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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): March 11, 2022

 

HYCROFT MINING HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware
--------------
001-38387
----------
82-2657796
------------------

(State or Other Jurisdiction of
Incorporation or Organization)

(Commission
File Number)
(IRS Employer
Identification No.)

 

4300 Water Canyon Road, Unit 1
Winnemucca, Nevada
89445
----------------------------------------- ----------
(Address of Principal Executive Offices)   (Zip Code)

 

(775) 304-0260

-------------------------

(Registrant’s Telephone Number, Including Area Code)

 

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
         
Warrants to purchase Common Stock   HYMCZ   The Nasdaq Capital Market
         
Warrants to purchase Common Stock   HYMCL   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.  ¨

 

 

 

 

 

 

Item 1.01Entry into a Material Definitive Agreement.

 

Agreement with Sprott Private Resource Lending II (Collector), LP

 

On March 11, 2022, Hycroft Mining Holding Corporation (the “Company” or “Hycroft”) entered into an agreement (the “Sprott Agreement”) with Sprott Private Resource Lending II (Collector), (the “Lender”) with respect to the Amended and Restated Credit Agreement, dated as of May 29, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among the Company, the Lender, the Guarantors (as defined in the Credit Agreement) and the other parties thereto. As described in the Sprott Agreement, the Company is contemplating the sale or issuance of its equity securities pursuant to one or more transactions to be completed on or before March 31, 2022 (the “Equity Financing Transactions”). Pursuant to the Sprott Agreement, if the Equity Financing Transactions result (or are likely to result pursuant to definitive subscription underwriting and/or similar legally binding agreements) in the Company’s receipt of total gross cash proceeds (before deduction of fees and expenses) of at least $50 million on or before March 31, 2022 (the “Required Equity Amount”), the Lender and the Company will amend the principal repayment terms under the Credit Agreement such that no further scheduled payments of principal shall be required prior to May 31, 2025 (the “Maturity Date”) (i.e., there will be no required regular amortization payments of the Facility (as defined in the Credit Agreement) and the full principal balance of the Facility shall be due and payable in a single “bullet” payment on the Maturity Date). Closing of the Offering as described under “Private Placement” below will satisfy this condition.

 

The Sprott Agreement also provides that, in connection with the modification of the required Facility amortization payments, the Company shall pay to the Lender an amount equal to USD $3.3 million, with such payment to be capitalized and added to the principal amount owing under the Credit Agreement and accrue interest at the same rate and upon the same terms as the existing loans under the Credit Agreement; provided, the payment or prepayment of such capitalized principal amount shall not be subject to the Prepayment Premium (as defined in the Credit Agreement) or any other penalty or premium.

 

The foregoing description of the Sprott Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Sprott Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 hereto.

 

The Lender also entered into an agreement in principle with the Company to restructure the Credit Agreement. See discussion below under Item 8.01- Other Events “Agreement in Principle with Lender.

 

Amendment to the 10% Senior Secured Notes and Note Exchange Agreement

 

On March 14, 2022, the Company entered into the Amendment to the 10% Senior Secured Notes and Note Exchange Agreement (the “Note Amendment”), with (i) certain direct and indirect subsidiaries of the Company as Guarantors; (ii) holders of the Notes, including certain funds affiliated with, or managed by, Mudrick Capital Management, L.P, Whitebox Advisors, LLC, Highbridge Capital Management, LLC, Aristeia Highbridge Capital Management, LLC and Wolverine Asset Management, LLC (collectively, the “Amending Holders”), and (iii) Wilmington Trust, National Association, in its capacity as collateral agent. The Note Amendment amends the Note Exchange Agreement dated as of January 13, 2020 (the “Note Exchange Agreement”) and the Notes (as defined in the Note Exchange Agreement) issued thereunder in order to extend the maturity date of the Notes from December 1, 2025 to December 1, 2027. The Note Amendment also removes the requirements that a holder receive the consent of the Company and the other holders in order to transfer any Note. The Amending Holders constitute all of the holders of the Notes. The Note Amendment shall not be effective until the consummation of one or more transactions for the sale or issuance of equity interests of the Company pursuant to which the Company receives total gross cash proceeds (before deduction of fees and expenses) of at least $50 million on or before March 31, 2022. Closing of the Offering as described under “Private Placement” below will satisfy this condition.

 

The foregoing description of the Note Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Note Amendment, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.2 hereto.

 

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Private Placement

 

On March 14, 2022,  the Company entered into subscription agreements (the “Subscription Agreements” and each a “Subscription Agreement”) with each of American Multi-Cinema, Inc. (“AMC”) and 2176423 Ontario Limited, an entity affiliated with Eric Sprott (“Sprott” and together with AMC, the “Purchasers”), pursuant to which the Company agreed to sell to the Purchasers, in a private placement, an aggregate of 46,816,480 units (“Units”) at a purchase price per Unit of $1.193, with each Unit consisting of one share of the Company’s Class A common stock, par value $0.0001 per share (“Common Stock”) and one warrant to purchase a share of Common Stock and the shares issuable upon exercise of the Warrants (the “Warrant Shares”), providing for a total purchase price of approximately $56 million (the “Offering”). The Warrants have an exercise price of $1.068 per Warrant Share, and will expire five years after issuance.

 

The closing of the sales of securities pursuant to the Subscription Agreements is expected to occur on March 15, 2022, subject to the closing conditions described therein, including, but not limited to (a) both Purchasers entering into their respective Subscription Agreements and (b) the Company entering into the Sprott Agreement and the Note Amendment. The Company expects the gross proceeds to the Company from the Offering to be approximately $56 million before deducting expenses incurred in connection with the Offering.

 

The Subscription Agreement with AMC also provided AMC with the right to appoint a director to the Company’s board of directors (the “Board”) and the Company agreed to support such director’s nomination so long as AMC retains at least 50% of the Common Stock purchased under the Subscription Agreement with AMC.

 

As part of the Subscription Agreements, the Company is required to prepare and file a resale registration statement with the Securities and Exchange Commission (the “SEC”) as soon as practicable, but in no event later than ten (10) business days after the filing of the Company’s Annual Report on Form 10-K for year ended December 31, 2021 to register the Common Stock, Warrants and Warrant Shares for sale under the Securities Act.

 

The foregoing descriptions of the Subscription Agreements and the Warrants do not purport to be complete and are subject to, and qualified in their entirety by reference to, the full text of the Subscription Agreements and the Warrant Agreements, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.3, 10.4, 10.5 and 10.6 hereto respectively.

 

Item 3.02Unregistered Sales of Equity Securities.

 

The information contained above in Item 1.01 related to the Offering is hereby incorporated by reference into this Item 3.02. The securities being sold pursuant to the Subscription Agreements are being sold and issued without registration under the Securities Act, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as a transaction not involving a public offering and/or Rule 506 promulgated thereunder, and in reliance on similar exemptions under applicable state laws.

 

Item 7.01Regulation FD Disclosure.

 

On March 14, 2022, the Company issued a press release with respect to the Offering. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.

 

In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 7.01 and in the press release is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

3

 

 

Item 8.01Other Events.

