incentive stock option under Section 422 of the Code.

 

Insider” means:

 

(a) the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer of the Corporation, of a Significant Stockholder of the Corporation or of a major Subsidiary of the Corporation;

  

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(b) a Director, or a director of a Significant Stockholder of the Corporation or of a major Subsidiary of the Corporation;

 

(c) a person or company responsible for a principal business unit, division or function of the Corporation;

 

(d) a Significant Stockholder of the Corporation;

 

(e) a Significant Stockholder based on post-conversion beneficial ownership of the Corporation’s securities and the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer and every director of the Significant Stockholder of the Corporation based on post-conversion beneficial ownership;

 

(f) a management company that provides significant management or administrative services to the Corporation or a major Subsidiary of the Corporation, every director of the management company, every Chief Executive Officer, Chief Financial Officer and Chief Operating Officer of the management company, and every significant stockholder of the management company;

 

(g) an individual performing functions similar to the functions performed by any of the insiders described in paragraphs (a) to (f); or

 

(h) any other insider that:

 

(i) in the ordinary course receives or has access to information as to material facts or material changes concerning the Corporation before the material facts or material changes are generally disclosed; and

 

(ii) directly or indirectly exercises, or has the ability to exercise, significant power or influence over the business, operations, capital or development of the Corporation.

 

“Key Employee” means a Participant if the Participant meets the requirements of Section 416(i)(1)(A)(i), (ii), or (iii) of the Code (applied in accordance with the Regulations and disregarding Section 416(i)(5)) of the Code) at any time during the 12-month period ending on the specified employee identification date (as such term is defined in Section 1.409A-1(i)(3) of the Regulations).

 

Non-qualified Stock Option” means a Stock Option that is not an Incentive Stock Option.

 

Option” or “Stock Option” means a right to purchase Common Stock granted under Article 8 to an Eligible Person.

 

Other Stock-Based Award” means an equity-based or equity-related Award of a type other than those described in Articles 7 – 10, and which is granted pursuant to Article 11.

 

Participant” means any Eligible Person who has received an Award under the Plan or such Eligible Person’s successor in interest.

 

Performance Period” means the period of time during which performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

 

Performance Share” means an Award granted to a Participant pursuant to Article 10, denominated in shares of Common Stock, the value of which at the time it is payable is determined based on actual results of the corresponding performance criteria.

 

Performance Unit” means an Award granted to a Participant pursuant to Article 10, denominated in units, the value of which at the time it is payable is determined based on actual results of the corresponding performance criteria.

 

Period of Restriction” means the period when Restricted Stock or Restricted Stock Units (or other types of Awards as may be applicable) are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or on the occurrence of other events as determined by the Committee, in its discretion), as provided in the Plan and/or the applicable Award Agreement.

 

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Permanent Disability” shall mean that the Participant becomes physically or mentally incapacitated or disabled so that the Participant is unable to perform substantially the same services as the Participant performed prior to incurring such incapacity or disability (the Corporation, at its option and expense, being entitled to retain a physician to confirm the existence of such incapacity or disability, and the determination of such physician to be binding upon the Corporation and the Participant), and such incapacity or disability continues for a period of three consecutive months or any six months in any 12-month period or such other period(s) as may be determined by the Committee with respect to any Award; provided, however, that if the Participant and the Corporation or the Affiliated Entity have entered into an employment or services agreement which defines the term “Permanent Disability” (or a similar term), such definition shall govern for purposes of determining whether such Participant is subject to a Permanent Disability for purposes of the Plan. Notwithstanding the foregoing, (i) for purposes of determining the period during which an Incentive Stock Option may be exercised pursuant to Section 13.2.1 hereof, “Permanent Disability” shall mean “permanent and total disability” as defined in Section 22(e)(3) of the Code and (ii) for purposes of an Award subject to Section 409A, “Permanent Disability” shall mean disabled” as set forth in Section 409A(a)(2)(C) of the Code.

 

Plan” means this HYMC 2020 Performance and Incentive Pay Plan of the Corporation, as amended, supplemented or restated from time to time.

 

Plan Term” means the period during which the Plan remains in effect (commencing on the Effective Date and ending on the Expiration Date).

 

Regulations” means the regulations, as amended from time to time, which are issued under Section 409A of the Code.

 

Reorganization” means any merger, consolidation, sale or other disposition of all or substantially all of the assets of the Corporation or other reorganization.

 

Representative” means an executor, administrator, guardian, trustee or other representative of a Participant who has legal authority to exercise such Participant’s Options or Stock Appreciation Rights or rights under other types of Awards on behalf of such Participant or such Participant’s estate.

 

Restricted Stock” means Common Stock granted under the Plan which is subject to certain restrictions and to a risk of forfeiture.

 

Restricted Stock Unit” means a right granted under the Plan to receive Common Stock, cash or a combination thereof at the end of a specified period (except that Canadian Taxpayers may only receive Common Stock), which is subject to certain restrictions and to a risk of forfeiture.

 

“Section 409A” means Section 409A of the Code.

 

Separation from Service” means separation from service as defined in Section 1.409A-1(h) of the Regulations.

 

Significant Stockholder” is a person who, at the time an Award is granted to such person under the Plan, owns more than 10% of the combined voting power of all classes of stock of the Corporation or of any Affiliated Entity (after application of the attribution rules set forth in Treas. Reg. § 1.424-1(d)).

 

Specified Employee” means any Participant who, as of the date of the Participant’s Separation from Service, is a Key Employee of the Company but only if any stock of the Company is publicly traded on an established securities market or otherwise. If a Participant is a Specified Employee as of the specified employee identification date, the Participant is treated as a Specified Employee for the entire 12-month period beginning on the specified employee effective date (as such term is defined in Section 1.409A-1(i)(4) of the Regulations). The Committee may, in compliance with the Regulations: (a) elect the definition of compensation which shall be used to determine whether a Participant is a Specified Employee, (b) designate the specified employee identification date, (c) designate the specified employee effective date and (d) make such other determinations as may be necessary, advisable or convenient to determine whether any Participant is a Specified Employee. In the absence of any designation by the Committee, the specified employee identification date shall be December 31 and the specified employee effective date shall be the first day of

the fourth month following the specified employee identification date.

 

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Stock Appreciation Right” or “SAR” means a right of the type described in Article 9.

 

Subsidiary” means any subsidiary corporation as defined in Section 424(f) of the Code.

 

Tax Act” means the Income Tax Act (Canada).

 

3. EFFECTIVE DATE AND TERM OF PLAN

 

3.1. Term of Plan; Amendment and Restatement. This Plan became effective as of the Effective Date and all Awards shall be governed by the Plan, as amended from time to time in accordance with Article 18. This Plan shall continue in effect until the Expiration Date, at which time the Plan shall automatically terminate.

 

3.2. Effect on Awards. Awards may be granted during the Plan Term. No Awards may be granted after the Plan Term. Notwithstanding the foregoing, each Award properly granted under the Plan during the Plan Term shall remain in effect after termination of the Plan until such Award has been exercised, terminated or expired, as applicable, in accordance with its terms and the terms of the Plan.

 

3.3. Stockholder Approval. This Plan will be submitted for approval by the Corporation’s stockholders on no later than May 29, 2020.

 

4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

 

4.1. Number of Shares Available for Awards.

 

4.1.1. Share Authorization. Subject to adjustment as provided in Section 4.3, the maximum number of shares of Common Stock available for issuance to Participants under the Plan on or after the Effective Date (the “Share Authorization”) shall be 2,508,002 shares, which may be issued entirely through Incentive Stock Options or through a combination of any one or more of the forms of Awards permitted under the Plan. The shares of Common Stock available for issuance under the Plan may be authorized and unissued shares or treasury shares.

 

4.1.2. Shares Available for Future Grant. Shares of Common Stock covered by an Award shall only be counted against the Share Authorization to the extent they are actually issued, provided, that, if any shares of Common Stock subject to an Award are forfeited, an Award expires or otherwise terminates without issuance of shares of Common Stock subject to such Award, or an Award is settled for cash (in whole or in part) or otherwise does not result in the issuance of all or a portion of the shares of Common Stock subject to such Award (including on payment in shares of Common Stock on exercise of a Stock Appreciation Right), such shares of Common Stock shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, be available again for grant under the Plan. In the event that (i) any Option or other Award granted hereunder is exercised through the tendering of shares of Common Stock (either actually or by attestation) or by the withholding of shares of Common Stock by the Corporation, or (ii) withholding tax liabilities arising from such Option or other Award are satisfied by the tendering of shares of Common Stock (either actually or by attestation) or by the withholding of shares of Common Stock by the Corporation, then in each such case the shares of Common Stock so tendered or withheld shall be added to the shares of Common Stock and available again for grant under the Plan for Awards other than Incentive Stock Options.

 

4.1.3. Limit on Grants to Directors. Subject to Section 4.1.4, the maximum aggregate number of shares of Common Stock that may be granted to Directors under the Plan shall be limited to 376,200.

 

4.1.4. Limit on Grants to Insiders. The maximum aggregate number of shares of Common Stock that may be issuable to Insiders under the Plan and all other security based compensation arrangements of the Corporation at any time shall not exceed 10% of the total number of shares of Common Stock then outstanding. The aggregate number of shares of Common Stock that may be issued to Insiders under the Plan and all other security-based compensation arrangements of the Corporation, within a one-year period, shall not exceed 10% of the total number of shares of Common Stock then outstanding.

 

4.2. Annual Award Limits. The following limits (“Annual Award Limits”) shall apply to grants of such Awards under the Plan, subject to any adjustments pursuant to Section 4.3 or 18.2.

 

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4.2.1. Restricted Stock or Restricted Stock Units. The aggregate maximum number of shares of Common Stock that may be subject to Awards of Restricted Stock or Restricted Stock Units granted in any one calendar year to any one Participant shall be 1,000,000.

 

4.2.2. Options and SARs. The aggregate maximum number of shares of Common Stock that may be subject to Awards of Options (including ISOs) or SARs granted in any one calendar year to any one Participant shall be 1,000,000.

 

4.2.3. Performance Shares and Performance Units. The aggregate maximum number of shares of Common Stock that may be subject to Awards of Performance Shares or Performance Units granted in any one calendar year to any one Participant shall be 1,000,000.

 

4.2.4. Other Stock-Based Awards. The aggregate maximum number of shares of Common Stock that may be subject to Other Stock-Based Awards granted in any one calendar year to any one Participant shall be 1,000,000.

 

4.2.5. Cash-Based Awards. The aggregate maximum amount of any Cash-Based Awards granted in any one calendar year to any one Participant shall be five million U.S. dollars ($5,000,000).

 

4.2.6. Awards to Directors. Notwithstanding Section 4.1.3, and subject to Sections 4.2.1 –4.2.5, the aggregate maximum number of shares of Common Stock that may be granted in any one calendar year to any Director shall be equal to (x) 1,000,000 divided by (y) the Fair Market Value of a share of Common Stock on the date of grant.

 

4.3. Adjustments in Authorized Shares. If the number of outstanding shares of Common Stock is increased or decreased through a Reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, an appropriate and proportionate adjustment shall be made in: (i) the number of shares of Common Stock included in the Share Authorization in Section 4.1.1 and the share limitation in Sections 4.1.3 and 4.1.4; (ii) the number of shares of Common Stock that may be issued under outstanding Awards; and (iii) the Award limits specified in Section 4.2. Subject to Section 18.1, in the event that the shares of Common Stock are changed into or exchanged for different kinds of shares or other securities of the Corporation through transactions of the type referenced above, or in the event of an extraordinary cash dividend, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under the Plan and in order to preserve the intended benefits of the Plan, may substitute or adjust, as applicable, the number and kind of shares or other securities that may be issued under the Plan or under particular forms of Awards, the number and kind of shares or securities subject to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.

 

Subject to Section 18.1 and any applicable regulatory approval, the Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under the Plan to reflect such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods, in order to preserve the intended benefits of the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. No amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 409A, except as permitted by such Section.

 

5. ADMINISTRATION

 

5.1. General. The Committee shall be responsible for administering the Plan, subject to this Article 5 and the other provisions of the Plan. The Committee may retain attorneys, consultants, accountants, or other advisors. The Committee, the Corporation, and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any such advisors. The fees of any such advisors shall be paid by the Corporation. All actions taken and all interpretations and determinations made by the Committee shall be final and binding on the Participants, beneficiaries, the Corporation, any Subsidiary of the Corporation, any Affiliated Entity and all other interested individuals.

 

5.2. Authority of the Committee. The Committee shall have full and, except as otherwise expressly provided in the Plan, exclusive power and discretion: (i) to interpret the terms and the intent of the Plan and any Award Agreement or other agreement or document ancillary to or entered into in connection with the Plan, and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper; (ii) to select Participants; (iii) to establish the terms and conditions of all Awards, including the terms and conditions to be set forth in Award Agreements; (iv) to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Corporation; and (v) subject to Article 18, to adopt modifications and amendments to the Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the jurisdictions in which the Corporation and/or its Affiliated Entities operate or may operate.

 

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5.3. Delegation. The Committee, in its sole discretion, may delegate the Committee’s authority and duties under the Plan to the Chief Executive Officer of the Corporation, or to any other committee, in either case to the extent permitted under applicable law, under such conditions and limitations as the Board or the Committee may from time to time establish, except that only the Committee may make any determinations regarding Awards to Participants who are subject to Section 16 of the Exchange Act.

 

5.4. No Liability. No member of the Board or the Committee or any designee thereof will be liable for any action or inaction with respect to the Plan or any Award or any transaction arising under the Plan or any Award, except in circumstances constituting bad faith of such member.

 

6. ELIGIBILITY

 

Only Eligible Persons shall be eligible to receive Awards under the Plan and may be selected from time to time to receive Awards by the Committee, in its sole and absolute discretion.

 

7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

7.1. Grant of Restricted Stock and Restricted Stock Units. The Committee may grant Restricted Stock Awards and/or Restricted Stock Units to any Eligible Persons, except that a Restricted Stock Award may not be granted to an Eligible Person that is a Canadian Taxpayer.

 

7.2. Restricted Stock or Restricted Stock Unit Award Agreement. Each Award of Restricted Stock and/or Restricted Stock Units shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, the Period(s) of Restriction, the number of shares of Restricted Stock or the number of Restricted Stock Units granted, vesting terms (which can include, without limitation, time-based or performance-based terms) and such other provisions as the Committee shall determine in its discretion.

 

7.3. Other Restrictions. The Committee may impose such other conditions and/or restrictions on any shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, time-based restrictions, and/or restrictions under applicable laws, rules and regulations or under the requirements of any stock exchange or market upon which such shares of Common Stock are listed or traded, holding requirements or sale restrictions placed on the shares by the Corporation upon vesting of such shares of Restricted Stock or Restricted Stock Units, a requirement that Participants pay a stipulated purchase price for each share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, and/or time-based restrictions on vesting.

 

Except as otherwise provided in this Article 7, and subject in all cases to the requirements of applicable laws, rules and regulations, shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, shares of Common Stock, or a combination of cash and shares of Common Stock as the Committee, in its sole discretion shall determine, except that Restricted Stock Units shall only be paid in shares of Common Stock to Canadian Taxpayers.

 

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7.4. Certificate Retention or Legend. To the extent that a certificate is issued to evidence shares of Restricted Stock, the Committee may determine in its sole discretion that such certificate shall: (i) be retained by the Corporation until such time as all conditions and/or restrictions applicable to such shares have been satisfied or lapse; and/or (ii) bear a legend such as the following or as otherwise determined by the Committee in its discretion: 

 

The sale or transfer of shares of Common Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the HYMC 2020 Performance and Incentive Pay Plan, and in the associated Award Agreement. A copy of such Plan and Award Agreement may be obtained from Hycroft Mining Holding Corporation.

 

7.5. Voting Rights. Issued and outstanding shares of Restricted Stock shall at all times possess the same voting rights as all other issued and outstanding shares of Common Stock. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

 

7.6. Dividends and Dividend Equivalents. Except as the Committee determines otherwise with respect to a particular Award and as set forth in the applicable Award Agreement, issued and outstanding shares of Restricted Stock shall be entitled to dividends if, as and when declared by the Board with respect to the Corporation’s shares of Common Stock on the same basis and on the same payment dates as all other issued and outstanding shares of Common Stock. The Committee may, in its discretion, grant dividend equivalents with respect to any Restricted Stock Units. The terms and conditions of such dividend equivalents, including the rate per Restricted Stock Unit, timing of payment and other requirements, shall be established by the Committee in its discretion, subject to the requirements of Article 17 of the Plan; such dividend equivalents may be paid by crediting the Participant’s account with additional Restricted Stock Units, with the number of such additional Restricted Stock Units determined by dividing the amount of the dividend paid on a share of Common Stock by the Fair Market Value of such shares of Common Stock on the date the dividend was paid, multiplied by the number of Restricted Stock Units credited to the Participant’s account; provided, however, that if an Award under the Plan is subject to vesting based upon the achievement of certain performance goals, any dividend and dividend equivalents, if any, with respect to such Award shall be paid only upon and to the extent that the underlying Award vests.

 

7.7. Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned on the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to promptly file a copy of such election with the Corporation.

 

7.8. Deferred Payment Date. A Participant who is a Canadian Taxpayer may elect to set a Deferred Payment Date with respect to any Restricted Stock Unit Award. To do so, such Participant must give the Committee written notice of the Deferred Payment Date not later than sixty (60) days prior to the expiration of the Period of Restriction. A Participant shall not be permitted to give or change any such notice after the day which is sixty (60) days prior to the expiration of the Period of Restriction. Participants who are United States-based taxpayers may not elect to set a Deferred Payment Date.

 

8. STOCK OPTIONS

 

8.1. Grant of Stock Options. The Committee may grant Option Awards and determine whether an Option will be an Incentive Stock Option or a Non-qualified Stock Option, whether to couple an SAR with an Option, the number of shares of Common Stock to be subject to each Option, the Exercise Price, the number of installments, if any, in which each Option may vest, the expiration date of each Option and all other terms and conditions of each Option. Incentive Stock Option Awards may be granted only to Participants who are Employees.

 

8.2. Stock Option Award Agreements. Each Option Award granted pursuant to the Plan shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, terms consistent with the following provisions, and such other provisions as the Committee shall determine in its discretion:

 

8.2.1. Duration. Each Option and all rights associated therewith, shall expire on such date as the Committee may determine, but in no event later than the ten-year anniversary of the date of grant; provided, however, that in the case of an Incentive Stock Option granted to a Significant Stockholder, the date of expiration may in no event be later than the five-year anniversary of the date of grant. Notwithstanding the foregoing, an Option held by a Participant will be subject to a limited extension of 10 business days if so provided in the Award Agreement in the event that the expiration date of the Option held by a Participant falls within a trading “blackout” period imposed by the Corporation and applicable to the Participant.

 

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8.2.2. Exercise Price. The Exercise Price for each share of Common Stock that is the subject of an Option shall be determined by the Committee as of the date of grant, subject to adjustment pursuant to Section 18.2. The exercise price of any Option designated as a Non-qualified Stock Option shall be equal to no less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to such Option on the date of grant. The exercise price of any Option designated as an Incentive Stock Option shall be equal to (i) no less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to such Option on the date of grant, if granted to a Participant other than a Significant Stockholder; and (ii) no less than one hundred ten percent (110%) of the Fair Market Value of the Common Stock subject to such Option on the date of grant, if granted to a Significant Stockholder.

 

8.2.3. Vesting. Each Option granted under the Plan shall vest and be exercisable in such installments, if any, during the period prior to its expiration date as the Committee shall determine.

 

8.2.4. No Repricing. Except as otherwise permitted as an adjustment pursuant to Section 18.2 or as approved by the Corporation’s stockholders, the Exercise Price of an Option outstanding under the Plan may not be reduced, whether through amendment, exchange, cancellation and re-grant, repurchase or other method.

 

8.3. Exercise of Options.

 

8.3.1. Notice by Participant. Each Participant (or such Participant’s Representative) who desires to exercise an Option shall give advance written notice of such exercise to the Corporation in such form as may be prescribed from time to time by the Committee or the management of the Corporation.

 

8.3.2. Payment of Exercise Price. Except as described in Section 8.3.3, in the discretion of the Committee, the Exercise Price for Stock Options may be payable in the following ways: (a) by cash or by check payable to the Corporation; (b) in shares of Common Stock (which are owned by the Participant free and clear of all liens and other encumbrances and which are not subject to vesting or other restrictions, including those set forth in Article 7) having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price for the shares being purchased;

 

(c) by requesting that the Corporation withhold such number of shares of Common Stock then issuable upon the exercise of the Stock Option as will have an aggregate Fair Market Value equal to the Exercise Price for the shares being acquired upon exercise of the Stock Option;

 

(d) by waiver of compensation due or accrued to the Participant for services rendered;

 

(e) provided that a public market for the Common Stock exists, and to the extent permitted by the Sarbanes-Oxley Act of 2002 and other applicable law:

 

(i) through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA Dealer”) whereby the Participant irrevocably elects to exercise the Stock Option and sell a portion of the shares so purchased to pay the Exercise Price (or a larger number of the shares so purchased), and whereby the FINRA Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Corporation (and any excess to the Participant); or

 

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(ii) through a “margin” commitment from the Participant and a FINRA Dealer whereby the Participant irrevocably elects to exercise the Stock Option and to pledge the shares so purchased to the FINRA Dealer in a margin account as security for a loan from the FINRA Dealer in the amount of the purchase price, and whereby the FINRA Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Corporation; or

 

(f) by any combination of the foregoing.

 

If the Exercise Price for a Stock Option is paid in whole or in part in shares of Common Stock, any portion of the Exercise Price representing a fraction of a share must be paid in cash. When full payment of the Exercise Price has been made to the Corporation, the Participant will be considered for all purposes the owner of the shares with respect to which payment has been made, subject to the restrictions set forth in the Plan or in the Award Agreement.

 

8.3.3. Payment of Exercise Price — Canadian Participants. Notwithstanding the terms of Section 8.3.2, with respect to Options held by Participants who are residents of Canada for purposes of the Income Tax Act (Canada) or Participants who were granted Options, all or partially, in respect of employment rendered in Canada, the payment of the Exercise Price associated with an Option may only be made in cash or by check payable to the Corporation.

 

8.3.4. Exercise by Participant’s Spouse. Unless otherwise provided in an Award Agreement, an Option shall be exercisable during the Participant’s lifetime only by the Participant (or, in the case of the incapacity of the Participant, by the Participant’s Representative) regardless of any community property interest therein of the spouse of the Participant, or such spouse’s successors in interest. If the spouse of the Participant shall have acquired a community property interest in such Option, the Participant, or the Participant’s Representative, may exercise the Option on behalf of the spouse of the Participant or such spouse’s successors in interest.

 

8.4. Special Provisions for Incentive Stock Options. In addition to the limitation applicable to Incentive Stock Options in Section 4.2.2, to the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock underlying an Incentive Stock Option granted to a Participant under the Plan (and any other option plans of the Corporation) that become exercisable for the first time by the Participant during any calendar year exceeds $100,000 (or, if different, the maximum limitation in effect at the time of grant under Section 422 of the Code, or any successor provision), the portion of such Incentive Stock Option in excess of $100,000 (or, if different, such maximum limitation) will be treated as a Non-qualified Stock Option. Except in the case of the Participant’s death or Permanent Disability, the portion of any Incentive Stock Option not exercised within three months after termination of employment with the Corporation and its Affiliated Entities will be treated as a Non-qualified Stock Option.

 

9. STOCK APPRECIATION RIGHTS

 

9.1. Grant of Stock Appreciation Rights. The Committee may grant an Award of Stock Appreciation Rights in connection with an Option Award (“Tandem SAR”) or independently of any Option Award (“Freestanding SAR”).

 

9.2. SAR Award Agreement. Each SAR Award granted pursuant to the Plan shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, terms consistent with the following provisions, and such other provisions as the Committee shall determine in its discretion:

 

9.2.1. Duration. Each SAR, and all rights associated therewith, shall expire on such date as the Committee may determine, but in no event later than the ten-year anniversary of the date of grant, subject to a limited extension of 10 business days if so provided in the Award Agreement in the event that the expiration date of an Award held by a Participant falls within a trading “blackout” period imposed by the Corporation and applicable to the Participant.

 

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9.2.2. Exercise Price. The Exercise Price for each share of Common Stock that is the subject of a SAR shall be determined by the Committee and shall not be less than the Fair Market Value of a share of Common Stock on the date of grant, subject to adjustment pursuant to Section 18.2.

 

9.2.3. Vesting. Unless otherwise specified in an Award Agreement, each SAR granted under the Plan shall vest and be exercisable in such installments, if any, during the period prior to its expiration date as the Committee shall determine.

 

9.2.4. No Repricing. Except as otherwise permitted as an adjustment pursuant to Section 18.2 or as approved by the Corporation’s stockholders, the Exercise Price of a SAR outstanding under the Plan may not be reduced, whether through amendment, exchange, cancellation and re-grant, repurchase or other method.

 

9.2.5. Exercise of Tandem SAR. A Tandem SAR shall be exercisable to the extent, and only to the extent, the associated Option is exercisable and shall be exercisable only for such period as the Committee may determine. Upon exercise of a Tandem SAR, the Participant shall be required to surrender to the Corporation unexercised the Option to which it relates, or any portion thereof.

 

9.2.6. Exercise of Freestanding SAR. A Freestanding SAR may be exercised in accordance with the terms of the applicable Award Agreement.

 

9.2.7. Receipt of Shares or Cash Upon Exercise. Upon exercise of a SAR, the Participant shall receive that number of shares of Common Stock (rounded down to the nearest whole number) having an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock over the Exercise Price per share specified in the applicable Award Agreement, multiplied by the number of shares of Common Stock subject to the SAR, or portion thereof, which is exercised. However, the Committee may elect to settle, or the Award Agreement may permit the Participant to elect to receive (subject to approval by the Committee), any part or all of the Corporation’s obligation arising out of the exercise of the SAR by the payment of cash equal to the aggregate Fair Market Value of that part or all of the shares of Common Stock it would otherwise be obligated to deliver.

 

10. PERFORMANCE SHARES AND PERFORMANCE UNITS

 

10.1. Grant of Performance Shares and Performance Units. The Committee may grant Performance Shares and/or Performance Units to Eligible Persons.

 

10.2. Performance Share or Performance Unit Award Agreement. Each Award of Performance Shares or Performance Units shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, any performance metrics, vesting provisions and expiration date, and such other provisions as the Committee shall determine in its discretion.

 

10.3. Value of Performance Shares and Performance Units. Each Performance Share shall have an initial value based on one share of Common Stock on the date of grant. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance metrics in its discretion that, depending on the actual performance results, will determine the number

and/or value of the Performance Shares and Performance Units that will be paid to the Participant.

 

10.4. Earning of Performance Shares and Performance Units. After the applicable Performance Period has ended, the holder of Performance Shares or Performance Units shall be entitled to receive a payout on the value and number of Performance Shares or Performance Units earned by the Participant over the Performance Period, if such payout is due as determined based on the actual results of the corresponding performance criteria.

 

10.5. Form and Timing of Payment of Performance Shares and Performance Units. Payment of earned Performance Shares and Performance Units shall be made as determined by the Committee and as set forth in the applicable Award Agreements. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Shares and Performance Units in the form of shares of Common Stock or in cash (or a combination thereof) equal to their value, if any, at the end of the applicable Performance Period or as soon as practicable thereafter. Shares of Common Stock may be granted subject to any restrictions deemed appropriate by the Committee, as set forth in the applicable Award Agreements.

 

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10.6. No Dividends Payable. Awards of Performance Shares or Performance Units shall not be entitled to dividends with respect to the Corporation’s shares of Common Stock, but, in the discretion of the Committee, may be entitled to dividend equivalents earned and payable to the extent, and at the time, of any payout of such Award.

 

11. OTHER STOCK-BASED AWARDS

 

The Committee may grant Other Stock-Based Awards (which may include unrestricted shares of Common Stock) in such amounts and subject to such terms and conditions as the Committee determines appropriate, and may include, without limitation, Awards that upon grant are fully vested and non-forfeitable. Such Other Stock-Based Awards may entail the issue or transfer of actual shares of Common Stock or payment in cash or otherwise of amounts based on the value of shares of Common Stock. Each Other Stock-Based Award shall be evidenced by an Award Agreement that specifies the material terms and conditions of the Award, including, without limitation, any restrictions or vesting provisions and whether such Award is entitled to dividends or dividend equivalents, and such other provisions as the Committee shall determine in its discretion.

 

12. CASH-BASED INCENTIVE AWARDS

 

12.1. Eligibility. The Committee may grant annual Cash-Based Incentive Awards to Employees in accordance with this Article 12. The terms of each Cash-Based Incentive Award shall be set forth in an Award Agreement.

 

12.2. Annual Awards.

 

12.2.1. Performance Goals. The Committee shall establish objective performance goals for a calendar year Performance Period.

 

12.2.2. Amount of Awards. In conjunction with the establishment of performance goals, the Committee shall adopt an objective formula for determining the respective amount payable under a Cash-Based Incentive Award if and to the extent the performance goals are attained.

 

12.3. Payment of Awards. Cash-Based Incentive Awards will be payable to Participants in cash following written certification by the Committee of attainment of the specified performance goals for the applicable Performance Period, provided, however, that such payments shall be made no later than March 15 of the calendar year following the year of the Performance Period.

 

12.4. Guidelines. The Committee may adopt from time to time written policies for its implementation of this Article 12.

 

13. FORFEITURE AND TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR OR CONSULTANT

 

13.1. Terms Provided in Award Agreements. Except as otherwise determined by the Committee in connection with particular Awards and set forth in the applicable Award Agreements, the provisions of Sections 13.2 and 13.3 shall apply to outstanding Awards held by a Participant at the time of termination of the Participant’s employment or the termination of a Participant’s service as a Director or Consultant.

 

13.2. Effect of Termination of Employment on Awards — Employees Only.

 

13.2.1. Termination. Subject to Section 13.2.2, and except as otherwise provided in an Award Agreement or other written agreement between the Corporation and the Participant, which may be entered into at any time before or after termination of employment of the Participant, in the event of the termination of an Employee Participant’s employment with the Corporation, a Subsidiary of the Corporation or an Affiliated Entity, (i) all of such Participant’s unvested Awards shall expire, terminate and be forfeited, and shall be void for all purposes, immediately on the date such Participant’s employment is terminated; and (ii) all of such Participant’s Awards that are vested on or prior to the date such Participant’s employment is terminated shall not expire for the applicable time period set forth below.

 

(a) Death or Permanent Disability. In the event such Participant’s employment with the Corporation, a Subsidiary of the Corporation or an Affiliated Entity terminates as a result of death or Permanent Disability, such Participant’s then vested Awards shall not expire until the earlier of (1) the date on which such Awards would have expired in accordance with their terms had such Participant remained employed; and (2) the date that is (A) one hundred eighty (180) days after the Participant’s employment is terminated, if the Award is not an Incentive Stock Option; or (B) twelve (12) months after the Participant’s employment is terminated, if the Award is an Incentive Stock Option.

 

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(b) Termination for Cause. In the event such Participant’s employment with the Corporation, a Subsidiary of the Corporation or an Affiliated Entity terminates for Cause, such Participant’s then vested Awards shall expire, terminate and be forfeited upon the date the Participant’s employment is terminated. If such Participant’s employment is suspended pending an investigation of whether such Participant’s employment should be terminated for Cause, all of such Participant’s rights under any Award shall likewise be suspended during the period of such investigation.

 

(c) Other Termination. In the event such Participant’s employment with the Corporation, a Subsidiary of the Corporation or an Affiliated Entity terminates for any reason other than as a result of death, Permanent Disability or for Cause, such Participant’s then vested Awards shall not expire until the earlier of (1) the date on which such Awards would have expired in accordance with their terms had such Participant remained employed; and (2) the date that is thirty (30) days after such Participant’s employment is terminated.

 

13.2.2. Alteration of Vesting and Exercise Periods. Notwithstanding anything to the contrary in Section 13.2.1, the Committee may in its discretion designate shorter or longer periods to claim or otherwise exercise Awards following a Participant’s termination of employment; provided; however, (i) that in no event shall the term to exercise a Stock Option after termination of employment be extended beyond the original maximum term of such Stock Option; and (ii) that any shorter periods determined by the Committee shall be effective only if provided for in the Award Agreement or if such shorter period is agreed to in writing by the Participant. Notwithstanding anything to the contrary herein, Awards shall be claimed or exercisable by a Participant following such Participant’s termination of employment only to the extent that installments thereof had become exercisable on or prior to the date of such termination; provided, however, that the Committee may, in its discretion, elect to accelerate the vesting of all or any portion of any Awards that had not vested on or prior to the date of such termination.

 

13.3. Effect of Termination of Engagement on Awards — Non-Employees Only.

 

13.3.1. Termination. Subject to Section 13.3.2, and except as otherwise provided in an Award Agreement or other written agreement between the Corporation and the Participant, which may be entered into at any time before or after termination of the engagement of the Participant, in the event of the termination of the engagement of a Director or Consultant, (i) all of such Participant’s unvested Awards shall expire, terminate and be forfeited, and shall be void for all purposes, immediately on the date such Director’s or Consultant’s engagement is terminated and (ii) all of such Participant’s Awards that are vested on or prior to the date such Participant’s engagement is terminated shall not expire for the applicable time period set forth below.

 

(a) Death or Permanent Disability. In the event such Participant’s engagement with the Corporation or an Affiliated Entity terminates as a result of death or Permanent Disability, such Participant’s then vested Awards shall not expire until the earlier of (1) the date on which such Awards would have expired in accordance with their terms had such Participant remained engaged; and (2) the date that is one hundred eighty (180) days after the Participant’s engagement is terminated.

 

(b) Termination for Cause. In the event such Participant’s engagement with the Corporation or an Affiliated Entity terminates for Cause, such Participant’s then vested Awards shall expire, terminate and be forfeited upon the date the Participant’s engagement is terminated. If such Participant’s engagement is suspended pending an investigation of whether such Participant’s engagement should be terminated for Cause, all of such Participant’s rights under any Award shall likewise be suspended during the period of such investigation.

 

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(c) Other Termination. In the event such Participant’s engagement with the Corporation or an Affiliated Entity terminates for any reason other than as a result of death, Permanent Disability or for Cause, such Participant’s then vested Awards shall not expire until the earlier of (1) the date on which such Awards would have expired in accordance with their terms had such Participant remained engaged and (2) the date that is thirty (30) days after such Participant’s engagement is terminated.

 

13.3.2. Alteration of Vesting and Exercise Periods. Notwithstanding anything to the contrary in Section 13.3.1, the Committee may, in its discretion, designate shorter or longer periods to claim or otherwise exercise Awards following a Director or Consultant Participant’s termination of engagement; provided, however, (i) that in no event shall the term to exercise a Stock Option after termination of an engagement be extended beyond the original maximum term of such Stock Option; and (ii) that any shorter periods determined by the Committee shall be effective only if provided for in the Award Agreement or if such shorter period is agreed to in writing by the Participant. Notwithstanding anything to the contrary herein, Awards shall be claimed or exercisable by a Participant following such Participant’s termination of engagement only to the extent that the installments thereof had become exercisable on or prior to the date of such termination; provided, however, that the Committee may, in its discretion, elect to accelerate the vesting of all or any portion of any Awards that had not vested on or prior to the date of such termination.

 

14. REORGANIZATIONS

 

14.1. Corporate Transactions Not Involving a Change in Control. If the Corporation shall consummate any Reorganization not involving a Change in Control in which holders of shares of Common Stock are entitled to receive in respect of such shares any securities, cash or other consideration (including, without limitation, a different number of shares of Common Stock), each Award outstanding under the Plan shall be subject to adjustment pursuant to and in accordance with Section 4.3.

 

14.2. Corporate Transactions Involving a Change in Control. Notwithstanding any other provision of the Plan to the contrary, except to the extent otherwise provided in an Award Agreement, in the event of a Change in Control:

 

(a) The Committee shall have the discretion to terminate and cancel, with or without the payment of any consideration, any or all Awards (or portions thereof) that are not vested as of the date of such Change in Control;

 

(b) The Committee shall have the discretion to accelerate the vesting of any or all Awards (or portions thereof) that are not vested as of the date of such Change in Control;

 

(c) The Committee shall have the discretion to remove any restrictions and to terminate any repurchase rights existing with respect to any or all Awards (or portions thereof) as of the date of such Change in Control;

 

(d) Outstanding Awards shall be subject to any agreement of sale, Reorganization or other corporate transaction that effects such Change in Control, which agreement shall provide for one or any combination of the following:

 

(i) The continuation of the outstanding Awards by the Corporation, if the Corporation is a surviving corporation;

 

(ii) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary;

 

(iii) The termination and cancellation, with or without consideration, of any outstanding Award (or portion of any outstanding Award) that is not vested;

 

(iv) The substitution by the surviving corporation or its parent or subsidiary of equivalent awards for the outstanding Awards; or

 

(v) Settlement of each share of Common Stock subject to an outstanding Award that is vested for the Change in Control Price (less, to the extent applicable, the per share Exercise Price), or if the per share Exercise Price equals or exceeds the Change in Control Price, the outstanding Award shall terminate and be canceled immediately prior to giving effect to the Change in Control.

 

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(e) In the absence of any agreement of sale, Reorganization or other corporate transaction effecting such Change in Control, each share of Common Stock subject to an outstanding Award that is vested shall be settled for the Change in Control Price less, to the extent applicable, the per share Exercise Price, or, if the per share Exercise Price equals or exceeds the Change in Control Price, the outstanding vested Award shall terminate and be canceled immediately prior to giving effect to the Change in Control, and each unvested Award shall terminate and be canceled immediately prior to giving effect to the Change in Control without the payment of any consideration therefor.

 

(f) Notwithstanding any provision of the Plan to the contrary, a Participant’s entitlement, if any, to payment pursuant to this Section 14.2 shall be forfeited on the date that is six (6) months following the Change in Control (i) if, by such date, such Participant has not responded to any notice from the Corporation with respect to such Change in Control and has failed to notify the Corporation of a new address to which notices from the Corporation may be delivered in accordance with the terms of the applicable Award Agreement; or (ii) if such Participant fails by such date to provide the Committee with a bank account to which funds can be wired, information necessary for tax withholding or any other information reasonably requested by the Committee.

 

15. TRANSFERABILITY OF AWARDS

 

15.1. Transferability. Unless otherwise provided in an Award Agreement, Awards shall not be transferable either voluntarily or by operation of law other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void.

 

15.2. Domestic Relations Orders. Without limiting the generality of Section 15.1, no domestic relations order purporting to authorize a transfer of an Award or any interest in an Award or to grant the power to exercise an Option or SAR to any person other than a Participant (or his or her Representative) shall be recognized as valid or enforceable.

 

16. ARBITRATION

 

The Committee may, as a condition to granting an Award, require that a Participant agree in writing to submit all disputes or claims arising out of or relating to any such Award to binding arbitration in accordance with such terms as the Committee shall prescribe.

 

17. COMPLIANCE WITH SECTION 409A

 

17.1. Compliance.

 

17.1.1. General. Any Award that is granted under the Plan shall be designed and administered so that the Award is either exempt from the application of, or compliant with, the requirements of Section 409A.

 

17.1.2. Terms of Award Agreement. To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A, the Award Agreement shall include such terms and conditions as the Committee determines, in its discretion, are necessary or advisable to avoid the imposition on the Participant of an additional tax under Section 409A. Notwithstanding any other provision of the Plan or any Award Agreement (unless the Award Agreement provides otherwise with specific reference to this Section): (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted, adjusted or modified under the Plan in a manner that would result in the imposition of an additional tax under Section 409A on a Participant; and (ii) if an Award Agreement with a Participant who is Specified Employee provides for the deferral of compensation within the meaning of Section 409A, no distribution or payment of any amount shall be made before a date that is six (6) months following the date of such Participant’s Separation from Service or, if earlier, the date of the Participant’s death.

 

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17.1.3. No Warranty. Although the Corporation intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A and the Regulations, the Corporation does not warrant that any Award under the Plan will qualify for favorable tax treatment under Section 409A or any other provision of federal, state, local, or non-United States law. Neither the Corporation, its Affiliated Entities nor their respective directors, officers, employees or advisers shall be liable to any Participant (or any other individual claiming a benefit through the Participant) for any tax, interest or penalties the Participant may owe as a result of the grant, holding, vesting, exercise or payment of any Award under the Plan.

 

17.2. Deferrals. Subject to the requirements of Section 17.1, the Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise be due to such Participant by virtue of the lapse or waiver of restrictions with respect to any Award of a type that may be subject to the deferral provisions of Section 409A and the Regulations. If any such deferral election is required or permitted, the Committee shall, prior to requiring or permitting such deferral election, establish written rules and procedures for such payment deferrals that are intended to comply with the requirements of Section 409A and the Regulations including, without limitation, the time when a deferral election can or must be made, the period of the deferral, and the events that would result in payment of the deferred amount.

 

18. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION

 

18.1. Amendment, Modification, Suspension, and Termination. Subject to Sections 17.1 and 18.3, the Board may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan without stockholder approval in whole or in part; provided, however, that, no amendment of the Plan shall be made without stockholder approval if stockholder approval is required by applicable United States or Canadian federal, state, provincial and local laws, rules, regulation, and any governmental or regulatory agency, including the TSX. Furthermore, no amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 409A, except as permitted by such Section. For greater certainty, the Corporation shall submit for stockholder approval any amendment of the Plan required to be submitted for stockholder approval by the TSX or that otherwise would:

 

(a) reduce the Exercise Price that would benefit an Insider;

 

(b) extend the term of Awards granted under the Plan that would benefit an Insider;

 

(c) remove or exceed the Insider and Director participation limits imposed by Section 4.1.4 and Sections 4.1.3 and 4.2.6, respectively;

 

(d) increase the maximum number of shares of Common Stock for which Awards may be granted under the Plan; and

 

(e) amend this Section 18.1.