 

Agreement in Principle with Lender

 

On March 14, 2022, the Company reached an agreement in principle with the Lender with respect to the Credit Agreement to modify the terms of the Credit Agreement and other applicable loan documents as follows: (a) to extend the maturity date for all of the loans and other principal obligations under the Credit Agreement by two years, to May 31, 2027; (b) the Company will prepay principal under the facility in the amount of $10,000,000 promptly upon the Company’s receipt of cash proceeds from the Private Placement with AMC and Sprott (the “Initial Equity Proceeds Prepayment”); (c) the Company will also prepay principal under the Credit Agreement in the amount of 10% of any subsequent issuance of its equity interests consummated on or prior to March 31, 2022 (if any), subject to a cap of $20,000,000, in aggregate, of principal repaid (the “Subsequent Equity Proceeds Prepayments”): (d) the Lender will waive all prepayment premiums with respect to the Initial Equity Proceeds Prepayment and the Subsequent Equity Proceeds Prepayments and a prepayment premium will be eliminated for all future prepayments of principal; (e) the Company’s obligation to prepay principal with proceeds of asset sales will be credited/offset by the aggregate amount of Initial Equity Proceeds Prepayment and the Subsequent Equity Proceeds Prepayments up to $30,000,000; and (f) the Company’s obligation to maintain a minimum amount of Unrestricted Cash (as defined in the Credit Agreement) will be increased to $15,000,000. The foregoing is expected to be documented pursuant to an amendment to the Credit Agreement.

 

Proposed Amendment to the Company’s Second Amended and Restated Certificate of Incorporation

 

On March 11, 2022, the Board approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation increasing the number of authorized shares of the Company’s Class A common stock by 1,000,000,000 to a total of 1,400,000,000 (the “Certificate of Incorporation Amendment”) and directed that the Certificate of Incorporation Amendment be submitted for consideration by the stockholders of the Corporation. The Company expects that AMC, Sprott, and Mudrick Distressed Opportunity Fund Global LP and its affiliate, Blackwell Partners LLC – Series A, who together will constitute the holders of a majority of the Common Stock, will approve the Certificate of Incorporation Amendment by written consent. The Certificate of Incorporation Amendment will not become effective until 20 days after the Company distributes an Information Statement on Schedule 14C to the stockholders of the Company.

 

Business Update

 

In February 2022, the Company, along with its third-party consultants, completed and filed an Initial Assessment Technical Report Summary for the Hycroft Mine with an effective date of February 18, 2022 (the “2022 Hycroft TRS”) and prepared in accordance with the Modernization of Property Disclosures for Mining Registrants (the “Modernization Rules”) set forth in subpart 1300 of Regulation S-K, as promulgated by the United States Securities and Exchange Commission (“SEC”). The 2022 Hycroft TRS provides an Initial Assessment of the mineral resource estimate utilizing a milling and acid pressure oxidation (“Acid POX”) process for sulfide mineralization and heap leaching process for oxide and transition mineralization. As a result of the milling and Acid POX process presented in the 2022 Hycroft TRS, as compared to the novel two-step oxidation and heap leap process in the Hycroft Technical Report Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization Rules, with an effective date of July 31, 2019 (the “2019 Hycroft TRS”), and the associated fundamental changes to the assumptions underlying the 2019 Hycroft TRS, the 2022 Hycroft TRS supersedes and replaces the 2019 Hycroft TRS and the 2019 Hycroft TRS and information from such 2019 Hycroft TRS should no longer be relied upon. In addition, please see the sections entitled “Cautionary Note to U.S. Investors Regarding Mineral Resources”, “Cautionary Note Regarding Forward-Looking Statements”, and “Risk Factors” each set forth below when reviewing the information set forth in this Section 8.01.

 

Upon furnishing the 2022 Hycroft TRS, the Hycroft Mine had measured and indicated mineral resources of 9.6 million ounces of gold and 446.0 million ounces of silver and inferred mineral resources of 5.0 million ounces of gold and 150.4 million ounces of silver, which are contained in oxide, transitional, and sulfide ores. Hycroft does not have comparable mineral reserves and mineral resources to provide for the prior year or periods due to changes in its intended mining process and the fact that such information would have been under the 2019 Hycroft TRS that has been superseded and replaced by the 2022 Hycroft TRS. As a result, any meaningful comparison of year end mineral resources and reserves is not possible.

 

Overview and Highlights

 

The information that follows relating to the Hycroft Mine is derived, for the most part, from, and in some instances is an extract from, the 2022 Hycroft TRS. Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the 2022 Hycroft TRS, as previously filed with the SEC on February 22, 2022 on a Current Report on Form 8-K.

 

The 2022 Hycroft TRS summarizes the results of an Initial Assessment and supports the disclosure of mineral resources at the Hycroft Mine utilizing a milling and acid POX process for sulfide mineralization and heap leaching process for oxide and transition mineralization. The work has been prepared at the request of the Company and completed by third-party consultants including Ausenco Engineering USA South Inc. (“Ausenco”), Independent Mining Consultants, Inc. (“IMC”), and WestLand Engineering & Environmental Services, Inc. (“Westland”). Employees of IMC and Ausenco who have worked on and approved this mineral resource estimate are Qualified Persons as defined under subpart 1300 of Regulation S-K.

 

Hycroft Mine

 

The Hycroft Mine and related facilities are located approximately 54 miles west of Winnemucca, Nevada. Winnemucca, a city with a population of approximately 8,431 (2020 Census data), is a commercial community on Interstate 80, 164 miles northeast of Reno. The mine property straddles Townships 34, 35, 351∕2 and 36 North and Ranges 28, 29 and 30 East (MDB&M) with an approximate latitude 40°52’ north and longitude 118°41’ west.

 

The following shows the location of our properties.

 

4

 

 

  

Additionally, the map below shows the current property and facilities layout.

 

5

 

 

The town is served by a transcontinental railroad and has a municipal airport. Access to the Hycroft Mine from Winnemucca is by Jungo Road, formerly designated as State Route 49, a good-quality, unpaved road, and a short access road to the main entrance of the mine. Well-maintained mine and exploration roads provide access throughout the property. Access is also possible from Imlay, Gerlach and Lovelock by unpaved roads intersecting Interstate 80 and Nevada State Route 447. The majority of our employees live in the Winnemucca area. The site receives electrical power provided by NV Energy from the northwestern Nevada power grid. Initial surveys indicate that the town of Winnemucca has the required infrastructure (shopping, emergency services, schools, etc.) to support the maximum workforce and dependents. The Hycroft Mine currently has water rights which are adequate to support our planned future heap leach operations. The mine is situated on the eastern edge of the Black Rock Desert and on the western flank of the Kamma Mountains between Winnemucca and Gerlach, Nevada. There are no streams, rivers or major lakes in the general area. Elevations in the mine area range between 4,500 and 5,500 feet above sea level.

 

6

 

 

The climate of the region is arid, with precipitation averaging 2.1 inches per year. Average temperatures during the summer range from 50°F to 90°F and average winter temperatures range from 20°F to 40°F.

 

The Hycroft Mine property consists of 30 private parcels with patented claims that comprise 1,912 acres, and 3,247 unpatented mining claims that encompass 68,759 acres. Combining the patented and unpatented claims, total claims cover approximately 70,671 acres. The Hycroft Mine patented claims occupy private lands and our unpatented claims occupy public lands, administered by the Bureau of Land Management (“BLM”). These claims are governed by the laws and regulations of the U.S. federal government and the State of Nevada. To maintain the patented claims in good standing, we must pay the annual property tax payments to the county in which the claims are held. To maintain the unpatented claims in good standing, we must file a notice of intent to maintain the claims within the county and pay the annual mineral claim filing fees to the BLM. Such filing fees amounted to $0.6 million in 2021. As long as we file the annual notice and pay the claim filing fees, there is no expiration date for our unpatented claims.

 

A portion of the Hycroft Mine is subject to a mining lease requiring us to pay 4% net profit royalty to the owner of certain patented and unpatented mining claims, subject to a maximum of $7.6 million, of which $4.6 million remained payable as of December 31, 2021. There is no expiration date on the net profit royalty.

 

The Hycroft Mine is also subject to the Sprott Royalty Agreement dated May 29, 2020 by and between the Company and Sprott Private Resource Lending II (the “Sprott Royalty Agreement”) that was previously filed on Form 8-K on June 2, 2020 and that requires us to pay a perpetual royalty equal to 1.5% of the Net Smelter Returns, as such term is defined in such agreement, from our Hycroft Mine. There is no expiration and no limit on the amount that can be paid on the Sprott Royalty Agreement.

 

The Hycroft Mine was formerly known as the Crofoot-Lewis open pit mine, which was a small heap leaching operation that commenced in 1983. Vista Gold Corp., a corporation incorporated under the laws of the Yukon Territory (“Vista”), acquired the Crofoot-Lewis claims and mine in 1987 and 1988. During this first operating period the mine produced over 1.0 million ounces of gold and 2.5 million ounces of silver. The mine production continued until it was placed on a care and maintenance program in December 1998 due to low gold prices. Hycroft Mining Corporation (“HMC”) acquired the Hycroft Mine in 2007 pursuant to an arrangement agreement where Vista transferred its Nevada mining properties to HMC’s predecessor. HMC restarted the Hycroft Mine in 2008 and suspended mining operations on July 8, 2015. During 2016, HMC was actively processing and producing gold from the ore within the heap leach pads. On January 1, 2017, Hycroft Mining Corporation (“HMC” or “Seller”) went into a care and maintenance mode when it stopped adding lime to the leach pads and continued to operate in a care and maintenance mode throughout 2017 and 2018. Prior to restarting operations, production of gold and silver was a byproduct of HMC’s maintenance activities on the Hycroft Mine. In December 2018 HMC began restart activities, including the rehabilitation of the crushing facility and construction of a new leach pad, with active mining operations beginning in the second quarter of 2019 with six haul trucks, two hydraulic shovels and one wheel loader. Initial gold and silver production occurred in August 2019 and continued until Hycroft ceased active mining operations in November 2021.

 

On site facilities include an administration building, mobile maintenance shop, light vehicle maintenance shop, warehouse, leach pads, crushing system, two Merrill-Crowe process plants and a refinery. The components for a second refinery are on-site and will be constructed as part of the expansion of mining activities. The crushing system was refurbished as part of the restart activities and all other facilities are operational with the exception of the North Merrill-Crowe plant, which will be rehabilitated and brought on line as is required. The gross book value of plant and equipment associated with the Hycroft Mine as of September 30, 2021, was $99.1 million. Subsequent to September 30, 2021, Hycroft recorded material impairments and reclassifications as set forth in the section entitled “Recent Developments - Financial Update and Impairment Charges” set forth below in this Form 8-K.

 

7

 

 

Measured, Indicated and Inferred Mineral Resources

 

Our mineral resource estimates are calculated in accordance with Modernization Rules as set forth in subpart 1300 of Regulation S-K. Measured, indicated and inferred mineral resources may not be comparable to similar information regarding mineral resources disclosed in accordance with the guidance of other countries. The estimates of mineral resources may be materially affected if mining, metallurgical, or infrastructure factors change from those currently anticipated at the Hycroft Mine. Estimates of inferred mineral resources have significant geological uncertainty and it should not be assumed that all or any part of an inferred mineral resource will be converted to the measured or indicated categories. Mineral resources that are not mineral reserves do not meet the threshold for reserve modifying factors, such as estimated economic viability, that would allow for conversion to mineral reserves. The Hycroft Mine contains a large precious metals deposit, based on measured and indicated mineral resource size. The mineral resource estimates were prepared by and are the responsibility of IMC, as set forth in the 2022 Hycroft TRS.

 

The following description of the Hycroft Mine measured, indicated and inferred mineral resources does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the 2022 Hycroft TRS, filed as Exhibit 96.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2022.

 

8

 

 

Classification  Cutoff Grade
$ Net of
Process
  

Approximate

Cutoff,
AuEq

Au oz/ton

   Ktons   Au
oz/ton
   Ag
oz/ton
   Sulfide
Sulfur%
   Au
Contained
Ounces
(000)
   Ag
Contained
Ounces
(000)
 
                                 
Heap Leach Resource
Measured  $0.01    0.003    97,086    0.008    0.30    2.75    777    29,417 
Indicated  $0.01    0.003    36,046    0.007    0.29    2.10    252    10,417 
Meas + Ind  $0.01    0.003    133,132    0.008    0.30    2.57    1,029    39,834 
Inferred  $0.01    0.003    101,314    0.008    0.09    1.77    811    9,118 
 
Mill, Flotation Concentrate, POX and Cyanide Leach Process Plant
Measured  $0.01    0.011    372,226    0.013    0.65    1.86    4,839    240,830 
Indicated  $0.01    0.011    314,866    0.012    0.53    1.65    3,778    165,305 
Meas + Ind  $0.01    0.011    687,092    0.013    0.59    1.76    8,617    406,135 
Inferred  $0.01    0.011    349,659    0.012    0.40    1.19    4,196    141,262 
 
Combined Mineral Resources Leach Plus Process Plant
Measured  $0.01    0.003 - 0.011    469,312    0.012    0.58    2.04    5,616    270,247 
Indicated  $0.01    0.003 - 0.011    350,912    0.011    0.50    1.70    4,030    175,722 
Meas + Ind  $0.01    0.003 - 0.011    820,224    0.012    0.54    1.90    9,646    445,969 
Inferred  $0.01    0.003 - 0.011    450,973    0.011    0.33    1.32    5,007    150,380 

 

·Cutoffs grades were determined by income – process cost = NPR = NSR – Process Opex. Cutoff grade is the minimum grade required for a mineral to be economically mined and processed to retrieve the metal for commercial sale. The cutoff grade for Hycroft is determined by assessing each mine block for gold and silver content and then applying a cost for extraction of these metals from that block by employing commercial mining practices and using the crushing, grinding, flotation, and pressure oxidation process to create a gold / silver dore bar.  Process costs includes the environmental practices for placing waste and tailing material in properly designed facilities that can be remediated in the future.

 

·Numbers in the table have been rounded to reflect the accuracy of the estimate and may not sum due to rounding.

 

·Mineral resources are contained within a computer-generated optimized pit. Total material in that pit is 3.516 billion tons.

 

·All units are imperial. Ktons refers to 1,000 short tons of 2,000 lbs. Gold and silver grades are in troy ounces/short ton.

 

Mineral resources were developed based on a conventional computer-based block model of the deposit and the application of open pit optimization software to determine the mineralization with reasonable expectation of economic extraction. Each block was evaluated to determine which process provides the best net return after operating cost. The two processes identified were:

 

·Run-of-Mine (“ROM”) cyanide heap leaching of oxide ore; and

 

·Milling, flotation and acid pressure oxidation of sulfide and transitional ores followed by cyanide leach and processing in a Merrill-Crowe facility.