 

For Subsection 18.1(a) – (c), the votes of securities held directly or indirectly by Insiders benefiting directly or indirectly from the amendment shall be excluded. For Subsection 18.1(d) – (e), the votes of securities held directly or indirectly by Insiders entitled to receive a benefit directly or indirectly under the arrangement shall be excluded unless the arrangement contains the Insider and Director participation limits imposed by Section 4.1.4 and Sections 4.1.3 and 4.2.6, respectively.

 

In addition to the above exclusions, for Subsection 18.1(e), where the amendment will disproportionately benefit one or more Insiders over other participants under the arrangement, the votes of securities held directly or indirectly by those Insiders receiving the disproportionate benefit shall be excluded.

 

18.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. Subject to Section 18.1, the Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3 hereof) affecting the Corporation (or any of its Affiliated Entities) or the financial statements of the Corporation (or any Subsidiary of the Corporation or any of its Affiliated Entities) or of changes in applicable laws, rules, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. No amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 409A, except as permitted by such Section.

 

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18.3. Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.

 

19. WITHHOLDING

 

19.1. Tax Withholding. The Corporation may take such steps as are considered necessary or appropriate for the withholding of any taxes which the Corporation is required to withhold by any law or regulation of any governmental authority whatsoever, without limiting the generality of the foregoing, through (i) the withholding of all or any portion of any payment or (ii) the withholding from the shares of Common Stock to be issued under the Plan a number of whole shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory rates for the Participant for federal, state, provincial and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction. The Corporation, in its discretion, may elect to sell such withheld shares of Common Stock on the market for and on behalf of the Participant or to a broker of the Corporation’s choosing and remit all or a portion of the cash proceeds to the applicable tax authorities to satisfy the applicable withholding requirements. The Participant shall remit to the Corporation in cash any and all applicable withholding taxes that exceed the amount available to the Corporation using whole shares.

 

19.2. Share Withholding. In the discretion of the Committee, any Award other than Options or SARs may provide that a Participant who is an Employee may elect, in accordance with any conditions set forth in such Award, to satisfy in full the tax withholding obligation by authorizing the Corporation to withhold from the shares of Common Stock to be issued under the Plan a number of whole shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory rates for the Participant for federal, state, provincial and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction (with any remainder to be withheld to be satisfied by the Participant remitting that amount to the Corporation in cash). The Corporation, in its discretion, may sell such withheld shares of Common Stock to a broker of the Corporation’s choosing and remit all or a portion of the cash proceeds to the applicable tax authorities to satisfy the applicable withholding requirements. This election and authorization to withhold shares is intended to comply with the requirements of Rule 10b5-1(c)(i)(B) of the Exchange Act and to be interpreted to comply with the requirements of Rule 10b5-1(c) of the Exchange Act.

 

19.3. Option or SAR Withholding. Upon the exercise of a Non-qualified Stock Option or a SAR, the Corporation shall have the right to: (i) require such Participant (or such Participant’s Representative) to pay the Corporation the amount of any taxes which the Corporation may be required to withhold with respect to such exercise; or (ii) deduct from all amounts paid in cash with respect to the exercise of a SAR the amount of any taxes which the Corporation may be required to withhold with respect to such cash amounts. In the discretion of the Committee, any Award may provide that a Participant or such Participant’s Representative may elect to satisfy in full the tax withholding obligations arising from the exercise of an Option or SAR by authorizing the Corporation to withhold from the shares of Common Stock to be issued under the Plan the tax withholding requirements based on the maximum statutory rates for the Participant for federal, state, provincial and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction (with any remainder to be withheld to be satisfied by the Participant remitting that amount to the Corporation in cash). The Corporation, in its discretion, may sell such withheld shares of Common Stock to a broker of the Corporation’s choosing and remit all or a portion of the cash proceeds to the applicable tax authorities to satisfy the applicable withholding requirements. No Participant or Participant’s Representative shall have the right to have shares of Common Stock withheld in excess of the tax withholding requirements based on the maximum statutory rates for the Participant for federal, state, provincial and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction. Shares of Common Stock used in either of the foregoing ways to satisfy tax withholding obligations will be valued at their Fair Market Value on the date of exercise.

 

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20. SUCCESSORS

 

All obligations of the Corporation under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Corporation, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Corporation.

 

21. GENERAL PROVISIONS

 

21.1. Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

 

21.2. Severability. In the event that any provision of the Plan shall for any reason be held illegal, invalid or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law, rule or regulation deemed applicable by the Committee, such provision shall be construed or deemed amended to the minimum extent necessary to conform to such applicable law, rule or regulation or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.

 

21.3. Requirements of Law. The granting of Awards and the issuance of shares of Common Stock under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities or other stock exchanges as may be required.

 

21.4. Delivery of Title. The Corporation shall have no obligation to issue or deliver evidence of title for shares of Common Stock issued under the Plan prior to obtaining any approvals from governmental agencies or national securities or other stock exchanges that the Corporation determines are necessary or advisable; and completion of any registration or other qualification of the shares of Common Stock under any applicable securities, “Blue Sky” or other laws that the Corporation determines to be necessary or advisable.

 

21.5. Inability to Obtain Authority. The inability of the Corporation to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Corporation’s counsel to be necessary to the lawful issuance and sale of any shares of Common Stock hereunder, shall relieve the Corporation of any liability in respect of the failure to issue or sell such shares of Common Stock as to which such requisite authority shall not have been obtained.

 

21.6. Investment Representations. The Committee may require any individual receiving shares of Common Stock pursuant to an Award under the Plan to represent and warrant in writing that the individual is acquiring the shares of Common Stock for investment and without any present intention to sell or distribute such shares of Common Stock.

 

21.7. Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Corporation, any Subsidiary of the Corporation and/or its Affiliated Entities may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and any Participant, beneficiary, legal representative, or any other individual. To the extent that any person acquires a right to receive payments from the Corporation, any Subsidiary of the Corporation or its Affiliated Entities under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Corporation, any Subsidiary of the Corporation or an Affiliated Entity, as the case may be. All payments to be made hereunder shall be paid from the general assets of the Corporation, any Subsidiary of the Corporation or an Affiliated Entity, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.

 

21.8. No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional shares of Common Stock or whether such fractional shares of Common Stock or any rights thereto shall be forfeited or otherwise eliminated.

 

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21.9. Non-Exclusivity of the Plan. The adoption of the Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

 

21.10. No Constraint on Corporate Action. Nothing in the Plan shall be construed to: (i) limit, impair, or otherwise affect the Corporation’s, any Subsidiary’s of the Corporation or an Affiliated Entity’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (ii) limit the right or power of the Corporation, any Subsidiary of the Corporation or an Affiliated Entity to take any action which such entity deems to be necessary or appropriate.

 

21.11. Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among Participants or Eligible Persons (whether or not such individuals are similarly situated). Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements, as to Participants under the Plan and the terms and conditions applicable to Awards made under the Plan.

 

21.12. No Employment or Other Continuing Rights. Nothing contained in the Plan (or in any Award Agreement or in any other agreement or document related to the Plan or to Awards granted hereunder) shall confer upon any Eligible Person or Participant any right to continue in the employ (or other business relationship) of the Corporation, any Subsidiary of the Corporation or any Affiliated Entity or constitute any contract or agreement of employment or engagement, or interfere in any way with the right of the Corporation, any Subsidiary of the Corporation or any Affiliated Entity to reduce such person’s compensation or other benefits or to terminate the employment or engagement of such Eligible Person or Participant, with or without Cause. Except as expressly provided in the Plan or in any Award Agreement pursuant to the Plan, the Corporation shall have the right to deal with each Participant in the same manner as if the Plan and any such Award Agreement did not exist, including without limitation with respect to all matters related to the hiring, retention, discharge, compensation and conditions of the employment or engagement of the Participant. Any questions as to whether and when there has been a termination of a Participant’s employment or engagement, the reason (if any) for such termination, and/or the consequences thereof under the terms of the Plan or any Award Agreement shall be determined by the Committee, and the Committee’s determination thereof shall be final and binding.

 

21.13. References to Successor Statutes, Regulations and Rules. Any reference in the Plan to a particular statute, regulation or rule shall also refer to any successor provision of such statute, regulation or rule.

 

21.14. Conflicts. In case of any conflict between the Plan and any Award Agreement, the Plan shall control.

 

21.15. Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.

 

 

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Exhibit 10.8

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of the date set forth on the last page of this Agreement (the “Effective Date”), is made by and between Hycroft Mining Corporation, a Delaware corporation (the “Company”) and Randy Buffington (the “Executive”).

 

WHEREAS, the Company currently employs the Executive as its President and Chief Executive Officer, and the Company desires to continue to employ the Executive in such capacity; and

 

WHEREAS, the Company and the Executive have reached agreement concerning the terms and conditions of his continuing employment and wish to formalize that agreement; and

 

WHEREAS, this Agreement is intended to replace and supersede in all respects that certain employment agreement dated October 19, 2015 between the Company and the Executive and any amendments thereto; and

 

WHEREAS, the Company is contemplating entering into a transaction with Mudrick Capital Acquisition Corporation, a publicly-traded special purpose acquisition corporation formed by affiliates of Mudrick Capital (“MUDS”), pursuant to which the Company would sell substantially all of the assets of its subsidiaries and certain of its assets and/or all of its common stock (a “Sale Transaction”), and, as a condition thereto, upon consummation of the Sale Transaction this Agreement shall be assigned to and assumed by MUDS.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the Company and the Executive agree as follows:

 

1.            Employment. The Company hereby employs the Executive as President and Chief Executive Officer and the Executive hereby accepts such employment upon the terms and conditions set forth in this Agreement. The Executive will report to the board of directors of the Company (the “Board”). The Executive’s principal office will be at the principal executive offices of the Company in Denver, Colorado; provided, however, it is also understood and expected that the Executive may spend substantial amounts of time at the Company’s primary operating mine in Winnemucca, Nevada (the “Hycroft Mine”).

 

2.            Duties. During the Term, the Executive shall serve as the Chief Executive Officer of the Company. In this capacity, the Executive shall have the duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to the Executive by the Board and that are not inconsistent with the Executive’s position as Chief Executive Officer of the Company. All other employees of the Company shall report, either directly or indirectly, to the Executive. In addition:

 

(a)            The Executive will devote his full time and best efforts, talents, knowledge and experience to serving as the Company’s President and Chief Executive Officer. The Executive will perform his duties diligently and competently and will act in conformity with Company’s written and oral policies and within the limits, budgets and business plans set by the Company. The Executive will at all times during the Term of this Agreement strictly adhere to and obey all of the rules and regulations in effect from time to time relating to the conduct of executives of the Company. The Executive will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or company that, as determined by the Board in its sole discretion, competes, conflicts or interferes with the performance of his duties hereunder in any material way.

 

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(b)            The Executive agrees to serve without additional compensation as an officer and director of any of the Company’s subsidiaries and agrees that any amounts, if any, received from such subsidiary may be offset against the amounts due hereunder.

 

3.           Term. Unless sooner terminated by either party in accordance with the provisions of this Agreement, the term of employment (the “Term”) will commence on the Effective Date and will continue thereafter until the second anniversary of the Effective Date. Unless otherwise provided in this Agreement or mutually agreed by the Company and the Executive, all of the terms and conditions of this Agreement will continue in full force and effect throughout the Term and, with respect to those terms and conditions that apply after the Term, after the Term. Any representation, statement or implication to the contrary is unauthorized and not valid. After the Term hereof, the Executive shall be deemed to be an “at-will” employee during the continuation of his employment by the Company. For purposes of this Agreement, expiration of this Agreement will not be considered a termination other than for Cause (as hereinafter defined) or voluntary termination for Good Reason (as hereinafter defined), provided that the Executive’s employment is not otherwise terminated prior to such expiration date.

 

4.            Compensation and Benefits.

 

(a)             Base Salary. The Company shall pay a base annual salary of US $525,000 (“Base Salary”) to the Executive payable in accordance with the normal payroll practices of the Company and which shall be subject to applicable withholdings, deductions and taxes. The Board, or the Compensation Committee thereof, will review the Executive’s performance and Base Salary annually in February of each year and determine whether to adjust the Executive’s Base Salary on a prospective basis. The first review will be in February 2020. Such adjusted annual salary then will become the Executive’s “Base Salary” for all purposes of this Agreement. The Executive’s annual Base Salary will not be reduced below the Base Salary then in effect, without the Executive’s consent.

 

(b)            Incentive Compensation. The Executive will be eligible to participate in any annual performance bonus plans and long-term incentive plans established or maintained by the Company for its senior executive officers, including, but not limited to, the Annual Incentive Cash Bonus Plan (“Cash Bonus Plan”) or such similar or successor plans as the Company may establish. The Executive’s target incentive cash bonus under the Cash Bonus Plan shall initially be set at 50% of the Executive’s Base Salary with initial performance metrics to be based upon successful financing of the Hycroft Mine development costs, Hycroft Mine operational start up, safety and other metrics to be determined by the Board. After commencement of mining operations, the Company anticipates establishing performance metrics under the Cash Bonus Plan, including: (i) gold and gold equivalent production/sales, (ii) total cash costs of production per gold or gold equivalent ounce, (iii) health and safety, and/or (iv) such other metrics as are determined from time to time by the Board or Compensation Committee thereof. Any bonus earned by the Executive will be paid in accordance with the Company’s standard practice, which shall not be later than March 15 of the year following the end of the calendar year in which the Executive earns and vests in the right to receive the bonus or compensation, unless a written plan document provides a different payment date.

 

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(c)             Equity Compensation. The Executive will be eligible to participate in any equity-based compensation plans established or maintained by the Company for its senior executive officers in connection with the anticipated initial public offering of the common stock, par value $0.001 of the Company (“Common Stock”) and for ongoing annual equity awards. In connection with the Company’s initial public offering of the Common Stock (“IPO”) or otherwise, the Company shall adopt and implement a Long-Term Equity Incentive Plan (“Equity Plan”). The Executive shall be entitled to equity awards initially targeted at 300% of the Executive’s Base Salary, with 50% of such awards initially in the form of performance-based equity awards with vesting tied to satisfaction of performance-based metrics (the “Performance-Based Equity Awards”) to be determined by the Board or Compensation Committee thereof at the end of the performance period, and with the remaining 50% of such awards initially in the form of time-based equity awards with vesting based upon continued employment by the Company (the “Time-Based Equity Awards”), with 50% of the Time-Based Equity Awards vesting after one (1) year of continued employment and 50% of the Time-Based Equity Awards vesting after two (2) years of continued employment. The Performance-Based Equity Awards and the Time-Based Equity Awards will initially be in the form of restricted stock units convertible upon vesting into shares of Common Stock of the Company (or any successor thereto) subject to the terms and conditions set forth in written equity award agreements, with the number of units to be awarded to be determined by an enterprise value of $350 million, reflecting the anticipated value of the Sale Transaction. The foregoing initial equity award agreements shall include the following additional non-exclusive vesting terms: (i) in the event of an equity investment (x) at a pre-money enterprise value in excess of $500 million and (y) in which the holders of the Company’s outstanding 1.5 lien secured notes (“1.5 Lien Notes”) and the holders of the Company’s outstanding second lien secured convertible notes (“Second Lien Notes”) have the right to receive cash in the aggregate amount of at least 33% of outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest) of such 1.5 Lien Notes and Second Lien Notes, or (ii) a transaction, other than an acquisition by MUDS or its affiliates, in which the holders of the Company’s outstanding 1.5 Lien Notes and Second Lien Notes receive cash or liquid securities in exchange or satisfaction and payment of the outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest and any premiums due and payable) of such 1.5 Lien Notes and Second Lien Notes (collectively, a “Liquidity Event”), then upon closing of such Liquidity Event vesting of such equity awards shall accelerate and such equity awards shall be fully vested; and (iii) in the event of a Change in Control transaction of the Company (as hereinafter defined), other than the Sale Transaction with MUDS which for purposes of this Agreement shall not constitute a Change in Control, then if the Executive is terminated within 90 days prior to the consummation of such Change in Control transaction or within 12 months following the consummation of such Change in Control transaction, then vesting of such equity awards shall accelerate and such equity awards shall be fully vested.

 

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(d)             Retention Bonus Plan. During the Executive’s employment by the Company or its subsidiaries, the Executive shall continue to participate in the Hycroft Mining Corporation Retention Bonus Plan (“Retention Bonus Plan”). While the Executive participates in the Retention Bonus Plan and subject to the terms of such plan, the Executive shall be eligible to receive the Retention Bonuses outlined on Schedule A thereto, which includes the MIP Bonus that constitutes part of the Third Retention Bonus, as such terms are defined in the Retention Bonus Plan. For avoidance of doubt, an acquisition by MUDS pursuant to the Sale Transaction will trigger the payment to the Executive of the Third Retention Bonus, including the MIP Bonus. Notwithstanding the foregoing, the Company shall have the right to amend or terminate the Retention Bonus Plan at any time by resolution of the Board or Compensation Committee thereof; provided, however, that no amendment that would have an adverse effect on the Executive’s right to, or the amount of, a Retention Bonus shall be effective any earlier than the second anniversary of any such resolution, and provided, further, that the termination of the Retention Bonus Plan shall not be effective any earlier than the second anniversary of the adoption of any such resolution (except as required by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)).

 

(e)             Benefits. During his employment, the Executive shall be entitled to participate in or benefit from, in accordance with the eligibility and other provisions thereof, benefit plans and policies such as medical, dental, disability, insurance, retirement savings plans or other fringe benefit plans or policies as the Company may make available to, or have in effect for, its senior executive officers. The Company reserves the right to modify, suspend or discontinue any and all of the plans, practices, policies and programs at any time without recourse by the Executive, so long as the Company takes such action generally with respect to other similarly situated senior executive officers.

 

(f)             Vacation and Sick Leave. The Executive will be entitled to vacation and sick leave in accordance with the Company’s vacation and sick leave policy for senior executive officers, but in no event less than four weeks per calendar year. Unused vacation will not be carried over to the next calendar year.

 

(g)             Reimbursement of Business Expenses. The Company agrees to reimburse the Executive for reasonable out-of-pocket expenses incurred in connection with Company business, including without limitation, travel and accommodations for authorized business trips, and within standards to be established by the Board, provided receipts, invoices or other supporting documentation satisfactory to the Company supporting the expenses are presented to the Company.

 

5.            Payments on Termination of Employment.

 

(a)            Termination of Employment for any Reason. Upon termination of the Executive’s employment for any reason, including without limitation, the expiration of this Agreement, the Company will pay or provide the following to the Executive upon his termination of employment from the Company for any reason:

 

(i)            Earned but unpaid Base Salary through the date of termination;

 

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(ii)          Any annual incentive bonus, or other form of incentive compensation, for which the performance measurement period has ended and the Executive has become eligible and earned in accordance with Section 4(b) above, but which is unpaid at the time of termination;

 

(iii)         Any amounts payable to the Executive under any of the Company’s executive benefit plans (other than any severance or termination pay plan) in accordance with the terms of those plans;

 

(iv)         Unreimbursed business expenses incurred by the Executive on the Company’s behalf; and

 

(v)          Continued coverage under the Company’s group health plan for the Executive during the COBRA continuation period; provided that the Executive timely elects COBRA continuation coverage and pays the applicable COBRA rate for such continued coverage.

 

(b)           Termination of Employment for Death or Disability. If the Executive’s termination of employment occurs by reason of death or Disability (as defined below), in addition to the amounts payable and benefits provided under Section 5(a) above, the Company will pay the Executive (or his estate) a pro rata portion of any bonus payable under the Company’s Cash Bonus Plan and/or Retention Bonus Plan, as the case may be, for the year in which such termination occurs determined based on the actual bonus attained for the fiscal year in which such termination occurs.

 

For purposes of this Agreement, “Disability” means the Executive’s long-term disability as defined by and determined under the Company’s long-term disability plan, or if the Executive is not covered by a long-term disability plan sponsored by the Company the Executive’s inability (as determined by the Board or Compensation Committee thereof in its discretion) to engage in any substantial gainful activity by reason of any medically-determined physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration.

 

(c)            Termination by the Company other Than for Cause or Voluntary Termination by the Executive for Good Reason. If the Company terminates the Executive’s employment other than for Cause, or if the Executive voluntarily terminates his employment for Good Reason, in addition to the amounts payable under Section 5(a) above and in lieu of the benefit provided in Section 5(a)(v) above, and subject to the provisions under this Section 5(c), Section 9(a) and Section 9(f), the Company will pay the following amounts and provide the following benefits to the Executive:

 

(i)            An amount in cash equal to 1.5 multiplied by the Executive’s Base Salary. This amount will be paid in equal installments during the 18 month period after termination in accordance with the Company’s normal payroll practices, provided, however, that any installments that would otherwise be payable within the first 60 days following the date of the Executive’s termination will be paid to the Executive on the 60th day following such termination.

 

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(ii)           Continued coverage under the Company’s medical, dental, life, and disability plans through the 18-month anniversary of the date that Executive’s employment was terminated, at the same cost to the Executive as in effect on the date of the Executive’s termination. Any continuation of group health plan benefits is conditioned upon the Executive timely electing COBRA continuation coverage and timely paying his share of the premium. If the Company determines that the Executive cannot participate in any benefit plan because he is not actively performing services for the Company, the Company may provide such benefits under an alternate arrangement, such as through the purchase of an individual insurance policy that provides similar benefits or a lump sum cash payment equal to the cost that the Company would have paid under the plan(s) for which coverage would have otherwise been available. Any cash amounts payable under an alternative arrangement will be paid to the Executive on the 60th day after the date of the Executive’s termination; provided, however, that any alternative arrangement provided through an insurance policy (e.g., health care and disability insurance) will be paid when the related premiums are due to the insurer.

 

(iii)          Professional outplacement services from a nationally recognized outplacement firm selected by the Executive provided to the Executive until the earlier of (A) $15,000 in the aggregate to be paid by the Company to such outplacement firm on behalf of the Executive, or (B) 12 months after the Executive’s termination date, whichever occurs first.

 

Notwithstanding anything to the contrary in this Agreement, any obligation of the Company to provide any payment, coverage or benefit described in this Section 5(c) is conditioned upon (A) the Executive’s execution and delivery to the Company of a valid General Release Agreement (a “Release”) in the form prepared by the Company within 25 days of the date of the Executive’s termination and (B) the Executive’s refraining from revoking the Release as permitted therein. The Executive’s failure to execute the Release within the later of 45 days of the date of the Executive’s termination or 25 days after receipt by the Executive of the Release, or his revocation of the Release, will result in forfeiture of any payment, coverage or benefit described in this Section 5(c).

 

(d)            Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following without the Executive’s consent: (i) a material reduction or a material adverse alteration in the nature of the Executive’s position, responsibilities or authorities or the assigning of duties to the Executive that are materially inconsistent with those of the position of a President and Chief Executive of a company of comparable size in a comparable industry; (ii) the Executive’s becoming the holder of a lesser office or title than that previously held; (iii) any material breach of this Agreement by the Company that causes an adverse change to the terms and conditions of the Executive’s employment; (iv) the Company requires the Executive to relocate his principal business office to a location not within 75 miles of the Company’s principal executive office located in Denver, Colorado or the Hycroft Mine; (v) any reduction in the Executive’s salary, other than a reduction in salary generally applicable to executive employees; or (vi) failure of the Company to pay the Executive any amount otherwise vested and due under this Agreement or under any plan or policy of the Company following written notice by the Executive to the Company identifying the failure and the basis for such payment and the Company’s failure to cure within 10 days following receipt of such written notice.  In no event will a resignation be deemed to occur for “Good Reason” unless the Executive provides notice to the Company, and such resignation occurs, within 90 days after the event or condition giving rise thereto.  Upon receiving notice from the Executive, the Company shall have a period of 30 days during which it may remedy the event or condition.

 

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(e)            Cause. For purposes of this Agreement, “Cause” shall mean that one or more of the following has occurred: (i) the Executive is convicted of a felony or pleads guilty or nolo contendere to a felony (whether or not with respect to the Company or any of its affiliates); (ii) a failure of the Executive to substantially perform his responsibilities and duties to the Company which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by any member of the Board identifying the failure in reasonable detail and granting the Executive an opportunity to cure such failure within such 10 day period; (iii) the failure of the Executive to carry out or comply with any lawful and reasonable directive of the Board (or any committee of the Board), which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by or on behalf of the Company identifying the failure in reasonable detail and granting the Executive an opportunity to cure such failure within such 10 day period; (iv) the Executive engages in illegal conduct, any breach of fiduciary duty (if any), any act of material dishonesty or other misconduct, in each case in this clause (iv), against the Company or any of its affiliates; (v) a material violation or willful breach by the Executive of any of the policies or procedures of the Company, including, without any limitation, any employee manual, handbook or code of conduct of the Company which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by or on behalf of the Company identifying the violation or breach in reasonable detail and granting the Executive an opportunity to cure such violation or breach within such 10 day period; (vi) the Executive fails to meet any material obligation the Executive may have under any agreement entered into with the Company which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by any member of the Company identifying the failure in reasonable detail and granting the Executive an opportunity to cure such failure within such 10 day period; (vii) the Executive’s failure to maintain any applicable license, permit or card required by the federal or state authorities or a political subdivision or agency thereof (or the suspension, revocation or denial of such license, permit or card); or (viii) the Executive’s breach of any non-compete, non-solicit, confidentiality or other restrictive covenant to which the Executive may be subject, pursuant to an employment agreement or otherwise.

 

(f)             Concurrent Resignation and Removal from Any Boards and Positions. If the Executive’s employment is terminated for any reason under this Agreement, such termination will constitute his resignation and removal from: (i) if a member, the Board and/or board of directors of any subsidiary of the Company, or any other board to which he has been appointed or nominated by or on behalf of the Company; (ii) any position with the Company or any of its subsidiaries, including, but not limited to, as an officer of the Company or any of its subsidiaries, and (iii) any fiduciary positions with respect to the Company’s benefit plans.

 

(g)            Assignment and Assumption. In the event that this Agreement is assigned to and assumed by MUDS in connection with the Sale Transaction, the Parties expressly agree that such assignment and assumption shall not constitute a termination of employment for purposes of this Agreement.

 

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6.            Change in Control.

 

(a)            Payments and Benefits upon Termination after a Change in Control. If within 90 days prior to, or one year after, a Change in Control (as defined below), the Company (or its successor) terminates the Executive’s employment for reasons other than for Cause, the Executive incurs a Disability or if the Executive voluntarily terminates his employment for Good Reason, and subject to the provisions of this Section 6(a), Section 9(a) and Section 9(f), the Company will provide the following payments and benefits to the Executive, in lieu of those payments and benefits provided under Section 5(a)(v) and Section 5(b) or (c), as applicable, but in addition to the amounts payable under Sections 5(a)(i) through 5(a)(iv) above:

 

(i)            An amount equal to 2.0 multiplied by the Executive’s Base Salary. This cash payment will be paid to the Executive on the 60th day following the date of the Executive’s termination; provided, however, that if the Change in Control does not constitute a “change in control event” pursuant to Treas. Reg. §1.409A-3(i)(5)(i), then to the extent that the cash payment does not qualify as a short-term deferral under Code Section 409A and Treas. Reg. §1.409A-1(b)(4), or for the exclusion for separation pay due to an involuntary separation from service to the extent permitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) then the payment shall be made in accordance with the schedule set forth in Section 5(c) (as may be modified in accordance with Section 9(a)).

 

(ii)            An amount in cash equal to 2.0 multiplied by the sum of the Executive’s Annual Bonus. For this purpose, “Annual Bonus” means the greater of: (A) the actual bonus paid for the fiscal year immediately preceding such termination; (B) the actual bonus attained for the fiscal year in which such termination occurs; or (C) the target bonus for the fiscal year in which such termination occurs prior to the first anniversary of this Agreement. This cash payment will be paid to the Executive in a lump sum on the 60th day following the date of the Executive’s termination; provided, however, that if the Change in Control does not constitute a “change in control event” pursuant to Treas. Reg. §1.409A-3(i)(5)(i), then to the extent that the cash payment does not qualify as a short-term deferral under Code Section 409A and Treas. Reg. §1.409A-1(b)(4), or for the exclusion for separation pay due to an involuntary separation from service to the extent permitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) then the payment shall be made in accordance with the schedule set forth in Section 5(c) (as may be modified in accordance with Section 9(a)).

 

(iii)          Continued coverage under the Company’s medical, dental, life, and disability plans through the 24-month anniversary of the date that Executive’s employment was terminated, at the same cost to the Executive as in effect on the date of the Change in Control (or, if lower, as in effect at any time thereafter). Any continuation of group health plan benefits is conditioned upon the Executive timely electing COBRA continuation coverage and timely paying his share of the premium. If the Company determines that the Executive cannot participate in any benefit plan because he is not actively performing services for the Company, the Company may provide such benefits under an alternate arrangement, such as through the purchase of an individual insurance policy that provides similar benefits or a lump sum cash payment equal to the cost that the Company would have paid under the plan(s) for which coverage would have otherwise been available. Any cash amounts payable under an alternative arrangement will be paid to the Executive on the 60th day after the date of the Executive’s termination; provided, however, that any alternative arrangement provided through an insurance policy (e.g., health care and disability insurance) will be paid when the related premiums are due to the insurer.

 

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(iv)         Professional outplacement services from a nationally recognized outplacement firm selected by the Executive provided to the Executive until the earlier of (A) $15,000 in the aggregate to be paid by the Company to such outplacement firm on behalf of the Executive, or (B) 12 months after the Executive’s termination date.

 

Notwithstanding anything to the contrary in this Agreement, any obligation of the Company to provide any payment, coverage or benefit described in this Section 6(a) is conditioned upon (A) the Executive’s execution and delivery to the Company of the Release described in Section 5(c) within 45 days of the date of the Executive’s termination and (B) the Executive’s refraining from revoking the Release as permitted therein. The Executive’s failure to execute the Release within 45 days of the date of the Executive’s termination or 25 days after receipt by the Executive of the Release, or his revocation of the Release, will result in forfeiture of any payment, coverage or benefit described in this Section 6(a).

 

(b)            Definition of Change in Control. For purposes of the Agreement, a “Change in Control” of the Company will be deemed to occur as of the first day that one or more of the following conditions is satisfied:

 

(i)           The “beneficial ownership” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of securities representing more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”) is accumulated, held or acquired by a “Person” (as defined in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, holders of capital stock of the Company as of the date hereof or a subsidiary thereof, any corporation owned, directly or indirectly, by the Company’s stockholders in substantially the same proportions as their ownership of stock of the Company); provided, however, that any acquisition from the Company or any acquisition pursuant to a transaction that complies with clauses (A), (B) and (C) of this Section (6)(b)(iii) will not be a Change in Control under this Section 6(b)(i); provided further, that immediately prior to such accumulation, holding or acquisition, such Person was not a direct or indirect beneficial owner of 15% or more of the Company Voting Securities as of the date of this Agreement; or

 

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(ii)           Individuals who, as of the date of the Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board; or

 

(iii)          Consummation by the Company of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity (a “Business Combination”), in each case, unless immediately following such Business Combination: (A) more than 50% of the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries (the “Parent Corporation”), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities; (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 40% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that (x) such ownership of the Company existed prior to the Business Combination or (y) that immediately prior to such Business Combination, such Person was a direct or indirect beneficial owner of 15% or more of the Company Voting Securities as of the date of this Agreement, and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.

 

Notwithstanding anything to the contrary in the foregoing, in no event will a Change in Control be deemed to have occurred with respect to the Executive (i) in connection with the initial public offering of the Parent Corporation’s Voting Securities; (ii) if the Executive is part of a purchasing group that consummates the Change in Control transaction. The Executive will be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except (i) passive ownership of less than two percent of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group that is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors; provided that, for purposes of the foregoing, participation as a management investor in such purchasing company will not be deemed to be within the exceptions provided for in these items (i) and (ii)); and/or (iii) in connection with the Sale Transaction with MUDS.

 

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7.            Executive Nondisclosure, Noncompetition, Nonsolicitation and Inventions Agreement. As a condition of the Executive’s continued employment by the Company and the payment of compensation and receipt of benefits referred to above, the Executive acknowledges that the Executive has executed an Executive Nondisclosure, Noncompetition, Nonsolicitation and Inventions Agreement in the form attached hereto as Exhibit A (the “ENNNI Agreement”), and that the ENNNI Agreement remains in effect on the date hereof (as amended as set forth below in this Section 7). The Executive acknowledges that the Company would not continue his employment or provide compensation and/or benefits set forth above if he was not willing to continue to be bound by the terms of the ENNNI Agreement (as amended as set forth below in this Section 7). The Executive acknowledges that:

 

(a)            he is, and will continue to be bound by the terms of such ENNNI Agreement (as amended as set forth below in this Section 7);

 

(b)            the ENNNI Agreement shall continue in full force and effect after the date hereof, except as provided below:

 

(i)            Confidential Information” under such agreement shall mean “all information disclosed to me or known to me, either directly or indirectly in writing, orally or by drawings or observation of parts or equipment, as a consequence of or through my employment with the Company, that is not generally known to the public or in the relevant trade or industry, about the Company's business, products, processes, services, investors and suppliers”; and

 

(ii)           The sections of the ENNNI Agreement entitled “No Solicitation of Executives”, “No Solicitation or Acceptance of Business from Customers or Business Partners”, and “Non-Competition”, and the applicable provisions thereunder, shall each be amended to apply to the term of employment and 18 months following the Executive’s termination of employment with the Company, so long as the Executive is entitled to receive severance payments pursuant to Section 5(b) or 5(c) or Sections 6(a) hereof; provided, however, that notwithstanding the foregoing, if the Executive voluntarily terminates employment without Good Reason prior to the expiration of the Term, then the Executive shall not be entitled to receive severance payments but sections of the ENNNI Agreement entitled “No Solicitation of Executives”, “No Solicitation or Acceptance of Business from Customers or Business Partners”, and “Non-Competition”, and the applicable provisions thereunder, shall continue to apply following such voluntary termination of employment without Good Reason;

 

(iii)           except as otherwise provided in Section 7(b) above, executing this Agreement does not change or alter his obligations under the ENNNI Agreement;

 

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(c)             the ENNNI Agreement is supported by adequate and sufficient consideration, including but not limited to the Executive’s continued employment with the Company; and

 

(d)            the terms of the ENNNI Agreement are incorporated herein by reference.

 

8.            Indemnification and Insurance. The Company will indemnify the Executive in accordance with the Company’s Certificate of Incorporation and Bylaws to the fullest extent permitted by law in the event he is made or threatened to be made a party to any action, suit, or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director, officer, or employee of the Company and its subsidiaries, or serves any other enterprise as a director, officer, or employee at the request of the Company.  While employed by the Company or any of its subsidiaries , the Company will maintain the Executive as an insured party on all directors’ and officers’ insurance maintained by the Company for the benefit of its directors and officers on at least the same basis as all other covered individuals (and subject to the same exclusions from coverage) with respect to time periods where the Executive served as an employee of the Company and its subsidiaries.

 

9.            Compliance with Code Section 409A and Treasury Regulations.

 

(a)            Payments under Sections 5(c) and 6(a) of this Agreement are intended to qualify as short-term deferrals or otherwise be exempt from Code Section 409A. However, if the Company reasonably determines that a payment under Section 5(c) or 6(a) above does not qualify as a short-term deferral under Code Section 409A and Treas. Reg. §1.409A-1(b)(4), or for the exclusion for separation pay due to an involuntary separation from service to the extent permitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) and the Executive is a Specified Employee (as defined below) as of the date of termination, such payment to the Executive may not be made before the date that is six months after the date of his separation from service or, if earlier, the date of the Executive’s death. Payments to which the Executive would otherwise be entitled during the first six months following the date of separation will be accumulated and paid on the first day of the seventh month following the date of termination. For purposes of this Agreement, “Specified Employee” has the meaning given in Code Section 409A and Treas. Reg. §1.409A-1(c)(i). The Company’s “specified employee identification date” (as described in Treas. Reg. §1.409A-1(c)(i)(3)) will be December 31 of each year, and the Company’s “specified employee effective date” (as described in Treas. Reg. §1.409A-1(c)(i)(4)) will be February 1 of each succeeding year.

 

(b)            This Agreement is intended to comply with, or be exempt from, the requirements of Code Section 409A and the Treasury Regulations and other administrative guidance issued thereunder and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.

 

(c)            Each payment or installment under this Agreement shall constitute a separate payment for purposes of Code Section 409A.

 

(d)            To the extent that any amount payable upon termination of employment constitutes “nonqualified deferred compensation” subject to the requirements of Code Section 409A, any reference to such termination shall mean a “separation from service” (as defined in Treas. Reg. §1.409A-1 (h)).

 

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(e)            With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such arrangement provides for a limit on the amount of expenses that may be reimbursed over some or all of the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expenses was incurred.

 

(f)             In the event that the Company’s independent registered public accounting firm or the Internal Revenue Service determines that any payment, coverage or benefit due or owing to the Executive pursuant to this Agreement is subject to the additional tax imposed by Code Section 409A or any successor provision thereof or any interest or penalties, including interest imposed under Code Section 409(A)(1)(B)(i)(I), incurred by the Executive as a result of the application of such provision, the Company agrees to cooperate with the Executive to execute any amendment to the provisions hereof reasonably necessary but only (i) to the minimum extent necessary to avoid application of such tax, and (ii) to the extent that the Company would not, as a result, suffer any adverse consequences (including, without limitation, accelerating the payment or provision of any benefit described herein).

 

(g)            Notwithstanding anything in this Section 9 or any other provision of this Agreement, if any payment under this Agreement gives rise, directly or indirectly, to liability for an additional income tax or penalty under Code Section 409A (and/or any penalties and/or interest with respect to such additional income tax or penalty), the Executive shall bear the cost of any and all such taxes, penalties and interest.

 

10.          [Reserved].

 

11.          Miscellaneous.

 

(a)            Assignment; Successors. This Agreement will be binding upon and inure to the benefit of the heirs and representatives of the Executive and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company and, for the avoidance of doubt, the parties expressly agree that this Agreement shall be assigned to, and assumed by, MUDS in connection with, and as a condition to, the consummation of the Sale Transaction and such assignment and assumption shall not constitute a termination of employment for purposes of this Agreement.

 

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(b)            Governing Law and Forum for Disputes. The laws of the State of Colorado will govern the validity, interpretation, construction and performance of this Agreement, without regard to the conflict of laws principles thereof. Any action or proceeding against the parties relating in any way to this Agreement or the Executive’s employment (a “Dispute”) must be brought and enforced in the courts of the State of Colorado, and the parties irrevocably (i) submit to the jurisdiction of such courts in respect of any such action or proceeding and (ii) waive any right to a trial by jury of any Dispute.

 

(c)            Withholding. The Company may withhold from any payment that it is required to make under this Agreement amounts sufficient to satisfy applicable withholding requirements under any federal, state or local law.

 

(d)            Modification or Amendment. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by a Company officer or director duly authorized by the Board and the Executive.

 

(e)            Notices. Notices given pursuant to this Agreement will be in writing and will be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile with confirmation of delivery, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery, including electronic transmission, that provides a written confirmation of delivery. Notice to the Company will be directed to:

 

Hycroft Mining Corporation

c/o Stephen M. Jones

Executive Vice President and Chief Financial Officer

8181 E. Tufts, Suite 510

Denver, CO 80237

 

with a copy to:

 

Neal, Gerber & Eisenberg, LLP

2 N. LaSalle Street, Suite 1700

Chicago, IL 60602

Attention: David S. Stone, Esq.

email: dstone@nge.com

 

The Company may change the person and/or address to whom the Executive must give notice under this Section by giving the Executive written notice of such change, in accordance with the procedures described above. Notices to or with respect to the Executive will be directed to the Executive, or to the Executive’s executors, personal representatives or distributees, if the Executive is deceased, or the assignees of the Executive, at the Executive’s home address on the records of the Company, or such other address provided to the Company in accordance with the procedures described above.

 

(f)            Severability. If any provisions of this Agreement will be found invalid or unenforceable by a court of competent jurisdiction, in whole or in part, then it is the parties’ mutual desire that such court modify such provision(s) to the extent and in the manner necessary to render the same valid and enforceable, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted, or as if such provision(s) had not been originally incorporated herein, as the case may be.

 

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(g)            No Waiver. No failure or delay by the Company or the Executive in enforcing or exercising any right or remedy hereunder will operate as a waiver thereof. No modification, amendment or waiver of this Agreement or consent to any departure by the Executive from any of the terms or conditions thereof, will be effective unless in writing and signed by the Executive Vice President and Chief Financial Officer. Any such waiver or consent will be effective only in the specific instance and for the purpose for which given.

 

(h)            Successors. This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and his estate, but the Executive may not assign or pledge this Agreement or any rights arising under it. Without the Executive’s consent, the Company may assign this Agreement to any affiliate or to a successor to substantially all the business and assets of the Company.

 

(i)              Effect on Other Obligations. Payments and benefits herein provided to be paid to the Executive by the Company will be made without regard to and in addition to any other payments or benefits required to be paid the Executive at any time hereafter under the terms of any other agreement between the Executive and the Company (it being understood and agreed that the Executive will not be entitled to severance or termination benefits in addition to those provided herein under any severance or termination plan of the Company or its subsidiaries). No payments or benefits provided the Executive hereunder will be reduced by any amount the Executive may earn or receive from employment with another employer or from any other source without violation of this Agreement. In no event will the Executive be obliged to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement.

 

(j)             Survival. The provisions of this Agreement, including but not limited to Sections 9 and 11 hereof and the ENNNI Agreement, to the extent consistent with or necessary to carry out the purposes thereof, shall survive termination of this Agreement or termination of the Executive’s employment with the Company or any successor or assign regardless of the reason for such termination.

 

(k)            Entire Agreement. The Executive acknowledges receipt of this Agreement and agrees that with respect to the subject matter hereof it, along with the ENNNI Agreement and the Retention Bonus Plan, contains the entire understanding and agreement with the Company, superseding any previous oral or written communication, representation, understanding or agreement with the Company or any representative thereof. No term or condition should be construed strictly against any party on the basis that it was drafted by such party.

 

(l)            Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning thereof.

 

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(m)            Counterparts.  This Agreement may be executed in any number of counterparts, including by facsimile or PDF, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

 

[Signature page to follow]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date set forth below.