 

9

 

 

Other assumptions used to develop measured, indicated and inferred mineral resources were:

 

·assumed metal prices of $1,800 per ounce for gold and $23 per ounce for silver;

 

·recoveries for gold and silver were estimated by process type;

 

omilling, flotation and acid pressure oxidation was 76% overall of the fire assays for gold and 76% for fire assays for silver; and

 

oROM heap leaching was 75% for cyanide soluble gold and 12.2% for fire assay silver;

 

·base mining cost of $1.45 per ton with an additional incremental $0.016/ton applied to each bench below the 4660 level;

 

·variable ore processing costs based on geometallurgical domains and sulfur content; and

 

·general and administrative cost of $0.75 per ton.

 

See Table 11-15 in Section 11 of the 2022 Hycroft TRS for a more detailed presentation of the economic parameters for mineral resource estimation.

 

Mineral resources are not mineral reserves and detailed economic considerations have not been applied. Modifying factors for mine and process design have not been applied.

 

Internal Controls and Material Assumptions

 

Independent Mining Consultants (“IMC”) developed and updated the block model for the 2022 Hycroft TRS. Below is the summary of the work and checks they used to develop the block model.

 

The Hycroft resource model includes data from 1981 to 2018 and includes 5,501 holes, representing 2,482,722 ft of drilling. There have been 5,576 drill holes reported completed in the Hycroft Project Area; some are water wells or are outside the resource model domain and were not applied to estimation. The drillhole collar locations are shown in the 2022 Hycroft TRS and later in this text. At this time, there are 5,323 drill holes in the resource model area of which 134 have been drilled to define stockpiles or the Crofoot leach pad.

 

In addition to drilling activity, the Company has also conducted geophysical surveys, soil and rock chip sampling programs, field mapping, historical data compilation, and regional reconnaissance at the Hycroft Mine site. These efforts are designed to improve the understanding of the known mineralization, as well as provide data for further exploration of the greater property position.

 

10

 

 

A soil sampling grid was conducted over the Vortex and Brimstone areas historically (1,797 samples) and was extended approximately 5,200 ft north and 29,600 ft south of the mine in 2011–2012 (1,834 samples). The soil sampling program was conducted primarily along the East Fault exposure, which is a primary ore-controlling feature at Vortex and Brimstone. Soil samples are taken on an evenly spaced grid, and screened for coarse material and wind-blown material, resulting in a fraction between 2 mm and 180 um being prepped for analysis. These samples are considered representative of local soil geochemistry and are used to guide the regional exploration effort.

 

Rock chip sampling has been conducted both historically in the active mine area, and on a regional basis (2007–present). A database of 2,416 samples has been compiled, covering the greater land position. Au values range from 0 to 0.372 oz/ton, while Ag values range from 0 to 71.8 oz/ton. Rock chip samples have been taken on most outcrops, with a focus on alteration and potential mineralization. These samples are used as a guide to exploration and are point samples only.

 

The land position has been surveyed with both gravity and induced polarity (IP) geophysical techniques by Hycroft. The current ground-based gravity survey covers approximately 130 square miles, centered on the mine site. Gravity indicates several structural features and density changes. Gravity has also defined the basin edge to the west, approximately 4 miles west of the Brimstone Pit.

 

Ground IP surveys were run over the mine site and Vortex in 2007 and extended outward in 2011 to cover approximately 24 square miles. The survey results focus on chargeability anomalies, that potentially identify sulfide material (> approximately 1.5%) at depth, and resistivity anomalies, that potentially identify silicification at depth.

 

Field mapping was historically and is currently carried out in all active mine areas. Mapping focuses on structure, bedding, joints, lithology, and alteration. The near mine data is incorporated into the three-dimensional geology model, while the regional work is focused on defining exploration targets for future drilling. A regional geology map covering the land position was compiled in 2012.

 

The drillhole database was assembled over many years by multiple companies using at least four different drill methods.

 

The gold assay values in the Hycroft legacy database prior to 2000 were historically factored upward by a factor of 1.19. Prior to this resource model estimation, that factor was removed by multiplying all gold assays prior to 2000 by 1/1.19 = 0.8403. The removal of the factor does not have substantial impact on the deeper sulfide component of the deposit, but it does remove an observed sample bias in the near surface data.

 

There are stockpiles and historical leach pads at the Hycroft Mine that are within the block model area. Many of those have been drilled after the original excavation of hard rock by sonic or rotary methods. The stockpile holes have been used to estimate the stockpile and leach pad areas, they have not been used to estimate in-situ rock. In total, the Hycroft database contains 5,377 drill holes with 500,960 sample intervals. Within the area of the block model, there are 5,323 drill holes with 493,357 drill intervals amounting to 2,838,923 ft of drilling.

 

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The block model was verified by several methods before being used to determine mineral resources.

 

·Detailed Visual Checks of Drilling versus Block Estimates;

 

·Swath Plots;

 

·IMC Smear Check;

 

·Reconciliation to Production History;

 

IMC completed visual checks on plan and section for all of the estimated variables in the model. In addition to IMC visual checks, the Hycroft engineering and geology team on site also reviewed the model and assisted IMC with identifying and correcting coding issues prior to finalizing the block model.

 

Swath plots are a practice now common among resource modelers to provide a visual indication if the block model follows the grade trends indicated by the supporting data and if there is any observable local bias in the block grade estimation.

 

Quality assurance and quality control methods utilized in the 2022 Hycroft TRS included the use of a test by IMC to understand the amount of grade smoothing within the block model and to confirm that the model grades are not high biased, referred to internally as the “smear check.”

 

The procedure utilized by IMC was as follows:

 

·A range of cutoff grades were selected for the check process, generally bracketing the potential planning cutoff grades.

 

·For each cutoff grade being tested, the blocks above cutoff were identified.

 

·All composites contained within those blocks were identified.

 

·The average grade of the composites and blocks were tabulated.

 

·The percentage of the contained composites less than cutoff were calculated.

 

IMC completed a reconciliation of the model against 19 months of reported production for the year ended December 31, 2020 and for the seven months ended July 31, 2021. The reported 2019 production from Hycroft included substantial stockpile reclaim that would not be indicative of the block model response. The 19-month time period for the test is relatively short with a total of 13,584 ktons of oxide ore delivered to the leach pad. This represented approximately 65% of processing the sulfide mineralized materials for one year.

 

During 2020, Hycroft delivered ROM to the leach pad and crush leach to the crusher prior to loading on the pad. Sulfide material that was being considered for a sulfide atmospheric leach was stockpiled for future processing. Hycroft provided IMC with calculations for materials control routing that are used at site. Those methods were set up for application to the 2021 block model by IMC.

 

Some modifications were made by IMC during the installation of the materials control procedure. During 2021, Hycroft stopped crushing leached oxide ore and shipped ROM oxide ore only to the pad. IMC assumed that material that would report to crush leach would instead be shipped directly as ROM to the pad.

 

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Hycroft provided surface files that reflect the mine survey progress. The surface files were used to measure the material within the block model for each of the time periods at the cutoffs reportedly applied during the control.

 

Tonnage from the model is about 4% less than reported by the materials control. Gold grade is substantially lower than the materials control grade from blast holes.