 

EXECUTIVE       HYCROFT MINING CORPORATION  
     
/s/ Randy Buffington   /s/ Stephen M. Jones
Randy Buffington   By: Stephen M. Jones
    Its: Executive Vice President & CFO
Date: March 15, 2019   Date: March 15, 2019

 

 

 

Exhibit 10.9

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of the date set forth on the last page of this Agreement (the “Effective Date”), is made by and between Hycroft Mining Corporation, a Delaware corporation (the “Company”) and Stephen M. Jones (the “Executive”).

 

WHEREAS, the Company currently employs the Executive as its Executive Vice President and Chief Financial Officer, and the Company desires to continue to employ the Executive in such capacity; and

 

WHEREAS, the Company and the Executive have reached agreement concerning the terms and conditions of his continuing employment and wish to formalize that agreement; and

 

WHEREAS, this Agreement is intended to replace and supersede in all respects that certain employment agreement dated October 19, 2015 between the Company and the Executive and any amendments thereto; and

 

WHEREAS, the Company is contemplating entering into a transaction with Mudrick Capital Acquisition Corporation, a publicly-traded special purpose acquisition corporation formed by affiliates of Mudrick Capital (“MUDS”), pursuant to which the Company would sell substantially all of the assets of its subsidiaries and certain of its assets and/or all of its common stock (a “Sale Transaction”), and, as a condition thereto, upon consummation of the Sale Transaction this Agreement shall be assigned to and assumed by MUDS.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the Company and the Executive agree as follows:

 

1.            Employment. The Company hereby employs the Executive as Executive Vice President and Chief Financial Officer and the Executive hereby accepts such employment upon the terms and conditions set forth in this Agreement. The Executive will report to the President and Chief Executive Officer. The Executive’s principal office will be at the principal executive offices of the Company in Denver, Colorado; provided, however, it is also understood and expected that the Executive may spend time at the Company’s primary operating mine in Winnemucca, Nevada (the “Hycroft Mine”).

 

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2.            Duties.      During the Term, the Executive shall serve as the Chief Financial Officer of the Company. In this capacity, the Executive shall have the duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to the Executive by the President and Chief Executive Officer and by the board of directors of the Company (the “Board”) that are not inconsistent with the Executive’s position as Chief Financial Officer of the Company. In addition:

 

(a)            The Executive will devote his full time and best efforts, talents, knowledge and experience to serving as the Company’s Executive Vice President and Chief Financial Officer. The Executive will perform his duties diligently and competently and will act in conformity with Company’s written and oral policies and within the limits, budgets and business plans set by the Company. The Executive will at all times during the Term of this Agreement strictly adhere to and obey all of the rules and regulations in effect from time to time relating to the conduct of executives of the Company. The Executive will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or company that, as determined by the Board in its sole discretion, competes, conflicts or interferes with the performance of his duties hereunder in any material way.

 

(b)            The Executive agrees to serve without additional compensation as an officer and director of any of the Company’s subsidiaries and agrees that any amounts, if any, received from such subsidiary may be offset against the amounts due hereunder.

 

3.            Term. Unless sooner terminated by either party in accordance with the provisions of this Agreement, the term of employment (the “Term”) will commence on the Effective Date and will continue thereafter until the third anniversary of the Effective Date. Unless otherwise provided in this Agreement or mutually agreed by the Company and the Executive, all of the terms and conditions of this Agreement will continue in full force and effect throughout the Term and, with respect to those terms and conditions that apply after the Term, after the Term. Any representation, statement or implication to the contrary is unauthorized and not valid. After the Term hereof, the Executive shall be deemed to be an “at-will” employee during the continuation of his employment by the Company. For purposes of this Agreement, expiration of this Agreement will not be considered a termination other than for Cause (as hereinafter defined) or voluntary termination for Good Reason (as hereinafter defined), provided that the Executive’s employment is not otherwise terminated prior to such expiration date.

 

4.            Compensation and Benefits.

 

(a)            Base Salary. The Company shall pay a base annual salary of US $425,000 (“Base Salary”) to the Executive payable in accordance with the normal payroll practices of the Company and which shall be subject to applicable withholdings, deductions and taxes. The Board, or the Compensation Committee thereof, will review the Executive’s performance and Base Salary annually in February of each year and determine whether to adjust the Executive’s Base Salary on a prospective basis. The first review will be in February 2020. Such adjusted annual salary then will become the Executive’s “Base Salary” for all purposes of this Agreement. The Executive’s annual Base Salary will not be reduced below the Base Salary then in effect, without the Executive’s consent.

 

(b)            Incentive Compensation. The Executive will be eligible to participate in any annual performance bonus plans and long-term incentive plans established or maintained by the Company for its senior executive officers, including, but not limited to, the Annual Incentive Cash Bonus Plan (“Cash Bonus Plan”) or such similar or successor plans as the Company may establish. The Executive’s target incentive cash bonus under the Cash Bonus Plan shall initially be set at 50% of the Executive’s Base Salary with initial performance metrics to be based upon successful financing of the Hycroft Mine development costs, Hycroft Mine operational start up, and other metrics to be determined by the Board. After commencement of mining operations, the Company anticipates establishing performance metrics under the Cash Bonus Plan, including: (i) gold and gold equivalent production/sales, (ii) total cash costs of production per gold or gold equivalent ounce, (iii) health and safety, and/or (iv) such other metrics as are determined from time to time by the Board or Compensation Committee thereof. Any bonus earned by the Executive will be paid in accordance with the Company’s standard practice, which shall not be later than March 15 of the year following the end of the calendar year in which the Executive earns and vests in the right to receive the bonus or compensation, unless a written plan document provides a different payment date.

 

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(c)            Equity Compensation. The Executive will be eligible to participate in any equity-based compensation plans established or maintained by the Company for its senior executive officers in connection with the anticipated initial public offering of the common stock, par value $0.001 of the Company (“Common Stock”) and for ongoing annual equity awards. In connection with the Company’s initial public offering of the Common Stock (“IPO”) or otherwise, the Company shall adopt and implement a Long-Term Equity Incentive Plan (“Equity Plan”). The Executive shall be entitled to equity awards initially targeted at 250% of the Executive’s Base Salary, with 50% of such awards initially in the form of performance-based equity awards with vesting tied to satisfaction of performance-based metrics (the “Performance-Based Equity Awards”) to be determined by the Board or Compensation Committee thereof at the end of the performance period, and with the remaining 50% of such awards initially in the form of time-based equity awards with vesting based upon continued employment by the Company (the “Time-Based Equity Awards”), with 50% of the Time-Based Equity Awards vesting after one (1) year of continued employment and 50% of the Time-Based Equity Awards vesting after two (2) years of continued employment. The Performance-Based Equity Awards and the Time-Based Equity Awards will initially be in the form of restricted stock units convertible upon vesting into shares of Common Stock of the Company (or any successor thereto) subject to the terms and conditions set forth in written equity award agreements, with the number of units to be awarded to be determined by an enterprise value of $350 million, reflecting the anticipated value of the Sale Transaction. The foregoing initial equity award agreements shall include the following additional, non-exclusive vesting terms: (i) in the event of an equity investment (x) at a pre-money enterprise value in excess of $500 million and (y) in which the holders of the Company’s outstanding 1.5 lien secured notes (“1.5 Lien Notes”) and the holders of the Company’s outstanding second lien secured convertible notes (“Second Lien Notes”) have the right to receive cash in the aggregate amount of at least 33% of outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest) of such 1.5 Lien Notes and Second Lien Notes, or (ii) a transaction, other than an acquisition by MUDS or its affiliates, in which the holders of the Company’s outstanding 1.5 Lien Notes and Second Lien Notes receive cash or liquid securities in exchange or satisfaction and payment of the outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest and any premiums due and payable) of such 1.5 Lien Notes and Second Lien Notes (collectively, a “Liquidity Event”), then upon closing of such Liquidity Event vesting of such equity awards shall accelerate and such equity awards shall be fully vested; and (iii) in the event of a Change in Control transaction of the Company (as hereinafter defined), other than the Sale Transaction with MUDS which for purposes of this Agreement shall not constitute a Change in Control, then if the Executive is terminated within 90 days prior to the consummation of such Change in Control transaction or within 12 months following the consummation of such Change in Control transaction, then vesting of such equity awards shall accelerate and such equity awards shall be fully vested.

 

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(d)            Retention Bonus Plan. During the Executive’s employment by the Company or its subsidiaries, the Executive shall continue to participate in the Hycroft Mining Corporation Retention Bonus Plan (“Retention Bonus Plan”). While the Executive participates in the Retention Bonus Plan and subject to the terms of such plan, the Executive shall be eligible to receive the Retention Bonuses outlined on Schedule A thereto, which includes the MIP Bonus that constitutes part of the Third Retention Bonus, as such terms are defined in the Retention Bonus Plan. For avoidance of doubt, an acquisition by MUDS pursuant to the Sale Transaction will trigger the payment to the Executive of the Third Retention Bonus, including the MIP Bonus. Notwithstanding the foregoing, the Company shall have the right to amend or terminate the Retention Bonus Plan at any time by resolution of the Board or Compensation Committee thereof; provided, however, that no amendment that would have an adverse effect on the Executive’s right to, or the amount of, a Retention Bonus shall be effective any earlier than the second anniversary of any such resolution, and provided, further, that the termination of the Retention Bonus Plan shall not be effective any earlier than the second anniversary of the adoption of any such resolution (except as required by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)).

 

(e)            Benefits. During his employment, the Executive shall be entitled to participate in or benefit from, in accordance with the eligibility and other provisions thereof, benefit plans and policies such as medical, dental, disability, insurance, retirement savings plans or other fringe benefit plans or policies as the Company may make available to, or have in effect for, its senior executive officers. The Company reserves the right to modify, suspend or discontinue any and all of the plans, practices, policies and programs at any time without recourse by the Executive, so long as the Company takes such action generally with respect to other similarly situated senior executive officers.

 

(f)            Vacation and Sick Leave. The Executive will be entitled to vacation and sick leave in accordance with the Company’s vacation and sick leave policy for senior executive officers, but in no event less than four weeks per calendar year. Unused vacation will not be carried over to the next calendar year.

 

(g)            Reimbursement of Business Expenses. The Company agrees to reimburse the Executive for reasonable out-of-pocket expenses incurred in connection with Company business, including without limitation, travel and accommodations for authorized business trips, and within standards to be established by the Board, provided receipts, invoices or other supporting documentation satisfactory to the Company supporting the expenses are presented to the Company.

 

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5.            Payments on Termination of Employment.

 

(a)            Termination of Employment for any Reason. Upon termination of the Executive’s employment for any reason, including without limitation, the expiration of this Agreement, the Company will pay or provide the following to the Executive upon his termination of employment from the Company for any reason:

 

(i)            Earned but unpaid Base Salary through the date of termination;

 

(ii)            Any annual incentive bonus, or other form of incentive compensation, for which the performance measurement period has ended and the Executive has become eligible and earned in accordance with Section 4(b) above, but which is unpaid at the time of termination;

 

(iii)            Any amounts payable to the Executive under any of the Company’s executive benefit plans (other than any severance or termination pay plan) in accordance with the terms of those plans;

 

(iv)            Unreimbursed business expenses incurred by the Executive on the Company’s behalf; and

 

(v)            Continued coverage under the Company’s group health plan for the Executive during the COBRA continuation period; provided that the Executive timely elects COBRA continuation coverage and pays the applicable COBRA rate for such continued coverage.

 

(b)            Termination of Employment for Death or Disability. If the Executive’s termination of employment occurs by reason of death or Disability (as defined below), in addition to the amounts payable and benefits provided under Section 5(a) above, the Company will pay the Executive (or his estate) a pro rata portion of any bonus payable under the Company’s Cash Bonus Plan and/or Retention Bonus Plan, as the case may be, for the year in which such termination occurs determined based on the actual bonus attained for the fiscal year in which such termination occurs.

 

For purposes of this Agreement, “Disability” means the Executive’s long-term disability as defined by and determined under the Company’s long-term disability plan, or if the Executive is not covered by a long-term disability plan sponsored by the Company the Executive’s inability (as determined by the Board or Compensation Committee thereof in its discretion) to engage in any substantial gainful activity by reason of any medically-determined physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration.

 

(c)            Termination by the Company other Than for Cause or Voluntary Termination by the Executive for Good Reason. If the Company terminates the Executive’s employment other than for Cause, or if the Executive voluntarily terminates his employment for Good Reason, in addition to the amounts payable under Section 5(a) above and in lieu of the benefit provided in Section 5(a)(v) above, and subject to the provisions under this Section 5(c), Section 9(a) and Section 9(f), the Company will pay the following amounts and provide the following benefits to the Executive:

 

(i)            An amount in cash equal to 1.5 multiplied by the Executive’s Base Salary. This amount will be paid in equal installments during the 18 month period after termination in accordance with the Company’s normal payroll practices, provided, however, that any installments that would otherwise be payable within the first 60 days following the date of the Executive’s termination will be paid to the Executive on the 60th day following such termination.

 

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(ii)            Continued coverage under the Company’s medical, dental, life, and disability plans through the 18-month anniversary of the date that Executive’s employment was terminated, at the same cost to the Executive as in effect on the date of the Executive’s termination. Any continuation of group health plan benefits is conditioned upon the Executive timely electing COBRA continuation coverage and timely paying his share of the premium. If the Company determines that the Executive cannot participate in any benefit plan because he is not actively performing services for the Company, the Company may provide such benefits under an alternate arrangement, such as through the purchase of an individual insurance policy that provides similar benefits or a lump sum cash payment equal to the cost that the Company would have paid under the plan(s) for which coverage would have otherwise been available. Any cash amounts payable under an alternative arrangement will be paid to the Executive on the 60th day after the date of the Executive’s termination; provided, however, that any alternative arrangement provided through an insurance policy (e.g., health care and disability insurance) will be paid when the related premiums are due to the insurer.

 

(iii)            Professional outplacement services from a nationally recognized outplacement firm selected by the Executive provided to the Executive until the earlier of (A) $15,000 in the aggregate having been paid by the Company to such outplacement firm on behalf of the Executive, or (B) 12 months after the Executive’s termination date.

 

Notwithstanding anything to the contrary in this Agreement, any obligation of the Company to provide any payment, coverage or benefit described in this Section 5(c) is conditioned upon (A) the Executive’s execution and delivery to the Company of a valid General Release Agreement (a “Release”) in the form prepared by the Company within 25 days of the date of the Executive’s termination and (B) the Executive’s refraining from revoking the Release as permitted therein. The Executive’s failure to execute the Release within the later of 45 days of the date of the Executive’s termination or 25 days after receipt by the Executive of the Release, or his revocation of the Release, will result in forfeiture of any payment, coverage or benefit described in this Section 5(c).

 

(d)            Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following without the Executive’s consent: (i) a material reduction or a material adverse alteration in the nature of the Executive’s position, responsibilities or authorities or the assigning of duties to the Executive that are materially inconsistent with those of the position of an Executive Vice President and Chief Financial Officer of a company of comparable size in a comparable industry; (ii) the Executive’s becoming the holder of a lesser office or title than that previously held; (iii) any material breach of this Agreement by the Company that causes an adverse change to the terms and conditions of the Executive’s employment; (iv) the Company requires the Executive to relocate his principal business office to a location not within 75 miles of the Company’s principal executive office located in Denver, Colorado; (v) any reduction in the Executive’s salary, other than a reduction in salary generally applicable to executive employees; or (vi) failure of the Company to pay the Executive any amount otherwise vested and due under this Agreement or under any plan or policy of the Company following written notice by the Executive to the Company identifying the failure and the basis for such payment and the Company’s failure to cure within 10 days following receipt of such written notice.  In no event will a resignation be deemed to occur for “Good Reason” unless the Executive provides notice to the Company, and such resignation occurs, within 90 days after the event or condition giving rise thereto.  Upon receiving notice from the Executive, the Company shall have a period of 30 days during which it may remedy the event or condition.

 

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(e)            Cause. For purposes of this Agreement, “Cause” shall mean that one or more of the following has occurred: (i) the Executive is convicted of a felony or pleads guilty or nolo contendere to a felony (whether or not with respect to the Company or any of its affiliates); (ii) a failure of the Executive to substantially perform his responsibilities and duties to the Company which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by the President and Chief Executive Officer or any member of the Board identifying the failure in reasonable detail and granting the Executive an opportunity to cure such failure within such 10 day period; (iii) the failure of the Executive to carry out or comply with any lawful and reasonable directive of the Board (or any committee of the Board), which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by or on behalf of the Company identifying the failure in reasonable detail and granting the Executive an opportunity to cure such failure within such 10 day period; (iv) the Executive engages in illegal conduct, any breach of fiduciary duty (if any), any act of material dishonesty or other misconduct, in each case in this clause (iv), against the Company or any of its affiliates; (v) a material violation or willful breach by the Executive of any of the policies or procedures of the Company, including, without any limitation, any employee manual, handbook or code of conduct of the Company which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by or on behalf of the Company identifying the violation or breach in reasonable detail and granting the Executive an opportunity to cure such violation or breach within such 10 day period; (vi) the Executive fails to meet any material obligation the Executive may have under any agreement entered into with the Company which, to the extent curable, is not remedied within 10 days after the Executive’s receipt of written notice given by any member of the Company identifying the failure in reasonable detail and granting the Executive an opportunity to cure such failure within such 10 day period; (vii) the Executive’s failure to maintain any applicable license, permit or card required by the federal or state authorities or a political subdivision or agency thereof (or the suspension, revocation or denial of such license, permit or card); or (viii) the Executive’s breach of any non-compete, non-solicit, confidentiality or other restrictive covenant to which the Executive may be subject, pursuant to an employment agreement or otherwise.

 

(f)            Concurrent Resignation and Removal from Any Boards and Positions. If the Executive’s employment is terminated for any reason under this Agreement, such termination will constitute his resignation and removal from: (i) if a member, the Board and/or board of directors of any subsidiary of the Company, or any other board to which he has been appointed or nominated by or on behalf of the Company; (ii) any position with the Company or any of its subsidiaries, including, but not limited to, as an officer of the Company or any of its subsidiaries; and (iii) any fiduciary positions with respect to the Company’s benefit plans.

 

(g)            Assignment and Assumption. In the event that this Agreement is assigned to and assumed by MUDS in connection with the Sale Transaction, the Parties expressly agree that such assignment and assumption shall not constitute a termination of employment for purposes of this Agreement.

 

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6.            Change in Control.

 

(a)            Payments and Benefits upon Termination after a Change in Control. If within 90 days prior to, or one year after, a Change in Control (as defined below), the Company (or its successor) terminates the Executive’s employment for reasons other than for Cause, the Executive incurs a Disability or if the Executive voluntarily terminates his employment for Good Reason, and subject to the provisions of this Section 6(a), Section 9(a) and Section 9(f), the Company will provide the following payments and benefits to the Executive, in lieu of those payments and benefits provided under Section 5(a)(v) and Section 5(b) or (c), as applicable, but in addition to the amounts payable under Sections 5(a)(i) through 5(a)(iv) above:

 

(i)            An amount equal to 2.0 multiplied by the Executive’s Base Salary. This cash payment will be paid to the Executive on the 60th day following the date of the Executive’s termination; provided, however, that if the Change in Control does not constitute a “change in control event” pursuant to Treas. Reg. §1.409A-3(i)(5)(i), then to the extent that the cash payment does not qualify as a short-term deferral under Code Section 409A and Treas. Reg. §1.409A-1(b)(4), or for the exclusion for separation pay due to an involuntary separation from service to the extent permitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) then the payment shall be made in accordance with the schedule set forth in Section 5(c) (as may be modified in accordance with Section 9(a)).

 

(ii)            An amount in cash equal to 2.0 multiplied by the sum of the Executive’s Annual Bonus. For this purpose, “Annual Bonus” means the greater of: (A) the actual bonus paid for the fiscal year immediately preceding such termination; (B) the actual bonus attained for the fiscal year in which such termination occurs; or (C) the target bonus for the fiscal year in which such termination occurs prior to the first anniversary of this Agreement. This cash payment will be paid to the Executive in a lump sum on the 60th day following the date of the Executive’s termination; provided, however, that if the Change in Control does not constitute a “change in control event” pursuant to Treas. Reg. §1.409A-3(i)(5)(i), then to the extent that the cash payment does not qualify as a short-term deferral under Code Section 409A and Treas. Reg. §1.409A-1(b)(4), or for the exclusion for separation pay due to an involuntary separation from service to the extent permitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) then the payment shall be made in accordance with the schedule set forth in Section 5(c) (as may be modified in accordance with Section 9(a)).

 

(iii)            Continued coverage under the Company’s medical, dental, life, and disability plans through the 24-month anniversary of the date that Executive’s employment was terminated, at the same cost to the Executive as in effect on the date of the Change in Control (or, if lower, as in effect at any time thereafter). Any continuation of group health plan benefits is conditioned upon the Executive timely electing COBRA continuation coverage and timely paying his share of the premium. If the Company determines that the Executive cannot participate in any benefit plan because he is not actively performing services for the Company, the Company may provide such benefits under an alternate arrangement, such as through the purchase of an individual insurance policy that provides similar benefits or a lump sum cash payment equal to the cost that the Company would have paid under the plan(s) for which coverage would have otherwise been available. Any cash amounts payable under an alternative arrangement will be paid to the Executive on the 60th day after the date of the Executive’s termination; provided, however, that any alternative arrangement provided through an insurance policy (e.g., health care and disability insurance) will be paid when the related premiums are due to the insurer.

 

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(iv)            Professional outplacement services from a nationally recognized outplacement firm selected by the Executive provided to the Executive until the earlier of (A) $15,000 in the aggregate having been paid by the Company to such outplacement firm on behalf of the Executive, or (B) 12 months after the Executive’s termination date.

 

Notwithstanding anything to the contrary in this Agreement, any obligation of the Company to provide any payment, coverage or benefit described in this Section 6(a) is conditioned upon (A) the Executive’s execution and delivery to the Company of the Release described in Section 5(c) within 45 days of the date of the Executive’s termination and (B) the Executive’s refraining from revoking the Release as permitted therein. The Executive’s failure to execute the Release within 45 days of the date of the Executive’s termination or 25 days after receipt by the Executive of the Release, or his revocation of the Release, will result in forfeiture of any payment, coverage or benefit described in this Section 6(a).

 

(b)            Definition of Change in Control. For purposes of the Agreement, a “Change in Control” of the Company will be deemed to occur as of the first day that one or more of the following conditions is satisfied:

 

(i)            The “beneficial ownership” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of securities representing more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”) is accumulated, held or acquired by a “Person” (as defined in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, holders of capital stock of the Company as of the date hereof or a subsidiary thereof, any corporation owned, directly or indirectly, by the Company’s stockholders in substantially the same proportions as their ownership of stock of the Company); provided, however, that any acquisition from the Company or any acquisition pursuant to a transaction that complies with clauses (A), (B) and (C) of this Section (6)(b)(iii) will not be a Change in Control under this Section 6(b)(i); provided further, that immediately prior to such accumulation, holding or acquisition, such Person was not a direct or indirect beneficial owner of 15% or more of the Company Voting Securities as of the date of this Agreement; or

 

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(ii)            Individuals who, as of the date of the Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board; or

 

(iii)            Consummation by the Company of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity (a “Business Combination”), in each case, unless immediately following such Business Combination: (A) more than 50% of the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries (the “Parent Corporation”), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities; (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 40% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that (x) such ownership of the Company existed prior to the Business Combination or (y) that immediately prior to such Business Combination, such Person was a direct or indirect beneficial owner of 15% or more of the Company Voting Securities as of the date of this Agreement, and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.

 

Notwithstanding anything to the contrary in the foregoing, in no event will a Change in Control be deemed to have occurred with respect to the Executive (i) in connection with the initial public offering of the Parent Corporation’s Voting Securities; or (ii) if the Executive is part of a purchasing group that consummates the Change in Control transaction. The Executive will be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except (i) passive ownership of less than two percent of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group that is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors; provided that, for purposes of the foregoing, participation as a management investor in such purchasing company will not be deemed to be within the exceptions provided for in these items (i) and (ii)); and/or (iii) in connection with the Sale Transaction with MUDS.

 

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7.            Executive Nondisclosure, Noncompetition, Nonsolicitation and Inventions Agreement. As a condition of the Executive’s continued employment by the Company and the payment of compensation and receipt of benefits referred to above, the Executive acknowledges that the Executive has executed an Executive Nondisclosure, Noncompetition, Nonsolicitation and Inventions Agreement in the form attached hereto as Exhibit A (the “ENNNI Agreement”), and that the ENNNI Agreement remains in effect on the date hereof (as amended as set forth below in this Section 7). The Executive acknowledges that the Company would not continue his employment or provide compensation and/or benefits set forth above if he was not willing to continue to be bound by the terms of the ENNNI Agreement (as amended as set forth below in this Section 7). The Executive acknowledges that:

 

(a)            he is, and will continue to be bound by the terms of such ENNNI Agreement (as amended as set forth below in this Section 7);

 

(b)            the ENNNI Agreement shall continue in full force and effect after the date hereof, except as provided below:

 

(i)            Confidential Information” under such agreement shall mean “all information disclosed to me or known to me, either directly or indirectly in writing, orally or by drawings or observation of parts or equipment, as a consequence of or through my employment with the Company, that is not generally known to the public or in the relevant trade or industry, about the Company's business, products, processes, services, investors and suppliers”; and

 

(ii)            The sections of the ENNNI Agreement entitled “No Solicitation of Executives”, “No Solicitation or Acceptance of Business from Customers or Business Partners”, and “Non-Competition”, and the applicable provisions thereunder, shall each be amended to apply to the term of employment and 18 months following the Executive’s termination of employment with the Company, so long as the Executive is entitled to receive severance payments pursuant to Section 5(b) or 5(c) or Sections 6(a) hereof; provided, however, that notwithstanding the foregoing, if the Executive voluntarily terminates employment without Good Reason prior to the expiration of the Term, then the Executive shall not be entitled to receive severance payments but sections of the ENNNI Agreement entitled “No Solicitation of Executives”, “No Solicitation or Acceptance of Business from Customers or Business Partners”, and “Non-Competition”, and the applicable provisions thereunder, shall continue to apply following such voluntary termination of employment without Good Reason;

 

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(c)            except as otherwise provided in Section 7(b) above, executing this Agreement does not change or alter his obligations under the ENNNI Agreement;

 

(d)            the ENNNI Agreement is supported by adequate and sufficient consideration, including but not limited to the Executive’s continued employment with the Company; and

 

(e)            the terms of the ENNNI Agreement are incorporated herein by reference.

 

8.            Indemnification and Insurance. The Company will indemnify the Executive in accordance with the Company’s Certificate of Incorporation and Bylaws to the fullest extent permitted by law in the event he is made or threatened to be made a party to any action, suit, or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director, officer, or employee of the Company and its subsidiaries, or serves any other enterprise as a director, officer, or employee at the request of the Company.  While employed by the Company or any of its subsidiaries, the Company will maintain the Executive as an insured party on all directors’ and officers’ insurance maintained by the Company for the benefit of its directors and officers on at least the same basis as all other covered individuals (and subject to the same exclusions from coverage) with respect to time periods where the Executive served as an employee of the Company and its subsidiaries.

 

9.            Compliance with Code Section 409A and Treasury Regulations.

 

(a)            Payments under Sections 5(c) and 6(a) of this Agreement are intended to qualify as short-term deferrals or otherwise be exempt from Code Section 409A. However, if the Company reasonably determines that a payment under Section 5(c) or 6(a) above does not qualify as a short-term deferral under Code Section 409A and Treas. Reg. §1.409A-1(b)(4), or for the exclusion for separation pay due to an involuntary separation from service to the extent permitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) and the Executive is a Specified Employee (as defined below) as of the date of termination, such payment to the Executive may not be made before the date that is six months after the date of his separation from service or, if earlier, the date of the Executive’s death. Payments to which the Executive would otherwise be entitled during the first six months following the date of separation will be accumulated and paid on the first day of the seventh month following the date of termination. For purposes of this Agreement, “Specified Employee” has the meaning given in Code Section 409A and Treas. Reg. §1.409A-1(c)(i). The Company’s “specified employee identification date” (as described in Treas. Reg. §1.409A-1(c)(i)(3)) will be December 31 of each year, and the Company’s “specified employee effective date” (as described in Treas. Reg. §1.409A-1(c)(i)(4)) will be February 1 of each succeeding year.

 

(b)            This Agreement is intended to comply with, or be exempt from, the requirements of Code Section 409A and the Treasury Regulations and other administrative guidance issued thereunder and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.

 

(c)            Each payment or installment under this Agreement shall constitute a separate payment for purposes of Code Section 409A.

 

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(d)            To the extent that any amount payable upon termination of employment constitutes “nonqualified deferred compensation” subject to the requirements of Code Section 409A, any reference to such termination shall mean a “separation from service” (as defined in Treas. Reg. §1.409A-1 (h)).

 

(e)            With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such arrangement provides for a limit on the amount of expenses that may be reimbursed over some or all of the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expenses was incurred.

 

(f)            In the event that the Company’s independent registered public accounting firm or the Internal Revenue Service determines that any payment, coverage or benefit due or owing to the Executive pursuant to this Agreement is subject to the additional tax imposed by Code Section 409A or any successor provision thereof or any interest or penalties, including interest imposed under Code Section 409(A)(1)(B)(i)(I), incurred by the Executive as a result of the application of such provision, the Company agrees to cooperate with the Executive to execute any amendment to the provisions hereof reasonably necessary but only (i) to the minimum extent necessary to avoid application of such tax, and (ii) to the extent that the Company would not, as a result, suffer any adverse consequences (including, without limitation, accelerating the payment or provision of any benefit described herein).

 

(g)            Notwithstanding anything in this Section 9 or any other provision of this Agreement, if any payment under this Agreement gives rise, directly or indirectly, to liability for an additional income tax or penalty under Code Section 409A (and/or any penalties and/or interest with respect to such additional income tax or penalty), the Executive shall bear the cost of any and all such taxes, penalties and interest.

 

10.            [Reserved].

 

11.            Miscellaneous.

 

(a)            Assignment; Successors. This Agreement will be binding upon and inure to the benefit of the heirs and representatives of the Executive and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company and, for the avoidance of doubt, the parties expressly agree that this Agreement shall be assigned to, and assumed by, MUDS in connection with, and as a condition to, the consummation of the Sale Transaction and such assignment and assumption shall not constitute a termination of employment for purposes of this Agreement.

 

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(b)            Governing Law and Forum for Disputes. The laws of the State of Colorado will govern the validity, interpretation, construction and performance of this Agreement, without regard to the conflict of laws principles thereof. Any action or proceeding against the parties relating in any way to this Agreement or the Executive’s employment (a “Dispute”) must be brought and enforced in the courts of the State of Colorado, and the parties irrevocably (i) submit to the jurisdiction of such courts in respect of any such action or proceeding and (ii) waive any right to a trial by jury of any Dispute.

 

(c)            Withholding. The Company may withhold from any payment that it is required to make under this Agreement amounts sufficient to satisfy applicable withholding requirements under any federal, state or local law.

 

(d)            Modification or Amendment. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by a Company officer or director duly authorized by the Board and the Executive.

 

(e)            Notices. Notices given pursuant to this Agreement will be in writing and will be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile with confirmation of delivery, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery, including electronic transmission, that provides a written confirmation of delivery. Notice to the Company will be directed to:

 

Hycroft Mining Corporation

c/o Randy Buffington
President and Chief Executive Officer
8181 E. Tufts, Suite 510
Denver, CO 80237

 

with a copy to:

 

Neal, Gerber & Eisenberg, LLP
2 N. LaSalle Street, Suite 1700
Chicago, IL 60602
Attention: David S. Stone, Esq.
email: dstone@nge.com

 

The Company may change the person and/or address to whom the Executive must give notice under this Section by giving the Executive written notice of such change, in accordance with the procedures described above. Notices to or with respect to the Executive will be directed to the Executive, or to the Executive’s executors, personal representatives or distributees, if the Executive is deceased, or the assignees of the Executive, at the Executive’s home address on the records of the Company, or such other address provided to the Company in accordance with the procedures described above.

 

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(f)            Severability. If any provisions of this Agreement will be found invalid or unenforceable by a court of competent jurisdiction, in whole or in part, then it is the parties’ mutual desire that such court modify such provision(s) to the extent and in the manner necessary to render the same valid and enforceable, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted, or as if such provision(s) had not been originally incorporated herein, as the case may be.

 

(g)            No Waiver. No failure or delay by the Company or the Executive in enforcing or exercising any right or remedy hereunder will operate as a waiver thereof. No modification, amendment or waiver of this Agreement or consent to any departure by the Executive from any of the terms or conditions thereof, will be effective unless in writing and signed by the President and Chief Executive Officer. Any such waiver or consent will be effective only in the specific instance and for the purpose for which given.

 

(h)            Successors. This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and his estate, but the Executive may not assign or pledge this Agreement or any rights arising under it. Without the Executive’s consent, the Company may assign this Agreement to any affiliate or to a successor to substantially all the business and assets of the Company.

 

(i)            Effect on Other Obligations. Payments and benefits herein provided to be paid to the Executive by the Company will be made without regard to and in addition to any other payments or benefits required to be paid the Executive at any time hereafter under the terms of any other agreement between the Executive and the Company (it being understood and agreed that the Executive will not be entitled to severance or termination benefits in addition to those provided herein under any severance or termination plan of the Company or its subsidiaries). No payments or benefits provided the Executive hereunder will be reduced by any amount the Executive may earn or receive from employment with another employer or from any other source without violation of this Agreement. In no event will the Executive be obliged to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement.

 

(j)            Survival. The provisions of this Agreement, including but not limited to Sections 9 and 11 hereof and the ENNNI Agreement, to the extent consistent with or necessary to carry out the purposes thereof, shall survive termination of this Agreement or termination of the Executive’s employment with the Company or any successor or assign regardless of the reason for such termination.

 

(k)            Entire Agreement. The Executive acknowledges receipt of this Agreement and agrees that with respect to the subject matter hereof it, along with the ENNNI Agreement and the Retention Bonus Plan, contains the entire understanding and agreement with the Company, superseding any previous oral or written communication, representation, understanding or agreement with the Company or any representative thereof. No term or condition should be construed strictly against any party on the basis that it was drafted by such party.

 

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(l)            Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning thereof.

 

(m)          Counterparts.  This Agreement may be executed in any number of counterparts, including by facsimile or PDF, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date set forth below.

 

EXECUTIVE   HYCROFT MINING CORPORATION  
     
/s/ Stephen M. Jones   /s/ Randy Buffington
Stephen M. Jones   By: Randy Buffington
    Its: President & CEO
Date: March 15, 2019   Date: March 15, 2019

 

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Exhibit 10.12

 

OMNIBUS AMENDMENT TO NOTE PURCHASE AGREEMENTS

AND EXCHANGE AGREEMENT

 

This Omnibus Amendment to the Note Purchase Agreements and the Exchange Agreement (this “Omnibus Amendment”) is made and entered into effective as of May 28, 2020, by and among: (a) with respect to the Note Purchase Agreements: (i) Hycroft Mining Corporation, a Delaware corporation (the “Company” or “Seller”)), (ii) each of the direct or indirect subsidiaries of the Company listed on the signature pages hereto (the “Subsidiaries”), (iii) the entities listed on Schedule A attached hereto (each, a “1.5 Lien Noteholder” and collectively, the “1.5 Lien Noteholders”) and (iv) WBox 2015-5 Ltd., in its capacity as collateral agent under each of the Note Purchase Agreements (the “Collateral Agent” and, together with the Company, the Subsidiaries and the 1.5 Lien Noteholders, the “Notes Parties”); and (b) with respect to the Exchange Agreement (as defined below): (i) the Company, (ii) MUDS Acquisition Sub, Inc., a Delaware corporation (“Acquisition Sub”), (iii) the 1.5 Lien Noteholders and (iv) the entities listed on Schedule B attached hereto (each, a “New Subordinated Noteholder” and collectively, the “New Subordinated Noteholders” and together with the 1.5 Lien Noteholders, the “Noteholders”). The parties hereto shall be collectively referred to as the “Parties.” Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Exchange Agreement or the Note Purchase Agreements, as applicable.

 

Recitals

 

A.            The Company, the Subsidiaries, the 1.5 Lien Noteholders and the Collateral Agent are parties to those certain Note Purchase Agreements dated May 3, 2016, July 29, 2016, September 22, 2016, November 30, 2016, February 2, 2017, April 12, 2017, June 30, 2017, July 14, 2017, December 20, 2017, March 8, 2018, May 10, 2018, July 10, 2018, August 22, 2018, November 1, 2018 and December 19, 2018 (the “Note Purchase Agreements”), pursuant to which the Company issued 15% PIK Secured Notes due 2020 (the “1.5 Lien Notes”) to the 1.5 Lien Noteholders.

 

B.            Pursuant to Section 9.2 of each Note Purchase Agreement, such Note Purchase Agreement may be amended with the consent of the Requisite Holders (as defined in the respective Note Purchase Agreement).

 

C.            The undersigned Noteholders constitute the Requisite Holders with respect to each Note Purchase Agreement.

 

D.            The Company, Acquisition Sub and the Noteholders are parties to that certain Exchange Agreement dated January 13, 2020 (the “Exchange Agreement”), pursuant to which the Noteholders will transfer the Exchange Notes (as defined in the Exchange Agreement) to Acquisition Sub.

 

E.            Pursuant to Section 8.k of the Exchange Agreement, the Exchange Agreement may be amended by written agreement signed by each of the parties to the Exchange Agreement.

 

 

Agreement

 

NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein contained, the receipt and adequacy of which is hereby acknowledged, the Parties agree to amend the Note Purchase Agreements and the Exchange Agreement as follows:

 

1.            Note Purchase Agreements.

 

1.1            The Company hereby waives any and all obligations set forth in Section 14.2(a)(i) of the Note Purchase Agreements, including, but not limited to, the obligation to deliver certificates in the form of Exhibit B and Exhibit C to the Note Purchase Agreements in connection with the transactions set forth in the Exchange Agreement.

 

1.2            Notwithstanding anything contained in the Note Purchase Agreements (or any related Note Document) to the contrary, the 1.5 Lien Notes may be transferred to a sophisticated party in connection with the transactions contemplated by the Exchange Agreement.

 

1.3            The registration of the transfer of the 1.5 Lien Notes by the 1.5 Lien Noteholders to Acquisition Sub, as contemplated by Section 14.2 of the Note Purchase Agreements, shall be deemed to occur upon consummation of the transactions set forth in the Exchange Agreement, and the transfer of such 1.5 Lien Notes from Acquisition Sub to the Company shall be deemed to occur concurrently with the closing of the Acquisition (as defined in the Exchange Agreement).

 

1.4            The Collateral Agent hereby waives any right to receive an Opinion of Counsel (as defined in the Note Purchase Agreements) and an Officer’s Certificate (as used in the Note Purchase Agreements) pursuant to Section 9.5 of the Note Purchase Agreements in connection with this Omnibus Amendment.

 

2.            Exchange Agreement.

 

2.1            The Company represents and warrants that it is in possession of all of the Excess Notes, and the Acquisition Sub and Seller hereby waive any obligation of the New Subordinated Noteholders to deliver such Excess Notes to Acquisition Sub pursuant to Section 2.b(i) of the Exchange Agreement.

 

2.2            To the extent a 1.5 Lien Noteholder fails to deliver one (or more) of its 1.5 Lien Notes to Acquisition Sub on or prior to the Closing Date, Acquisition Sub and Seller hereby waive the obligations of such 1.5 Lien Noteholder to deliver the 1.5 Lien Notes to Acquisition Sub pursuant to Section 2.b(i) of the Exchange Agreement.

 

2.3            Section 3 of the Exchange Agreement is hereby amended to add the following as Section 3.l:

 

i.            Neither such Noteholder nor any person acting on its behalf has conducted any general solicitation or general advertising within the meaning of Regulation D of the Securities Act of 1933, as amended in connection with the assignment and transfer of the 1.5 Lien Notes.

 

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ii.            The Noteholder is not the issuer of the 1.5 Lien Notes or a subsidiary of such issuer.

 

iii.            The Noteholder acquired the 1.5 Lien Notes for investment purposes and not with a view to distribution in violation of the federal securities laws.”

 

2.4            Section 4 of the Exchange Agreement is hereby amended to add the following as Section 4.j, to move the “Disclaimer of Other Warranties” provision to Section 4.k and to revise references to Section 4.j in the Exchange Agreement to refer to Section 4.k instead:

 

a.          “j.      Ability to Bear Risk and Sophistication.

 

i.            Acquisition Sub hereby acknowledges that ownership of and investment in Exchange Notes involves substantial risk. Acquisition Sub has such knowledge and experience in financial and business matters, and its financial situation is such, that it is capable of evaluating the merits and risks of its participation in this Exchange Agreement and of bearing the economic risk of its investment in Exchange Notes (including the complete loss of such investment). The Exchange Notes are being acquired solely for Acquisition Sub's own account. Acquisition Sub has been given the opportunity to (i) ask questions of and receive answers concerning the terms and conditions of the Exchange Notes and the business and financial condition of the Seller and (ii) obtain any additional information that is necessary to assist Acquisition Sub in evaluating the advisability of the purchase of the Exchange Notes.”

 

2.5            Section 4 of the Exchange Agreement is hereby amended to add the following as Section 4.l:

 

a.            Delivery of Exchange Notes. Acquisition Sub hereby (i) acknowledges that some or all of the 1.5 Lien Noteholders may be unable to deliver each 1.5 Lien Note to Acquisition Sub prior to the Closing Date and (ii) waives the condition precedent under the Exchange Agreement to deliver each 1.5 Lien Note prior to the Closing Date; provided that Acquisition Sub makes such acknowledgments and waivers upon the representations and warranties and covenants, obligations and other provisions contained in this Agreement, including without limitation Exhibit D hereto.