 

A check of the database composites contained within the materials control shapes indicate that average of the composites contained in the materials control are less than the materials control grade and match the predicted grade from the block model. As a result, the composite data could not generate a gold grade as high as that reported by materials control. The difference may be due to smaller selective mining units or blast hole bias. In summary, the data within the mining shapes could not support grades that are different from those estimated in the model.

 

Recent Developments

 

Going concern

 

As discussed in Note 2 - Summary of Significant Accounting Policies to the Notes to the Financial Statements in the Quarterly Report on Form 10-Q for the period ended September 30, 2021, events and conditions exist that, when considered individually or in the aggregate, raise substantial doubt about our ability to continue as a going concern because without additional funding we may be unable to meet our obligations as they become due within one year after the date that the financial statements for the period ended September 30, 2021 were issued. Hycroft’s unrestricted cash balance as of December 31, 2021 was $12.3 million (unaudited) which was a $7.5 million decrease from September 30, 2021. Accordingly, based upon our current internal forecasts and cash flow projection models, we currently project we will require additional cash from financing activities in the next three to five months from December 31, 2021 to meet our operating and investing requirements and future obligations as they become due. Our ability to continue as a going concern is contingent upon securing additional funding for working capital, capital and project expenditures, satisfying debt covenants required under the Sprott Credit Agreement, and other corporate expenses so that we can continue to develop the Hycroft Mine by conducting targeted exploration and completing the necessary technical studies to determine the likely timeline to bring the sulfides into commercial scale operation. Historically, we have been dependent on various forms of debt and equity financing to fund our business.

 

Mineral Resource Update

 

Gold equivalent mineral resources totaled 15.3 million ounces of measured & indicated and 6.9 million ounces of inferred. For this study, Independent Mining Consultants, Inc. (“IMC”) developed the Hycroft resource block model which includes data from 1981 to 2018 and includes 5,501 holes, representing 2,482,722 ft of drilling. The current inflationary environment and change in processing technique has resulted in increased cost assumptions and an associated higher cut-off grade partially mitigated by higher recoveries leading to a change in the Mineral Resource estimate, when compared with the prior model.

 

The mineral resources were estimated based upon results of an Initial Assessment, as conducted in accordance with the Modernization Rules as set forth in subpart 1300 of Regulation S-K. With the issuance of the Initial Assessment reflecting a different mining process, the 2019 Hycroft TRS is superseded and the 2019 Hycroft TRS and information from such 2019 Hycroft TRS should no longer be relied upon.

 

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Technical Activities

 

During the first year ended of 2021, we continued to work alongside our industry leading consultants to provide additional and expanded information on the ore body and investigate opportunities for improvements in operating parameters for commercial scale operations at the Hycroft Mine. This information is critical in understanding the mineralogical properties of the deposit and ultimately the most economic processing technology for the various ore domains. Accordingly, we developed an approximate $10 million program for drilling and additional metallurgical and mineralogical studies in 2021 and early 2022. The drilling program was completed in January 2022, and the metallurgical test work portion of the program is expected to be completed in the early third quarter of 2022. Lab testing continues to be challenged by labor shortages and equipment availability. As of December 31, 2021, we have spent $7.3 million under the program.

 

Ongoing and future technical work for the Hycroft Mine will be primarily focused on the Acid Pressure Oxidation (“Acid POX”) milling for processing sulfide ore and completing the variability and metallurgical test work. We also plan to evaluate exploration opportunities targeting higher ore grades and expect to continue to advance the novel two-step heap oxidation and leap process (the “Novel Process”) as time and resources permit.

 

Exploration – We have identified exploration drilling opportunities to follow up on higher grade areas that would benefit from expanded drilling in order to convert inferred blocks to measured or indicated blocks, and areas that are prospective for higher grade material. We currently have plans to opportunistically and cost effectively drill these areas as we have drilling capacity with the drill rigs that were contracted to complete the variability drilling program.

 

Mill sulfide processing options – While our technical team continued to progress and develop an understanding of the requirements for implementing the Novel Process on a commercial scale, we received a completed peer reviewed report in the fourth quarter 2021 from one of our independent technical consultants stating that, for reasons outlined below as well as increased commodity costs, it did not appear that the proprietary two-stage oxidation and leaching process as detailed in the 2019 Hycroft TRS, will be economic as designed at current metal prices or those metal prices used in the 2019 Hycroft TRS. Based on scoping level economic analyses on multiple processing options completed by our technical team, together with independent engineering firms and consultants and on the currently contemplated designs and operating parameters of the alternative sulfide milling processes being studied, we completed pit optimization runs comparing the alternative processes. The comparative analysis indicated that using an Acid POX process should be significantly more economic than the alternatives. Therefore, we used the test results and documented recoveries from the Acid POX process in the financial determination of the mineral resource. These are documented in the 2022 Hycroft TRS.

 

Two-stage sulfide heap oxidation and leach process – As a result of challenges to consistently achieve targeted oxidation and recoveries from the Novel Process, our new technical and operating team, together with our industry leading metallurgical consultants, initiated detailed reviews of the technical information and prior work. We also had fresh samples of material from our Brimstone deposit metallurgically tested and launched a $10.0 million expanded variability drilling and metallurgical test program in late Q1 2021. While the variability metallurgical test work is on-going, the information to date supports our view that milling is likely the preferred method of processing sulfide ores at the Hycroft Mine. Additionally, while the chemistry of the two-stage sulfide oxidation and leach process has been confirmed, the commercial scale application of the process as currently understood will be economically challenged due to:

 

Higher operating costs – In the field work on the pre-commercial test pads, higher levels of soda ash were being applied to oxidize the transitional ore, and inconsistencies in achieving the targeted oxidation levels across the ore body. The test work has confirmed soda ash consumption is significantly higher than what was estimated in the 2019 Hycroft TRS. Moreover, the cost of soda ash and other reagents has increased substantially since 2019, which will negatively impact operating costs.

 

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Higher capital costs – We identified a number of critical areas that had not been previously addressed in the 2019 Technical Report. These included 1) the logistical placement of large volumes of new run-of-mine material at the same time there is removal of material for preparation of the second stage, 2) the implementation of on/off pads to avoid comingling solutions on the leach pads, 3) addition of a material handling system, 4) an additional amalgamation circuit, and 5) an additional forced air injection pumping system. As a result, the necessary capital costs are expected to be materially higher than previously reported. Additionally, working capital is projected to be higher due to slower oxidation rates for some ores.

  

Lower recoveries on some ores – After reviewing all the column tests and considering additional factors in measuring oxidation and recovery rates, we were not able to consistently replicate a strong correlation between oxidation rates and gold recoveries. We believe that more test work is required before implementing this process in a commercial setting.

 

Finer crush size will be required – The results from the Brimstone samples demonstrated that heavy silicification caused the gold in pyrite to be surrounded in gangue material which precluded oxidation and leach solutions from accessing and liberating the precious metals in pyrite at a ½ inch crush size. We believe that a milling operation is needed to achieve the finer grind size required to liberate the pyrite and allow solution contact.

 

We currently believe that more test and development work is required to demonstrate that this Novel Process can be applied successfully on a commercial scale and the analysis to date indicates the process may not be amenable to all ore domains at the Hycroft Mine. For the near term, we currently plan to complete the following test work which is important and will benefit all processing methods for the Hycroft Mine:

 

Column test work – Column tests were being performed on sulfide ores mined during the year ended December 31, 2021 . These column tests will provide additional information for the Novel Process.