 

2.6            Section 5.d of the Exchange Agreement is hereby amended to add the following as the final sentence:

 

a.            “Seller hereby represents and warrants to Acquisition Sub that each Noteholder is the holder of record of the Exchange Notes being assigned by such Noteholder pursuant to this Exchange Agreement.”

 

2.7            Section 5 of the Exchange Agreement is hereby amended to add the following as Section 5.e:

 

a.            Exhibit D. To the extent a 1.5 Lien Noteholder fails to deliver one (or more) of its 1.5 Lien Notes to Acquisition Sub on or prior to the Closing Date, such 1.5 Lien Noteholder hereby makes the representations and warranties contained in Exhibit D hereto and agrees to the covenants, obligations and other provisions contained in Exhibit D hereto.

 

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2.8            Section 5 of the Exchange Agreement is hereby amended to add the following as Section 5.f:

 

a.            Cancellation of Exchange Notes. Seller hereby (i) acknowledges that some or all of the 1.5 Lien Noteholders may be unable to deliver each 1.5 Lien Note to Acquisition Sub prior to the Closing Date and (ii) waives the condition precedent under the Exchange Agreement to deliver each 1.5 Lien Note prior to the Closing Date; provided that any failure to deliver one or more of the 1.5 Lien Notes shall be subject to the terms of the Noteholder representations and warranties, covenants, obligations and other provisions set forth in Exhibit D hereto. Further, Seller hereby covenants that, notwithstanding any failure by the 1.5 Lien Noteholders to deliver all of the 1.5 Lien Notes prior to the Closing Date, upon consummation of the transactions contemplated by the Exchange Agreement, Seller will cancel all Exchange Notes and will treat such Exchange Notes as no longer outstanding for all purposes.”

 

2.9            Schedule A and Schedule B to the Exchange Agreement are hereby deleted in their entirety and replaced with Schedule A and Schedule B attached.

 

2.10          The Exchange Agreement is hereby amended to add Exhibit D attached.

 

3.            Miscellaneous.

 

3.1            The Company hereby acknowledges that each undersigned Noteholder is the holder of record of the 1.5 Lien Notes listed in Schedule A next to such Noteholder’s name.

 

3.2            Entire Agreement. Except as specifically amended or waived in this Omnibus Amendment, the Exchange Notes shall otherwise continue in full force and effect. This Omnibus Amendment together with the Exchange Notes, the Note Purchase Agreements (as amended by this Omnibus Amendment), the other Note Documents (as defined in the Note Purchase Agreements) and the Exchange Agreement (as amended by this Omnibus Amendment) constitute the entire understanding among the Parties and the parties thereto with respect to the subject matter hereof and thereof and replace and supersede all prior agreements and understandings, both written and oral, among the Parties and the parties thereto with respect to the subject matter hereof and thereof.

 

3.3            Governing Law. THIS OMNIBUS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

3.4            Judicial Interpretation. The parties hereto agree that they have been represented by legal counsel during the negotiation and execution of this Omnibus Amendment and, therefore, waive the application of any regulation, holding, rule of construction or Law providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

 

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3.5            Counterparts. This Omnibus Amendment may be executed in any number of counterparts, each of which will be an original, and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of this Omnibus Amendment by facsimile or portable document format (PDF) will be effective as delivery of a manually executed counterpart of this Omnibus Amendment.

 

3.6            Termination and Release.

 

The parties hereto acknowledge and agree that upon the cancellation of the 1.5 Lien Notes as contemplated pursuant to the Purchase Agreement, the 1.5 Lien Note Purchase Agreements and each of the Note Documents relating to the 1.5 Lien Note Purchase Agreements shall be automatically terminated and any and all other agreements, documents and instruments executed in connection therewith, shall be automatically and irrevocably terminated in its entirety and be of no further force or effect, and the Collateral Agent for the 1.5 Lien Notes, without recourse, representation or warranty, hereby irrevocably releases and terminates all security interests and other Liens on the Collateral securing the 1.5 Lien Notes created pursuant to the Collateral Documents relating to the 1.5 Lien Notes.

 

The Collateral Agent for the 1.5 Lien Notes will promptly, (i) at the Seller’s sole cost and expense, deliver or cause to be delivered any Collateral in its possession or control, to the Seller or to such other person or entity as the Seller may otherwise direct and (ii) execute and deliver to the Seller, its successors or assigns, at any time and from time to time, upon and after the date hereof, at such requestor’s sole cost and expense, such releases, notices of release, discharges, full reconveyances, termination statements and similar documents (and, if applicable, in recordable form) as such person may reasonably request in writing in connection with, or to effectuate or evidence, the termination of the 1.5 Lien Note Purchase Agreements and the release and termination of Liens and security interests granted in respect of the 1.5 Lien Notes or the Note Guarantees relating to the 1.5 Lien Notes. The Collateral Agent for the 1.5 Lien Notes hereby authorizes the Seller, its successors and assigns, and their respective agents or designees (including Dorsey & Whitney LLP) to file or record any of the foregoing releases, notices of release, discharges, termination statements and similar documents pertaining to all Liens and security interests of the Collateral Agent for the 1.5 Lien Notes in the Collateral securing the 1.5 Lien Notes.

 

[signature pages to follow]

 

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IN WITNESS WHEREOF, the Parties have executed this Omnibus Amendment as of the date first above written.

 

  HYCROFT MINING CORPORATION
  a Delaware corporation
   
  By: /s/ Stephen M. Jones
    Name: Stephen M. Jones
    Title: Executive Vice President and Chief Financial Officer
   
  HYCROFT RESOURCES & DEVELOPMENT, LLC,
  ALLIED VGH LLC,
  VICTORY EXPLORATION LLC
   
  By: /s/ Stephen M. Jones
    Name: Stephen M. Jones
    Title: Chief Financial Officer
   
   
  ALLIED NEVADA GOLD HOLDINGS LLC
   
  By: /s/ Randy E. Buffington
    Name: Randy E. Buffington
    Title: Manager

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  MUDS ACQUISITION SUB, INC.
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
  Title: President    

 

[Signature Page to Omnibus Amendment (1.5 NPA and Exchange Agreement)]

 

   

 

 

 

HIGHBRIDGE TACTICAL CREDIT MASTER FUND, L.P.,

as a 1.5 Lien Noteholder and New Subordinated Noteholder

   
  By: Highbridge Capital Management, LLC, its Trading Manager
   
  By: /s/ Jonathan Segal
    Name: Jonathan Segal
    Title: Managing Director

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

 

highbridge msf international ltd.,

as a 1.5 Lien Noteholder and New Subordinated Noteholder

   
  By: Highbridge Capital Management, LLC, its Trading Manager
   
  By: /s/ Jonathan Segal
    Name: Jonathan Segal
    Title: Managing Director

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  boston patriot batterymarch st llc,
  as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: Mudrick Capital Management, LP, its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer 

 

[Signature Page to Omnibus Amendment (1.5 NPA and Exchange Agreement)]

 

   

 

 

  Mudrick Distressed Opportunity Specialty Fund, L.P,
  as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: Mudrick Capital Management, LP, its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer 

 

[Signature Page to Omnibus Amendment (1.5 NPA and Exchange Agreement)]

 

   

 

 

  Mudrick Distressed Opportunity Drawdown Fund, L.P. ,
as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: Mudrick Capital Management, LP, its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  Mudrick DISTRESSED OPPORTUNITY FUND GLOBAL LP,
as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: Mudrick Capital Management, LP, its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  BLACKWELL PARTNERS LLC – Series A,
as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: Mudrick Capital Management, LP, its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  MERCER QIF FUND PLC,
as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: Mudrick Capital Management, LP, its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  ALSV LIMITED., as a 1.5 Lien Noteholder and a New Subordinated Noteholder
   
  By: /s/ Robert H. Lynch, Jr.
    Name: Robert H. Lynch, Jr.
    Title: Managing Member
   
  By: /s/ Andrew David
    Name: Andrew David
    Title: Chief Operating Officer
   
  APSV, L.L.C., as a 1.5 Lien Noteholder and a New Subordinated Noteholder
   
  By: /s/ Robert H. Lynch, Jr.
    Name: Robert H. Lynch, Jr.
    Title: Managing Member
   
  By: /s/ Andrew David
    Name: Andrew David
    Title: Chief Operating Officer

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  WBOX 2015-5 LTD.,
as Collateral Agent and as a 1.5 Lien Noteholder and New Subordinated Noteholder
   
  By: /s/ Mark M. Strefling
    Name: Mark M. Strefling
    Title: Director

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

 

  WFF CAYMAN II LTD.,
as a New Subordinated Noteholder
   
  By: /s/ Kenneth L. Nadel
    Name: Kenneth L. Nadel
    Title: Authorized Signatory

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

 

  WOLVERINE FLAGSHIP FUND TRADING LIMITED,
as a 1.5 Lien Noteholder
   
  By: Wolverine Asset Management, LLC, its investment manager
   
  By: /s/ Kenneth L. Nadel
    Name: Kenneth L. Nadel
    Title: Chief Operating Officer

 

[Signature Page to Note Purchase Agreement (1.5 NPA and Exchange Agreement)]

 

   

 

Exhibit 10.14

 

OMNIBUS AMENDMENT TO NOTE PURCHASE AGREEMENTS

AND NOTE EXCHANGE AGREEMENT

 

This Omnibus Amendment to the Note Purchase Agreements and the Note Exchange Agreement (this “Omnibus Amendment”) is made and entered into effective as of May 28, 2020, by and among (i) Hycroft Mining Corporation, a Delaware corporation (the “Company”), (ii) each of the direct or indirect subsidiaries of the Company listed on the signature pages hereto (the “Subsidiaries”), (iii) the entities listed on Schedule 1.1 attached hereto (each, an “Exchanging Holder” and collectively, the “Exchanging Holders”) and (iv) WBox 2015-5 Ltd., in its capacity as collateral agent under each of the Note Purchase Agreements (the “Collateral Agent”). The parties hereto shall be collectively referred to as the “Parties.” Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Note Exchange Agreement or the Note Purchase Agreements, as applicable.

 

Recitals

 

A.            The Company, the Subsidiaries, the Exchanging Holders and the Collateral Agent are parties to those certain Note Purchase Agreements dated February 22, 2019, May 21, 2019, June 27, 2019, August 6, 2019, August 29, 2019, September 25, 2019, October 16, 2019, November 21, 2019, December 17, 2019, January 17, 2020, February 7, 2020, March 12, 2020, April 16, 2020, and May 7, 2020, as amended (the “Note Purchase Agreements”), pursuant to which the Company issued Senior Secured Notes (the “Existing Notes”) to the Exchanging Holders.

 

B.            Pursuant to Section 9.2 of each Note Purchase Agreement, such Note Purchase Agreement may be amended with the consent of the Requisite Holders (as defined in the respective Note Purchase Agreement).

 

C.            The undersigned Exchanging Holders constitute the Requisite Holders with respect to each Note Purchase Agreement.

 

D.            The Company, the Subsidiaries, the Exchanging Holders and the Collateral Agent are parties to that certain Note Exchange Agreement dated January 13, 2020 (the “Note Exchange Agreement”), pursuant to which the Exchanging Holders will transfer the Existing Notes (as defined in the Note Exchange Agreement) to the Company subject to the terms and conditions set forth in the Note Exchange Agreement.

 

E.            Pursuant to Section 9.2 of the Note Exchange Agreement, such Note Exchange Agreement may be amended with the consent of the Requisite Holders (as defined in the Note Exchange Agreement).

 

F.            The undersigned Exchanging Holders constitute the Requisite Holders with respect to the Note Exchange Agreement.

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

Agreement

 

NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein contained, the receipt and adequacy of which is hereby acknowledged, the Parties agree to amend the Note Purchase Agreements and the Note Exchange Agreement as follows:

 

1.            Note Purchase Agreements.

 

1.1            The Company hereby waives any and all obligations set forth in Section 14.2(a)(i) of the Note Purchase Agreements, including, but not limited to, the obligation to deliver certificates in the form of Exhibit B and Exhibit C to the Note Purchase Agreements, in connection with the transactions set forth in the Note Exchange Agreement.

 

1.2            The Collateral Agent hereby waives any right to receive an Opinion of Counsel (as defined in the Note Purchase Agreements) and an Officer’s Certificate (as used in the Note Purchase Agreements) pursuant to Section 9.5 of the Note Purchase Agreements in connection with this Omnibus Amendment.

 

2.            Note Exchange Agreement.

 

2.1            The first recital of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

WHEREAS, on February 22, 2019, May 21, 2019, June 27, 2019, August 6, 2019, August 29, 2019, September 25, 2019, October 16, 2019, November 21, 2019, December 17, 2019, January 17, 2020, February 7, 2020, March 12, 2020, April 16, 2020, and May 7, 2020, the Company issued, pursuant to Note Purchase Agreements of even date therewith (as amended, the “1.25 Lien Note Purchase Agreements”), $18,000,000, $9,000,000, $10,000,000, $5,000,000, $5,000,000, $5,000,000, $10,000,000, $5,000,000, $5,000,000, $5,000,000, $5,000,000, $10,000,000, $10,000,000 and $10,000,000  respectively, in aggregate principal amount of Senior Secured Notes due June 30, 2020 (the “Existing Notes”);”

 

2.2            To the extent an Exchanging Holder fails to deliver one (or more) of its Existing Notes to the Company on or prior to the Closing Date, the Company hereby waives the obligations of such Exchanging Holders to deliver the Existing Notes to the Company pursuant to Section 2.2(c) of the Note Exchange Agreement; provided that the Company waives such obligations upon the representations and warranties and covenants, obligations and other provisions contained in this Agreement (including, without limitation, Exhibit G hereto).

 

2.3            The Collateral Agent hereby waives any right to receive an Officer’s Certificate (as used in the Note Exchange Agreement) pursuant to Section 9.5 of the Note Exchange Agreement in connection with this Omnibus Amendment.

 

2.4            Section 2.2 of the Note Exchange Agreement is hereby amended to add the following as subsection 2.2(d):

 

Delivery of Officer’s Certificate. Each Exchanging Holder shall have delivered a certificate signed on behalf of such Exchanging Holder by an authorized Officer thereof in the form attached hereto as Exhibit F.”

 

 

 

2.5            Section 6 of the Note Exchange Agreement is hereby amended to add the following as Section 6.21:

 

Cancellation of Existing Notes. The Company hereby (i) acknowledges that some or all of the Exchanging Holders may be unable to deliver each Note Document to the Company prior to the Closing Date and (ii) waives the condition precedent under the Note Exchange Agreement to deliver each Note Document prior to the Closing Date, provided that any failure to deliver one or more of the Existing Notes shall be subject to the terms of the Existing Holder representations and warranties, covenants, obligations and other provisions provided in Section 7.3 of the Note Exchange Agreement, as amended herein. Further, the Company covenants that, notwithstanding any failure by the Exchanging Holders to deliver all of the Existing Notes prior to the Closing Date, upon consummation of the transactions contemplated by the Note Exchange Agreement, the Company will cancel all Existing Notes and will treat such Existing Notes as no longer outstanding for all purposes.”

 

2.6            The first sentence of Section 6.4(a) of the Note Exchange Agreement is hereby amended to add the phrase “and Holders” after the phrase “Collateral Agent”.

 

2.7            Section 6.4(b) of the Note Exchange Agreement is hereby amended to add the phrase “and Holders” after the phrase “Collateral Agent”.

 

2.8            Section 6.14(b)(xvi) of the Note Exchange Agreement is hereby amended to delete the phrase “Collateral Agent” and substitute the word “Holders” in its place.

 

2.9            Section 6.15(d) of the Note Exchange Agreement is hereby amended to replace each use of the phrase “Collateral Agent” with the word “Holders”.

 

2.10            Section 6.18(d) of the Note Exchange Agreement is hereby amended to replace the first use of the phrase “Collateral Agent” with the phrase “the Requisite Holders”.

 

2.11            Section 7 of the Note Exchange Agreement is hereby amended to add the following Exchanging Holder covenant as Section 7.3:

 

Exhibit G. To the extent an Exchanging Holder fails to deliver one (or more) of its Existing Notes on or prior to the Closing Date, such Exchanging Holder hereby makes the representations and warranties contained in Exhibit G hereto and agrees to the covenants, obligations and other provisions contained in Exhibit G hereto.”

 

2.12            Section 8.2 of the Note Exchange Agreement is hereby amended to delete the phrase “the Collateral Agent or” in the first sentence of the first paragraph.

 

 

 

2.13            Section 8.5 of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

Control by Majority. Requisite Holders may direct, subject to the terms and conditions of the Intercreditor Agreement and the provision of security or indemnity satisfactory to the Collateral Agent, the time, method and place of conducting any proceeding for exercising any remedy available to the Collateral Agent or exercising any trust or power conferred on it; provided, however, that the Collateral Agent may refuse to follow any direction that conflicts with Law or this Agreement, that may involve the Collateral Agent in personal liability or that the Collateral Agent determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction (it being understood that the Collateral Agent has no duty to determine whether any action is prejudicial to any Holder) and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes.”

 

2.14            Section 8.8 of the Note Exchange Agreement is hereby amended by adding the following sentence to the end of such Section:

 

“The Collateral Agent is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have its claims allowed in any judicial proceeding relative to the Company (or any other obligor upon the Notes), its creditors or its property.”

 

2.15            Section 10.4(b) of the Note Exchange Agreement is hereby amended by amending the last sentence thereof to read as follows:

 

“The Collateral Agent shall deliver such instrument or instruments reasonably requested by and prepared by the Company, evidencing such release upon receipt of a Company Request accompanied by an Officer’s Certificate certifying as to the compliance with this Section 10.4 and the other applicable provisions of this Agreement.”

 

2.16            Section 11.4 of the Note Exchange Agreement is hereby amended by adding a “)” after “Section 11.9(l).

 

2.17            Section 11.7(a) of the Note Exchange Agreement is hereby amended to add the phrase “(or amendments thereto)” after the phrase “continuation statements”.

 

2.18            Section 11.9(a) of the Note Exchange Agreement is hereby amended to delete the following sentence in its entirety: “Except as expressly otherwise provided in this Agreement, the Collateral Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Collateral Agent is expressly entitled to take or assert under this Agreement and the Collateral Documents, including the exercise of remedies pursuant to Section 8, and any action so taken or not taken shall be deemed consented to by the Holders.”

 

2.19            Section 11.9(d)(iii) of the Note Exchange Agreement is hereby amended to delete the following in its entirety: “that would constitute an exercise of remedies hereunder or under any of the Note Documents”.

 

 

 

2.20            The fourth sentence of Section 11.9(d) of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

“Whenever reference is made in this Agreement or any other Note Document to any action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by the Collateral Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Collateral Agent, it is understood that in all cases the Collateral Agent shall be fully justified in failing or refusing to take any such action under this Agreement if it shall not have received such advice or concurrence of the Requisite Holders (acting in accordance with this Agreement and other Note Documents, with such direction to be binding upon all of the Holders), as it deems appropriate accompanied by, if requested, indemnity satisfactory to the Collateral Agent.”

 

2.21            Section 11.9(f) of the Note Exchange Agreement is hereby amended to replace each reference to “WBox 2015-5 Ltd.” with “Wilmington Trust, National Association”.

 

2.22            The first sentence of the second paragraph of Section 11.9(m) of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

“The Company and the Guarantors, jointly and severally, shall indemnify the Collateral Agent in any of its capacities under this Agreement, any of the Note Documents and any other document or transaction entered into in connection herewith or therewith and its agents against any and all losses, liabilities or expenses incurred by them arising out of or in connection with the acceptance or administration of its duties under this Agreement or any such other document or transaction, including the costs and expenses of enforcing this Agreement against the Company (including this Section 11.9) and defending themselves against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of their powers or duties hereunder or under any such other document or transaction, except to the extent any such loss, liability or expense may be attributable to its gross negligence or willful misconduct on the part of the Collateral Agent, its officers, directors, agents or employees, or such agent, as the case may be, as determined by a final non-appealable order of a court of competent jurisdiction.”

 

 

 

2.23            The last sentence of the second paragraph of Section 11.9(m) of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

“The Company need not reimburse any expense or indemnify against any loss incurred by the Collateral Agent through the Collateral Agent’s own gross negligence or willful misconduct, as determined by a final non-appealable order of a court of competent jurisdiction.”

 

2.24            Section 11.9(q) of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

“Notwithstanding anything in this Agreement or any other Note Document to the contrary, the Collateral Agent shall not be liable to any other party for any indirect, special incidental, punitive or consequential damages (including but not limited to lost profits) whatsoever, even if it has been informed of the likelihood thereof and regardless of the form of action.”

 

2.25            Section 12 of the Note Exchange Agreement is hereby amended by adding the following paragraph to the end of such section:

 

“Each Holder shall, on a ratable basis based on such Holder’s pro rata share of all the Outstanding Notes, indemnify upon demand the Collateral Agent (to the extent not reimbursed by or on behalf of the Company or any Guarantor and without limiting the obligation of the Company and the Guarantors to do so), and hold harmless the Collateral Agent in each case from and against any and all losses, liabilities or expenses incurred by the Collateral Agent in connection with this Agreement and the other Note Documents, except for losses, liabilities or expenses determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the Collateral Agent’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Requisite Holders (or such other number or percentage of the Holders as shall be required by the Note Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section.”

 

2.26            The Company hereby waives any and all obligations set forth in Section 14.2(a)(i) of the Note Exchange Agreement, including, but not limited to, the obligation of a transferor to deliver certificates in the form of Exhibit B and Exhibit C to the Note Exchange Agreement in connection with the exchange of the Notes (as defined in the Note Exchange Agreement).

 

2.27            Section 16.21(b)(i) of the Note Exchange Agreement is hereby deleted in its entirety and replaced with the following:

 

“the payment of principal, interest, fees, expenses or other amounts on account of the Note Obligations (other than the payment of PIK Interest and other Permitted Payments, and the fees and expenses (including attorney’s fees and expenses) of the Collateral Agent in its capacity as such) is expressly subject to the payment in full of the Senior Debt Obligations;”

 

 

 

2.28            Section 16.21 of the Note Exchange Agreement is hereby amended by adding the following subsection (c):

 

“(c)      Notwithstanding any other provisions of this Agreement, in the event the Senior Representative enters into any amendment, supplement, modification, waiver or consent in respect of any of the Senior Collateral Documents (as defined in the Intercreditor Agreement) for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any Senior Collateral Document (as defined in the Intercreditor Agreement) or changing in any manner the rights of any parties thereunder, then such amendment, waiver, supplement, modification, or consent shall apply automatically to any comparable provision of any Collateral Document, if any, and each other comparable Collateral Document without the consent of or action by the Collateral Agent or any other Secured Party (with all such amendments, waivers, supplements, consents and modifications subject to the terms of the Intercreditor Agreement); provided that (other than with respect to amendments, modifications or waivers that secure additional extensions of credit and add additional secured creditors and do not violate the express provisions of the Note Documents), (i)  such amendment, supplement, modification, waiver or consent does not have the effect of (A) removing assets subject to the Lien granted to the Collateral Agent hereunder or under the other Collateral Documents, except to the extent that a release of such Lien is permitted by Section 5.01 of the Intercreditor Agreement, (B) imposing additional duties on the Collateral Agent without its consent or (C) permitting other Liens on the Collateral not permitted under the terms of the Note Documents or the Intercreditor Agreement, and (ii) any such amendment, waiver, supplement, modification or consent that materially and adversely affects the rights of the Secured Parties and does not affect the Senior Parties in a like or similar manner shall not apply to this Agreement or the other Collateral Document without the consent of the Collateral Agent.”

 

2.29            The Exchanging Holders hereby consent to, and the Company hereby agrees to, the full release of each of Allied Nevada Gold Holdings LLC and Victory Exploration LLC (f/k/a Victory Exploration Inc.) from any and all liabilities and other obligations under or otherwise in connection with the Note Exchange Agreement, the Notes, any Note Guarantee and any other Note Documents, including its guarantee obligations thereunder, effective immediately without further action from any other person or entity, shall cease to be a “Guarantor” for all purposes thereunder and shall hereafter be deemed no longer a party thereto.  The Company hereby agrees to execute and deliver to Allied Nevada Gold Holdings LLC and/or Victory Exploration LLC (f/k/a Victory Exploration Inc.), at any time and from time to time, upon reasonable request thereby, such other documents or instruments evidencing such release.

 

2.30            Schedule 1.1 to the Note Exchange Agreement is hereby deleted in its entirety and replaced with Schedule 1.1 attached.

 

2.31            The Note Exchange Agreement is hereby amended to add Exhibit F and Exhibit G attached hereto.

 

3.            Resignation of Collateral Agent. Pursuant to Section 11.9(g) of the Note Exchange Agreement, the Collateral Agent hereby resigns as collateral agent under the Note Exchange Agreement, and the Company hereby appoints Wilmington Trust, National Association (“WTNA”) as its successor collateral agent. By executing this Omnibus Amendment, WTNA acknowledges, confirms, and accepts such appointment and agrees to act as the “Collateral Agent” under the Note Exchange Agreement in accordance with the terms thereof, this Omnibus Amendment and the Resignation, Appointment, Assignment and Acceptance Agreement of even date herewith.

 

 

 

4.            Miscellaneous.

 

4.1            The Company hereby acknowledges that each undersigned Exchanging Holder is the holder of record of the Notes listed in Schedule 1.1 next to such Exchange Holder’s name

 

4.2            Entire Agreement. Except as specifically amended or waived in this Omnibus Amendment, the Existing Notes shall otherwise continue in full force and effect. This Omnibus Amendment together with the Existing Notes, the Note Purchase Agreements (as amended by this Omnibus Amendment), the Intercreditor Agreement (as defined in the Note Purchase Agreement and the Note Exchange Agreement), the other Note Documents (as defined in the Note Purchase Agreements and the Note Exchange Agreement) and the Note Exchange Agreement (as amended by this Omnibus Amendment) constitute the entire understanding among the Parties and the parties thereto with respect to the subject matter hereof and thereof and replace and supersede all prior agreements and understandings, both written and oral, among the Parties and the parties thereto with respect to the subject matter hereof and thereof.

 

4.3            Governing Law. THIS OMNIBUS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

4.4            Judicial Interpretation. The parties hereto agree that they have been represented by legal counsel during the negotiation and execution of this Omnibus Amendment and, therefore, waive the application of any regulation, holding, rule of construction or Law providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

 

4.5            Counterparts. This Omnibus Amendment may be executed in any number of counterparts, each of which will be an original, and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of this Omnibus Amendment by facsimile or portable document format (PDF) will be effective as delivery of a manually executed counterpart of this Omnibus Amendment.

 

4.6            Termination and Release.

 

The parties hereto acknowledge and agree that upon the consummation of the exchange of the Existing Notes as contemplated pursuant to the Note Exchange Agreement, the 1.5 Lien Note Purchase Agreements and each of the Note Documents relating to the Note Purchase Agreements shall be automatically terminated and any and all other agreements, documents and instruments executed in connection therewith, shall be automatically and irrevocably terminated in its entirety and be of no further force or effect, and the Collateral Agent for the Existing Notes, without recourse, representation or warranty, hereby irrevocably releases and terminates all security interests and other Liens on the Collateral securing the Existing Notes created pursuant to the Collateral Documents relating to the Existing Notes.

 

The Collateral Agent for the Existing Notes will promptly, (i) at the Company’s sole cost and expense, deliver or cause to be delivered any Collateral in its possession or control, to the Company or to such other person or entity as the Company may otherwise direct and (ii) execute and deliver to the Company, its successors or assigns, at any time and from time to time, upon and after the date hereof, at such requestor’s sole cost and expense, such releases, notices of release, discharges, full reconveyances, termination statements and similar documents (and, if applicable, in recordable form) as such person may reasonably request in writing in connection with, or to effectuate or evidence, the termination of the Note Purchase Agreements and the release and termination of Liens and security interests granted in respect of the Existing Notes or the Note Guarantees relating to the Existing Notes. The Collateral Agent for the Existing Notes hereby authorizes the Company, its successors and assigns, and their respective agents or designees (including Dorsey & Whitney LLP) to file or record any of the foregoing releases, notices of release, discharges, termination statements and similar documents pertaining to all Liens and security interests of the Collateral Agent for the Existing Notes in the Collateral securing the Existing Notes.

 

 

 

 

IN WITNESS WHEREOF, the Parties have executed this Omnibus Amendment as of the date first above written.

 

   
   
  HYCROFT MINING CORPORATION
  a Delaware corporation
   
  By: /s/ Stephen M. Jones
    Name: Stephen M. Jones
    Title: Executive Vice President and Chief Financial Officer
   
   
   
  HYCROFT RESOURCES & DEVELOPMENT, LLC,
  ALLIED VGH LLC,
  VICTORY EXPLORATION LLC
   
   
  By: /s/ Stephen M. Jones
    Name: Stephen M. Jones
    Title: Chief Financial Officer
   
   
  ALLIED NEVADA GOLD HOLDINGS LLC
   
  By: /s/ Randy E. Buffington
    Name: Randy E. Buffington
    Title: Manager
   
       

 

 

 

  HIGHBRIDGE TACTICAL CREDIT MASTER FUND, L.P.,
  as an Exchanging Holder
   
  By: Highbridge Capital Management, LLC,
its Trading Manager
   
  By: /s/ Jonathan Segal
    Name: Jonathan Segal
    Title: Managing Director

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  highbridge msf international ltd.,
  as an Exchanging Holder
   
  By: Highbridge Capital Management, LLC,
its Trading Manager
   
  By: /s/ Jonathan Segal
    Name: Jonathan Segal
    Title: Managing Director

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  boston patriot batterymarch st llc,
  as an Exchanging Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  Mudrick Distressed Opportunity Specialty Fund, L.P,
  as an Exchanging Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  Mudrick Distressed Opportunity Drawdown Fund, L.P. ,
  as an Exchanging Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  Mudrick DISTRESSED OPPORTUNITY FUND GLOBAL LP,
  as an Exchanging Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  BLACKWELL PARTNERS LLC – Series A,
  as an Exchanging Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  MERCER QIF FUND PLC,
  as an Exchanging Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
  By: /s/ Glenn Springer
    Name: Glenn Springer
    Title: Chief Financial Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  ALSV LIMITED., as an Exchanging Holder
   
  By: /s/ Robert H. Lynch, Jr.
  Name: Robert H. Lynch, Jr.
  Title: Managing Member
   
  By: /s/ Andrew David
  Name: Andrew David
  Title: Chief Operating Officer
   
  APSV, L.L.C., as an Exchanging Holder
   
  By: /s/ Robert H. Lynch, Jr.
  Name: Robert H. Lynch, Jr.
  Title: Managing Member
   
  By: /s/ Andrew David
  Name: Andrew David
  Title: Chief Operating Officer

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  WBOX 2015-5 LTD.,
  as Collateral Agent and as an Exchanging Holder
   
   
  By: /s/ Mark M. Strefling
    Name: Mark M. Strefling
    Title: Director

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

 

  WFF CAYMAN II LTD.,
  as an Exchanging Holder
   
   
  By: /s/ Kenneth L. Nadel
    Name: Kenneth L. Nadel
    Title: Authorized Signatory

 

[Signature Page to Omnibus Amendment (1.25 NPA and Note Exchange Agreement)]

 

 

Exhibit 10.19

 

HYCROFT MINING CORPORATION
RESTRICTED STOCK UNIT AGREEMENT

(PERFORMANCE-VESTING)

 

THIS AGREEMENT (the “Agreement”) is made and entered into as of this 20th day of February, 2019 (the “Grant Date”) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”), and Randy Buffington (the “Participant”), pursuant to the Hycroft Mining Corporation Performance and Incentive Pay Plan (the “Plan”). This Agreement and the award contained herein are subject to the terms and conditions set forth in the Plan, which are incorporated by reference herein, and the following terms and conditions. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Plan.

 

WITNESSETH:

 

WHEREAS, the Participant is the President and Chief Executive Officer of the Corporation;

 

WHEREAS, the Corporation has adopted the Plan in order to promote the interests of the Corporation, its Affiliated Entities and its stockholders by using stock-based and cash-based incentives to attract, retain and motivate its management and other persons to encourage and reward such persons contributing to the performance of the Corporation and to align their interests with the interests of the Corporation’s stockholders;

 

WHEREAS, the Compensation Committee of the Board (the “Committee”) of the Board of Directors of the Corporation (the “Board”) has determined that it is in the best interests of the Corporation to grant Restricted Stock Units (as defined herein) under the Plan to the Participant on the terms and conditions set forth below to encourage the Participant to remain in the employ of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity and to reward the Participant for his continued employment;

 

Whereas, the Corporation and Participant agreed in principle to this equity award on or about June 1, 2018; and

 

WHEREAS, the Corporation is contemplating entering into a transaction with Mudrick Capital Acquisition Corporation, a publicly-traded special purpose acquisition corporation formed by affiliates of Mudrick Capital (“MUDS”), pursuant to which the Corporation would sell substantially all of the assets of its subsidiaries and certain of its assets and/or its shares of common stock (a “Sale Transaction”), and upon consummation of such Sale Transaction the securities issued hereunder shall become convertible into shares of common stock of MUDS in lieu of and in substitution for shares of the common stock of the Corporation (“Common Stock”).

 

NOW, THEREFORE, in consideration of the various covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.            Award of Restricted Stock Units. In consideration for the continued service of the Participant to the Corporation and its Subsidiaries and Affiliated Entities, and as part of the Plan, the Corporation hereby awards to the Participant, subject to the further terms and conditions set forth in this Agreement, restricted stock units (the “Restricted Stock Units” or “RSUs”), with a value of $787,500 as of the Grant Date (the “Grant Date Value”).

 

 

 

 

2.            No Rights of Stockholder. Until converted as described in Section 6 hereof, the Restricted Stock Units represent the Corporation’s unfunded and unsecured promise to issue shares of Common Stock, at a future date, subject to the terms of this Agreement. The Participant has no rights with respect to the Restricted Stock Units other than rights of a general creditor of the Corporation. Except as set forth in Section 3 hereof, the Participant shall not have any of the rights of a stockholder with respect to unvested Restricted Stock Units.

 

3.            Dividend Equivalents. Subject to the provisions of Section 5 hereof, in the event that the Corporation declares a dividend on its Common Stock, the Corporation will increase the number of Restricted Stock Units hereunder (i.e., by increasing the award) by the number of units, rounded to the nearest whole number, equal to the result of dividing (a) the per share cash dividend paid by the Corporation on its shares of Common Stock multiplied by the number of unvested Restricted Stock Units awarded to Participant under this Agreement as of the related dividend payment record date by (b) the fair market value of one share of Common Stock on the related dividend payment record date.   Any such additional Restricted Stock Units shall be subject to the same vesting, forfeiture, payment, termination and other terms, conditions and restrictions as the original Restricted Stock Units to which they relate. No additional Restricted Stock Units shall be granted with respect to any Restricted Stock Units which, as of the dividend payment record date, have either vested or been terminated. For the avoidance of doubt, these Restricted Stock Units shall not be entitled to, and no adjustment shall be made, for any distribution of shares of MUDS common stock received by the Corporation in connection with the Sale Transaction to holders of shares of Common Stock.

 

4.            Restrictions on Transfer. Except as otherwise provided in this Agreement, the Participant may not sell, transfer, assign, pledge, encumber or otherwise dispose of any of the Restricted Stock Units or the rights granted hereunder (any such disposition or encumbrance being referred to herein as a “Transfer”). Until converted as described in Section 6 hereof, any Transfer or purported Transfer by the Participant of any of the Restricted Stock Units shall be null and void and the Corporation shall not recognize or give effect to such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such Restricted Stock Units. The Restricted Stock Units shall not be subject to sale, execution, pledge, attachment, encumbrance or other process prior to vesting and no person shall be entitled to exercise any rights of the Participant as the holder of such Restricted Stock Units by virtue of any attempted execution, attachment or other process until the Restricted Stock Units are converted as provided in Section 6 hereof.

 

5.            Vesting of Restricted Stock Units.     Subject to any forfeiture provisions in this Agreement or in the Plan, and subject to the terms of this Section 5 hereof, the Restricted Stock Units shall vest in accordance with the corporate performance metrics set forth in Sections 5(a)-(g). The Participant’s cumulative vested percentage of the Restricted Stock Units shall be the sum of the vesting percentages earned in Sections 5(a)-(g), provided, however, that the Participant must be employed with the Corporation or any of its Subsidiaries or Affiliates on the date a corporate performance metric is achieved in order to earn any vesting credit with respect to such performance metric. The later of the date on which the Committee determines that a corporate performance has been achieved or the closing of the MUDS Sale Transaction shall be the “Vesting Date” for 50% of the RSU's and the later of (i) the second anniversary of the Effective Date and (ii) closing of the MUDS Sale Transaction shall be the “Vesting Date” for the remaining 50% of the RSU’s.

 

  2  

 

 

(a)          Operations.

 

Date by which the First Ore to the Pads is Delivered RSU Vesting Percentage
On or before March 1, 2019 5.0% of the RSUs
After March 1, 2019 but on or before March 15, 2019 2.5% of the RSUs
After March 15, 2019 0.0% of the RSUs

 

(b)          2019 Gold Equivalent Sales. If the amount of 2019 Gold Equivalent Sales is at least 40,000 ounces but less than 50,000 ounces, and if such amount is between sales targets listed below, the RSU Vesting Percentage earned shall be determined by linear interpolation.

 

2019 Gold Equivalent Sales RSU Vesting Percentage
50,000 ounces or more 27.5% of the RSUs
47,334 ounces 20.0% of the RSUs
43,667 ounces 12.5% of the RSUs
40,000 ounces 7.5% of the RSUs
Less than 40,000 ounces 0.0% of the RSUs

 

(c)          Adjusted Cash Cost Per Ounce of Gold Sold. If the Adjusted Cash Cost Per Ounce of Gold Sold is at least $1,000 per ounce or less but less than $1,150 per ounce, and if such cost is between targets listed below, the RSU Vesting Percentage earned shall be determined by linear interpolation.

 

Adjusted Cash Cost Per Ounce of Gold Sold RSU Vesting Percentage
$1,000 per ounce or less 27.5% of the RSUs
$1,050 per ounce 20.0% of the RSUs
$1,100 per ounce 12.5% of the RSUs
$1,150 per ounce 7.5% of the RSUs
More than $1,150 per ounce 0.0% of the RSUs

 

  3  

 

 

(d)          Capital Expenditures. If the Corporation’s 2019 Capital Expenditures are at least $11.0 million but less than $13.0 million, and if such capital expenditures are between targets listed below, the RSU Vesting Percentage earned shall be determined by linear interpolation.

 

2019 Capital Expenditures RSU Vesting Percentage
Less than $11.0 million 12.5% of the RSUs
$12.0 million 10.0% of the RSUs
$13.0 million 7.5% of the RSUs
More than $13.0 million 0.0% of the RSUs

 

(e)          Updated Feasibility Study.

 

Date by which an Updated Feasibility Study Incorporating Phase III Testwork is Successfully Completed RSU Vesting Percentage
Prior to April 30, 2019 12.5% of the RSUs
After April 29, 2019 but prior to June 30, 2019 10.0% of the RSUs
After June 29, 2019 but prior to January 1, 2020 7.5% of the RSUs
After December 31, 2019 0.0% of the RSUs

 

(f)           Financing.

 

Date of Execution of MUDS Acquisition Agreement RSU Vesting Percentage
On or before March 31, 2019 15.0% of the RSUs
After March 31, 2019 but on or before April 30, 2019 7.5% of the RSUs
After April 30, 2019 0.0% of the RSUs

 

(g)          Health, Safety and Environmental.

 

Date by which EIS is Approved RSU Vesting Percentage
On or before June 30, 2019 15.0% of the RSUs
After June 30, 2019 but on or before September 30, 2019 10.0% of the RSUs

After September 30, 2019 but on or before

December 31, 2019

5.0% of the RSUs
After December 31, 2019 0.0% of the RSUs

 

  4  

 

 

(h)          If the application of the vesting schedule in Sections 5(a)-(g) would yield a fractional Restricted Stock Unit, such fractional Restricted Stock Unit shall be rounded down to the next whole unit if it is less than 0.5 and rounded up to the next whole unit if it is 0.5 or more.

 

(i)           Except as otherwise described in this Section 5, to the extent any Restricted Stock Units have not vested upon the earlier of (i) the last day permitted to earn vesting credit under any performance metric described in Sections 5(a)-(g) or (ii) the Participant’s Separation from Service for any reason, those Restricted Stock Units that have not vested shall be immediately forfeited upon such date. Upon such forfeiture, the Participant shall no longer have any rights with respect to such Restricted Stock Units or any interest therein.

 

(j)           Notwithstanding anything to the contrary in this Section 5, in the event of (i) an equity investment (x) at a pre-money enterprise value in excess of $500 million and (y) in which the holders of the Corporation’s outstanding 1.5 lien secured notes (“1.5 Lien Notes”) and the holders of the Corporation’s outstanding second lien secured convertible notes (“Second Lien Notes”) have the right to receive cash in the aggregate amount of at least 33% of outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest) of such 1.5 Lien Notes and Second Lien Notes, or (ii) a transaction, other than an acquisition by Mudrick Capital Acquisition Corporation or its affiliates, in which the holders of the Corporation’s outstanding 1.5 Lien Notes and Second Lien Notes receive cash or liquid securities in exchange or satisfaction and payment of the outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest and any premiums due and payable) of such 1.5 Lien Notes and Second Lien Notes (collectively, a “Liquidity Event”), then upon closing of such Liquidity Event vesting of the Restricted Stock Units shall accelerate and such Restricted Stock Units shall be fully vested.

 

(k)          Notwithstanding anything to the contrary in this Section 5, (x) in the event of a Change in Control in which the resulting entity does not assume, continue, convert or replace this Agreement, the Restricted Stock Units that have not been previously forfeited shall be fully vested and converted into an equivalent number of shares of Common Stock immediately prior to the Change in Control, or (y) in the event of a Change in Control where the Participant incurs an involuntary Separation from Service for any reason other than Cause (as defined in the Plan) within 90 days prior or 12 months following the Change in Control, the Restricted Stock Units which have not been previously forfeited shall be fully vested and converted into shares as described in Section 6 and Section 7 hereof. For purposes of this Agreement, the Restricted Stock Units awarded hereunder will not be considered to be assumed, continued, converted or replaced by the resulting entity in connection with the Change in Control unless the Restricted Stock Units are adjusted to prevent dilution of the Participant’s rights hereunder as a result of the Change in Control. For purposes of this Agreement, “Change in Control shall have the meaning set forth in the Participant’s Employment Agreement with the Corporation dated February 20, 2019 (the “Employment Agreement”).