 

Variability test work – The variability test work that is underway is necessary for all commercial scale sulfide processing options. The test work includes a suite of laboratory tests designed to:

 

understand the metallurgical characteristics of each geologic domain and their amenability to various processing technologies;

 

understand the metallurgical characteristics of sulfide material below the water table;

 

understand the role other minerals may play in the overall oxidation process;

 

determine amenability to oxidation in each geologic domain; and

 

establish a relationship between oxidation levels and gold recoveries across each geologic domain.

 

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Unaudited Financial Update and Impairment Charges

 

During the fourth quarter of 2021 the Company discontinued pre-commercial scale mining at its Hycroft Mine and determined that Novel Process was not expected to be economic as currently designed. As a result, in February 2022 the Company filed the 2022 Hycroft TRS for the Hycroft Mine in accordance with the Modernization Rules, which included updated mineral resource estimates. As a result of management’s evaluation of these activities in conjunction with its plans and estimates, the Company expects to record material non-cash charges and reclassifications for the year ended December 31, 2021, as follows:

 

  Capitalized costs associated with the metallurgical drilling and variability test work no longer qualify for capitalization because the Company did not report mineral reserves in the 2022 Hycroft TRS for the Hycroft Mine. As a result, $6.7 million of capitalized mine development costs were expensed to projects and development costs in the Consolidated Statement of Operations

 

The Company expects to record the following charges in its Consolidated Statement of Operations:

 

An impairment charge between $5.0 million and $6.0 million related to Ore on leach pads, non-current for gold ounces contained in the leach pad over liner;

 

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An impairment charge between $3.5 million and $6.5 million related to supplies inventories which are a component of the Company’s Inventories;
 

An impairment charge between $1.5 million and $5.5 million related to Assets held for sale; and

 

Accelerated depreciation between $1.5 million to $2.0 million for the estimated decrease in the remaining capacity of in-service leach pads included in Plant, equipment and mine development, net.

 

The Company reclassified grinding mill assets not in use of $11.2 million and, in addition, expects to reclass between $0.2 million and $1.5 million for equipment included in Plant, equipment and mine development, net to Assets held for sale.

 

In addition, prior management committed to a long-term consignment commitment to purchase crusher liners for an aggregate $8.7 million over the period beginning in the third quarter of 2020 and ending in the second quarter of 2023. Under the consignment commitment, the consignor has delivered liners in the amount of $1.7 million to-date which will be included in Accounts payable and accrued liabilities as of December 31, 2021. As the Company does not currently plan to operate the crusher during the remainder of the consignment commitment period, Management is in discussions with the consignor to terminate the consignment commitment and negotiate the remaining $7.0 million outstanding consignment commitment. Depending on the outcome of the discussions, the Company may need to record an additional liability and corresponding charge which amount has not yet been determined. Management is also evaluating its disclosures and internal controls as they relate to this consignment commitment to determine whether it rises to the level of a significant deficiency or material weakness.

 

All of the items discussed above are unaudited and estimates of amounts the Company currently expects to record or disclose in its Annual Report on Form 10-K for the year ended December 31, 2021. The Company is working with its auditors to complete the year-end audit and anticipates filing its Annual Report on Form 10-K on or around March 31, 2022.

 

Drilling

 

The Hycroft mineral resource model includes data from 1981 to 2018 and includes 5,501 holes, representing 2,482,722 ft of drilling. There have been 5,576 drill holes reported completed in the Hycroft project area; some are water wells or are outside the resource model domain and were not applied to estimation. At this time, there are 5,323 drill holes in the resource model area of which 134 have been drilled to define stockpiles or the Crofoot leach pad.

 

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Drill hole collar locations are shown in the figure below.

 

 

Consistent with HMC’s suspension of mining operations and conducting only care and maintenance activities on the Hycroft Mine, during 2017 and through December 2018, only drilling to obtain ore for metallurgical testing purposes was conducted. In December 2018, HMC began confirmation drilling of certain sulfide ore stockpiles that we planned to mine.

 

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Any expansion of the Hycroft Mine necessary to exploit any additional mineral resources that may be established through our exploration drilling program beyond the mineral resources in the 2022 Hycroft TRS, will require us to obtain all permits, approvals and consents of regulatory agencies responsible for the use and development of mines in Nevada.

 

Risk Factors

 

You should carefully review and consider the following risk factors and the other information contained in the Company’s filings with the SEC. Investing in our common stock or warrants is speculative and involves a high degree of risk due to the nature of our business and the present stage of exploration and advancement of our mineral properties. We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. If any of those risks actually occur, our business, financial condition and results of operations would suffer. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See also Cautionary Statement Regarding Forward-Looking Statements in this Current Report on Form 8-K. The following discussion should be read in conjunction with the Company’s financial statements and notes to the financial statements included in the Company’s most recent filings with the SEC.

 

Summary of Risk Factors:

 

The following list provides a summary our risk factors discussed in further detail below:

 

Risks related to changes in our operations at the Hycroft Mine including:

 

Risks associated with cessation of commercial mining operations at the Hycroft Mine;
Uncertainties concerning estimates of mineral resources;
Risks relating to a lack of a complete feasibility study; and
Risks related to our ability to re-establish commercially feasible mining operations.

 

Industry-related risks including:

 

Fluctuations in the prices of gold and silver;
Uncertainties relating to the COVID-19 pandemic;
The intense competition within the mining industry;
The commercial success of, and risks relating to, our development activities;
Uncertainties and risks related to our reliance on contractors and consultants;

 

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Availability and cost of equipment, supplies, energy, or commodities;
The inherently hazardous nature of mining activities, including environmental risks;
Potential effects on our operations of U.S. federal and state governmental regulations, including environmental regulation and permitting requirements;
Uncertainties relating to obtaining or retaining approvals and permits from governmental regulatory authorities;
Cost of compliance with current and future government regulations, including environmental regulations;
Potential challenges to title in our mineral properties;
Our insurance may not be adequate to cover all risks associated with our business, or cover the replacement costs of our assets or may not be available for some risks;
Risks associated with proposed legislation in Nevada that could significantly increase the costs or taxation of our operations; and
Changes to the climate and regulations and pending legislation regarding climate change.

 

Business-related risks including:

 

Risks related to our liquidity and going concern considerations;
Risks related to our ability to raise capital on favorable terms or at all;
The loss of key personnel or our failure to attract and retain personnel;
Risks related to our substantial indebtedness, including operating and financial restrictions under existing indebtedness, cross acceleration and our ability to generate sufficient cash to service our indebtedness;
The costs related to our land reclamation requirements;
Risks related to technology systems and security breaches;

  Any failure to remdiate any possible litigation as a result of a material weakness in our internal controls over financial reporting; and

Risks that our principal stockholders will be able to exert significant influence over matters submitted to stockholders for approval.

 

Risks related to our common stock and warrants, including:

 

Volatility in the price of our common stock and warrants;
Risks relating to potential dilution as a result of future equity offerings;
Risks associated with future offerings of senior debt or equity securities
Risks relating to our delisting notice from Nasdaq;
Risks that warrants may expire worthless and that certain warrants are being accounted for as a liability;
Anti - takeover provisions could make a third-party acquisition of us difficult; and
Risks related to limited access to our financial information, as we have elected to take advantage of the disclosure requirement exemptions granted to emerging growth companies and smaller reporting companies.