 

  5  

 

 

6.            Conversion of Restricted Stock Units into Common Stock upon Vesting.

 

(a)          Except as described in Section 6(b) hereof, on the Conversion Date (as defined below), the Restricted Stock Units that vested pursuant to the terms of Section 5 hereof, if any, shall be converted into the number of shares of Common Stock equal to the Grant Date Value divided by the fair market value of a share of Common Stock, which shares of Common Stock will be issued to the Participant, or in the event of the Participant’s death, the Participant’s beneficiary pursuant to the Plan. Promptly after the Conversion Date, certificates of such shares of Common Stock shall be delivered to the Participant. Except as provided in Section 11(b), the “Conversion Date” shall be December 31, 2020; provided, however, that if on such date the Participant is prohibited from trading in the Corporation’s securities pursuant to applicable securities laws and/or the Corporation’s policy on securities trading and disclosure of confidential information, the Conversion Date, shall be, in the determination of the Committee, the second trading day after the date the Participant is no longer prohibited from such trading. For purposes of this Section 6(a), the fair market value shall mean the closing price of a share of Common Stock on a national securities exchange on which such shares of Common Stock may be listed for trading or as determined by the Committee on a vesting date. Notwithstanding anything to the contrary herein, a Sale Transaction with MUDS, whether in the structure contemplated or another corporate structure, shall not be deemed to constitute a Change in Control and will not accelerate vesting of conversion of the Restricted Stock Units provided that the obligations under this Agreement are assumed by MUDS.

 

(b)          In the event of the consummation of the Sale Transaction with MUDS, whether in the structure currently contemplated or another corporate structure, it shall be a condition to the consummation of the Sale Transaction with MUDS that all obligations of the Corporation under this Agreement shall be assumed by MUDS and the Restricted Stock Units shall be convertible, subject to the terms and conditions hereunder, into shares of MUDS common stock following consummation of the Sale Transaction rather than into shares of Common Stock.

 

7.            Adjustment Provisions. If, during the term of this Agreement, there shall be any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse stock split, rights offering or extraordinary distribution with respect to the Common Stock, or other change in corporate structure affecting the Common Stock, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the Restricted Stock Units in a manner consistent with Section 4.3 of the Plan, including a substitution or adjustment in the aggregate number or kind of shares subject to this Agreement, notwithstanding that the Restricted Stock Units are subject to the restrictions on transfer imposed by Section 4 above.  Any securities, awards or rights issued pursuant to this Section 7 shall be subject to the same restrictions as the underlying Restricted Stock Units to which they relate.

 

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8.            Tax Withholding. As a condition precedent to the receipt of any Restricted Stock Units hereunder, the Participant agrees to pay to the Corporation, at such times as the Corporation shall determine, such amounts as the Corporation shall deem necessary to satisfy any withholding taxes due on income that the Participant recognizes pursuant to this Award. The obligations of the Corporation under this Agreement and the Plan shall be conditional on such payment or arrangements, and the Corporation and its Subsidiaries and Affiliated Entities shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. In addition, the Participant may elect, unless otherwise determined by the Committee, to satisfy the withholding requirement by having the Corporation withhold shares of Common Stock with a Fair Market Value, as of the date of such withholding, sufficient to satisfy the withholding obligation.

 

9.            Registration. This grant is subject to the condition that if at any time the Board or Committee shall determine, in its discretion, that the listing of the shares of Common Stock subject hereto on any securities exchange, or the registration or qualification of such shares under any federal or state law, or the consent or approval of any regulatory body, shall be necessary or desirable as a condition of, or in connection with, the grant, receipt or delivery of shares hereunder, such grant, receipt or delivery will not be effected unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or Committee. The Corporation agrees to make every reasonable effort to effect or obtain any such listing, registration, qualification, consent or approval.

 

10.          No Right to Continued Employment or Engagement. In no event shall the granting of the Restricted Stock Units or the other provisions hereof or the acceptance of the Restricted Stock Units by the Participant interfere with or limit in any way the right of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity to terminate the Participant’s employment or engagement as a service provider at any time, nor confer upon the Participant any right to continue in the employ or service of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity for any period of time or to continue his present or any other rate of compensation.

 

11.          Section 409A Compliance.

 

(a)          The intent of the parties is that payments and benefits under this Agreement be excluded from the scope of, or comply with, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted as such. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Participant and the Corporation of the applicable provision without violating the provisions of Code Section 409A.

 

(b)          A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if the Participant is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of the Participant’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 11(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Participant in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

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(c)          For purposes of Code Section 409A, the Participant’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Corporation.

 

(d)          Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

12.          Miscellaneous.

 

(a)          Assignment; Successors. This Agreement will be binding upon and inure to the benefit of the heirs and representatives of the Participant and the assigns and successors of the Corporation, but neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Participant (except by will or by operation of the laws of intestate succession) or by the Corporation, except that the Corporation may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Corporation and, for the avoidance of doubt, the parties expressly agree that this Agreement shall be assigned to, and assumed by, MUDS in connection with, and as a condition to, the consummation of the Sale Transaction.

 

(b)          Governing Law and Forum for Disputes. The laws of the State of Colorado will govern the validity, interpretation, construction and performance of this Agreement, without regard to the conflict of laws principles thereof. Any action or proceeding against the parties relating in any way to this Agreement or the Participant’s employment (a “Dispute”) must be brought and enforced in the courts of the State of Colorado, and the parties irrevocably (i) submit to the jurisdiction of such courts in respect of any such action or proceeding and (ii) waive any right to a trial by jury of any Dispute.

 

(c)          Modification or Amendment. No failure or delay by the Corporation or the Participant in enforcing or exercising any right or remedy hereunder will operate as a waiver thereof. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by an officer or director of the Corporation duly authorized by the Board and the Participant.

 

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(d)          Notices. Notices given pursuant to this Agreement will be in writing and will be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile with confirmation of delivery, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery, including electronic transmission, that provides a written confirmation of delivery. Notice to the Corporation will be directed to:

 

Hycroft Mining Corporation

c/o Stephen M. Jones

Executive Vice President and Chief Financial Officer

8181 E. Tufts, Suite 510

Denver, CO 80237

 

with a copy to:

 

Neal, Gerber & Eisenberg, LLP
2 N. LaSalle Street, Suite 1700
Chicago, IL 60602
Attention: David S. Stone, Esq.
email:  dstone@nge.com

 

The Corporation may change the person and/or address to whom the Participant must give notice under this Section 12(d) by giving the Participant written notice of such change, in accordance with the procedures described above. Notices to or with respect to the Participant will be directed to the Participant, or to the Participant’s executors, personal representatives or distributees, if the Participant is deceased, at the Participant’s home address on the records of the Corporation, or such other address provided to the Corporation in accordance with the procedures described above.

 

(e)          Severability. If any provisions of this Agreement will be found invalid or unenforceable by a court of competent jurisdiction, in whole or in part, then it is the parties’ mutual desire that such court modify such provision(s) to the extent and in the manner necessary to render the same valid and enforceable, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted, or as if such provision(s) had not been originally incorporated herein, as the case may be.

 

(f)           Entire Agreement. The Participant acknowledges receipt of this Agreement and agrees that with respect to the Restricted Stock Units (Performance Vesting), it contains the entire understanding and agreement with the Corporation, superseding any previous oral or written communication, representation, understanding or agreement with the Corporation or any representative thereof. No term or condition should be construed strictly against any party on the basis that it was drafted by such party.

 

(g)          Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning thereof.

 

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(h)            Counterparts.  This Agreement may be executed in any number of counterparts, including by facsimile or PDF, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

[Signature page to follow]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the Grant Date.

 

 

PARTICIPANT           HYCROFT MINING CORPORATION
     
/s/ Randy Buffington   /s/ Stephen M. Jones
Randy Buffington   By: Stephen M. Jones
    Its: Executive Vice President & CFO

 

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Exhibit 10.20

 

HYCROFT MINING CORPORATION
RESTRICTED STOCK UNIT AGREEMENT

(TIME-VESTING)

 

THIS AGREEMENT (the “Agreement”) is made and entered into as of this 20th day of February, 2019 (the “Grant Date”) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”), and Randy Buffington (the “Participant”), pursuant to the Hycroft Mining Corporation Performance and Incentive Pay Plan (the “Plan”). This Agreement and the award contained herein are subject to the terms and conditions set forth in the Plan, which are incorporated by reference herein, and the following terms and conditions. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Plan.

 

WITNESSETH:

 

WHEREAS, the Participant is the President and Chief Executive Officer of the Corporation;

 

WHEREAS, the Corporation has adopted the Plan in order to promote the interests of the Corporation, its Affiliated Entities and its stockholders by using stock-based and cash-based incentives to attract, retain and motivate its management and other persons to encourage and reward such persons contributing to the performance of the Corporation and to align their interests with the interests of the Corporation’s stockholders;

 

WHEREAS, the Compensation Committee of the Board (the “Committee”) of the Board of Directors of the Corporation (the “Board”) has determined that it is in the best interests of the Corporation to grant Restricted Stock Units (as defined herein) under the Plan to the Participant on the terms and conditions set forth below to encourage the Participant to remain in the employ of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity and to reward the Participant for his continued employment;

 

WHEREAS, the Corporation and Participant agreed in principle to this equity award on or about June 1, 2018 (the “Effective Date”); and

 

WHEREAS, the Corporation is contemplating entering into a transaction with Mudrick Capital Acquisition Corporation, a publicly-traded special purpose acquisition corporation formed by affiliates of Mudrick Capital (“MUDS”), pursuant to which the Corporation would sell substantially all of the assets of its subsidiaries and certain of its assets and/or its shares of common stock (a “Sale Transaction”), and upon consummation of such Sale Transaction the securities issued hereunder shall become convertible into shares of common stock of MUDS in lieu of and in substitution for shares of the common stock of the Corporation (“Common Stock”).

 

NOW, THEREFORE, in consideration of the various covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.            Award of Restricted Stock Units. In consideration for the continued service of the Participant to the Corporation and its Subsidiaries and Affiliated Entities, and as part of the Plan, the Corporation hereby awards to the Participant, subject to the further terms and conditions set forth in this Agreement, restricted stock units (the “Restricted Stock Units” or “RSUs”), with a value of $787,500 as of the Grant Date (the “Grant Date Value”).

 

 

 

 

2.            No Rights of Stockholder. Until converted as described in Section 6 hereof, the Restricted Stock Units represent the Corporation’s unfunded and unsecured promise to issue shares of Common Stock at a future date, subject to the terms of this Agreement. The Participant has no rights with respect to the Restricted Stock Units other than rights of a general creditor of the Corporation. Except as set forth in Section 3 hereof, the Participant shall not have any of the rights of a stockholder with respect to unvested Restricted Stock Units.

 

3.            Dividend Equivalents. Subject to the provisions of Section 5 hereof, in the event that the Corporation declares a dividend on its Common Stock, the Corporation will increase the number of Restricted Stock Units hereunder (i.e., by increasing the award) by the number of units, rounded to the nearest whole number, equal to the result of dividing (a) the per share cash dividend paid by the Corporation on its shares of Common Stock multiplied by the number of unvested Restricted Stock Units awarded to Participant under this Agreement as of the related dividend payment record date by (b) the fair market value of one share of Common Stock on the related dividend payment record date.   Any such additional Restricted Stock Units shall be subject to the same vesting, forfeiture, payment, termination and other terms, conditions and restrictions as the original Restricted Stock Units to which they relate. No additional Restricted Stock Units shall be granted with respect to any Restricted Stock Units which, as of the dividend payment record date, have either vested or been terminated. For the avoidance of doubt, these Restricted Stock Units shall not be entitled to, and no adjustment shall be made, for any distribution of shares of MUDS common stock received by the Corporation in connection with the Sale Transaction to holders of shares of Common Stock.

 

4.            Restrictions on Transfer. Except as otherwise provided in this Agreement, the Participant may not sell, transfer, assign, pledge, encumber or otherwise dispose of any of the Restricted Stock Units or the rights granted hereunder (any such disposition or encumbrance being referred to herein as a “Transfer”). Until converted as described in Section 6 hereof, any Transfer or purported Transfer by the Participant of any of the Restricted Stock Units shall be null and void and the Corporation shall not recognize or give effect to such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such Restricted Stock Units. The Restricted Stock Units shall not be subject to sale, execution, pledge, attachment, encumbrance or other process prior to vesting and no person shall be entitled to exercise any rights of the Participant as the holder of such Restricted Stock Units by virtue of any attempted execution, attachment or other process until the Restricted Stock Units are converted as provided in Section 6 hereof.

 

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5.            Vesting of Restricted Stock Units.

 

(a)            Subject to any forfeiture provisions in this Agreement or in the Plan, and subject to the terms of this Section 5 hereof, the Restricted Stock Units shall vest in accordance with the following schedule provided that the Participant has not had a Separation from Service for any reason prior to the applicable vesting date:

 

Vesting Date Cumulative Vested Percentage of the RSUs
The closing of the MUDS Sale Transaction 50% of the RSUs
Later of (i) second anniversary of the Effective Date and (ii) closing of the MUDS Sale Transaction 100% of the RSUs

 

(b)            If the application of the vesting schedule in Section 5(a) would yield a fractional Restricted Stock Unit, such fractional Restricted Stock Unit shall be rounded down to the next whole unit if it is less than 0.5 and rounded up to the next whole unit if it is 0.5 or more.

 

(c)            Except as described in Section 5(d), to the extent any Restricted Stock Units have not vested upon the Participant’s Separation from Service for any reason, those Restricted Stock Units that have not vested shall be immediately forfeited upon such Separation from Service. Upon such forfeiture, the Participant shall no longer have any rights with respect to such Restricted Stock Units or any interest therein.

 

(d)            Notwithstanding anything to the contrary in this Section 5, in the event of (i) an equity investment (x) at a pre-money enterprise value in excess of $500 million and (y) in which the holders of the Corporation’s outstanding 1.5 lien secured notes (“1.5 Lien Notes”) and the holders of the Corporation’s outstanding second lien secured convertible notes (“Second Lien Notes”) have the right to receive cash in the aggregate amount of at least 33% of outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest) of such 1.5 Lien Notes and Second Lien Notes, or (ii) a transaction, other than an acquisition by Mudrick Capital Acquisition Corporation or its affiliates, in which the holders of the Corporation’s outstanding 1.5 Lien Notes and Second Lien Notes receive cash or liquid securities in exchange or satisfaction and payment of the outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest and any premiums due and payable) of such 1.5 Lien Notes and Second Lien Notes (collectively, a “Liquidity Event”), then upon closing of such Liquidity Event vesting of the Restricted Stock Units shall accelerate and such Restricted Stock Units shall be fully vested.

 

(e)            Notwithstanding anything to the contrary in this Section 5, (x) in the event of a Change in Control in which the resulting entity does not assume, continue, convert or replace this Agreement, the Restricted Stock Units shall be fully vested and converted into an equivalent number of shares of Common Stock immediately prior to the Change in Control, or (y) in the event of a Change in Control where the Participant incurs an involuntary Separation from Service for any reason other than Cause (as defined in the Plan) within 90 days prior or 12 months following the Change in Control, the Restricted Stock Units shall be fully vested and converted into shares as described in Section 6 and Section 7 hereof. For purposes of this Agreement, the Restricted Stock Units awarded hereunder will not be considered to be assumed, continued, converted or replaced by the resulting entity in connection with the Change in Control unless the Restricted Stock Units are adjusted to prevent dilution of the Participant’s rights hereunder as a result of the Change in Control. For purposes of this Agreement, “Change in Control shall have the meaning set forth in the Participant’s Employment Agreement with the Corporation dated February 20, 2019 (the “Employment Agreement”).

 

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6.            Conversion of Restricted Stock Units into Common Stock upon Vesting.

 

(a)            Except as described in Section 6(b) hereof, on the Conversion Date (as defined below), the Restricted Stock Units that vested pursuant to the terms of Section 5 hereof, if any, shall be converted into the number of shares of Common Stock equal to the Grant Date Value divided by the fair market value of a share of Common Stock, which shares of Common Stock will be issued to the Participant, or in the event of the Participant’s death, the Participant’s beneficiary pursuant to the Plan. Promptly after the Conversion Date, certificates of such shares of Common Stock shall be delivered to the Participant. Except as provided in Section 11(b), the “Conversion Date” shall be the later of the applicable vesting date or December 31, 2020; provided, however, that if on such date the Participant is prohibited from trading in the Corporation’s securities pursuant to applicable securities laws and/or the Corporation’s policy on securities trading and disclosure of confidential information, the Conversion Date, shall be, in the determination of the Committee, the second trading day after the date the Participant is no longer prohibited from such trading. For purposes of this Section 6(a), the fair market value shall mean the closing price of a share of Common Stock on a national securities exchange on which such shares of Common Stock may be listed for trading or as determined by the Committee on a vesting date. Notwithstanding anything to the contrary herein, a Sale Transaction with MUDS, whether in the structure contemplated or another corporate structure, shall not be deemed to constitute a Change in Control and will not accelerate vesting of conversion of the Restricted Stock Units provided that the obligations under this Agreement are assumed by MUDS.

 

(b)            In the event of the consummation of the Sale Transaction with MUDS, whether in the structure currently contemplated or another corporate structure, it shall be a condition to the consummation of the Sale Transaction with MUDS that all obligations of the Corporation under this Agreement shall be assumed by MUDS and the Restricted Stock Units shall be convertible, subject to the terms and conditions hereunder, into shares of MUDS common stock following consummation of the Sale Transaction rather than into shares of Common Stock.

 

7.            Adjustment Provisions. If, during the term of this Agreement, there shall be any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse stock split, rights offering or extraordinary distribution with respect to the Common Stock, or other change in corporate structure affecting the Common Stock, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the Restricted Stock Units in a manner consistent with Section 4.3 of the Plan, including a substitution or adjustment in the aggregate number or kind of shares subject to this Agreement, notwithstanding that the Restricted Stock Units are subject to the restrictions on transfer imposed by Section 4 above.  Any securities, awards or rights issued pursuant to this Section 7 shall be subject to the same restrictions as the underlying Restricted Stock Units to which they relate.

 

8.            Tax Withholding. As a condition precedent to the receipt of any Restricted Stock Units hereunder, the Participant agrees to pay to the Corporation, at such times as the Corporation shall determine, such amounts as the Corporation shall deem necessary to satisfy any withholding taxes due on income that the Participant recognizes pursuant to this Award. The obligations of the Corporation under this Agreement and the Plan shall be conditional on such payment or arrangements, and the Corporation and its Subsidiaries and Affiliated Entities shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. In addition, the Participant may elect, unless otherwise determined by the Committee, to satisfy the withholding requirement by having the Corporation withhold shares of Common Stock with a Fair Market Value, as of the date of such withholding, sufficient to satisfy the withholding obligation.

 

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9.            Registration. This grant is subject to the condition that if at any time the Board or Committee shall determine, in its discretion, that the listing of the shares of Common Stock subject hereto on any securities exchange, or the registration or qualification of such shares under any federal or state law, or the consent or approval of any regulatory body, shall be necessary or desirable as a condition of, or in connection with, the grant, receipt or delivery of shares hereunder, such grant, receipt or delivery will not be effected unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or Committee. The Corporation agrees to make every reasonable effort to effect or obtain any such listing, registration, qualification, consent or approval.

 

10.            No Right to Continued Employment or Engagement. In no event shall the granting of the Restricted Stock Units or the other provisions hereof or the acceptance of the Restricted Stock Units by the Participant interfere with or limit in any way the right of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity to terminate the Participant’s employment or engagement as a service provider at any time, nor confer upon the Participant any right to continue in the employ or service of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity for any period of time or to continue his present or any other rate of compensation.

 

11.            Section 409A Compliance.

 

(a)            The intent of the parties is that payments and benefits under this Agreement be excluded from the scope of, or comply with, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted as such. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Participant and the Corporation of the applicable provision without violating the provisions of Code Section 409A.

 

(b)            A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if the Participant is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of the Participant’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 11(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Participant in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

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(c)            For purposes of Code Section 409A, the Participant’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Corporation.

 

(d)            Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

12.            Miscellaneous.

 

(a)            Assignment; Successors. This Agreement will be binding upon and inure to the benefit of the heirs and representatives of the Participant and the assigns and successors of the Corporation, but neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Participant (except by will or by operation of the laws of intestate succession) or by the Corporation, except that the Corporation may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Corporation and, for the avoidance of doubt, the parties expressly agree that this Agreement shall be assigned to, and assumed by, MUDS in connection with, and as a condition to, the consummation of the Sale Transaction.

 

(b)            Governing Law and Forum for Disputes. The laws of the State of Colorado will govern the validity, interpretation, construction and performance of this Agreement, without regard to the conflict of laws principles thereof. Any action or proceeding against the parties relating in any way to this Agreement or the Participant’s employment (a “Dispute”) must be brought and enforced in the courts of the State of Colorado, and the parties irrevocably (i) submit to the jurisdiction of such courts in respect of any such action or proceeding and (ii) waive any right to a trial by jury of any Dispute.

 

(c)            Modification or Amendment. No failure or delay by the Corporation or the Participant in enforcing or exercising any right or remedy hereunder will operate as a waiver thereof. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by an officer or director of the Corporation duly authorized by the Board and the Participant.

 

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(d)            Notices. Notices given pursuant to this Agreement will be in writing and will be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile with confirmation of delivery, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery, including electronic transmission, that provides a written confirmation of delivery. Notice to the Corporation will be directed to:

 

Hycroft Mining Corporation

c/o Stephen M. Jones
Executive Vice President and Chief Financial Officer
8181 E. Tufts, Suite 510
Denver, CO 80237

 

with a copy to:

 

Neal, Gerber & Eisenberg, LLP
2 N. LaSalle Street, Suite 1700
Chicago, IL 60602
Attention: David S. Stone, Esq.
email: dstone@nge.com

 

The Corporation may change the person and/or address to whom the Participant must give notice under this Section 12(d) by giving the Participant written notice of such change, in accordance with the procedures described above. Notices to or with respect to the Participant will be directed to the Participant, or to the Participant’s executors, personal representatives or distributees, if the Participant is deceased, at the Participant’s home address on the records of the Corporation, or such other address provided to the Corporation in accordance with the procedures described above.

 

(e)            Severability. If any provisions of this Agreement will be found invalid or unenforceable by a court of competent jurisdiction, in whole or in part, then it is the parties’ mutual desire that such court modify such provision(s) to the extent and in the manner necessary to render the same valid and enforceable, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted, or as if such provision(s) had not been originally incorporated herein, as the case may be.

 

(f)            Entire Agreement. The Participant acknowledges receipt of this Agreement and agrees that with respect to the Restricted Stock Units (Time-Vesting), it contains the entire understanding and agreement with the Corporation, superseding any previous oral or written communication, representation, understanding or agreement with the Corporation or any representative thereof. No term or condition should be construed strictly against any party on the basis that it was drafted by such party.

 

(g)            Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning thereof.

 

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(h)            Counterparts.  This Agreement may be executed in any number of counterparts, including by facsimile or PDF, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

[Signature page to follow]

 

8 

 

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the Grant Date.

 

PARTICIPANT   HYCROFT MINING CORPORATION
/s/ Randy Buffington   /s/ Stephen M. Jones
Randy Buffington   By: Stephen M. Jones
    Its: Executive Vice President & CFO
     

 

9 

 

Exhibit 10.21

 

HYCROFT MINING CORPORATION
RESTRICTED STOCK UNIT AGREEMENT

(PERFORMANCE-VESTING)

 

THIS AGREEMENT (the “Agreement”) is made and entered into as of this 20th day of February, 2019 (the “Grant Date”) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”), and Stephen M. Jones (the “Participant”), pursuant to the Hycroft Mining Corporation Performance and Incentive Pay Plan (the “Plan”). This Agreement and the award contained herein are subject to the terms and conditions set forth in the Plan, which are incorporated by reference herein, and the following terms and conditions. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Plan.

 

WITNESSETH:

 

WHEREAS, the Participant is the Executive Vice President and Chief Financial Officer of the Corporation;

 

WHEREAS, the Corporation has adopted the Plan in order to promote the interests of the Corporation, its Affiliated Entities and its stockholders by using stock-based and cash-based incentives to attract, retain and motivate its management and other persons to encourage and reward such persons contributing to the performance of the Corporation and to align their interests with the interests of the Corporation’s stockholders;

 

WHEREAS, the Compensation Committee of the Board (the “Committee”) of the Board of Directors of the Corporation (the “Board”) has determined that it is in the best interests of the Corporation to grant Restricted Stock Units (as defined herein) under the Plan to the Participant on the terms and conditions set forth below to encourage the Participant to remain in the employ of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity and to reward the Participant for his continued employment;

 

WHEREAS, the Corporation and Participant agreed in principle to this equity award on or about June 1, 2018 (the “Effective Date”); and

 

WHEREAS, the Corporation is contemplating entering into a transaction with Mudrick Capital Acquisition Corporation, a publicly-traded special purpose acquisition corporation formed by affiliates of Mudrick Capital (“MUDS”), pursuant to which the Corporation would sell substantially all of the assets of its subsidiaries and certain of its assets and/or its shares of common stock (a “Sale Transaction”), and upon consummation of such Sale Transaction the securities issued hereunder shall become convertible into shares of common stock of MUDS in lieu of and in substitution for shares of the common stock of the Corporation (“Common Stock”).

 

NOW, THEREFORE, in consideration of the various covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.            Award of Restricted Stock Units. In consideration for the continued service of the Participant to the Corporation and its Subsidiaries and Affiliated Entities, and as part of the Plan, the Corporation hereby awards to the Participant, subject to the further terms and conditions set forth in this Agreement, restricted stock units (the “Restricted Stock Units” or “RSUs”), with a value of $531,250 as of the Grant Date (the “Grant Date Value”).

 

 

2.            No Rights of Stockholder. Until converted as described in Section 6 hereof, the Restricted Stock Units represent the Corporation’s unfunded and unsecured promise to issue shares of Common Stock, at a future date, subject to the terms of this Agreement. The Participant has no rights with respect to the Restricted Stock Units other than rights of a general creditor of the Corporation. Except as set forth in Section 3 hereof, the Participant shall not have any of the rights of a stockholder with respect to unvested Restricted Stock Units.

 

3.            Dividend Equivalents. Subject to the provisions of Section 5 hereof, in the event that the Corporation declares a dividend on its Common Stock, the Corporation will increase the number of Restricted Stock Units hereunder (i.e., by increasing the award) by the number of units, rounded to the nearest whole number, equal to the result of dividing (a) the per share cash dividend paid by the Corporation on its shares of Common Stock multiplied by the number of unvested Restricted Stock Units awarded to Participant under this Agreement as of the related dividend payment record date by (b) the fair market value of one share of Common Stock on the related dividend payment record date.   Any such additional Restricted Stock Units shall be subject to the same vesting, forfeiture, payment, termination and other terms, conditions and restrictions as the original Restricted Stock Units to which they relate. No additional Restricted Stock Units shall be granted with respect to any Restricted Stock Units which, as of the dividend payment record date, have either vested or been terminated. For the avoidance of doubt, these Restricted Stock Units shall not be entitled to, and no adjustment shall be made, for any distribution of shares of MUDS common stock received by the Corporation in connection with the Sale Transaction to holders of shares of Common Stock.

 

4.            Restrictions on Transfer. Except as otherwise provided in this Agreement, the Participant may not sell, transfer, assign, pledge, encumber or otherwise dispose of any of the Restricted Stock Units or the rights granted hereunder (any such disposition or encumbrance being referred to herein as a “Transfer”). Until converted as described in Section 6 hereof, any Transfer or purported Transfer by the Participant of any of the Restricted Stock Units shall be null and void and the Corporation shall not recognize or give effect to such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such Restricted Stock Units. The Restricted Stock Units shall not be subject to sale, execution, pledge, attachment, encumbrance or other process prior to vesting and no person shall be entitled to exercise any rights of the Participant as the holder of such Restricted Stock Units by virtue of any attempted execution, attachment or other process until the Restricted Stock Units are converted as provided in Section 6 hereof.

 

5.            Vesting of Restricted Stock Units.     Subject to any forfeiture provisions in this Agreement or in the Plan, and subject to the terms of this Section 5 hereof, the Restricted Stock Units shall vest in accordance with the corporate performance metrics set forth in Sections 5(a)-(g). The Participant’s cumulative vested percentage of the Restricted Stock Units shall be the sum of the vesting percentages earned in Sections 5(a)-(g), provided, however, that the Participant must be employed with the Corporation or any of its Subsidiaries or Affiliates on the date a corporate performance metric is achieved in order to earn any vesting credit with respect to such performance metric. The later of the date on which the Committee determines that a corporate performance has been achieved or the closing of the MUDS Sale Transaction shall be the “Vesting Date” for 50% of the RSU’s and the later of (i) the second anniversary of the Effective Date and (ii) closing of the MUDS Sale Transaction shall be the “Vesting Date” for the remaining 50% of the RSU’s.

 

2

 

(a)            Operations.

 

Date by which the First Ore to the Pads is Delivered RSU Vesting Percentage
On or before March 1, 2019 5.0% of the RSUs
After March 1, 2019 but on or before March 15, 2019 2.5% of the RSUs
After March 15, 2019 0.0% of the RSUs

 

(b)            2019 Gold Equivalent Sales. If the amount of 2019 Gold Equivalent Sales is at least 40,000 ounces but less than 50,000 ounces, and if such amount is between sales targets listed below, the RSU Vesting Percentage earned shall be determined by linear interpolation.

 

2019 Gold Equivalent Sales RSU Vesting Percentage
50,000 ounces or more 27.5% of the RSUs
47,334 ounces 20.0% of the RSUs
43,667 ounces 12.5% of the RSUs
40,000 ounces 7.5% of the RSUs
Less than 40,000 ounces 0.0% of the RSUs

 

(c)            Adjusted Cash Cost Per Ounce of Gold Sold. If the Adjusted Cash Cost Per Ounce of Gold Sold is at least $1,000 per ounce or less but less than $1,150 per ounce, and if such cost is between targets listed below, the RSU Vesting Percentage earned shall be determined by linear interpolation.

 

Adjusted Cash Cost Per Ounce of Gold Sold RSU Vesting Percentage
$1,000 per ounce or less 27.5% of the RSUs
$1,050 per ounce 20.0% of the RSUs
$1,100 per ounce 12.5% of the RSUs
$1,150 per ounce 7.5% of the RSUs
More than $1,150 per ounce 0.0% of the RSUs

 

3

 

(d)            Capital Expenditures. If the Corporation’s 2019 Capital Expenditures are at least $11.0 million but less than $13.0 million, and if such capital expenditures are between targets listed below, the RSU Vesting Percentage earned shall be determined by linear interpolation.

 

2019 Capital Expenditures RSU Vesting Percentage
Less than $11.0 million 12.5% of the RSUs
$12.0 million 10.0% of the RSUs
$13.0 million 7.5% of the RSUs
More than $13.0 million 0.0% of the RSUs

 

(e)            Updated Feasibility Study.

 

Date by which an Updated Feasibility Study
Incorporating Phase III Testwork is
Successfully Completed
RSU Vesting Percentage
Prior to April 30, 2019 12.5% of the RSUs
After April 29, 2019 but prior to June 30, 2019 10.0% of the RSUs
After June 29, 2019 but prior to January 1, 2020 7.5% of the RSUs
After December 31, 2019 0.0% of the RSUs

 

(f)            Financing.

 

Date of Execution of MUDS Acquisition
Agreement
RSU Vesting Percentage
On or before March 31, 2019 15.0% of the RSUs
After March 31, 2019 but on or before April 30, 2019 7.5% of the RSUs
After April 30, 2019 0.0% of the RSUs

 

(g)            Health, Safety and Environmental.

 

Date by which EIS is Approved RSU Vesting Percentage
On or before June 30, 2019 15.0% of the RSUs
After June 30, 2019 but on or before September 30, 2019 10.0% of the RSUs

After September 30, 2019 but on or before

December 31, 2019

5.0% of the RSUs
After December 31, 2019 0.0% of the RSUs

 

4

 

(h)            If the application of the vesting schedule in Sections 5(a)-(g) would yield a fractional Restricted Stock Unit, such fractional Restricted Stock Unit shall be rounded down to the next whole unit if it is less than 0.5 and rounded up to the next whole unit if it is 0.5 or more.

 

(i)            Except as otherwise described in this Section 5, to the extent any Restricted Stock Units have not vested upon the earlier of (i) the last day permitted to earn vesting credit under any performance metric described in Sections 5(a)-(g) or (ii) the Participant’s Separation from Service for any reason, those Restricted Stock Units that have not vested shall be immediately forfeited upon such date. Upon such forfeiture, the Participant shall no longer have any rights with respect to such Restricted Stock Units or any interest therein.

 

(j)            Notwithstanding anything to the contrary in this Section 5, in the event of (i) an equity investment (x) at a pre-money enterprise value in excess of $500 million and (y) in which the holders of the Corporation’s outstanding 1.5 lien secured notes (“1.5 Lien Notes”) and the holders of the Corporation’s outstanding second lien secured convertible notes (“Second Lien Notes”) have the right to receive cash in the aggregate amount of at least 33% of outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest) of such 1.5 Lien Notes and Second Lien Notes, or (ii) a transaction, other than an acquisition by Mudrick Capital Acquisition Corporation or its affiliates, in which the holders of the Corporation’s outstanding 1.5 Lien Notes and Second Lien Notes receive cash or liquid securities in exchange or satisfaction and payment of the outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest and any premiums due and payable) of such 1.5 Lien Notes and Second Lien Notes (collectively, a “Liquidity Event”), then upon closing of such Liquidity Event vesting of the Restricted Stock Units shall accelerate and such Restricted Stock Units shall be fully vested.

 

(k)            Notwithstanding anything to the contrary in this Section 5, (x) in the event of a Change in Control in which the resulting entity does not assume, continue, convert or replace this Agreement, the Restricted Stock Units that have not been previously forfeited shall be fully vested and converted into an equivalent number of shares of Common Stock immediately prior to the Change in Control, or (y) in the event of a Change in Control where the Participant incurs an involuntary Separation from Service for any reason other than Cause (as defined in the Plan) within 90 days prior or 24 months following the Change in Control, the Restricted Stock Units which have not been previously forfeited shall be fully vested and converted into shares as described in Section 6 and Section 7 hereof. For purposes of this Agreement, the Restricted Stock Units awarded hereunder will not be considered to be assumed, continued, converted or replaced by the resulting entity in connection with the Change in Control unless the Restricted Stock Units are adjusted to prevent dilution of the Participant’s rights hereunder as a result of the Change in Control. For purposes of this Agreement, “Change in Control shall have the meaning set forth in the Participant’s Employment Agreement with the Corporation dated February 20, 2019 (the “Employment Agreement”).

 

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6.            Conversion of Restricted Stock Units into Common Stock upon Vesting.

 

(a)            Except as described in Section 6(b) hereof, on the Conversion Date (as defined below), the Restricted Stock Units that vested pursuant to the terms of Section 5 hereof, if any, shall be converted into the number of shares of Common Stock equal to the Grant Date Value divided by the fair market value of a share of Common Stock, which shares of Common Stock will be issued to the Participant, or in the event of the Participant’s death, the Participant’s beneficiary pursuant to the Plan. Promptly after the Conversion Date, certificates of such shares of Common Stock shall be delivered to the Participant. Except as provided in Section 11(b), the “Conversion Date” shall be December 31, 2020; provided, however, that if on such date the Participant is prohibited from trading in the Corporation’s securities pursuant to applicable securities laws and/or the Corporation’s policy on securities trading and disclosure of confidential information, the Conversion Date, shall be, in the determination of the Committee, the second trading day after the date the Participant is no longer prohibited from such trading. For purposes of this Section 6(a), the fair market value shall mean the closing price of a share of Common Stock on a national securities exchange on which such shares of Common Stock may be listed for trading or as determined by the Committee on a vesting date. Notwithstanding anything to the contrary herein, a Sale Transaction with MUDS, whether in the structure contemplated or another corporate structure, shall not be deemed to constitute a Change in Control and will not accelerate vesting of conversion of the Restricted Stock Units provided that the obligations under this Agreement are assumed by MUDS.

 

(b)            In the event of the consummation of the Sale Transaction with MUDS, whether in the structure currently contemplated or another corporate structure, it shall be a condition to the consummation of the Sale Transaction with MUDS that all obligations of the Corporation under this Agreement shall be assumed by MUDS and the Restricted Stock Units shall be convertible, subject to the terms and conditions hereunder, into shares of MUDS common stock following consummation of the Sale Transaction rather than into shares of Common Stock.

 

7.            Adjustment Provisions. If, during the term of this Agreement, there shall be any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse stock split, rights offering or extraordinary distribution with respect to the Common Stock, or other change in corporate structure affecting the Common Stock, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the Restricted Stock Units in a manner consistent with Section 4.3 of the Plan, including a substitution or adjustment in the aggregate number or kind of shares subject to this Agreement, notwithstanding that the Restricted Stock Units are subject to the restrictions on transfer imposed by Section 4 above.  Any securities, awards or rights issued pursuant to this Section 7 shall be subject to the same restrictions as the underlying Restricted Stock Units to which they relate.

 

8.            Tax Withholding. As a condition precedent to the receipt of any Restricted Stock Units hereunder, the Participant agrees to pay to the Corporation, at such times as the Corporation shall determine, such amounts as the Corporation shall deem necessary to satisfy any withholding taxes due on income that the Participant recognizes pursuant to this Award. The obligations of the Corporation under this Agreement and the Plan shall be conditional on such payment or arrangements, and the Corporation and its Subsidiaries and Affiliated Entities shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. In addition, the Participant may elect, unless otherwise determined by the Committee, to satisfy the withholding requirement by having the Corporation withhold shares of Common Stock with a Fair Market Value, as of the date of such withholding, sufficient to satisfy the withholding obligation.

 

6

 

9.            Registration. This grant is subject to the condition that if at any time the Board or Committee shall determine, in its discretion, that the listing of the shares of Common Stock subject hereto on any securities exchange, or the registration or qualification of such shares under any federal or state law, or the consent or approval of any regulatory body, shall be necessary or desirable as a condition of, or in connection with, the grant, receipt or delivery of shares hereunder, such grant, receipt or delivery will not be effected unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or Committee. The Corporation agrees to make every reasonable effort to effect or obtain any such listing, registration, qualification, consent or approval.

 

10.            No Right to Continued Employment or Engagement. In no event shall the granting of the Restricted Stock Units or the other provisions hereof or the acceptance of the Restricted Stock Units by the Participant interfere with or limit in any way the right of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity to terminate the Participant’s employment or engagement as a service provider at any time, nor confer upon the Participant any right to continue in the employ or service of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity for any period of time or to continue his present or any other rate of compensation.

 

11.            Section 409A Compliance.

 

(a)            The intent of the parties is that payments and benefits under this Agreement be excluded from the scope of, or comply with, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted as such. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Participant and the Corporation of the applicable provision without violating the provisions of Code Section 409A.

 

(b)            A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if the Participant is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of the Participant’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 11(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Participant in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

7

 

(c)            For purposes of Code Section 409A, the Participant’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Corporation.

 

(d)            Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

12.            Miscellaneous.

 

(a)            Assignment; Successors. This Agreement will be binding upon and inure to the benefit of the heirs and representatives of the Participant and the assigns and successors of the Corporation, but neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Participant (except by will or by operation of the laws of intestate succession) or by the Corporation, except that the Corporation may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Corporation and, for the avoidance of doubt, the parties expressly agree that this Agreement shall be assigned to, and assumed by, MUDS in connection with, and as a condition to, the consummation of the Sale Transaction.

 

(b)            Governing Law and Forum for Disputes. The laws of the State of Colorado will govern the validity, interpretation, construction and performance of this Agreement, without regard to the conflict of laws principles thereof. Any action or proceeding against the parties relating in any way to this Agreement or the Participant’s employment (a “Dispute”) must be brought and enforced in the courts of the State of Colorado, and the parties irrevocably (i) submit to the jurisdiction of such courts in respect of any such action or proceeding and (ii) waive any right to a trial by jury of any Dispute.

 

(c)            Modification or Amendment. No failure or delay by the Corporation or the Participant in enforcing or exercising any right or remedy hereunder will operate as a waiver thereof. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by an officer or director of the Corporation duly authorized by the Board and the Participant.

 

8

 

(d)            Notices. Notices given pursuant to this Agreement will be in writing and will be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile with confirmation of delivery, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery, including electronic transmission, that provides a written confirmation of delivery. Notice to the Corporation will be directed to:

 

Hycroft Mining Corporation

c/o Randy Buffington
President and Chief Executive Officer
8181 E. Tufts, Suite 510
Denver, CO 80237

 

with a copy to:

 

Neal, Gerber & Eisenberg, LLP
2 N. LaSalle Street, Suite 1700
Chicago, IL 60602
Attention: David S. Stone, Esq.
email: dstone@nge.com

 

The Corporation may change the person and/or address to whom the Participant must give notice under this Section 12(d) by giving the Participant written notice of such change, in accordance with the procedures described above. Notices to or with respect to the Participant will be directed to the Participant, or to the Participant’s executors, personal representatives or distributees, if the Participant is deceased, at the Participant’s home address on the records of the Corporation, or such other address provided to the Corporation in accordance with the procedures described above.

 

(e)            Severability. If any provisions of this Agreement will be found invalid or unenforceable by a court of competent jurisdiction, in whole or in part, then it is the parties’ mutual desire that such court modify such provision(s) to the extent and in the manner necessary to render the same valid and enforceable, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted, or as if such provision(s) had not been originally incorporated herein, as the case may be.