 

Risks Related to Changes in Hycroft Mine Operations

 

We have mineral resources at the Hycroft Mine but they may not be brought into production.

  

We are not currently conducting commercial mining operations at the Hycroft Mine. There is no certainty that the mineral resources estimated at the Hycroft Mine will be mined or, if mined, processed profitably. We have no specific plans and cannot currently predict when we will be able to bring the Hycroft Mine back into production. The commercial viability of the Hycroft Mine is dependent on a number of factors, including metal prices, the availability of and ability to raise capital for development, government policy and regulation and environmental protection, which are beyond our control. We may not generate commercial-scale revenues until we bring the Hycroft Mine back into production.

 

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The figures for our mineral resources are estimates based on interpretation and assumptions and the properties may yield less mineral production or less profit under actual conditions than is currently estimated.

 

Unless otherwise indicated, mineral resource figures in our filings with the SEC, press releases and other public statements that may be made from time to time are based upon estimates made by our personnel and independent geologists. These estimates are imprecise and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be inaccurate. There can be no assurance that resource or other mineralization figures will be accurate or that this mineralization could be mined or processed profitably.

 

Because we have not completed a feasibility study or recommenced commercial production at the Hycroft Mine, mineral resource estimates for our properties may require adjustments or downward revisions based upon further exploration or advancement work or actual production experience. In addition, the grade of ore ultimately mined, if any, may differ from that indicated by drilling results. There can be no assurance that recovery of minerals in small-scale tests will be duplicated in large-scale tests under on-site conditions or in production scale.

 

Until mineral resources are mined and processed, the quantity of ore and grades must be considered as an estimate only. In addition, the quantity of mineral resources may vary depending on metal prices, which largely determine whether mineral resources are classified as ore (economic to mine) or waste (uneconomic to mine). Current mineral resource estimates were calculated using sales prices of $1,800 per ounce of gold price and $23.00 per ounce of silver. A material decline in the current price of gold or silver or material changes in our processing methods or cost assumptions could require a reduction in our mineral resource estimates. Any material reductions in estimates of mineral resources, or of our ability to upgrade these mineral resources to mineral reserves and extract these mineral resources, could have a material adverse effect on the our prospects and could restrict our ability to successfully implement our strategies for long-term growth. In addition, we can provide no assurance that gold and silver recoveries experienced in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production.

 

We have not completed a feasibility study for the proposed processing method for the Hycroft Mine and actual capital costs, operating costs, production and economic returns may differ significantly from those the Company has anticipated. There are no assurances future advancement activities by the Company, if any, will lead to a favorable feasibility study or profitable mining operations.

  

We have completed and issued the 2022 Hycroft TRS with an effective date of February 18, 2022 which was prepared in accordance with the Modernization Rules which replaced the prior Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants, with an effective date of July 31, 2019 (the “2019 Hycroft Technical Report Summary”). The 2022 Hycroft Technical Report is an initial assessment and is not a feasibility study for the Hycroft Mine. Typically a company will not make a production decision until it has completed a feasibility study. Feasibility studies derive estimates of cash operating costs based upon, among other things:

 

  anticipated tonnage, grades and metallurgical characteristics of the mineral reserves to be mined and processed;

 

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  anticipated recovery rates of gold and other metals from the mineral reserves;

 

  cash operating costs of comparable facilities and equipment; and

 

  anticipated climatic conditions and environmental protection measures.

 

Completing a feasibility study of the Hycroft Mine will require significant additional work and study in order to reduce the range of uncertainty associated with the study’s estimates and conclusions. Cash operating costs, production and economic returns, and other estimates contained in studies or estimates prepared by or for us may differ significantly from those anticipated by us and estimated costs as they are developed if too high may result in further delays or cancellation of advancement at the Hycroft Mine.

 

There is no certainty that a feasibility study for the Hycroft Mine will be completed or, if completed, that it will result in sufficiently favorable estimates of the economic viability of the Hycroft Mine to justify a construction decision.

 

We may not be able to successfully re-establish mining operations or profitably produce precious metals.

 

We have no ongoing commercial mining operations or sustaining revenue from the care and maintenance processing operations currently conducted at the Hycroft Mine. Mineral exploration and advancement involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. The future advancement of the Hycroft Mine will require obtaining permits and financing and the construction and operation of the mine, processing plants and related infrastructure. Our ability to establish mining operations or profitably produce precious metals from the Hycroft Mine will be affected by:

 

  timing and cost, which can be considerable, of the construction of additional mining and processing facilities;

 

  availability and costs of skilled labor and mining equipment;

 

  availability and cost of appropriate smelting and/or refining arrangements;

 

  need to obtain necessary additional environmental and other governmental approvals and permits, and the timing of those approvals and permits;

 

  availability of funds to finance equipment purchases, construction and advancement activities;

 

  management of an increased workforce and co-ordination of contractors;

 

  potential opposition from non-governmental organizations, environmental groups, or local groups which may delay or prevent advancement activities; and

 

  potential increases in construction and operating costs due to changes in the cost of fuel, power, labor, materials and supplies and foreign exchange rates.

 

It is common in new mining operations to experience unexpected problems and delays during advancement, construction and mine start-up. In addition, delays in the commencement of mineral production often occur. Accordingly, there are no assurances that, if we decide to initiate construction or mining activities, that we will be able to successfully establish mining operations or profitably produce gold and silver at the Hycroft Mine.

 

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Industry-Related Risks

 

The market prices of gold and silver are volatile. A decline in gold and silver prices could result in decreased revenues, decreased net income, increased losses and decreased cash inflows which may negatively affect our business.

 

Gold and silver are commodities. Their prices fluctuate and are affected by many factors beyond our control, including interest rates, expectations regarding inflation, speculation, currency values, central bank activities, governmental decisions regarding the disposal of precious metals stockpiles, global and regional demand and production, political and economic conditions and other factors. The prices of gold and silver, as quoted by The London Bullion Market Association on March 11, 2022, December 31, 2021 and December 31, 2020, were $1,979, $1,820 and $1,891 per ounce for gold, respectively, and $25.66, $23.09 and $26.49 per ounce for silver, respectively. The prices of gold and silver may decline in the future. A substantial or extended decline in gold or silver prices would adversely impact our ability to profitably conduct mining operations and our financial position, revenues, net income and cash flows. In addition, sustained lower gold or silver prices may:

 

halt, delay, modify, or cancel plans for the development and construction of facilities to restart mining operations at the Hycroft Mine;
reduce existing mineral resources by removing ores from mineral resources that can no longer be economically processed at prevailing prices; and
cause us to recognize an impairment to the carrying values of long-lived assets.

 

The COVID-19 pandemic may adversely impact our business and financial condition.