 

(f)            Entire Agreement. The Participant acknowledges receipt of this Agreement and agrees that with respect to the Restricted Stock Units (Performance Vesting), it contains the entire understanding and agreement with the Corporation, superseding any previous oral or written communication, representation, understanding or agreement with the Corporation or any representative thereof. No term or condition should be construed strictly against any party on the basis that it was drafted by such party.

 

(g)            Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning thereof.

 

9

 

(h)            Counterparts.  This Agreement may be executed in any number of counterparts, including by facsimile or PDF, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

[Signature page to follow]

 

10

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the Grant Date.

 

PARTICIPANT   HYCROFT MINING CORPORATION
/s/ Stephen M. Jones   /s/ Randy Buffington
Stephen M. Jones     By: Randy Buffington
    Its: President & CFO

 

11

 

Exhibit 10.22

 

HYCROFT MINING CORPORATION
RESTRICTED STOCK UNIT AGREEMENT

(TIME-VESTING)

 

THIS AGREEMENT (the “Agreement”) is made and entered into as of this 20th day of February, 2019 (the “Grant Date”) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”), and Stephen M. Jones (the “Participant”), pursuant to the Hycroft Mining Corporation Performance and Incentive Pay Plan (the “Plan”). This Agreement and the award contained herein are subject to the terms and conditions set forth in the Plan, which are incorporated by reference herein, and the following terms and conditions. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Plan.

 

WITNESSETH:

 

WHEREAS, the Participant is the Executive Vice President and Chief Financial Officer of the Corporation;

 

WHEREAS, the Corporation has adopted the Plan in order to promote the interests of the Corporation, its Affiliated Entities and its stockholders by using stock-based and cash-based incentives to attract, retain and motivate its management and other persons to encourage and reward such persons contributing to the performance of the Corporation and to align their interests with the interests of the Corporation’s stockholders;

 

WHEREAS, the Compensation Committee of the Board (the “Committee”) of the Board of Directors of the Corporation (the “Board”) has determined that it is in the best interests of the Corporation to grant Restricted Stock Units (as defined herein) under the Plan to the Participant on the terms and conditions set forth below to encourage the Participant to remain in the employ of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity and to reward the Participant for his continued employment;

 

WHEREAS, the Corporation and Participant agreed in principle to this equity award on or about June 1, 2018 (the “Effective Date”); and

 

WHEREAS, the Corporation is contemplating entering into a transaction with Mudrick Capital Acquisition Corporation, a publicly-traded special purpose acquisition corporation formed by affiliates of Mudrick Capital (“MUDS”), pursuant to which the Corporation would sell substantially all of the assets of its subsidiaries and certain of its assets and/or its shares of common stock (a “Sale Transaction”), and upon consummation of such Sale Transaction the securities issued hereunder shall become convertible into shares of common stock of MUDS in lieu of and in substitution for shares of the common stock of the Corporation (“Common Stock”).

 

NOW, THEREFORE, in consideration of the various covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.            Award of Restricted Stock Units. In consideration for the continued service of the Participant to the Corporation and its Subsidiaries and Affiliated Entities, and as part of the Plan, the Corporation hereby awards to the Participant, subject to the further terms and conditions set forth in this Agreement, restricted stock units (the “Restricted Stock Units” or “RSUs”), with a value of $531,250 as of the Grant Date (the “Grant Date Value”).

 

 

 

2.            No Rights of Stockholder. Until converted as described in Section 6 hereof, the Restricted Stock Units represent the Corporation’s unfunded and unsecured promise to issue shares of Common Stock at a future date, subject to the terms of this Agreement. The Participant has no rights with respect to the Restricted Stock Units other than rights of a general creditor of the Corporation. Except as set forth in Section 3 hereof, the Participant shall not have any of the rights of a stockholder with respect to unvested Restricted Stock Units.

 

3.            Dividend Equivalents. Subject to the provisions of Section 5 hereof, in the event that the Corporation declares a dividend on its Common Stock, the Corporation will increase the number of Restricted Stock Units hereunder (i.e., by increasing the award) by the number of units, rounded to the nearest whole number, equal to the result of dividing (a) the per share cash dividend paid by the Corporation on its shares of Common Stock multiplied by the number of unvested Restricted Stock Units awarded to Participant under this Agreement as of the related dividend payment record date by (b) the fair market value of one share of Common Stock on the related dividend payment record date.   Any such additional Restricted Stock Units shall be subject to the same vesting, forfeiture, payment, termination and other terms, conditions and restrictions as the original Restricted Stock Units to which they relate. No additional Restricted Stock Units shall be granted with respect to any Restricted Stock Units which, as of the dividend payment record date, have either vested or been terminated. For the avoidance of doubt, these Restricted Stock Units shall not be entitled to, and no adjustment shall be made, for any distribution of shares of MUDS common stock received by the Corporation in connection with the Sale Transaction to holders of shares of Common Stock.

 

4.            Restrictions on Transfer. Except as otherwise provided in this Agreement, the Participant may not sell, transfer, assign, pledge, encumber or otherwise dispose of any of the Restricted Stock Units or the rights granted hereunder (any such disposition or encumbrance being referred to herein as a “Transfer”). Until converted as described in Section 6 hereof, any Transfer or purported Transfer by the Participant of any of the Restricted Stock Units shall be null and void and the Corporation shall not recognize or give effect to such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such Restricted Stock Units. The Restricted Stock Units shall not be subject to sale, execution, pledge, attachment, encumbrance or other process prior to vesting and no person shall be entitled to exercise any rights of the Participant as the holder of such Restricted Stock Units by virtue of any attempted execution, attachment or other process until the Restricted Stock Units are converted as provided in Section 6 hereof.

 

  2  

 

 

5.            Vesting of Restricted Stock Units.

 

(a)            Subject to any forfeiture provisions in this Agreement or in the Plan, and subject to the terms of this Section 5 hereof, the Restricted Stock Units shall vest in accordance with the following schedule provided that the Participant has not had a Separation from Service for any reason prior to the applicable vesting date:

 

Vesting Date Cumulative Vested Percentage of the RSUs
The closing of the MUDS Sale Transaction 50% of the RSUs
Later of (i) second anniversary of the Effective Date and (ii) closing of the MUDS Sale Transaction 100% of the RSUs

 

(b)            If the application of the vesting schedule in Section 5(a) would yield a fractional Restricted Stock Unit, such fractional Restricted Stock Unit shall be rounded down to the next whole unit if it is less than 0.5 and rounded up to the next whole unit if it is 0.5 or more.

 

(c)            Except as described in Section 5(d), to the extent any Restricted Stock Units have not vested upon the Participant’s Separation from Service for any reason, those Restricted Stock Units that have not vested shall be immediately forfeited upon such Separation from Service. Upon such forfeiture, the Participant shall no longer have any rights with respect to such Restricted Stock Units or any interest therein.

 

(d)            Notwithstanding anything to the contrary in this Section 5, in the event of (i) an equity investment (x) at a pre-money enterprise value in excess of $500 million and (y) in which the holders of the Corporation’s outstanding 1.5 lien secured notes (“1.5 Lien Notes”) and the holders of the Corporation’s outstanding second lien secured convertible notes (“Second Lien Notes”) have the right to receive cash in the aggregate amount of at least 33% of outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest) of such 1.5 Lien Notes and Second Lien Notes, or (ii) a transaction, other than an acquisition by Mudrick Capital Acquisition Corporation or its affiliates, in which the holders of the Corporation’s outstanding 1.5 Lien Notes and Second Lien Notes receive cash or liquid securities in exchange or satisfaction and payment of the outstanding principal balance (including, without limitation, accrued but unpaid pay-in-kind interest and any premiums due and payable) of such 1.5 Lien Notes and Second Lien Notes (collectively, a “Liquidity Event”), then upon closing of such Liquidity Event vesting of the Restricted Stock Units shall accelerate and such Restricted Stock Units shall be fully vested.

 

(e)            Notwithstanding anything to the contrary in this Section 5, (x) in the event of a Change in Control in which the resulting entity does not assume, continue, convert or replace this Agreement, the Restricted Stock Units shall be fully vested and converted into an equivalent number of shares of Common Stock immediately prior to the Change in Control, or (y) in the event of a Change in Control where the Participant incurs an involuntary Separation from Service for any reason other than Cause (as defined in the Plan) within 90 days prior or 24 months following the Change in Control, the Restricted Stock Units shall be fully vested and converted into shares as described in Section 6 and Section 7 hereof. For purposes of this Agreement, the Restricted Stock Units awarded hereunder will not be considered to be assumed, continued, converted or replaced by the resulting entity in connection with the Change in Control unless the Restricted Stock Units are adjusted to prevent dilution of the Participant’s rights hereunder as a result of the Change in Control. For purposes of this Agreement, “Change in Control shall have the meaning set forth in the Participant’s Employment Agreement with the Corporation dated February 20, 2019 (the “Employment Agreement”).

 

  3  

 

 

6.            Conversion of Restricted Stock Units into Common Stock upon Vesting.

 

(a)            Except as described in Section 6(b) hereof, on the Conversion Date (as defined below), the Restricted Stock Units that vested pursuant to the terms of Section 5 hereof, if any, shall be converted into the number of shares of Common Stock equal to the Grant Date Value divided by the fair market value of a share of Common Stock, which shares of Common Stock will be issued to the Participant, or in the event of the Participant’s death, the Participant’s beneficiary pursuant to the Plan. Promptly after the Conversion Date, certificates of such shares of Common Stock shall be delivered to the Participant. Except as provided in Section 11(b), the “Conversion Date” shall be the later of the applicable vesting date or December 31, 2020; provided, however, that if on such date the Participant is prohibited from trading in the Corporation’s securities pursuant to applicable securities laws and/or the Corporation’s policy on securities trading and disclosure of confidential information, the Conversion Date, shall be, in the determination of the Committee, the second trading day after the date the Participant is no longer prohibited from such trading. For purposes of this Section 6(a), the fair market value shall mean the closing price of a share of Common Stock on a national securities exchange on which such shares of Common Stock may be listed for trading or as determined by the Committee on a vesting date. Notwithstanding anything to the contrary herein, a Sale Transaction with MUDS, whether in the structure contemplated or another corporate structure, shall not be deemed to constitute a Change in Control and will not accelerate vesting of conversion of the Restricted Stock Units provided that the obligations under this Agreement are assumed by MUDS.

 

(b)            In the event of the consummation of the Sale Transaction with MUDS, whether in the structure currently contemplated or another corporate structure, it shall be a condition to the consummation of the Sale Transaction with MUDS that all obligations of the Corporation under this Agreement shall be assumed by MUDS and the Restricted Stock Units shall be convertible, subject to the terms and conditions hereunder, into shares of MUDS common stock following consummation of the Sale Transaction rather than into shares of Common Stock.

 

7.            Adjustment Provisions. If, during the term of this Agreement, there shall be any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse stock split, rights offering or extraordinary distribution with respect to the Common Stock, or other change in corporate structure affecting the Common Stock, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the Restricted Stock Units in a manner consistent with Section 4.3 of the Plan, including a substitution or adjustment in the aggregate number or kind of shares subject to this Agreement, notwithstanding that the Restricted Stock Units are subject to the restrictions on transfer imposed by Section 4 above.  Any securities, awards or rights issued pursuant to this Section 7 shall be subject to the same restrictions as the underlying Restricted Stock Units to which they relate.

 

8.            Tax Withholding. As a condition precedent to the receipt of any Restricted Stock Units hereunder, the Participant agrees to pay to the Corporation, at such times as the Corporation shall determine, such amounts as the Corporation shall deem necessary to satisfy any withholding taxes due on income that the Participant recognizes pursuant to this Award. The obligations of the Corporation under this Agreement and the Plan shall be conditional on such payment or arrangements, and the Corporation and its Subsidiaries and Affiliated Entities shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. In addition, the Participant may elect, unless otherwise determined by the Committee, to satisfy the withholding requirement by having the Corporation withhold shares of Common Stock with a Fair Market Value, as of the date of such withholding, sufficient to satisfy the withholding obligation.

 

  4  

 

 

9.            Registration. This grant is subject to the condition that if at any time the Board or Committee shall determine, in its discretion, that the listing of the shares of Common Stock subject hereto on any securities exchange, or the registration or qualification of such shares under any federal or state law, or the consent or approval of any regulatory body, shall be necessary or desirable as a condition of, or in connection with, the grant, receipt or delivery of shares hereunder, such grant, receipt or delivery will not be effected unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or Committee. The Corporation agrees to make every reasonable effort to effect or obtain any such listing, registration, qualification, consent or approval.

 

10.           No Right to Continued Employment or Engagement. In no event shall the granting of the Restricted Stock Units or the other provisions hereof or the acceptance of the Restricted Stock Units by the Participant interfere with or limit in any way the right of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity to terminate the Participant’s employment or engagement as a service provider at any time, nor confer upon the Participant any right to continue in the employ or service of the Corporation, a Subsidiary of the Corporation or an Affiliated Entity for any period of time or to continue his present or any other rate of compensation.

 

11.           Section 409A Compliance.

 

(a)            The intent of the parties is that payments and benefits under this Agreement be excluded from the scope of, or comply with, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted as such. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Participant and the Corporation of the applicable provision without violating the provisions of Code Section 409A.

 

(b)            A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if the Participant is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of the Participant’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 11(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Participant in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

  5  

 

 

(c)            For purposes of Code Section 409A, the Participant’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Corporation.

 

(d)            Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

12.           Miscellaneous.

 

(a)            Assignment; Successors. This Agreement will be binding upon and inure to the benefit of the heirs and representatives of the Participant and the assigns and successors of the Corporation, but neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Participant (except by will or by operation of the laws of intestate succession) or by the Corporation, except that the Corporation may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Corporation and, for the avoidance of doubt, the parties expressly agree that this Agreement shall be assigned to, and assumed by, MUDS in connection with, and as a condition to, the consummation of the Sale Transaction.

 

(b)            Governing Law and Forum for Disputes. The laws of the State of Colorado will govern the validity, interpretation, construction and performance of this Agreement, without regard to the conflict of laws principles thereof. Any action or proceeding against the parties relating in any way to this Agreement or the Participant’s employment (a “Dispute”) must be brought and enforced in the courts of the State of Colorado, and the parties irrevocably (i) submit to the jurisdiction of such courts in respect of any such action or proceeding and (ii) waive any right to a trial by jury of any Dispute.

 

(c)            Modification or Amendment. No failure or delay by the Corporation or the Participant in enforcing or exercising any right or remedy hereunder will operate as a waiver thereof. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by an officer or director of the Corporation duly authorized by the Board and the Participant.

 

  6  

 

 

(d)            Notices. Notices given pursuant to this Agreement will be in writing and will be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile with confirmation of delivery, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery, including electronic transmission, that provides a written confirmation of delivery. Notice to the Corporation will be directed to:

 

Hycroft Mining Corporation

c/o Randy Buffington
President and Chief Executive Officer
8181 E. Tufts, Suite 510
Denver, CO 80237

 

with a copy to:

 

Neal, Gerber & Eisenberg, LLP
2 N. LaSalle Street, Suite 1700
Chicago, IL 60602
Attention: David S. Stone, Esq.
email: dstone@nge.com

 

The Corporation may change the person and/or address to whom the Participant must give notice under this Section 12(d) by giving the Participant written notice of such change, in accordance with the procedures described above. Notices to or with respect to the Participant will be directed to the Participant, or to the Participant’s executors, personal representatives or distributees, if the Participant is deceased, at the Participant’s home address on the records of the Corporation, or such other address provided to the Corporation in accordance with the procedures described above.

 

(e)            Severability. If any provisions of this Agreement will be found invalid or unenforceable by a court of competent jurisdiction, in whole or in part, then it is the parties’ mutual desire that such court modify such provision(s) to the extent and in the manner necessary to render the same valid and enforceable, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted, or as if such provision(s) had not been originally incorporated herein, as the case may be.

 

(f)            Entire Agreement. The Participant acknowledges receipt of this Agreement and agrees that with respect to the Restricted Stock Units (Time Vesting), it contains the entire understanding and agreement with the Corporation, superseding any previous oral or written communication, representation, understanding or agreement with the Corporation or any representative thereof. No term or condition should be construed strictly against any party on the basis that it was drafted by such party.

 

(g)            Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning thereof.

 

  7  

 

 

(h)            Counterparts.  This Agreement may be executed in any number of counterparts, including by facsimile or PDF, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

[Signature page to follow]

 

  8  

 

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the Grant Date.

 

PARTICIPANT   HYCROFT MINING CORPORATION
       
/s/ Stephen M. Jones   /s/ Randy Buffington
Stephen M. Jones   By: Randy Buffington
    Its: President & CEO

  

  9  

 

Exhibit 10.23

 

Amendment to

HYCROFT MINING CORPORATION

Restricted stock unit agreement

(PERFORMANCE-VESTING)

 

THIS AMENDMENT (the “Amendment”) to the Hycroft Mining Corporation Restricted Stock Unit Agreement (Performance-Vesting) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”) and Randy Buffington (the “Participant”) made and entered into as of February 20, 2019 (the “Agreement”) is made as of May 29, 2020 (the “Effective Date”).

 

WITNESSETH:

 

WHEREAS, Hycroft Mining Corporation, a Delaware corporation (the “Company”) sponsors the Plan for the benefit of its employees and its stockholders;

 

WHEREAS, the Company has entered into that certain Purchase Agreement, dated as of January 13, 2020, as amended as of February 26, 2020, by and among the Company, Mudrick Capital Acquisition Corporation, a Delaware corporation (“MUDS”) and MUDS Acquisition Sub, Inc., a Delaware corporation (each of MUDS and MUDS Acquisition Sub, Inc., a “Buyer”);

 

WHEREAS, the Company has agreed to assign the Plan to a Buyer or one of their affiliates and the Buyers have agreed that a Buyer or an affiliate will assume sponsorship of the Plan; and

 

WHEREAS, it is desirable to amend the Agreement to reflect changes resulting from the foregoing.

 

NOW, THEREFORE, the Plan is hereby amended as of the Effective Date so that: (i) references to the “Corporation” in the Agreement be revised to mean “Hycroft Mining Holding Corporation” and (ii) references to the “Plan” in the Agreement be revised to mean the “Hycroft Mining Holding Corporation 2020 Performance and Incentive Pay Plan.”

 

[Signature page to follow]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date.

 

  HYCROFT MINING CORPORATION
   
  By: /s/ Stephen M. Jones
    Stephen Jones,
    Executive Vice President and Chief Financial Officer

 

  PARTICIPANT
   
  /s/ Randy Buffington
  Randy Buffington

 

- 2 -

 

Exhibit 10.24

 

Amendment to

HYCROFT MINING CORPORATION

Restricted stock unit agreement

(TIME-VESTING)

 

THIS AMENDMENT (the “Amendment”) to the Hycroft Mining Corporation Restricted Stock Unit Agreement (Time-Vesting) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”) and Randy Buffington (the “Participant”) made and entered into as of February 20, 2019 (the “Agreement”) is made as of May 29, 2020 (the “Effective Date”).

 

WITNESSETH:

 

WHEREAS, Hycroft Mining Corporation, a Delaware corporation (the “Company”) sponsors the Plan for the benefit of its employees and its stockholders;

 

WHEREAS, the Company has entered into that certain Purchase Agreement, dated as of January 13, 2020, as amended as of February 26, 2020, by and among the Company, Mudrick Capital Acquisition Corporation, a Delaware corporation (“MUDS”) and MUDS Acquisition Sub, Inc., a Delaware corporation (each of MUDS and MUDS Acquisition Sub, Inc., a “Buyer”);

 

WHEREAS, the Company has agreed to assign the Plan to a Buyer or one of their affiliates and the Buyers have agreed that a Buyer or an affiliate will assume sponsorship of the Plan; and

 

WHEREAS, it is desirable to amend the Agreement to reflect changes resulting from the foregoing.

 

NOW, THEREFORE, the Plan is hereby amended as of the Effective Date so that: (i) references to the “Corporation” in the Agreement be revised to mean “Hycroft Mining Holding Corporation” and (ii) references to the “Plan” in the Agreement be revised to mean the “Hycroft Mining Holding Corporation 2020 Performance and Incentive Pay Plan.”

 

[Signature page to follow]

 

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date.

 

  HYCROFT MINING CORPORATION
 
  By: /s/ Stephen M. Jones
    Stephen Jones,
    Executive Vice President and Chief Financial Officer

 

PARTICIPANT

 

  /s/ Randy Buffington
  Randy Buffington

 

-2-

 

Exhibit 10.25

 

Amendment to

HYCROFT MINING CORPORATION

Restricted stock unit agreement

(PERFORMANCE-VESTING)

 

THIS AMENDMENT (the “Amendment”) to the Hycroft Mining Corporation Restricted Stock Unit Agreement (Performance-Vesting) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”) and Stephen M. Jones (the “Participant”) made and entered into as of February 20, 2019 (the “Agreement”) is made as of May 29, 2020 (the “Effective Date”).

 

WITNESSETH:

 

WHEREAS, Hycroft Mining Corporation, a Delaware corporation (the “Company”) sponsors the Plan for the benefit of its employees and its stockholders;

 

WHEREAS, the Company has entered into that certain Purchase Agreement, dated as of January 13, 2020, as amended as of February 26, 2020, by and among the Company, Mudrick Capital Acquisition Corporation, a Delaware corporation (“MUDS”) and MUDS Acquisition Sub, Inc., a Delaware corporation (each of MUDS and MUDS Acquisition Sub, Inc., a “Buyer”);

 

WHEREAS, the Company has agreed to assign the Plan to a Buyer or one of their affiliates and the Buyers have agreed that a Buyer or an affiliate will assume sponsorship of the Plan; and

 

WHEREAS, it is desirable to amend the Agreement to reflect changes resulting from the foregoing.

 

NOW, THEREFORE, the Plan is hereby amended as of the Effective Date so that: (i) references to the “Corporation” in the Agreement be revised to mean “Hycroft Mining Holding Corporation” and (ii) references to the “Plan” in the Agreement be revised to mean the “Hycroft Mining Holding Corporation 2020 Performance and Incentive Pay Plan.”

 

[Signature page to follow]

 

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date.

 

  HYCROFT MINING CORPORATION
   
   
  By: /s/ Randy Buffington
    Randy Buffington,
    President and Chief Executive Officer
   
  PARTICIPANT
   
  /s/ Stephen M. jones
  Stephen M. Jones

 

- 2 -

 

Exhibit 10.26

 

Amendment to 

HYCROFT MINING CORPORATION 

Restricted stock unit agreement 

(TIME-VESTING)

 

THIS AMENDMENT (the “Amendment”) to the Hycroft Mining Corporation Restricted Stock Unit Agreement (Time-Vesting) by and between Hycroft Mining Corporation, a Delaware corporation (the “Corporation”) and Stephen M. Jones (the “Participant”) made and entered into as of February 20, 2019 (the “Agreement”) is made as of May 29, 2020 (the “Effective Date”).

 

WITNESSETH:

 

WHEREAS, Hycroft Mining Corporation, a Delaware corporation (the “Company”) sponsors the Plan for the benefit of its employees and its stockholders;

 

WHEREAS, the Company has entered into that certain Purchase Agreement, dated as of January 13, 2020, as amended as of February 26, 2020, by and among the Company, Mudrick Capital Acquisition Corporation, a Delaware corporation (“MUDS”) and MUDS Acquisition Sub, Inc., a Delaware corporation (each of MUDS and MUDS Acquisition Sub, Inc., a “Buyer”);

 

WHEREAS, the Company has agreed to assign the Plan to a Buyer or one of their affiliates and the Buyers have agreed that a Buyer or an affiliate will assume sponsorship of the Plan; and

 

WHEREAS, it is desirable to amend the Agreement to reflect changes resulting from the foregoing.

 

NOW, THEREFORE, the Plan is hereby amended as of the Effective Date so that: (i) references to the “Corporation” in the Agreement be revised to mean “Hycroft Mining Holding Corporation” and (ii) references to the “Plan” in the Agreement be revised to mean the “Hycroft Mining Holding Corporation 2020 Performance and Incentive Pay Plan.”

 

[Signature page to follow]

 

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date.

 

  HYCROFT MINING CORPORATION
 
  By: /s/ Randy Buffington
    Randy Buffington,
    President and Chief Executive Officer

 

  PARTICIPANT
   
  /s/ Stephen M. Jones
  Stephen M. Jones

 

- 2 -

 

Exhibit 21.1

 

Subsidiaries

 

Following is a list of the subsidiaries of Hycroft Mining Holding Corporation, each of which is wholly owned by Hycroft Mining Holding Corporation either directly or through another subsidiary.

 

 

 

Subsidiary State of Incorporation or Organization
   
AuxAg Mining Corporation Delaware
Autur Gold Corporation Delaware
Allied Nevada Gold Holdings LLC Nevada
Allied VGH LLC Delaware
Hycroft Resources & Development, LLC Delaware
Victory Exploration LLC Delaware
Allied Nevada Delaware Holdings LLC Delaware
   

        

 

 

Exhibit 99.2

 

HYCROFT MINING CORPORATION

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except per share amounts)

 

    March 31,     December 31,  
    2020     2019  
    (unaudited)        
Assets:                
Cash   $ 6,566     $ 6,220  
Restricted cash - Note 5     2,929       3,270  
Accounts receivable     851       97  
Inventories - Note 3     4,989       4,453  
Ore on leach pads - Note 3     26,122       22,062  
Prepaids and other - Note 4     4,131       2,648  
Current assets     45,588       38,750  
Restricted cash - Note 5     39,595       39,477  
Plant, equipment and mine development, net - Note 6     51,573       51,207  
Other assets, non-current - Note 4     7,551       5,203  
Total assets   $ 144,307     $ 134,637  
                 
Liabilities:                
Accounts payable   $ 13,086     $ 10,746  
Interest payable     371       846  
Other liabilities, current - Note 7     4,858       3,939  
Debt, current - net - Notes 8 and 18     595,376       553,965  
Current liabilities     613,691       569,496  
Other liabilities, non-current - Note 7     18       18  
Asset retirement obligation, non-current - Note 9     4,467       4,374  
Total liabilities     618,176       573,888  
Commitments and contingencies - Note 17                
Stockholders' (Deficit) Equity: - Note 10                
Common stock, $0.001 par value; 400,000,000 shares authorized for both periods;                
3,095,650 and 3,095,650 issued; and 2,897,568 and 2,897,568 outstanding at                
March 31, 2020 and December 31, 2019, respectively     3       3  
Additional paid-in capital     5,184       5,184  
Accumulated deficit     (479,056 )     (444,438 )
Total stockholders' (deficit) equity     (473,869 )     (439,251 )
Total liabilities and stockholders' (deficit) equity   $ 144,307     $ 134,637  

 

The accompanying notes are an integral part of these statements.

 

  1  

 

 

HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, unaudited)

 

    Three months ended March 31,  
    2020     2019  
Revenues - Note 11   $ 11,124     $ -  
Cost of sales:                
Production costs     15,569       -  
Depreciation and amortization     1,334       -  
Write-down of production inventories - Note 3     6,965       -  
Total cost of sales     23,868       -  
Operating expenses:                
Care and maintenance     -       3,770  
Project and development     -       2,216  
Pre-production depreciation and amortization     -       827  
Accretion - Note 9     93       106  
General and administrative     2,006       1,947  
Loss from operations     (14,843 )     (8,866 )
Other income (expense):                
Interest expense, net of capitalized interest of $44 and $145, respectively - Note 8     (19,887 )     (14,398 )
Interest income     112       116  
Loss before reorganization items, net and income taxes     (34,618 )     (23,148 )
Reorganization items, net     -       (292 )
Loss before income taxes     (34,618 )     (23,440 )
Income tax - Note 13     -       -  
Net loss   $ (34,618 )   $ (23,440 )
                 
Loss per share:                
Basic - Note 14   $ (11.95 )   $ (8.77 )
Diluted - Note 14   $ (11.95 )   $ (8.77 )
Weighted average shares outstanding:                
Basic - Note 14     2,897,568       2,672,502  
Diluted - Note 14     2,897,568       2,672,502  
                 

 

The accompanying notes are an integral part of these statements.

 

  2  

 

 

HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands, unaudited)

 

    Three months ended March 31,  
    2020     2019  
Cash flows from operating activities:                
Net loss   $ (34,618 )   $ (23,440 )
Adjustments to reconcile net loss for the period to net cash used in operating activities:                
Depreciation and amortization     1,334       827  
Accretion     93       106  
Stock-based compensation - Note 12     365       161  
Phantom share compensation     263       525  
Non-cash portion of interest expense     17,020       11,884  
Write-down of production inventories     6,965       -  
Changes in operating assets and liabilities:                
Accounts receivable     (754 )     -  
Materials and supplies inventories     (332 )     (209 )
Production-related inventories     (10,393 )     -  
Prepaids and other     (1,484 )     12  
Other assets, non-current     (120 )     -  
Accounts payable     2,409       1,594  
Interest payable     (447 )     (434 )
Other liabilities     254       (99 )
Net cash used in operating activities     (19,445 )     (9,073 )
Cash flows used in investing activities:                
Additions to plant and equipment     (2,090 )     (4,498 )
Net cash used in investing activities     (2,090 )     (4,498 )
Cash flows from financing activities:                
Proceeds from debt issuances, net     24,900       17,957  
Refinancing of First Lien     (632 )     (702 )
Refinancing issuance costs     (2,610 )     (101 )
Net cash provided by financing activities     21,658       17,154  
Net increase in cash     123       3,583  
Cash, beginning of period     48,967       52,861  
Cash, end of period   $ 49,090     $ 56,444  
                 
Reconciliation of cash, cash equivalents and restricted cash:                
Cash   $ 6,566     $ 15,025  
Restricted cash - current     2,929       2,611  
Restricted cash - non-current     39,595       38,808  
Total cash, cash equivalents and restricted cash   $ 49,090     $ 56,444  

 

The accompanying notes are an integral part of these statements.

 

  3  

 

 

HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(U.S. dollars in thousands, except share amounts, unaudited)

 

                                        Total  
                            Additional           Stockholders’  
    Common Stock     Treasury Stock     Paid-in     Accumulated     (Deficit)  
    Shares     Amount     Shares     Amount     Capital     Deficit     Equity  
Balance at January 1, 2019     2,758,690     $ 3       160,654     $ -     $ 5,184     $ (345,543 )   $ (340,356 )
Net loss     -       -       -       -       -       (23,440 )     (23,440 )
Shares issued (1)     90,560       -       -       -       -       -       -  
Balance at March 31, 2019     2,849,250     $ 3       160,654     $ -     $ 5,184     $ (368,983 )   $ (363,796 )
                                                         

 

                                        Total  
                            Additional           Stockholders'  
    Common Stock     Treasury Stock     Paid-in     Accumulated     (Deficit)  
    Shares     Amount     Shares     Amount     Capital     Deficit     Equity  
Balance at January 1, 2020     3,095,650     $ 3       198,082     $ -     $ 5,184     $ (444,438 )   $ (439,251 )
Net loss     -       -       -       -       -       (34,618 )     (34,618 )
Balance at March 31, 2020     3,095,650     $ 3       198,082     $ -     $ 5,184     $ (479,056 )   $ (473,869 )

 

(1) Shares issued during the three months ended March 31, 2019 were related to settling the remaining bankruptcy claims.

 

The accompanying notes are an integral part of these statements.

 

  4  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

1. Company Overview

 

Hycroft Mining Corporation (formerly known as Allied Nevada Gold Corp.) and its subsidiaries (collectively, “Hycroft”, the “Company”, “we”, “us”, “our”, etc.) is a U.S.-based gold producer that is focused on mining, developing, and exploring properties in the state of Nevada in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of the Company’s operating revenues and, when operating, the market prices of gold and silver significantly impact the Company’s financial position, operating results, and cash flows. The Hycroft Mine is located in the state of Nevada and the corporate office is located in Denver, Colorado.

 

On January 13, 2020, – Mudrick Capital Acquisition Corporation (“MUDS”), a publicly traded blank check company, and Hycroft entered into a definitive purchase agreement under which Hycroft will sell substantially all of its assets to MUDS, and MUDS will discharge and pay or assume certain of Hycroft’s liabilities (the “MUDS transaction”) and amended on February 26, 2020 (as amended, the “Purchase Agreement”). Following the closing of the MUDS transaction, MUDS will be renamed as Hycroft Mining Holding Corporation and its shares of common stock will be listed on the Nasdaq Stock Market under the ticker symbol “HYMC”.

 

Pursuant to the terms of the MUDS transaction, MUDS will have at least $50.0 million of unrestricted and available cash on hand at closing. Cash sources for the MUDS transaction include (a) a $110.0 million multi-tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (b) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Resource Lending Corp., (c) consummation of the $25 million forward purchase of MUDS units and shares by Mudrick Capital Acquisition Holdings LLC, (d) a $65 million backstop agreement to purchase MUDS shares by certain existing stockholders of Hycroft, (e) $20 million of incremental private investment, and (f) the net cash remaining in MUDS’ trust account following any stockholder redemptions.

 

MUDS post-transaction indebtedness will include amounts drawn from the Sprott Credit Agreement plus the assumption of $80.0 million in aggregate principal amount of newly issued subordinated notes. All other indebtedness of Hycroft will be retired, exchanged for MUDS shares, converted into Hycroft shares.

 

The MUDS transaction will be funded through a combination of stock consideration payable to Hycroft (which Hycroft will promptly distribute to is stockholders), cash and stock to repay certain Hycroft indebtedness and the assumption of certain Hycroft obligations. The MUDS transaction is designed to support the Company’s expansion of mining operations to an economic level and to refinance its existing debt obligations. The boards of directors of MUDS and Hycroft have approved the transaction and recommended that their respective stockholders approve the transaction. Stockholders of Hycroft holding a majority of the outstanding stock of Hycroft have agreed to support approval of the transaction at any meeting of Hycroft stockholders, subject to customary exceptions.

 

The MUDS transaction was completed on May 29, 2020 upon receiving regulatory approvals and approvals from MUDS and Hycroft stockholders. With the closing of the MUDS transaction, the Company has in excess of $50.0 million of unrestricted cash. Additionally, all existing debt of the Company was retired, exchanged for $80.0 million of new notes which mature on December 1, 2025 and were assumed by MUDS, exchanged for MUDS shares or converted into shares of the Company. For more information on the consummation of the MUDS transaction, see Note 19 – Subsequent Events. Assuming the Company is able to ramp up operations and produce and sell the forecasted volumes, the Company believes it has adequate liquidity to meet its obligations for the next twelve months.

 

Operational Restart

 

During the 2019 second quarter, the Company restarted open pit mining at the Hycroft Mine, and, during the 2019 third quarter, produced and sold gold and silver. As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, upgrades were made to the crushing system and new leach pad space was added to the existing leach pads. The 2019 restart of mining operations through March 31, 2020 was funded by the issuance of $97.0 million of Senior Secured Notes due June 30, 2020 (the “1.25 Lien Notes”), discussed below.

 

During August 2019, M3 Engineering and Technology Corp. in association with SRK Consulting US and the Company completed a feasibility study (the “2019 Hycroft Technical Report”). The 2019 Hycroft Technical Report projects the economic viability and potential future cash flows for the Hycroft Mine when mining operations expand.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited Consolidated Financial Statements of the Company have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments and disclosures necessary to fairly present the interim financial information set forth herein have been included.

 

References to “$” refers to United States currency.

  

  5  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Use of estimates

 

The preparation of the Company’s Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in these Consolidated Financial Statements and accompanying notes. The more significant areas requiring the use of management estimates and assumptions relate to recoverable gold and silver on the leach pads and in-process inventories; the useful lives of long-lived assets; probabilities of future expansion projects; environmental reclamation and closure costs; deferred taxes and related valuation allowances; and estimates of fair value for asset impairments and financial instruments. The Company bases its estimates on historical experience and various assumptions that are believed to be reasonable at the time the estimate is made. Actual results may differ from amounts estimated in these Consolidated Financial Statements, and such differences could be material.

 

Principles of consolidation

 

The Consolidated Financial Statements include the accounts of Hycroft Mining Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

Cash

 

Cash and cash equivalents have historically consisted of cash balances and highly liquid investments with an original maturity of three months or less. The Company has not experienced any losses on cash balances and believes that no significant risk of loss exists with respect to its cash. As of March 31, 2020 and December 31, 2019, the Company held no cash equivalents. Restricted cash is excluded from cash and is listed separately on the consolidated balance sheets. See Note 5 – Restricted Cash for additional information.

 

Ore on leach pads and inventories

 

The Company’s production-related inventories include: ore on leach pads; in-process inventories; and doré finished goods. Production-related inventories are carried at the lower of average cost or net realizable value. Cost includes mining (ore and waste); processing; refining costs incurred during production stages, and mine site overhead and depreciation and amortization relating to mining and processing operations. Net realizable value represents the estimated future sales price of production-related inventory quantities computed using the London Bullion Market Association’s (“LBMA”) quoted period-end metal prices, less any further estimated processing, refining, and selling costs.

 

The recovery of gold and silver at the Hycroft Mine is accomplished through a heap leaching process, the nature of which limits the Company’s ability to precisely determine the recoverable gold ounces in ore on leach pads. The Company estimates the quantity of recoverable gold ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, solution sampling, and estimated recovery percentages based on ore type and domain. The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). Changes in recovery rate estimates from metallurgical balancing that do not result in write-downs are accounted for on a prospective basis. If a write-down is required, production-related inventories would be adjusted to net realizable value and recorded as a component of Cost of sales in the consolidated statements of operations. See Note 3 – Inventories for additional information.

 

Ore on leach pads

 

Ore on leach pads represents ore that is being treated with a chemical solution to dissolve the contained gold. Costs are added to ore on leach pads based on current mining costs, including applicable depreciation and amortization relating to mining operations. As gold-bearing materials are further processed, costs are transferred from ore on leach pads at an average cost per estimated recoverable ounce of gold to in-process inventories. 

 

  6  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

In-process inventories

 

In-process inventories represent gold-bearing concentrated materials that are in the process of being converted to a saleable product using a Merrill-Crowe or carbon in column processing method. As gold ounces are recovered using the Merrill-Crowe process, costs are transferred from in-process inventories at an average cost per ounce of gold to doré finished goods inventory. In-process inventories are valued at the average cost of the material fed into the process, plus the in-process conversion costs, including applicable depreciation and amortization relating to the process facilities incurred to that point in the process.

 

Precious metals inventory

 

Precious metals inventory consists of doré containing both gold and silver. While operations are actively producing gold and silver, and as the Company sells its in-process inventories, costs are recognized in Production costs in the consolidated statements of operations at an average cost per gold ounce sold.

 

Materials and supplies

 

Materials and supplies are valued at the lower of average cost or net realizable value. Cost includes applicable taxes and freight.

 

Fair value measurements

 

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

 

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis;

 

Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

 

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain financial instruments, including cash, prepaids and other, accounts payable, and other liabilities are carried at cost, which approximates their fair value due to the short-term nature of these instruments.

 

Plant, equipment, and mine development

 

Expenditures for new facilities and equipment, and expenditures that extend the useful lives or increase the capacity of existing facilities or equipment are capitalized and recorded at cost. Such costs are depreciated using either the straight-line method over the estimated productive lives of such assets or using the units-of-production method (when actively operating) at rates sufficient to depreciate such costs over the estimated proven and probable reserves as gold ounces are recovered. See Note 6 – Plant, Equipment, and Mine Development, Net for additional information.

 

  7  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Mine development

 

Mine development costs include the cost of engineering and metallurgical studies, drilling and assaying costs to delineate an ore body, environmental costs and the building of infrastructure. Additionally, interest is capitalized to mine development until such assets are ready for their intended use. Any of the above costs incurred before mineralization is classified as proven and probable reserves are expensed. During the second half of 2019, the Company established proven and probable mineral reserves.

 

Drilling, engineering, metallurgical, and other related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body, converting non-reserve mineralization to proven and probable mineral reserves, infrastructure planning, or supporting the environmental impact statement. All other drilling costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to inventory costs to be included as a component of Total cost of sales on the consolidated statements of operations.

 

Mine development costs are amortized using the units-of-production method based upon estimated recoverable ounces in proven and probable mineral reserves. To the extent such capitalized costs benefit an entire ore body, they are amortized over the estimated life of that ore body. Capitalized costs that benefit specific ore blocks or areas are amortized over the estimated life of that specific ore block or area. Recoverable ounces are determined by the Company based upon its proven and probable mineral reserves and estimated metal recoveries associated with those mineral reserves.

 

Impairment of long-lived assets

 

The Company’s long-lived assets consist of plant, equipment and mine development. The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues, costs, or future expansion plans or changes to federal and state regulations (with which the Company must comply) that may adversely impact the Company’s current or future operations. 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, the Company uses a discounted cash flow model based on quantities of estimated recoverable minerals and incorporates 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. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. 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 Company’s estimates of future cash flows are based on numerous assumptions, which are consistent or reasonable in relation to internal budgets and projections, and actual future cash flows may be significantly different than the estimates, as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projects are each subject to significant risks and uncertainties. See Note 6 – Plant, Equipment, and Mine Development, Net for additional information.

 

Mineral properties

 

Mineral properties are tangible assets recorded at cost and include royalty interests, asset retirement costs, and land and mineral rights to explore and extract minerals from properties. Once a property is in the production phase, mineral property costs are amortized using the units-of-production method based upon the estimated recoverable gold ounces in proven and probable reserves at such properties. Costs to maintain mineral properties are expensed in the period they are incurred. As of March 31, 2020 and December 31, 2019, there was no value assigned to mineral properties as the value had been written-down to $0 in previous periods.

 

  8  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Asset retirement obligation

 

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. The Company’s asset retirement obligation (“ARO”), consisting of estimated future mine reclamation and closure costs, may increase or decrease significantly in the future as a result of changes in regulations, mine plans, estimates, or other factors. The Company’s ARO relates to its operating property, the Hycroft Mine, and was recognized as a liability at fair value in the period incurred. An ARO, which is initially estimated based on discounted cash flow estimates, is accreted to full value over time through charges to Accretion expense in the consolidated statements of operations. Resultant ARO cost assets (recorded in Mineral properties, net on the consolidated balance sheets) are depreciated on a straight-line method over the related long-lived asset’s useful life. The Company’s ARO is adjusted annually, or more frequently if necessary, to reflect changes in the estimated present value resulting from revisions to the timing or amount of reclamation and closure costs.

 

Derivative instruments

 

The fair value of the Company’s derivative instruments is reflected as liabilities on the consolidated balance sheets. The Company does not hold derivative instruments for trading purposes.

 

Derivative Instruments Not Designated as Hedges

 

Previous equity stockholders of the Company received warrants with a seven-year term that represent 17.5% of the outstanding new common shares. These warrants were accounted for as a derivative instrument and included in Other liabilities, non-current on the consolidated balance sheets at fair value with periodic changes in fair value included in Other, net in the consolidated statements of operations. During the three months ended March 31, 2020 and 2019 there were no adjustments recorded as a result of no change in the fair value.

 

See Note 10 - Stockholders' Equity and Note 15 – Fair Value Measurements for additional information on the Company’s derivative instruments.

 

Treasury Stock

 

The Company records repurchases of common shares as Treasury stock at cost.

 

Revenue recognition

 

When actively operating, the Company recognizes revenue on gold and silver sales. During the year ended December 31, 2019, the Company began actively operating the Hycroft Mine and, as such, gold and silver sales in 2020 and 2019 were recorded as Revenue. For the three months ended March 31, 2020, 93% of the Company’s gold and silver sales were attributable to gold sales. There were no gold or silver sales during the three months ended March 31, 2019.

 

The Company recognizes revenue for gold and silver production when it satisfies the performance obligation of transferring gold inventory to the customer, which generally occurs when the refiner notifies the customer that gold has been credited or irrevocably pledged to their account at which point the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits of ownership of the asset. The transaction amount is determined based on the agreed upon market price and the number of ounces delivered. Concurrently, the payment date is agreed upon, which is usually within one week. All sales are final.

 

Stock-Based Compensation

 

Stock-based compensation costs for eligible employees are measured at fair value on the date of grant and charged to expense over the requisite service period. The fair value of awards is determined using the stock price on either the date of grant (if subject only to service conditions) or the date that the Compensation Committee of the Board of Directors establishes applicable performance targets (if subject to performance conditions). The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods through the final vesting date. See Note 12 - Stock-Based Compensation for additional information.

 

  9  

 

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Phantom shares

 

Non-employee members of the Company’s board of directors receive phantom shares of stock pursuant to a Non-Employee Director Phantom Stock Plan. For grants issued during the years ended 2015 and 2016, the cash payment is equal to the fair market value of one share of common stock of the Company at the date of payment. Under the grant agreements, each phantom share vests on the date of grant and entitles the participant to a cash payment. For grants issued during 2020, 2019 and 2018, the cash payment is equal to the greater of the (1) grant date value and (2) the fair market value of one share of common stock of the Company at the date of payment. The fair market value at date of grant of the phantom shares was based upon the valuation of the Company determined in the bankruptcy process. During the three months ended March 31, 2020 and 2019, the Company recorded $0.3 million and $0.5 million, respectively, in compensation expense related to the vesting of the phantom shares granted during each respective period, which are included in General and administrative on the consolidated statements of operations. See Note 15 – Fair Value Measurements for additional information.

 

Reorganization items, net

 

On March 10, 2015, the Company 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 the Company’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 are reported as Reorganization items, net in the consolidated statements of operations. The Company incurred legal and professional fees of $0 and $0.3 million for the three months ended March 31, 2020 and 2019, respectively. On October 3, 2019, the Bankruptcy Court finalized the proceedings and closed the case.

 

Income taxes

 

The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect at the anticipated time of reversal. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. See Note 13 – Income Taxes for additional information.

 

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. Evidence evaluated includes past operating results, forecasted earnings, estimated future taxable income, and prudent and feasible tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying business.

 

As necessary, the Company also provides reserves against the benefits of uncertain tax positions taken on its tax filings. The necessity for and amount of a reserve is established by determining, based on the weight of available evidence, the amount of benefit which is more likely than not to be sustained upon audit for each uncertain tax position. The difference, if any, between the full benefit recorded on the tax return and the amount more likely than not to be sustained is recorded as a liability on the Company’s consolidated balance sheets unless the additional tax expense that would result from the disallowance of the tax position can be offset by a net operating loss, a similar tax loss, or a tax credit carryforward. In that case, the reserve is recorded as a reduction to the deferred tax asset associated with the applicable net operating loss, similar tax loss, or tax credit carryforward.

 

Recently issued accounting pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes current revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company’s only revenue stream is from the sale of precious metals, which is scoped into ASU 2014-09.

 

  10  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The Company adopted ASU 2014-09 on January 1, 2019 using a modified retrospective approach. As there were no unfulfilled contracts outstanding as of December 31, 2018, there was no cumulative effect adjustment required to be recognized at January 1, 2019.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within the year. A modified retrospective transition approach is required to either the beginning of the earliest period presented or the beginning of the year of adoption. The Company is evaluating the potential impact on its Consolidated Financial Statements.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires companies to include restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 was adopted on January 1, 2019 on a retrospective basis. The adoption of ASU 2016-18 did not have a material impact on our statements of cash flows for the periods presented.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which amends the disclosure requirements for fair value measurements in Topic 820 based on the considerations of costs and benefits. Under ASU 2018-13, certain disclosures were eliminated, while others were modified and there were some additions. The Company adopted ASU 2018-13 on January 1, 2020, but it did not affect the financial statement disclosures.

 

3. Inventories

 

The following table provides the components of inventories and the estimated recoverable gold ounces therein (in thousands, except ounces):

 

    March 31, 2020     December 31, 2019  
    Amount     Gold Ounces     Amount     Gold Ounces  
Materials and supplies   $ 2,891       -     $ 2,559       -  
Merrill-Crowe in process     679       536       1,004       691  
Carbon column in-process     478       474       478       474  
Doré finished goods     941       594       412       278  
Total   $ 4,989       1,604     $ 4,453       1,443  

 

As of both March 31, 2020 and December 31, 2019, in-process Inventories included $0.1 million of capitalized depreciation and amortization costs.

 

The following table summarizes ore on leach pads and the estimated recoverable gold ounces therein (in thousands, except ounces):

 

    March 31, 2020     December 31, 2019  
    Amount     Gold Ounces     Amount     Gold Ounces  
Ore on leach pads   $ 26,122       18,921     $ 22,062       17,019  

 

As of March 31, 2020 and December 31, 2019 (including write-downs discussed below), Ore on leach pads included $2.0 million and $1.8 million, respectively, of capitalized depreciation and amortization costs.

 

  11  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Write-down of production inventories

 

The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). During the three months ended March 31, 2020, based on metallurgical balancing results, the Company 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 the Company recognized a Write-down of production inventories on the consolidated statements of operations, which included production costs of $6.4 million and capitalized depreciation and amortization costs of $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, the Company determined that we would recover 20% less than planned of the mismanaged section of the leach pads.

 

4. Prepaids and Other Assets

 

The following table provides the components of prepaids and other assets (in thousands):

 

    March 31,     December 31,  
    2020     2019  
Prepaids and other                
Prepaids   $ 3,592     $ 2,109  
Deposits     539       539  
Total   $ 4,131     $ 2,648  
                 
Other assets, non-current                
Deferred future financing costs   $ 7,311     $ 5,083  
Royalty - advance payment     240       120  
Total   $ 7,551     $ 5,203  

 

5. Restricted Cash

 

The following table provides the components of restricted cash (in thousands):

 

    March 31,     December 31,  
    2020     2019  
First Lien agreement restricted cash - Note 8   $ 2,929     $ 3,270  
Asset retirement obligation surety bonds (collateralized obligation)     39,595       39,477  
Total   $ 42,524     $ 42,747  

 

  12  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

6. Plant, Equipment, and Mine Development, Net

 

The following table provides the components of plant, equipment, and mine development, net (in thousands):

 

    Depreciation Life   March 31,     December 31,  
    of Method   2020     2019  
Process equipment   5 - 13 years   $ 15,144     $ 14,770  
Leach pads   Units-of-production     11,190       11,190  
Buildings and leashold improvements   10 years     10,507       10,507  
Restart leach pads   18 months     6,241       6,229  
Mine equipment   5 - 7 years     4,847       4,716  
Vehicles   3 - 5 years     184       136  
Furniture and office equipment   7 years     264       129  
Mine development   Units-of-production     476       119  
Construction in progress and other         22,062       20,619  
        $ 70,915     $ 68,415  
Less: accumulated depreciation and amortization         (19,342 )     (17,208 )
Total       $ 51,573     $ 51,207  

 

During the 2020 first quarter, new processing equipment was placed into service, construction of the restart leach pads was completed and various mine development projects were ongoing. During the three months ended March 31, 2020 and 2019, the Company recorded depreciation and amortization related to plant, equipment and mine development of $2.1 million and $0.8 million, respectively. The Company capitalized $2.1 million and $0 of depreciation and amortization during the three months ended March 31, 2020 and 2019, respectively, to Ore on leach pads on the consolidated balance sheets. During the three months ended March 31, 2020, as a result of ounces sold, the Company recognized $1.3 million in depreciation and amortization in the consolidated statements of operations.

 

7. Other Liabilities

 

The following table summarizes the components of other liabilities, current and non-current (in thousands):

 

    March 31,     December 31,  
    2020     2019  
Other liabilities, current                
Accrued compensation for phantom shares - Note 15   $ 1,853     $ 1,590  
Other accrued compensation     1,392       1,139  
Restricted stock units - Note 12     1,613       1,210  
Total   $ 4,858     $ 3,939  
                 
Other liabilities, non-current                
Warrant liability - Notes 10 and 15   $ 18     $ 18  

 

  13  

 

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

8. Debt

 

Debt covenants

 

The Company’s debt agreements contain representations and warranties, events of default, and covenants that are customary for agreements of these types. The Company’s First Lien Term Loan Credit Agreement (the “First Lien Agreement”) contains financial covenants that, among other things, restrict or limit the ability of the Company to enter into liens, dispose of its assets, enter into hedging arrangements, pay dividends, purchase or redeem shares, incur or guarantee additional indebtedness, and make capital expenditures. The Second Lien Convertible Notes (the “Convertible Notes”), the Secured Notes due June 30, 2020 (the “1.5 Lien Notes”) and the 1.25 Lien Notes contain provisions that, among other things, restrict or limit the ability of the Company to incur or guarantee additional debt, pay dividends, enter into liens, or dispose of its assets.

 

The Company’s First Lien Agreement, the Convertible Notes, the 1.5 Lien Notes and the 1.25 Lien Notes include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents.

 

As of March 31, 2020, we were in compliance with all covenants related to the debt obligations.

 

Debt balances

 

The following table summarizes the components of debt (in thousands):

 

    March 31,     December 31,  
    2020     2019  
Debt, current:                
Convertible Notes   $ 216,227     $ 208,411  
1.5 Lien Notes     142,189       137,050  
1.25 Lien Notes     105,593       77,212  
First Lien Agreement     125,468       125,468  
Other note payable     6,858       6,773  
Less, debt issuance costs     (959 )     (949 )
Total   $ 595,376     $ 553,965  

 

First lien term loan agreement

 

For the period from December 13, 2019 through January 31, 2020 the First Lien Agreement bore interest at either LIBOR plus 7.0% or an Alternate Base Rate Canada, as defined in the First Lien Agreement, plus 7.0% and thereafter increased to either LIBOR plus 7.5% or an Alternate Base Rate Canada plus 7.5%. Prior to December 13, 2019, the First Lien Agreement bore interest at either LIBOR plus 5.5% or an Alternate Base Rate Canada plus 4.5%. Fifty percent of the monthly Excess Cash Flow, as defined in the First Lien Agreement and subject to minimum cash balance restrictions, is required to be paid to reduce the outstanding amount under the First Lien Agreement. The maximum outstanding amount under the First Lien Agreement was initially determined by a Borrowing Base (as defined in the First Lien Agreement) that is based upon 80% of the net realizable value of the gold and silver in the Company’s ore on leach pads, in-process and finished goods inventories less estimated selling and processing costs. The repayment of the First Lien Agreement and other obligations under the First Lien Agreement are guaranteed by all of the direct and indirect domestic subsidiaries of the Company. The First Lien Agreement, the guarantees by the guarantors in respect thereof and all obligations under the First Lien Agreement, and such guarantees are secured by liens on substantially all of the assets of the Company and its subsidiaries. The First Lien Agreement matures on May 31, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the First Lien Agreement.

 

  14  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

After a series of short-term maturity extensions through July 14, 2017, the Company amended the First Lien Agreement to provide for a maturity of January 31, 2019. After several short-term maturity extensions through February 22, 2019, the First Lien Agreement maturity was extended to December 13, 2019 (the “February 2019 Extension”). The extended amendment requires that the Company will maintain at all times a cash balance of $5.0 million, including a balance in a segregated account sufficient to pay projected First Lien Agreement interest payments for the succeeding three months. In conjunction with the close of the February 2019 Extension, the Company issued $18.0 million of 1.25 Lien Notes (discussed below). Pursuant to the February 2019 Extension, the Company obtained commitments from the holders of the 1.5 Lien Notes to purchase an additional $9.0 million of 1.25 Lien Notes during 2019, which was fulfilled in May 2019. Additionally, pursuant to the February 2019 Extension, the maximum outstanding amount under the First Lien Agreement was no longer determined by the Borrowing Base, however, the Company is to maintain at all times at least 175,000 recoverable gold equivalent ounces on the leach pads. The Company has agreed to certain operational and reporting milestones during the remaining life of the First Lien Agreement. Also, the Company agreed that it will ensure that the holders of the 1.5 Lien Notes or other parties acceptable to the Administrative Agent (as defined in the First Lien Agreement) will reduce the Bank of Nova Scotia’s holdings under the First Lien Agreement by $5.0 million within two banking days of each of June 30, 2019, if a certain milestone is not met, and October 28, 2019. Both buy-down obligations were met by the holders of the 1.5 Lien Notes.

 

The Company completed two additional maturity amendments in December 2019 and January 2020. The First Lien Agreement now matures May 31, 2020. In connection with these two amendments, the Company has agreed to certain operational and reporting milestones during the remaining life of the First Lien Agreement. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the First Lien Agreement.

 

Second Lien Convertible Notes

 

The Convertible Notes mature on October 22, 2020 and bear interest at a rate of 15% per annum, payable in-kind on a quarterly basis. During the three months ended March 31, 2020 and 2019 the Company issued an additional $7.8 million and $6.7 million, respectively, in Convertible Notes, representing interest payments on the outstanding Convertible Notes. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the Convertible Notes.

 

The Convertible Notes are convertible at an initial conversion price of $1.67 per share, subject to anti-dilution protection. There was no beneficial conversion feature as it was determined that the conversion price was equal to the commitment date value of the common stock. The obligations under the Convertible Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations under the First Lien Agreement, the 1.25 Lien Notes and the 1.5 Lien Notes. In connection with the issuance of the Convertible Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the trustee under the indenture.

 

1.5 Lien Notes

 

In May, 2016, the Company issued $10.0 million of the 1.5 Lien Notes, pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”). The 1.5 Lien Notes bear interest at a rate of 15% per annum, which is payable in-kind on a quarterly basis, and mature June 30, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the 1.5 Lien Notes. The obligations under the 1.5 Lien Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations of the First Lien Agreement and the 1.25 Lien Notes but superior in priority to the liens that secure the obligations of the Convertible Notes and the unsecured obligations of the Company. In connection with the issuance of the 1.5 Lien Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the collateral agent under the Note Purchase Agreement. Additionally, an Intercreditor Agreement was entered into by and among the collateral agent under the Note Purchase Agreement and the trustee under the Indenture.

 

  15  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

During the three months ended March 31, 2020 and 2019 the Company issued an additional $5.1 million and $4.5 million, respectively, in 1.5 Lien Notes, representing interest payments on the outstanding 1.5 Lien Notes. While each 1.5 Lien Notes issuance is pursuant to a new note purchase agreement, all the 1.5 Lien Notes have the same terms and security priority as the original issuance in May 2016.

 

The 1.5 Lien Notes provide the holders the right upon a change of control, as defined in the Note Purchase Agreement, to require the Company to repurchase all of the holder’s notes for 110% of the outstanding principal balance, plus accrued and unpaid interest. Furthermore, the 1.5 Lien Notes give the Company the right upon a change of control, as defined in the Note Purchase Agreement, to redeem the notes for 110% of the outstanding principal balance, plus accrued and unpaid interest.

 

1.25 Lien Notes

 

On February 22, 2019, the Company issued $18.0 million of the 1.25 Lien Notes, pursuant to a Note Purchase Agreement (the “1.25 Note Purchase Agreement”). The 1.25 Lien Notes bear interest at a rate of 15% per annum, which is payable in-kind on a quarterly basis, and mature June 30, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the 1.25 Lien Notes. The obligations under the 1.25 Lien Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations of the First Lien Agreement but superior in priority to the liens that secure the obligations of the 1.5 Lien Notes, the Convertible Notes and the unsecured obligations of the Company. In connection with the issuance of the 1.25 Lien Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the collateral agent under the 1.25 Note Purchase Agreement, and an Intercreditor Agreement was entered into by and among the collateral agent under the Note Purchase Agreement and the collateral agent under the 1.25 Note Purchase Agreement. Additionally, an Intercreditor Agreement was entered into by and among the collateral agent under the 1.25 Note Purchase Agreement and the trustee under the Indenture.

 

Additional 1.25 Lien Notes were issued in 2019 and 2020 pursuant to new note purchase agreements. All of the 1.25 Lien Notes have the same terms and security priority as the original issuance in February 2019. During the three months ended March 31, 2020 a total of a total of $33.4 million of 1.25 Lien Notes were issued, including $3.4 million of interest in-kind notes. During the three months ended March 31, 2019, in addition to the initial issuance of 1.25 Lien Notes, $0.3 million of interest in-kind notes were issued.

 

Other notes payable

 

On October 15, 2014, the Company entered into a Release and Settlement Agreement (the “Settlement Agreement”) and a Promissory Note (the “Promissory Note”) resolving and settling any and all disputes between Jacobs Field Services North America and the Company. A First Amendment to the Settlement Agreement was executed on April 5, 2016, a Second Amendment was executed on October 6, 2016, a Third Amendment was executed on December 21, 2017 (the “Third Amendment”), a Fourth Amendment was executed on December 31, 2018 (the “Fourth Amendment”) and a Fifth Amendment was executed on June 27, 2019 (the “Fifth Amendment”). The Fourth Amendment amended the Promissory Note to begin accruing interest January 1, 2019, at the rate of 5% per annum, to be added to the principal of the Promissory Note. Interest for 2018 was prepaid coincident with the execution of the Third Amendment. Pursuant to the Fourth Amendment, a delayed payment fee of 5.5% of the principal balance as of June 30, 2019, including accrued interest, was added to the principal balance of the Promissory Note. The due date of the Promissory Note was extended to December 31, 2019, pursuant to the Fifth Amendment. A Sixth Amendment was executed on December 19, 2019 (the “Sixth Amendment”), which extended the Promissory Note due date to June 30, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the Promissory Note.

 

On each of December 31, 2019 and 2018, coincident with the execution of the Sixth Amendment and Fourth Amendment, delayed payment fees of 2% of the principal balance at each date, or $0.1 million and $0.1 million, respectively, were added to the principal balance of the Promissory Note.

 

  16  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

During each of the three months ended March 31, 2020 and 2019 the Company recognized $0.1 million of interest-in kind.

 

Interest expense

 

The following table summarizes the components of recorded interest expense (in thousands):

 

    Three months ended March 31,  
    2020     2019  
Second Lien Convertible Notes   $ 7,816     $ 6,746  
1.5 Lien Notes     5,139       4,433  
1.25 Lien Notes     3,352       278  
First Lien Agreement     2,867       2,511  
Amortization of debt issuance costs     672       499  
Promissory Note     85       76  
Capitalized interest     (44 )     (145 )
Total interest expense   $ 19,887     $ 14,398  

 

We capitalize interest to Property and equipment, net on the consolidated balance sheets for construction projects in accordance with ASC Topic 835, Interest.

 

9. Asset Retirement Obligation

 

The following table summarizes changes in the Company’s ARO (in thousands):

 

      2020       2019  
Balance at January 1,   $ 4,374     $ 5,832  
Accretion expense     93       106  
Balance at March 31,   $ 4,467     $ 5,938  

 

10. Stockholders' Equity

 

Common stock

 

In connection with the Company’s emergence from bankruptcy and as detailed in the plan of reorganization, the Company’s then-existing unsecured notes and general unsecured claims were canceled and holders of such claims received equity in the reorganized Company or received cash in amounts negotiated by the major creditor groups. The Company was required to issue 3.0 million new common shares to its creditors, but has not listed the new common shares for public trading and is not a reporting company with the Securities and Exchange Commission (“SEC”). Previous equity stockholders of the Company received warrants with a seven-year term that represent the right to purchase up to 17.5% of the outstanding new common shares.

 

As of March 31, 2020, all 3.0 million shares had been issued. For additional information see Note 15 – Fair Value Measurements. As of March 31, 2020, the Company had 400.0 million shares of common stock authorized at $.001 par value per share.

 

  17  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Preferred stock

 

In addition to common stock, the authorized share capital of the Company includes 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share, none of which has been issued.

 

Treasury stock

 

As of March 31, 2020, the Company held 198,082 shares of its common stock outstanding that it had repurchased in previous years.

 

Dividend policy

 

The Company has never paid dividends and currently has no intention to do so. The Company’s Convertible Notes, 1.5 Lien Notes, 1.25 Lien Notes and First Lien Agreement contain provisions that restrict its ability to pay dividends. For additional information see Note 8 - Debt.

 

Warrants

 

As of March 31, 2020, the Company had previously issued 12.7 million warrants with a seven-year term that represented the right to purchase up to 17.5% of the outstanding common shares on the date of issuance. At issuance, each warrant was exercisable into one share of the Company’s common stock. As the number of shares of common stock issuable upon conversion of the Convertible Notes increased, the conversion ratio of the warrants increased such that the warrants continue to represent the right to purchase up to 17.5% of the shares of common stock outstanding, assuming that all Convertible Notes have been converted to common shares. As of March 31, 2020, each warrant was convertible into 2.21 shares of common stock for a total of 28.2 million shares. The exercise price per share was $5.07 as of March 31, 2020. The warrants were accounted for as a derivative instrument and included in Other liabilities, non-current on the consolidated balance sheets at fair value as of March 31, 2020 and December 31, 2019.

 

11. Gold and Silver Sales

 

The table below is a summary of the Company’s gold and silver sales (in thousands, except ounces sold):

 

    Three months ended March 31,  
    2020     2019  
          Ounces           Ounces  
    Amount     Sold     Amount     Sold  
Gold sales   $ 10,328       6,560     $ -       -  
Silver sales     796       49,373               -                -  
Total gold and silver sales   $ 11,124             $ -          

 

For the three months ended March 31, 2020, gold and silver sales of $11.1 million were reported as Revenue as the Hycroft Mine was operating. Nearly all gold and silver sales during 2020 were to the same customer. However, the Company is not obligated to sell all of its gold and silver to one customer.

 

12. Stock-Based Compensation

 

The Company has a stock-based compensation plan, the Performance and Incentive Pay Plan (the “PIPP”), to attract, retain and motivate employees while directly linking incentives to increases in stockholder value. Terms and conditions (including performance-based vesting criteria) of awards granted under the PIPP are established by the Board of Directors or the Compensation Committee of the Board of Directors, who administer the plan.

 

  18  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

On February 20, 2019, the Board of Directors of the Company approved the PIPP, which makes available up to 4,277,000 shares of common stock for award. The awards may be granted in a variety of forms, including restricted stock, restricted stock units, stock options, stock appreciation rights, performance awards, and other stock-based awards. As of December 31, 2019, all awards granted under the PIPP were in the form of restricted stock units.

 

Restricted stock units granted under the PIPP without performance-based vesting criteria typically vest in equal annual installments over two or three years. Awards granted with performance-based vesting criteria typically vest in annual installments over two or three years subject to achievement of certain financial and operating results of the Company.

 

For the restricted stock units granted in the 2019 first quarter, a price per share was not determined as of the grant date. The number of shares of common stock of the Company to be issued upon vesting will be calculated on the vesting date based on the grant date value. The first tranche of restricted stock units will vest upon the closing of the MUDS transaction, which the Company expects to close during the second quarter of 2020. Restricted stock units set to vest during 2020 are convertible into shares of MUDS common stock as of December 31, 2020, if the MUDS transaction closes. The remainder of the restricted stock units vest through March 2022. The restricted stock units are included in Other liabilities, current on the consolidated balance sheets.

 

The fair value of restricted stock units is recognized as expense over the vesting period. During the three months ended March 31, 2020 and 2019, the Company recognized $0.4 and $0.2 million, respectively, in stock-based compensation cost related to the issuance of the restricted stock units of which less than $0.1 million was capitalized to ore on leach pads during each period.

 

13. Income Taxes

 

For both the three months ended March 31, 2020 and 2019, the Company recorded no income tax benefit or expense as the estimated annual effective tax rate was 0.0% for both the three-month periods. The estimated annual effective tax rate for each period was driven by net losses year-to-date for both periods along with the expectation of continued losses for the remainder of the year.

 

The Company is not subject to state income tax in Nevada, which does not impose a state income tax, nor is the Company subject to foreign income taxes as all of the Company’s operations and properties are located within the United States. The Company is subject to state income tax in Colorado, the location of the corporate office, but did not incur any income tax expense related to Colorado.

 

As necessary, the Company provides a reserve against the benefits of uncertain tax positions taken in its tax filings that are not more likely than not to be sustained upon examination. Based on the weight of available evidence, the Company does not believe it has taken any uncertain tax positions that require the establishment of a reserve. The Company has not recorded any interest or penalties related to income tax liabilities as of March 31, 2020.

 

  19  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

14. Earnings (Loss) Per Share

 

The table below shows our basic and diluted earnings (loss) per share calculations (in thousands, except share and per share amounts):

 

    Three months ended March 31,  
    2020     2019  
Net loss   $ (34,618 )   $ (23,440 )
                 
Weighted average shares outstanding                
Basic     2,897,568       2,672,502  
Diluted     2,897,568       2,672,502  
                 
Basic earnings per common share   $ (11.95 )   $ (8.77 )
Diluted earnings per common share   $ (11.95 )   $ (8.77 )

 

There was no dilutive effect of common stock equivalents for the three months ended March 31, 2020 or 2019 because the effect of their inclusion would have been anti-dilutive.

 

There was no dilutive effect of common stock equivalents for the years ended March 31, 2020 and 2019 because the effect of their inclusion would have been anti-dilutive. Using the treasury stock method, the weighted-average common stock equivalents excluded from diluted EPS were 157.9 million shares and 136.4 million shares for the three months ended March 31, 2020 and 2019, respectively. The restricted stock units are not included in the common stock equivalents because the number of shares used to settle them is not known.

 

15. Fair Value Measurements

 

Recurring fair value measurements

 

The following table sets forth by level within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands).

 

    Hierarchy     March 31,     December 31,  
    Level     2020     2019  
Liabilities                        
Accrued compensation for phantom shares     3     $ 1,853     $ 1,590  
Derivative instruments:                        
Warrant liability - Notes 7 and 10     2     $ 18     $ 18  

 

Accrued compensation

 

The fair market value at date of grant of the phantom shares was based upon the valuation of the Company determined in the bankruptcy process. The liability will be marked-to-market on a recurring basis using a quoted price if the Company’s common stock is actively traded on a national securities market exchange or in the over the counter market. Since the common stock is not quoted, a reasonable valuation method in accordance with treasury regulations was used.

 

  20  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

During the three months ended March 31, 2020 and 2019, non-employee members of the Company’s board of directors were granted a total of 157,500 and 315,000 phantom shares of stock, respectively, which vested upon grant, pursuant to a Non-Employee Director Phantom Stock Plan. Under the grant agreements, the phantom shares entitle the participant to a cash payment equal to the greater of the (1) grant date fair value and (2) the fair market value of one share of common stock of the Company at the date of payment. The cash payments are to be made to a participant upon the first of the following to occur: (i) retirement from the Board; (ii) resignation from the Board; (iii) failure to stand for re-election as a non-employee director of the Board; (iv) removal from the board for reasons other than cause; (v) death of the participant; or (vi) a change of control.

 

As of March 31, 2020 and December 31, 2019, the Company performed fair value analyses of the phantom shares. A valuation of the Company based on negotiated financing arrangements with several unrelated parties was used to determine the value at both March 31, 2020 and December 31, 2019. The phantom shares issued during 2020, 2019 and 2018 were recorded at the grant date fair value and, pursuant to the grant agreements, cannot be written-down below the grant date fair value. During the three months ended March 31, 2020 and 2019, there was no change in the fair market value of the 2015 and 2016 phantom shares issuances.

 

Derivative instruments

 

The fair values (as prescribed by GAAP) of the warrants, the Company’s only derivative instrument, were computed by independent third-party consultants (and validated by the Company) using models that require a variety of inputs, including contractual terms, market prices, exercise prices, and correlations of such inputs. In general, model inputs that are significant to the fair value measurements of the Company’s derivative instruments trade in active markets or are observable in markets that are not active, and, as such, derivative instruments are classified within Level 2 of the fair value hierarchy.

 

The fair value of the Company’s warrant liability was approximately $18,000 as of both March 31, 2020 and December 31, 2019 and was determined using a Monte Carlo simulation-based valuation model. The warrants have a seven-year term and an initial exercise price of $8.40 per share. The assumptions used include a risk-free interest rate of 1.74%, an expected volatility of 70%, and a dividend rate of 0%.

 

Items disclosed at fair value

 

The carrying amount and fair value of the debt as of March 31, 2020 and December 31, 2019 are disclosed in the following table (in thousands):

 

    March 31, 2020     December 31, 2019  
    Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value  
Total current and non-current debt   $ 595,376     $ 539,631     $ 553,965     $ 471,890  

 

As of March 31, 2020 and December 31, 2019, the fair value of the Company’s debt was determined using level 3 inputs and the phantom shares were marked to market based on level 3 inputs. There were no changes to the Company’s valuation techniques, and no transfers in or out of Levels 1, 2, or 3.

 

The Company determined the fair value of the debt at March 31, 2020 and December 31, 2019 based upon assumptions used in the Purchase Agreement, which are considered level 3 inputs.

 

  21  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

16. Supplemental Cash Flow Information

 

The following table provides supplemental cash flow information (in thousands):

 

    Three months ended March 31,  
    2020     2019  
Cash paid for interest   $ 3,313     $ 2,945  
                 
Significant non-cash financing and investing activities:                
Increase in Second Lien convertible notes from in-kind interest     7,815       6,746  
Increase in 1.5 Lien Notes from in-kind interest     5,139       4,450  
Increase in 1.25 Lien Notes from in-kind interest     3,381       278  
Increase in the Promissory Note from in-kind interest     85       76  
Accrual of deferred future financing costs     382       986  
Plant and equipment additions included in accounts payable     364       -  

 

17. Commitments and Contingencies

 

From time to time, the Company is involved in various legal actions related to its business, some of which are class actions lawsuits. Management does not believe, based on currently available information, that contingencies related to any pending or threatened legal matter will have a material adverse effect on the Company’s Consolidated Financial Statements, although a contingency could be material to the Company’s results of operations or cash flows for a particular period depending on the results of operations and cash flows for such period. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

 

On February 7, 2020, a purported class action complaint was filed by a purported holder of the Company’s warrants, in the Court of Chancery of the State of Delaware against the Company and MUDS. The complaint seeks a declaratory judgment that the MUDS transaction constitutes a “Fundamental Change” under the terms of the Hycroft Warrant Agreement and thereby requiring that the Company warrants be assumed by MUDS as part of the MUDS transactions, in addition to asserting claims for (i) breach or anticipatory breach of contract against the Company, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against the Company, and (iii) tortious interference with contractual relations against MUDS. The complaint seeks unspecified money damages and also seeks an injunction enjoining the Company and MUDS from consummating the MUDS transactions. On February 26, 2020, MUDS and Hycroft entered into an amendment to the Purchase Agreement whereby the Company’s liabilities and obligations under the Hycroft Warrant Agreement shall be 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.

 

Financial commitments not recorded in the Consolidated Financial Statements

 

Net profit royalty

 

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 certain patented and unpatented mining claims. The mining lease also requires an annual advance payment of $120,000 every year mining occurs on the leased claims. All advance annual 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, of which the Company has paid $2.6 million through March 31, 2020.

 

  22  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Transaction bonus plan

 

The Company has entered into a bonus plan whereby, upon completion of the MUDS transaction or certain other transformative transactions as defined in the plan, the Company will be obligated to pay certain senior level employees a total of $5.9 million.

 

18. Related Party Transactions

 

As disclosed in Note 8Debt, the Company has issued numerous tranches of debt primarily to five financial institutions. These financial institutions, Aristeia Capital LLC (“Aristeia”), Highbridge Capital Management, LLC (“Highbridge”), Mudrick Capital Management, L.P (“Mudrick”) Whitebox Advisors, LLC (“Whitebox”) and Wolverine Asset Management, LLC (“Wolverine”), each hold beneficial ownership (assuming conversion of the Convertible Notes) of 5% or more of the Company’s common stock. Additionally, Highbridge, Mudrick and Whitebox, as long as they remain holders of 10% or more of the Company’s common stock, have the right to nominate and designate one director pursuant to the Company’s stockholder agreement. As a result of their owning 5% or more of the Company’s common stock, Aristeia, Highbridge, Mudrick, Whitebox, and Wolverine are each considered a related party (the “Related Parties”) in accordance with ASC 850, Related Party Disclosures.

 

The following table provides the recorded interest expense by Related Party (in thousands):

 

    Three months ended March 31,  
    2020     2019  
Aristeia   $ 1,871     $ 1,307  
Highbridge     2,901       2,047  
Mudrick     7,372       5,228  
Whitebox     4,873       3,403  
Wolverine     907       633  
Total related party interest expense   $ 17,924     $ 12,618  

 

The following table provides debt balances by Related Party (in thousands):

 

    March 31,     December 31,  
    2020     2019  
Aristeia   $ 55,340     $ 50,905  
Highbridge     87,516       80,930  
Mudrick     224,474       208,078  
Whitebox     144,111       132,559  
Wolverine     26,833       24,683  
Total related party debt   $ 538,274     $ 497,155  

 

19. Subsequent Events

 

Issuance of Additional 1.25 Lien Notes

 

On each of April 16, 2020 and May 7, 2020, the Company issued additional tranches of 1.25 Lien Notes in the aggregate principal amount of $10.0 million. The 1.25 Lien Notes issued in April and May have the same terms and security priority as the original issuance of 1.25 Lien Notes in February 2019.

 

  23  

 

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Tax Impact of MUDS Transaction

 

The Company estimates that as a result of the MUDS transaction discussed above, that the Company will record a taxable gain of approximately $140.0 million. The Company has deferred tax assets (net operating loss carryforwards), which have a full valuation allowance recorded against them, in excess of the estimated taxable gains.

 

Consummation of the MUDS Transaction

 

On May 29, 2020, Hycroft Mining Holding Corporation, formerly known as Mudrick Capital Acquisition Corporation (“HYMC”), consummated the MUDS transaction by and among the HYMC, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft, as set forth in the Purchase Agreement. Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of the Company and substantially all of the other assets and assumed substantially all of the liabilities of the Company.

 

The value of the aggregate consideration was $615.0 million, which amount was inclusive of the value of HYMC’s shares of common stock issued as consideration in the MUDS transaction, the value of the Company’s debt assumed by HYMC at the closing of the MUDS transaction, the value of the Company’s debt paid off or converted into shares of the Company’s common stock in connection with or at the closing of the MUDS transaction and the value of the Company’s debt exchanged for HYMC’s shares of common stock and cancelled by the Company.

 

In connection with the consummation of the MUDS Transaction, the parties undertook the following transactions, among others:

 

· $80 million of the 1.25 Lien Notes were exchanged for new subordinated notes of the Company and $80.0 million in aggregate principal amount of such New Subordinated Notes (the “Assumed New Subordinated Notes”) were assumed by HYMC.

 

· The Company and the Second Lien Noteholders consummated the conversion of the Second Lien Notes into shares of the Company’s common stock.

 

· HYMC and the Company repaid in full all outstanding obligations of the Company under certain existing third-party indebtedness, including indebtedness under the First Lien Agreement and the Promissory Note.

 

· The consideration paid to the Company was comprised of 15.1 million shares of HYMC’s Class A common stock, par value $0.0001 per share (“HYMC Common Stock”), including 3,511,820 surrendered shares, valued at $10.00 per share, issued to the Company and promptly distributed pro rata pursuant to a plan of dissolution to the Company’s stockholders, plus $145.7 million of 1.5 Lien Notes that were exchanged by the holders for approximately 16.03 million shares of HYMC common stock and cancelled by the Company and $48.5 million of 1.25 Lien Notes that were exchanged by the holders for approximately 4.85 million shares of HYMC common stock and cancelled by the Company.

 

· MUDS had $12.4 million in trust that was transferred to the Company after giving effect to the stock that was redeemed by the public stockholders prior to closing.

 

On May 29, 2020, immediately prior to the consummation of the MUDS transaction, HYMC issued, in a private placement transaction (the “PIPE Financing”), an aggregate of approximately $7.6 million shares of HYMC Common Stock for an aggregate purchase price of approximately $76.0 million and 3,250,000 warrants to purchase HYMC Common Stock at a price of $11.50 per share (the “PIPE warrants”), to certain accredited investors (the “Initial Subscribers”) pursuant to the terms of separate Subscription/Backstop Agreements, dated January 13, 2020 as amended as of May 28, 2020.

 

  24  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

At the consummation of the MUDS transaction, HYMC, Mudrick Capital Acquisition Holdings LLC (“sponsor”), Cantor Fitzgerald & Co. (“Cantor”), holders of 1.25 Lien Notes and 1.5 Lien Notes that received shares of the HYMC Common Stock upon exchange of such 1.25 Lien Notes and 1.5 Lien Notes, certain stockholders of the Company that received shares of HYMC Common Stock in the MUDS transaction and may be affiliates of HYMC after consummation of the MUDS transaction (collectively, the “Exchanging Noteholders”), the Initial Subscribers and Sprott Private Resource Lending II (Collector), LP. (“Lender”) (Cantor, the Exchanging Noteholders, certain stockholders of the Company, the Initial Subscribers, Lender and sponsor, 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 MUDS transaction for shares purchased in the PIPE Financing to six months for shares received in the exchange, to one year after the consummation of the MUDS transaction for founder shares, subject to certain exceptions. Pursuant to the terms of the Registration Rights Agreement, HYMC 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 63 million shares of HYMC Common Stock, in addition to warrants and units. Concurrently with the consummation of the MUDS transaction, sponsor also purchased 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 HYMC and sponsor (the “Forward Purchase Contract”). Following the completion of the PIPE Financing, the MUDS transaction and related debt and warrant assumption, there were 50,160,042 shares of HYMC Common Stock outstanding.

 

Concurrently with the consummation of the MUDS transaction, sponsor also purchased 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 HYMC and sponsor (the “Forward Purchase Contract”).

 

On October 4, 2019, the Company, as borrower, certain subsidiaries of the Company, 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 $110.0 million. 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 to the details of the business combination. At the consummation of the business combination, the Company assumed the initial Sprott credit agreement and entered into the Sprott Credit Agreement and borrowed $70.0 million under such facility and issued to Lender 496,634 shares of HYMC Common Stock, equal to 1% of HYMC’s post-closing shares of HYMC Common Stock outstanding. Advances under the Sprott Credit Agreement are made available at an original issue discount of 2% and bear interest monthly at a floating rate equal to 7% plus the greater of (i) US Dollar three month LIBOR and (ii) 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.

 

In addition to the Sprott Credit Agreement, concurrently with the consummation of the MUDS transaction, HYMC and Hycroft Resources & Development, LLC, a Delaware limited liability company (“HRD”) and an indirect wholly-owned subsidiary of the Company acquired by HYMC in the MUDS transaction 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 $30.0 million and incurred a 1.5% net smelter royalty payment obligation relating to the Hycroft mine, the principal asset of HRD acquired in the MUDS transaction.

 

Upon consummation of the MUDS transaction, HYMC assumed the Company’s liabilities and obligations under the warrant agreement, dated as of October 22, 2015, by and between the Company 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”). Following the MUDS transaction and the assumption of the liabilities and obligations under the Hycroft Warrant Agreement, each warrant of the Company outstanding and unexercised immediately prior to the effective time of the MUDS transaction is exercisable to purchase 0.2523 shares of HYMC Common Stock at an exercise price of $44.82 per share of common stock.

 

Upon completion of the MUDS transaction, in addition to the warrants related to Hycroft Warrant Agreement, HYMC had the following warrants outstanding to purchase one share of HYMC Common Stock for $11.50 per share: (A) 20,800,000 issued in connection with the initial offer of MUDS stock, (B) 2,500,000  issued to sponsor in connection with the Forward Purchase Contract (as discussed above), (C) 6,700,000 issued to sponsor for $1.00 each in January 2018, (D) 1,040,000 issued to Cantor, the underwriter for the SPAC for $1.00 each in January 2018, by and between MUDS and Cantor, and (E) 3,250,000 issued pursuant to the Subscription/Backstop Agreements.

 

  25  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

  

The issuance of the shares of HYMC Common Stock to the Company for prompt distribution to its stockholders pursuant to a plan of dissolution was registered with the SEC on the Registration Statement on Form S-4 (File No. 333-236460) dated May 7, 2020 (the “Registration Statement”). 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 Proxy Statement/Prospectus on Form S-8. HYMC has agreed in the Registration Rights Agreement to file a registration statement in respect of shares of HYMC Common Stock, forward purchase units, and warrants, held by the parties to the Registration Rights Agreement, including the shares of HYMC Common Stock underlying such units and 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 MUDS transaction.

 

Plan of Dissolution

 

Promptly following the consummation of the MUDS transaction, the Company filed a certificate of dissolution with the Secretary of State of Delaware to effect a complete plan of dissolution and liquidation of the Company as approved upon the recommendation of the Company’s Board of Directors at a special meeting of the Company’s stockholders held on May 29, 2020.

 

  26  

 

 

HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

Other

 

The Company has evaluated all subsequent events through June 3, 2020, which is the date these Consolidated Financial Statements were available to be issued. There were no additional material subsequent events that required recognition or additional disclosure in these Consolidated Financial Statements.

  

  27  

 

Exhibit 99.6

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Introduction

 

We are providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the business combination. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to such statements. The information used to prepare the unaudited pro forma condensed combined financial statements was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are included in the joint proxy statement/prospectus forming a part of the Registration Statement on Form S-4 (Registration No. 333-236460) dated May 7, 2020 (the “Joint Proxy Statement/Prospectus”) and incorporated by reference herein.

 

• The historical unaudited condensed financial statements as of and for the three months ended March 31, 2020 and the historical audited financial statements as of and for the year ended December 31, 2019 of Hycroft Mining Corporation (“Seller”); and

 

• The historical unaudited condensed financial statements as of and for the three months ended March 31, 2020 and the historical audited financial statements as of and for the year ended December 31, 2019 of Mudrick Capital Acquisition Corporation (“MUDS”).

 

The foregoing historical financial statements have been prepared in accordance with GAAP.

 

The unaudited pro forma condensed combined financial statements are based on MUDS’ historical financial statements and Seller’s historical consolidated financial statements as adjusted to give effect to the business combination assuming that the minimum cash condition under the Purchase Agreement is satisfied with no additional cash. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 and the year ended December 31, 2019 gives effect to the business combination, the exchange, the debt and warrant assumption, the 1.25 Lien Exchange, the conversion and the private investment as if they had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of March 31, 2020 gives effect to the business combination as if such transactions had occurred on March 31, 2020.

 

The historical financial information has been adjusted to give pro forma effect to the following events that are related and/or directly attributable to the business combination: (i) the exchange, (ii) the debt and warrant assumption, (iii) the 1.25 Lien Exchange, (iv) the conversion, (v) the PIPE Investment (as defined below), (vi) the forward purchase, (vii) the underwriting commission issuance of MUDS Class A common stock and (viii) the lender issuance of MUDS Class A common stock, each of which are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. For purposes of the unaudited pro forma financial information contained in this joint proxy statement/prospectus, the “PIPE Investment” consists of the private investment plus an incremental private placement equity investment, if needed. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combination and related transactions.

 

The unaudited pro forma condensed combined financial information is for illustrative purposes only and preliminary in nature. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. MUDS and Seller have not had any historical commercial relationship prior to the business combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

This information should be read together with MUDS’ and Seller’s financial statements and related notes, “Unaudited Pro Forma Condensed Combined Financial Information,” “Seller’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included in the Joint Proxy Statement/Prospectus incorporated by reference herein.

 

For more information about the business combination, please see the sections entitled “The Business Combination” and “The Purchase Agreement and Related Agreements” in the Joint Proxy Statement/Prospectus incorporated by reference herein.

 

  1  

 

 

PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2020
(UNAUDITED)
(in thousands)

 

                  No Redemption Scenario     Maximum Redemption Scenario  
      (a)
Seller
Subsidiaries
    (b)
MUDS
    Pro Forma
Adjustments
(No
Redemptions)
        Pro Forma
Combined
(No
Redemptions)
    Pro Forma
Adjustments
(Max
Redemptions)
        Pro Forma
Combined
(Max
Redemptions)
 
Assets:                                              
Cash   $ 6,566   $ 13     679   c           679   c        
                  (1,853 ) c           (1,853 ) c        
                  25,000   d           25,000   d        
                  71,786   d             d        
                  98,600   e           98,600   e        
                  10,000   f           20,000   f        
                  (132,697 ) g           (132,697 ) g        
                  (13,589 ) h           (12,014 ) h        
                  3,214   i   $ 67,719     65,000   i   $ 69,294  
Restricted cash     2,929           (2,929 ) c         (2,929 ) c      
Accounts receivable     851                     851               851  
Inventories     4,989                     4,989               4,989  
Ore on leach pads     26,122                     26,122               26,122  
Prepaids and other     4,131     54               4,185               4,185  
Current assets     45,588     67     58,211         103,866     59,786         105,441  
Investments held in Trust account           71,786     (71,786 ) d         (71,786 ) d      
Restricted cash     39,595                     39,595               39,595  
Plant and equipment, net     51,573                     51,573               51,573  
Deferred tax asset, net                   k           k      
Other assets, non-current     7,551           (7,311 ) j     240     (7,311 ) j     240  
Total assets   $ 144,307   $ 71,853   $ (20,886 )     $ 195,274   $ (19,311 )     $ 196,849  
Liabilities:                                              
Accounts payable   $ 13,086   $ 2,671     (1,025 ) h   $ 14,732     (1,025 ) h   $ 14,732  
Interest payable     371           (371 ) g         (371 ) g      
Other liabilities, current     4,858     33     (1,853 ) c     3,038     (1,853 ) c     3,038  
Debt, current     595,376     600     (595,376 ) g     600     (595,376 ) g     600  
Current liabilities     613,691     3,304     (598,625 )       18,370     (598,625 )       18370  
Deferred underwriting fees           7,280     (7,280 ) h         (7,280 ) h      
Other liabilities, non-current     18                     18               18  
Debt, non-current                 64,350   e           64,350   e        
                  80,000   g           80,000   g        
                  (7,311 ) j     137,039     (7,311 ) j     137,039  
Royalty agreement                 30,000   e     30,000     30,000   e     30,000  
Asset retirement obligation, non-current     4,467                     4,467               4,467  
Total liabilities     618,176     10,584     (438,866 )       189,894     (438,866 )       189,894  

 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

 

  2  

 

 

            No Redemption Scenario   Maximum Redemption Scenario  
    (a)
Seller
Subsidiaries
  (b)
MUDS
  Pro Forma
Adjustments
(No
Redemptions)
      Pro Forma
Combined
(No
Redemptions)
  Pro Forma
Adjustments
(Max
Redemptions)
      Pro Forma
Combined
(Max
Redemptions)
 
Stockholders’ (Deficit) Equity:                                  
Common stock subject to possible redemption           56,269     (56,269 ) d         (56,269 ) d      
Preferred stock                                        
Class A common stock               2   d           1   d        
                  3   g           3   g        
                    i     5     1   i     5  
Class B common stock           1     (1 ) d         (1 ) d      
Common stock     3           (3 ) c         (3 ) c      
Additional paid-in capital     5,184     3,302     (2,058 ) c           (2,058 ) c        
                  82,965   d           11,180   d        
                  4,250   e           4,250   e        
                  10,000   f           20,000   f        
                  321,914   g           321,914   g        
                  4,561   h           2,371   h        
                  3,214   i     433,332     64,999   i     431,141  
Retained earnings (accumulated deficit)     (479,056 )   1,697     61,133   g           61,133   g        
                  (189 ) c           (189 ) c        
                  (1,697 ) d           (1,697 ) d        
                  (9,845 ) h     (427,957 )   (6,080 ) h     (424,191 )
Total stockholders’ (deficit) equity     (473,869 )   61,269     417,980         5,380     419,555         6,9555  
Total liabilities and stockholders’ (deficit) equity   $ 144,307   $ 71,853   $ (20,886 )     $ 195,274   $ (19,311 )     $ 196,849  

 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

 

  3  

 

 

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2020
(UNAUDITED)
(in thousands, except share and per share amounts)

 

            No Redemption Scenario   Maximum Redemption Scenario  
    (a)
Seller
Subsidiaries
  (b)
MUDS
  Pro Forma
Adjustments
(No
Redemptions)
      Pro Forma
Combined
(No
Redemptions)
  Pro Forma
Adjustments
(Max
Redemptions)
      Pro Forma
Combined
(Max
Redemptions)
 
Revenues   $ 11,124                   $ 11,124             $ 11,124  
Cost of sales:                                              
Production costs     15,569           167   c     15,736     167   c     15,736  
Depreciation and amortization     1,334                     1,334               1,334  
Write-down of production inventories     6,965                     6,965               6,965  
Total cost of sales     23,868         167         24,035     167         24,035  
Operating expenses:                                              
Accretion     93                     93               93  
General and administrative     2,006     3,122     (3,385 ) d     1,743     (3,385 ) d     1,743  
Loss from operations     (14,843 )   (3,122 )   3,218         (14,747 )   3,218         (14,747 )
Other income (expense):                                              
Interest income     112     660     (660 ) e     112     (660 ) e     112  
Interest expense     (19,887 )         16,443   f     (3,444 )   16,443   f     (3,444 )
Loss before income taxes     (34,618 )   (2,462 )   19,001         (18,079 )   19,001         (18,079 )
Income tax         (128 )   128   g         128   g      
Net loss   $ (34,618 ) $ (2,590 ) $ 19,129       $ (18,079 ) $ 19,129       $ (18,079 )
Loss per share:                                              
Basic and diluted   $ (11.95 )                 $ (0.36 )           $ (0.36 )
Weighted average shares outstanding:                                              
Basic and diluted     2,897,568           47,109,341         50,006,909     47,160,119         50,057,687  

 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

 

  4  

 

 

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2019
(UNAUDITED)
(in thousands, except share and per share amounts)

 

            No Redemption Scenario   Maximum Redemption Scenario  
    (a)
Seller
Subsidiaries
  (b)
MUDS
  Pro Forma
Adjustments
(No
Redemptions)
      Pro Forma
Combined
(No
Redemptions)
  Pro Forma
Adjustments
(Max
Redemptions)
      Pro Forma
Combined
(Max
Redemptions)
 
Revenues   $ 13,709                   $ 13,709             $ 13,709  
Cost of sales:                                              
Production costs     11,041           206   c     11,247     206   c     11,247  
Depreciation and amortization     1,011                     1,011               1,011  
Write-down of production inventories     18,617                     18,617               18,617  
Total cost of sales     30,669         206         30,875     206         30,875  
Operating expenses:                                              
Project and development     7,708                     7,708               7,708  
Care and maintenance     3,529                     3,529               3,529  
Pre-production depreciation and amortization     1,067                     1,067               1,067  
Accretion     422                     422               422  
General and administrative     6,072     876     (1,582 ) d     5,366     (1,582 ) d     5,366  
Reduction in asset retirement obligation     (1,880 )                   (1,880 )             (1,880 )
Impairment of long-lived assets     63                     63               63  
Loss from operations     (33,941 )   (876 )   1,376         (33,441 )   1,376         (33,441 )
Other income (expense):                                              
Interest income     795     4,387     (4,387 ) e     795     (4,387 ) e     795  
Interest expense     (64,844 )         51,521   f     (13,323 )   51,521   f     (13,323 )
Loss before reorganization items, net and income taxes     (97,990 )   3,511     48,510         (45,969 )   48,510         (45,969 )
Reorganization items, net     (905 )                   (905 )             (905 )
Loss before income taxes     (98,895 )   3,511     48,510         (46,874 )   48,510         (46,874 )
Income tax         (900 )   900   g         900   g      
Net loss   $ (98,895 ) $ 2,611   $ 49,410       $ (46,874 ) $ 49,410       $ (46,874 )
Loss per share:                                              
Basic and diluted   $ (36.10 )                 $ (0.94 )           $ (0.94 )
Weighted average shares outstanding:                                              
Basic and diluted     2,739,505           47,272,555         50,012,060     47,318,182         50,057,687  

 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

 

  5  

 

 

NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1.   Basis of Presentation

 

Description of the Transactions

 

MUDS, a publicly traded blank check company, and Seller, a US-based, gold and silver producer operating the Hycroft mine located in the world-class mining region of Northern Nevada, have entered into a definitive purchase agreement, under which Seller will sell all of the equity interests of Seller’s subsidiaries to MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of MUDS (“Acquisition Sub”), and MUDS or Acquisition Sub will acquire substantially all of Seller’s other assets and discharge and pay or assume substantially all of Seller’s liabilities.

 

Pursuant to the terms of the business combination, Seller will have, after raising gross cash proceeds of $210.0 million, the minimum cash condition under the Purchase Agreement, at least $50.0 million of unrestricted and available cash on hand at closing. Cash and financing sources for the transaction include (a) a $110.0 million multi-tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (b) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Private Resource Lending II (Co.) Inc. (the “Sprott Royalty Agreement”), (c) consummation of a $25.0 million forward purchase of MUDS units and shares by sponsor, (d) Assumed New Subordinated Notes not to exceed $80.0 million, (e) the net cash remaining in MUDS’ trust account following any MUDS stockholder redemptions, (f) proceeds generated from the PIPE Investment, which are expected to be at least $10.0 million and (g) the exchange of the Excess Notes and the 1.5 Lien Notes into shares of MUDS Class A common stock and conversion of the Second Lien Notes into shares of Seller common stock immediately prior to the consummation of the business combination.

 

Seller’s post-transaction indebtedness will include amounts drawn from the Sprott Credit Agreement plus the Assumed New Subordinated Notes not to exceed $80.0 million. All other indebtedness of Seller will be repaid and retired, exchanged for shares of MUDS Class A common stock, converted into shares of Seller common stock or assumed by MUDS in the transaction.

 

Accounting for the Business Combination

 

The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Seller has been treated as the “acquirer”. This determination was primarily based on current stockholders of Seller having a relative majority of the voting power of the combined entity, the operations of Seller prior to the acquisition comprising the only ongoing operations of the combined entity, the fact that four of the seven director nominees to the HYMC board of directors are current directors of Seller (and such nominees are therefore expected to comprise a majority of the HYMC board of directors following the business combination), and senior management of Seller comprising the majority of the senior management of the combined entity. At any redemption level, including the maximum, the Seller’s common stockholders prior to the consummation of the business combination (and after issuance of additional shares of Seller common stock pursuant to the conversion of the Second Lien Notes) and the holders of the Excess Notes and 1.5 Lien Notes receiving shares of MUDS Class A common stock in exchange for their notes, will hold more than 50% at a minimum, and up to approximately 94% at a maximum, of the total shares of MUDS Class A common stock which will be issued and outstanding upon consummation of the business combination.

 

Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of Seller. The net assets of Seller will be stated at historical cost, with no goodwill or other intangible assets recorded.

 

  6  

 

 

Basis of Pro Forma Presentation

 

The historical financial information has been adjusted to give pro forma effect to the following events that are related and/or directly attributable to the business combination: (i) the exchange, (ii) the debt and warrant assumption, (iii) the 1.25 Lien Exchange, (iv) the conversion, (v) the PIPE Investment, (vi) the forward purchase, (vii) the underwriting commission issuance of MUDS Class A common stock and (viii) the lender issuance of MUDS Class A common stock, each of which are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combination, and the foregoing transactions attributable to the business combination listed above.

 

The unaudited pro forma condensed combined financial information is for illustrative purposes only and preliminary in nature. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. MUDS and Seller have not had any historical commercial relationship prior to the business combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

This information should be read together with MUDS’ and Seller’s financial statements and related notes, “Seller’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included in the Joint Proxy Statement/Prospectus incorporated by reference herein.

 

Redemption Scenarios

 

The unaudited pro forma condensed combined financial information has been prepared using two redemption scenarios, which give effect to the range of minimum and maximum redemptions that may occur in addition to the effects of other financing agreements and exchanges outlined in the Description of Business Combination section above.

 

a) No Redemption Scenario — The no redemption scenario assumes that, after giving effect to the stock redeemed by public stockholders in connection with the Extension Meeting, no additional shares of MUDS Class A common stock are redeemed, resulting in aggregate cash available for transaction consideration, before any costs and fees, of $71.8 million for the benefit of the continuing combined entity. At the Extension Meeting, 13,890,713 shares of MUDS Class A common stock (approximately 67%) were redeemed leaving a total of 6,909,287 shares of MUDS Class A common stock unredeemed as of March 31, 2020.

 

b) Maximum Redemption Scenario — The maximum redemption scenario assumes that 6,909,287 shares of MUDS Class A common stock are redeemed, resulting in an aggregate payment before any costs and fees, of $71.8 million as of March 31, 2020 out of the trust account to the holders of MUDS Class A common stock. In its unaudited condensed interim financial statements as of and for the three months ended March 31, 2020, to support its financial reporting presentation requirements for the Trust, the Sponsor has presented 1,338,072 shares of Class A Common Stock as issued and outstanding which is exclusive of the 5,571,215 shares of Class A Common Stock presented as subject to possible redemption in those same financial statements; however, the total of these two amounts, which equals 6,909,287 shares, is entirely subject to redemption.

 

The following table summarizes the estimated transaction consideration and costs and fees under each redemption scenario. The amounts reflected below are preliminary in nature and subject to future adjustment as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs. The preliminary amounts shown below are not indicative or representative of how such transactions may be reported in the future for financial reporting purposes upon the completion of all technical accounting analysis. See the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements for additional details and pro forma adjustments related to the below instruments and transactions.

 

  7  

 

 

Preliminary Estimated Consideration   (a)
No
Redemptions
    (b)
Maximum
Redemptions
 
Cash:                
Investments held in Trust account(1)   $ 71,786     $  
Sprott Credit Agreement(2)     68,600       68,600  
Royalty Agreement(3)     30,000       30,000  
Sponsor forward purchase (MUDS units and shares)(4)     25,000       25,000  
Proceeds from PIPE Investment (MUDS stock)(5)     10,000       20,000  
Backstop Agreement (MUDS stock and warrants)(6)     3,214       65,000  
Class A common stock:                
MUDS stock issued to holders of Seller’s 1.25 and 1.5 Lien Notes(7)     182,001       182,001  
MUDS stock issued to former holders of Seller’s Second Lien Notes(8)(9)     139,873       139,873  
MUDS stock issued to Seller’s common stockholders(8)(9)     3,126       3,126  
Assumed debt:                
New Subordinated Notes(10)     80,000       80,000  
Estimated Consideration, Gross     613,600       613,600  
Transaction fees and costs:                
Management incentive compensation(11)     (7,339 )     (5,764 )
Deferred underwriting fees(12)     (7,061 )     (4,871 )
Investment banking advisory services(13)     (3,750 )     (3,750 )
Estimated Fees and Costs     (18,150 )     (14,385 )
Estimated Consideration, Net   $ 595,450     $ 599,215  

 

 

  (1) Represents estimated remaining gross proceeds from investments held in Trust account, using the March 31, 2020 trust balance.

 

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  (2) Represents the gross proceeds expected to be advanced under the Sprott Credit Agreement on the closing date after giving effect to the 2% issuance discount of $1.4 million.
  (3) Proceeds from the Sprott Royalty Agreement.
  (4) Gross proceeds from the forward purchase of MUDS’ units and shares by sponsor at $10.00 per unit.
  (5) Estimated gross proceeds from shares of MUDS Class A common stock purchased at $10.00 per share through the PIPE Investment (excluding the proceeds from the Subscription/Backstop Agreements but including incremental equity investment).
  (6) Estimated gross proceeds from shares of MUDS Class A common stock issued at $10.00 per share under the Subscription/Backstop Agreements; the counterparties to the Subscription/Backstop Agreements are investment funds affiliated with Seller and will receive 0.5 warrants per share (3.25 million warrants) regardless of whether or not such parties are required to purchase any shares pursuant to the Subscription/Backstop Agreements.
  (7) Represents the estimated value of shares of MUDS Class A common stock issued at $10.00 per share to former holders of Seller’s 1.25 Lien and 1.5 Lien Notes to satisfy any remaining and unpaid balance following any cash repayments of the such notes (based on the cash available for such repayments, if any).
  (8) Represents the estimated value of shares of MUDS Class A common stock distributed, on a pro rata basis, to holders of Seller common stock, including the former holders of the Second Lien Notes, at $10.00 per share following the conversion of the Second Lien Notes into shares of Seller common stock.
  (9) Does not reflect distribution of Surrendered Shares to holders of Seller common stock, including the former holders of the Second Lien Notes, as Surrendered Shares, while received by Seller as consideration in transaction for distribution to holders of Seller common stock, including the former holders of the Second Lien Notes, are an allocation of MUDS Class A common shares and do not result in specific or additional transaction consideration requiring pro forma adjustment in these unaudited pro forma condensed combined financial statements.
  (10) Represents the New Subordinated Notes (not to exceed $80.0 million) issued in exchange for the 1.25 Lien Notes.
  (11) Represents cash payments for management incentive bonuses pursuant to Seller’s Retention Bonus Plan.
  (12) Represents amounts due to MUDS’ underwriter which were deferred until the completion of a business combination. The fees will be paid with (a) $2.5 million cash, (b) $2.0 million of MUDS’ Class A common stock, and (c) $2.78 million of MUDS Class A common stock to be paid dependent on the level of redemptions and PIPE investment proceeds and a sliding scale using a price of $10.00 per share and a $75.0 million threshold.
  (13) Represents amounts due for investment banking advisory services to Seller.

 

  9  

 

 

Note 2. Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2020

 

The unaudited pro forma condensed combined balance sheet as of March 31, 2020 reflects the following adjustments:

 

  (a) Represents the historical unaudited balance sheet of Hycroft Mining Corporation, Seller, as of March 31, 2020. For financial reporting purposes under US GAAP, Seller is the acquirer.

 

  (b) Represents the historical unaudited balance sheet of MUDS, as of March 31, 2020. For financial reporting purposes under US GAAP, MUDS is the acquiree.

 

  (c) Represents adjustments to the Seller’s balances for certain assets and liabilities that will either remain with Seller or be settled as part of the transaction, including, (1) $2.25 million of cash (post reclassification of $2.9 million of restricted cash to available cash) to be retained by Seller, (2) $1.8 million of cash paid at closing of the business combination to settle the deferred phantom unit liability, and (3) related stockholders’ equity adjustments based on the $3.1 million of value for 312,595 shares of MUDS Class A common stock, at $10.00 per share, representing the portion of the 32,500,000 shares of MUDS Class A common stock issued by MUDS that is distributed to the existing owners of Seller’s common stock. Based on the terms of the business combination and allocation hierarchy of transaction consideration, the value of the 312,595 shares of MUDS Class A common stock received by Seller’s stockholders is lower than Seller’s March 31, 2020 paid-in capital balance of $5.2 million, less the $2.25 million of cash retained by Seller, by approximately $0.1 million.

 

The allocation of the 32,500,000 shares of MUDS Class A common stock issued by MUDS is determined using the balances of Seller’s paid-in capital and the Excess Notes, the 1.5 Lien Notes and the Second Lien Notes (collectively referred to as the “Seller Stockholder Funded Debt”, which, based on the terms of the business combination and allocation hierarchy of transaction consideration results in the Excess Notes and 1.5 Lien Notes (at 110% of face value) being satisfied in full, after which the remaining consideration is distributed on a pro rata basis to Seller’s common stockholders, which includes the former holders of the Second Lien Notes. Accordingly, as the balances of the Seller Stockholder Funded Debt has increased after March 31, 2020 for additional 1.25 Lien Note issuances, which increases the balance of the Excess Notes, and for payment-in-kind interest added to the Seller Stockholder Funded Debt balances, the future/actual allocation of the 32,500,000 shares of MUDS Class A common stock at the transaction closing date will not match the presentation of such herein or included elsewhere in this joint proxy statement/prospectus as a higher number of shares will be allocated to the holders of the Excess Notes and 1.50 Lien Notes with corresponding decreases to the number of shares of MUDS Class A common stock distributed on a pro rata basis to Seller’s common stockholders, which includes the former holders of the Second Lien Notes. The following table provides a summary of the pro forma adjustments related to the $325.0 million (representing 32,500,000 shares of MUDS Class A common stock) of consideration paid to Seller and distributed to Seller’s stockholders, including the former Second Lien Noteholders, using Seller’s March 31, 2020 recorded balances:

 

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          Pro Forma Adjustments              
    Seller
Subsidiaries
    Issuance of New
Subordinated
Note
    1.5 Lien Notes
Exchanged
at 110%
    Cash
Retained by
Seller
    Pro Rata
Adjustments
    Total Pro
Forma
Adjustments
    Pro Forma
Combined(1)
 
Additional paid-in capital   $ 5,184                     $ (2,250 )   $ 192     $ (2,058 )   $ 3,126  
Debt, current:                                                        
1.25 Lien Notes     105,593       (80,000 )                             (80,000 )     25,593  
1.5 Lien Notes     142,189               14,219                       14,219       156,408  
Second Lien Notes     216,227                               (76,354 )     (76,354 )     139,873  
    $ 469,193     $ (80,000 )   $ 14,219     $ (2,250 )   $ (76,162 )   $ (144,193 )   $ 325,000  

 

  (1) $325.0 million of consideration issued by MUDS is allocated among the exchange of Seller’s existing Excess Notes and conversion of Second Lien Notes balances into shares of Seller common stock and the exchange of the 1.5 Lien Notes for shares of MUDS Class A common stock. See Note 5. Pro Forma Loss Per Share to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (d) Under both the no redemption and maximum redemption scenarios, a $1.7 million adjustment is made to remove the retained earnings balance of MUDS.

 

No Redemption — Represents (1) the reclassification of $71.8 million (representing 6,909,287 shares of MUDS Class A common stock) of investments held in Trust account to cash available for the benefit of the continuing combined entity, (2) $25.0 million of proceeds received pursuant to the Sponsor’s forward purchase agreement for 2,500,000 MUDS units and 625,000 of shares of MUDS Class A common stock, and (3) related stockholders’ equity adjustments to (i) reclassify 5,571,215 shares of MUDS Class A common stock subject to redemption to HYMC Class A common stock and additional paid-in capital, (ii) record the units and shares of MUDS Class A common stock purchased by the Sponsor under the forward purchase, and (iii) record the conversion and reclassification of 5,200,000 shares of MUDS Class B common stock into shares of MUDS Class A common stock, of which 1,941,667 are surrendered to Seller for pro rata distribution to Seller’s stockholders, which includes the former Second Lien Noteholders following conversion of the Second Lien Notes into Seller common stock. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

Maximum Redemption — Represents (1) the distribution of $71.8 million (representing 6,909,287 shares of MUDS Class A common stock) of investments held in Trust account to common stockholders of MUDS to disburse the funds for redemptions, (2) $25.0 million of proceeds received pursuant to the Sponsor’s forward purchase agreement for 2,500,000 MUDS units and 625,000 of shares of MUDS Class A common stock, and (3) related stockholders’ equity adjustments to (i) record the distribution of MUDS Class A common stock subject to redemption, (ii) record the units and shares of MUDS Class A common stock purchased by the Sponsor under the forward purchase agreement and (iii) record the conversion and reclassification of 5,200,000 shares of MUDS Class B common stock into shares of MUDS Class A common stock, of which 3,584,616 are surrendered to Seller for pro rata distribution to Seller’s stockholders, which includes the former Second Lien Noteholders following conversion of the Second Lien Notes into Seller common stock. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (e) Represents the $98.6 million of proceeds from transactions with the Sprott entities, which include (1) $68.6 million of net proceeds received from the Sprott Credit Agreement ($70.0 million gross reduced for a 2% issuance discount), of which $4.3 million was recorded to additional paid-in capital for the partner alignment shares (495,118 shares of MUDS Class A common stock under the No Redemption scenario and 495,621 shares of MUDS Class A common stock under the Maximum Redemption scenario), and (2) $30.0 million of proceeds received from the Sprott Royalty Agreement arranged by Sprott Resource Lending Corp. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (f) No Redemption — Represents $10.0 million of proceeds received from the 1,000,000 shares of MUDS’ stock sold to investors in the PIPE Investment at $10.00 per share. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

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Maximum Redemption — Represents $20.0 million of proceeds received from the 2,000,000 shares of MUDS Class A common stock sold to investors in the PIPE Investment (excluding the proceeds from the Subscription/Backstop Agreements but including the incremental equity investment) at $10.00 per share to satisfy the minimum cash requirement of $210.0 million of gross cash raised in the transactions. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (g) Represents the repayment, exchange, or conversion of Seller’s existing debt and interest balances.

 

Under both the no redemption and maximum redemption scenarios (1) the $125.5 million First Lien Credit Agreement, $6.9 million Jacobs Note, and $0.4 million of interest payable are repaid with cash, (2) $80.0 million of outstanding 1.25 Lien Notes are exchanged for Assumed New Subordinated Notes and $25.6 million of outstanding 1.25L Notes are exchanged for 2,559,300 shares of MUDS Class A common stock, (3) the 1.5 Lien Notes are entitled to receive an amount equal to 110% of the principal balance, which was $14.2 million more than the $142.2 million recorded balance as of March 31, 2020, and are repaid with 15,640,790 shares of MUDS Class A common stock, and (4) the Second Lien Notes are converted into shares of Seller common stock and then 14,299,910 shares of MUDS Class A common stock is distributed pro rata to all holders of Seller common stock (including former holders of Seller common stock following the conversion of the Second Lien Notes which represents 13,987,315 shares of MUDS Class A common stock distributed on a pro rata basis) and the Second Lien Notes will realize a $76.4 million adjustment below the March 31, 2020 recorded balance of $216.2 million based on the terms of the business combination and allocation hierarchy of transaction consideration. See “2(c)” above for additional detail on the methodology and adjustments to the Seller’s 1.25 Lien Notes, 1.5 Lien Notes and 2.0 Lien Notes balances.

 

    Seller
Subsidiaries
Balance
    Adjustments     Cash
Repayments
    Issuance of
New Subord.
Notes
    Equity
Conversions /
Exchanges
    Pro Forma
Combined
 
Debt, current                                                
First Lien Agreement   $ 125,468             $ (125,468 )                   $  
1.25 Lien Notes     105,593                       (80,000 )     (25,593 )      
1.5 Lien Notes     142,189       14,219                     (156,408 )      
Second Lien Notes     216,227       (76,354 )                     (139,873 )        
Jacobs Note     6,858               (6,858 )                      
Less, debt issuance costs     (959 )     959                                
    $ 595,376                                     $  
Interest payable                                                
First Lien Agreement   $ 371               (371 )                   $  
            $ (61,176 )   $ (132,697 )   $ (80,000 )   $ (321,874 )        

 

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See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (h) No Redemption — Represents the payments of underwriting fees and transaction costs, including (1) $13.6 million of cash for (i) a $7.3 million management incentive plan payment, (ii) $2.5 million paid for deferred underwriting fees, and (iii) $3.8 million for investment banking advisory services for Seller and (2) $4.6 million for 456,104 shares of MUDS Class A common stock issued for deferred underwriting fees. As of March 31, 2020, $1.0 million was accrued in accounts payable for the investment banking advisory services for Seller and $7.3 million was accrued as deferred underwriting fees.

 

Maximum Redemption — Represents the same pro forma adjustments as the no redemption scenario except that (1) cash underwriting fees and transaction costs total $12.0 million, which includes (i) a $5.8 million management incentive plan payment, (ii) $2.5 million paid for deferred underwriting fees, and (iii) $3.8 million for investment banking advisory services for Seller, and (2) only $2.4 million, representing 237,067 shares of MUDS Class A common stock, are issued for deferred underwriting fees.

 

See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (i) No Redemption — Represents $3.2 million (representing 321,400 shares of MUDS Class A common stock) of cash proceeds received pursuant to the Subscription/Backstop Agreements, to satisfy the minimum cash requirement of $210.0 million of gross cash raised in the transactions, and related stockholders’ equity adjustments. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

Maximum Redemption — Represents $65.0 million (representing 6,500,000 shares of MUDS Class A common stock) of cash proceeds received pursuant to the Subscription/Backstop Agreements and related stockholders’ equity adjustments. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

 

  (j) Represents the reclassification of Seller’s deferred future financing costs related to the debt financing to debt, resulting in $7.3 million of such deferred costs presented as a contra-liability.

 

  (k) The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Seller has been treated as the “acquirer.” For tax purposes, MUDS will be treated as the acquirer and is expected to establish a new tax basis in the purchased assets which may result in the recognition of a net deferred tax asset; however, these pro forma adjustments do not include any adjustments for increases in deferred tax assets as it uncertain as to the ultimate realization of any future tax benefits.

 

Note 3. Adjustments to the Unaudited Pro Forma Condensed Statement of Operations for the Three Months Ended March 31, 2020

 

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 reflects the following adjustments:

 

  (a) Represents the historical unaudited statement of operations of Seller for the three months ended March 31, 2020. For financial reporting purposes under GAAP, Seller is the acquirer.

 

  (b) Represents the historical unaudited statement of operations of MUDS for the three months ended March 31, 2020. For financial reporting purposes under GAAP, MUDS is the acquiree.

 

  13  

 

 

  (c) Represents the effect of the Sprott Royalty Agreement cost, calculated as a percentage of revenue.

 

  (d) Represents adjustments of (1) $3.1 million for MUDS’ general and administrative costs and (2) $0.3 million of deferred phantom unit costs of Seller, both of which are not expected to have a continuing impact on the combined company.

 

  (e) Represents an adjustment of $0.7 million for interest income from investments held in the Trust account as such funds would be used as transaction consideration or classified as available cash in the combined company.

 

  (f) Represents adjustments to interest expense to (1) remove effects of Seller’s obligations, which will not have a continuing effect on the combined company, and (2) add the effects of the obligations of the combined company, namely (i) $70.0 million expected to be advanced under the Sprott Credit Agreement on the closing date of the business combination and (ii) $80.0 million of Assumed New Subordinated Notes in exchange for the 1.25 Lien Notes. The pro forma adjustments do not include the effects of any issuance discounts which may be calculated in the future as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs.

 

    Seller
Subsidiaries
Balance
    Pro Forma
Adjustments
    Pro Forma
Combined
 
First Lien Agreement   $ 2,867     $ (2,867 )   $  
1.25 Lien Notes     3,352       (3,352 )      
1.5 Lien Notes     5,139       (5,139 )      
Second Lien Notes     7,816       (7,816 )      
Jacobs Note     85       (85 )      
Amortization of debt issuance costs     672       (672 )      
Less: capitalized interest     (44 )             (44 )
Assumed New Subordinated Notes             2,000       2,000  
Sprott Credit Agreement             1,488       1,488  
    $ 19,887     $ (16,443 )   $ 3,444  

 

  (g) Represents adjustments to reverse income tax expense recorded by MUDS as the combined company has a loss before income taxes.

 

Note 4. Adjustments to the Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 2019

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 reflects the following adjustments:

 

  14  

 

 

  (a) Represents the historical audited statement of operations of Seller for the year ended December 31, 2019. For financial reporting purposes under GAAP, Seller is the acquirer.

 

  (b) Represents the historical audited statement of operations of MUDS for the year ended December 31, 2019. For financial reporting purposes under GAAP, MUDS is the acquiree.

 

  (c) Represents the effect of the Sprott Royalty Agreement cost, calculated as a percentage of revenue.

 

  (d) Represents adjustments of (1) $0.9 million for MUDS’ general and administrative costs and (2) $0.7 million of deferred phantom unit costs of Seller, both of which are not expected to have a continuing impact on the combined company.

 

  (e) Represents an adjustment of $4.4 million for interest income from investments held in the Trust account as such funds would be used as transaction consideration or classified as available cash in the combined company.

 

  (f) Represents adjustments to interest expense to (1) remove effects of Seller’s obligations, which will not have a continuing effect on the combined company, and (2) add the effects of the obligations of the combined company, namely (i) $70.0 million expected to be advanced under the Sprott Credit Agreement on the closing date of the business combination and (ii) $77.2 million of Assumed New Subordinated Notes in exchange for the 1.25 Lien Notes. The pro forma adjustments do not include the effects of any issuance discounts which may be calculated in the future as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs.

 

    Seller
Subsidiaries
Balance
    Pro Forma
Adjustments
    Pro Forma
Combined
 
First Lien Agreement   $ 10,022     $ (10,022 )   $  
1.25 Lien Notes     5,241       (5,241 )      
1.5 Lien Notes     18,763       (18,763 )      
Second Lien Notes     28,537       (28,537 )      
Jacobs Note     785       (785 )      
Amortization of debt issuance costs     2,047       (2,047 )      
Less: capitalized interest     (551 )             (551 )
Assumed New Subordinated Notes             7,721       7,721  
Sprott Credit Agreement             6,153       6,153  
    $ 64,844     $ (51,521 )   $ 13,323  

 

  (g) Represents adjustments to reverse income tax expense recorded by MUDS as the combined company has a loss before income taxes.

 

  15  

 

 

Note 5. Pro Forma Loss Per Share

 

The tables below summarize the estimated pro forma shares of HYMC Class A common stock issued and outstanding as a result of the transactions using March 31, 2020 recorded balances and the no redemption and maximum redemptions scenarios and assumptions described in Note 1. Basis of Presentation to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements. Since the balances of the Seller Stockholder Funded Debt have increased after March 31, 2020 for additional issuance of 1.25 Lien Notes and for payment-in-kind interest added to the Seller Stockholder Funded Debt balances, the future/actual allocation of 32,500,000 shares of MUDS Class A common stock at the transaction closing date between the Seller Stockholder Funded Debt holders and Seller’s common stockholders (including holders of Seller common stock following the conversion of the Second Lien Notes) will not match the presentation of such herein or included elsewhere in this joint proxy statement/prospectus as a higher number of shares will be allocated to the holders of the Excess Notes and 1.50 Lien Notes with corresponding decreases to the number of shares allocated to Seller’s common stockholders (including holders of Seller common stock following the conversion of the Second Lien Notes).

 

                Pro Forma Adjustments — No Redemption Scenario        
Description   Seller
Subsidiaries
    Mudrick
Capital
Acquisition
Corporation
    See
Note 2(c)
for further
detail
    See
Note 2(d)
for further
detail
    See
Note 2(e)
for further
detail
    See
Note 2(f)
for further
detail
    See
Note 2(g)
for further
detail
    See
Note 2(h)
for further
detail
    See
Note 2(i)
for further
detail
    Pro Forma
Combined
(No
Redemptions)
 
Seller’s common stockholders     2,897,568               (2,584,973 )                                                     312,595  
MUDS’ stockholders:                                                                                
Common Stock subject to redemption             5,571,215               (5,571,215 )                                              
Class A Common Stock:                                                                                
Existing stockholders             1,338,072               5,571,215                                               6,909,287  
Sponsor forward purchase                             3,125,000                                               3,125,000  
Shares retained by Sponsor from Class B conversions                             3,258,333                                               3,258,333  
Surrendered Shares to Seller’s stockholders and Second Lien Noteholders                             1,941,667                                               1,941,667  
Class B Common Stock             5,200,000               (5,200,000 )                                              
PIPE Investment                                             1,000,000                               1,000,000  
Exchange and conversions of Seller’s debt:                                                                                
1.25 Lien Notes                                                     2,559,300                       2,559,300  
1.5 Lien Notes                                                     15,640,790                       15,640,790  
Former holders of Second Lien Notes                                                     13,987,315                       13,987,315  
Deferred underwriting fees (Cantor)                                                             456,104               456,104  
Sprott Credit Agreement                                     495,118                                       495,118  
Backstop Agreement with Initial Subscribers                                                                     321,400       321,400  
      2,897,568       12,109,287       (2,584,973 )     3,125,000       495,118       1,000,000       32,187,405       456,104       321,400       50,006,909  

 

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                Pro Forma Adjustments — Maximum Redemption Scenario        
Description   Seller
Subsidiaries
    Mudrick
Capital
Acquisition
Corporation
    See
Note 2(c) 
for further
detail
    See
Note 2(d) 
for further
detail
    See
Note 2(e) 
for further
detail
    See
Note 2(f) 
for further
detail
    See
Note 2(g) 
for further
detail
    See
Note 2(h) 
for further
detail
    See
Note 2(i) 
for further
detail
    Pro Forma
Combined
(Max
Redemptions)
 
Seller’s common stockholders     2,897,568               (2,584,973 )                                                     312,595  
MUDS’ stockholders:                                                                                
Common Stock subject to redemption             5,571,215               (5,571,215 )                                              
Class A Common Stock:                                                                                
Existing stockholders             1,338,072               (1,338,072 )                                              
Sponsor forward purchase                             3,125,000                                               3,125,000  
Shares retained by Sponsor from Class B conversions                             1,615,384                                               1,615,384  
Surrendered Shares to Seller’s stockholders and Second Lien Noteholders                             3,584,616                                               3,584,616  
Class B Common Stock             5,200,000               (5,200,000 )                                              
PIPE Investment                                             2,000,000                               2,000,000  
Exchange and conversions of Seller’s debt:                                                                                
1.25 Lien Notes                                                     2,559,300                       2,559,300  
1.5 Lien Notes                                                     15,640,790                       15,640,790  
Former holders of Second Lien Notes                                                     13,987,315                       13,987,315  
Deferred underwriting fees (Cantor)                                                             237,067               237,067  
Sprott Credit Agreement                                     495,621                                       495,621  
Backstop Agreement with Initial Subscribers                                                                     6,500,000       6,500,000  
      2,897,568       12,109,287       (2,584,973 )     (3,784,287 )     495,621       2,000,000       32,187,405       237,067       6,500,000       50,057,687  

 

  17  

 

 

The table below summarizes the estimated pro forma loss per share as a result of the transactions had such transactions occurred on January 1, 2019. After the transaction, there will be (1) 34.3 million warrants to purchase shares of MUDS common stock outstanding at an exercise price of $11.50 per share and (2) an additional number of warrants to purchase shares of MUDS common stock pursuant to the assumption of the outstanding Seller warrants, the quantity and exercise price of which will be determined pursuant to the terms of the Seller Warrant Agreement to be assumed by MUDS upon consummation of the business combination; however, since all warrant instruments would be anti-dilutive, they were excluded from the below calculations.

 

    Three Months Ended March 31, 2020     Year ended December 31, 2019  
    No
Redemptions
    Max
Redemptions
    No
Redemptions
    Max
Redemptions
 
Net loss   $ (18,079 )   $ (18,079 )   $ (46,874 )   $ (46,874 )
Basic and diluted shares outstanding     50,006,909       50,057,687       50,012,060       50,057,687  
Basic and diluted loss per share   $ (0.36 )   $ (0.36 )   $ (0.94 )   $ (0.94 )

 

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