 

The COVID-19 pandemic has caused, and is expected to continue to cause, disruptions in regional economies and the world economy and financial and commodity markets in general. The transmission of COVID-19 and efforts to contain its spread have resulted in international, national and local border closings, travel restrictions, significant disruptions to business operations, supply chains and customer activity and demand, service cancellations, workforce reductions and other changes, significant challenges in healthcare service provision and delivery, mandated closures and quarantines, as well as considerable general concern and uncertainty, all of which have negatively affected the economic environment and may in the future have further and larger impacts. The full extent of the impact of the pandemic on the economy and commodity prices, including gold and silver prices, is not known at this time and it is not known what measures will be implemented by governmental authorities in the future and how long these measures, or the measures currently in effect, will be in place. The COVID-19 global pandemic and efforts to reduce its spread have led to a significant decline of economic activity and significant disruption and volatility in global markets. Additionally, COVID-19 has disrupted the capital markets world-wide and commodity prices, including gold prices, and we may be unable to complete future capital raising transactions if continued concerns relating to COVID-19 cause further significant market disruptions. We cannot at this time predict the duration of the coronavirus pandemic or the impact of government regulations that might be imposed in response of the pandemic; however, the coronavirus pandemic may have a material adverse effect on our business, financial position, results of operations and cash flows.

 

We face intense competition in the mining industry.

 

The mining industry is intensely competitive, and includes several large established mining companies with substantial mining capabilities and with greater financial and technical resources than ours. We compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully attract and retain qualified employees, our development programs and/or our operations may be slowed down or suspended, which may adversely impact our development, financial condition and results of operations.

 

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We cannot be certain that our future development activities will be commercially successful.

 

Substantial expenditures are required to construct and operate the Hycroft Mine including additional equipment and infrastructure such as is typically seen in a milling and Acid POX plant to allow for extraction of gold and silver from the sulfide mineral resource, to further develop our Hycroft Mine to establish mineral reserves and identify new mineral resources through drilling and analysis. In 2022, we expect to continue to advance the Acid POX evaluation reflected in the Initial Assessment in the 2022 Hycroft TRS. In conjunction with that Initial Assessment, we intend to focus much of our technical efforts for 2022 on, among other things, (1) complete metallurgical testing including bench top autoclave tests and review the results thereof; (2) reviewing historical drilling data in the drillhole database to identify areas of potential underestimated silver and improve where applicable through rerunning available pulps; (3) follow-up on higher grades encountered during the 2021 drill program to improve overall grade of mineral resources; (4) assessing the potential to convert material currently considered waste and upgrade inferred material to a higher resource classification in the designed pits through a limited drill program and initiate said program. We cannot provide assurance that an economic process can be developed for the sulfide resource using Acid POX or other similar sulfide extraction processes, that any mineral resources discovered will be in sufficient quantities and grades to justify commercial operations or that the funds required for development can be obtained on a timely or economic basis. A number of factors, including costs, actual mineralization, consistency and reliability of ore grades and commodity and reagent quantities and prices affect successful project development. The efficient operation of processing facilities, the existence of competent operational management, as well as the availability and reliability of appropriately skilled and experienced consultants also can affect successful project development. We can provide no assurance that the development and advancement of the Hycroft Mine sulfide processing operations will result in economically viable mining operations or yield mineral reserves or new mineral resources.

 

Our reliance on third party contractors and consultants to conduct our exploration and development projects exposes us to risks.

 

In connection with the exploration and development of the Hycroft Mine, we contract and engage third party contractors and consultants to assist with aspects of such projects. As a result, we are subject to a number of risks, some of which are outside our control, including:

 

negotiating agreements with contractors and consultants on acceptable terms;

 

the inability to replace a contractor or consultant and their operating equipment in the event that either party terminates the agreement;

 

reduced control over those aspects of exploration or development operations which are the responsibility of the contractor or consultant;

 

failure of a contractor or consultant to perform under their agreement or disputes relative to their performance;

 

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interruption of exploration or development operations or increased costs in the event that a contractor or consultant ceases their business due to insolvency or other unforeseen events;

 

failure of a contractor or consultant to comply with applicable legal and regulatory requirements, to the extent they are responsible for such compliance; and

 

problems of a contractor or consultant with managing their workforce, labor unrest or other employment issues.

 

In addition, we may incur liability to third parties as a result of the actions of our contractors or consultants. The occurrence of one or more of these risks could increase our costs, interrupt or delay our exploration or development activities or our ability to access our ores, and adversely affect our liquidity, results of operations and financial position.

 

A shortage of equipment and supplies and/or the time it takes such items to arrive at our Hycroft Mine could adversely affect our ability to operate our business.

 

We are dependent on various supplies and equipment to engage in exploration and development activities. The shortage of such supplies, equipment and parts and/or the time it takes such items to arrive at our Hycroft Mine could have a material adverse effect on our ability to explore and develop the Hycroft Mine. Such shortages could also result in increased costs and cause delays in exploration and development projects.

 

Mining development and processing operations pose inherent risks and costs that may negatively impact our business.

 

Mining development and processing operations involve many hazards and uncertainties, including, among others:

 

metallurgical or other processing problems;
ground or slope failures;
industrial accidents;
unusual and unexpected rock formations or water conditions;
environmental contamination or leakage;
flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of nature;
fires;
seismic activity;
pandemics adversely affecting the availability of workforces and supplies;
mechanical equipment failure and facility performance problems; and
the availability of critical materials, equipment and skilled labor.

 

These occurrences could result in damage to, or destruction of, our properties or production facilities, personal injury or death, environmental damage, delays in future mining or processing, increased future production costs, asset write downs, monetary losses and legal liability, any of which could have a material adverse effect on our future development plans and ability to raise additional capital.

 

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Environmental regulations could require us to make significant expenditures or expose us to potential liability.

 

To the extent we become subject to environmental liabilities, the payment of such liabilities or the costs that we may incur, including costs to remedy environmental pollution, would reduce funds otherwise available to us and could have a material adverse effect on our financial condition, results of operations, and liquidity. If we are unable to fully remedy an environmental violation or release of hazardous substances, we might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy or corrective action. The environmental standards that may ultimately be imposed at a mine site can vary and may impact the cost of remediation. Actual remedial costs may exceed the financial accruals that have been made for such remediation. Additionally, the timing of the remedial costs may be materially different from the current remediation plan. The potential exposure may be significant and could have an adverse effect on our financial condition and results of operations.

 

Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property or natural resources and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, which could lead to the imposition of substantial fines, remediation costs, penalties, injunctive relief and other civil and criminal sanctions. Substantial costs and liabilities, including those required to restore the environment after the closure of mines, are inherent in our operations. We cannot provide any assurance that any such law, regulation, enforcement or private claim will not have a negative effect on our business, financial condition or results of operations.

 

We are subject to numerous governmental permits that are difficult to obtain and we may not be able to obtain or renew all of the permits we require, or such permits may not be timely obtained or renewed.

 

In the ordinary course of business we are required to obtain and renew governmental permits for our current limited operations at the Hycroft Mine. We will also need additional governmental permits to accomplish our long-term plans to mine sulfide ores under plans yet to be developed. Obtaining or renewing the necessary governmental permits is a complex and time-consuming process involving costly undertakings by us. The duration and success of our efforts to obtain and renew permits are contingent upon many variables not within our control, including the interpretation of applicable requirements implemented by the permitting authority and intervention by third parties in any required environmental review. We may not be able to obtain or renew permits that are necessary on a timely basis or at all, and the cost to obtain or renew permits may exceed our estimates. Failure to comply with the terms of our permits may result in injunctions, fines, suspension or revocation of permits and other penalties. We can provide no assurance that we have been, or will at all times be, in full compliance with all of the terms of our permits or that we have all required permits. The costs and delays associated with compliance with these permits and with the permitting process could alter all or a portion of our life of mine plan, delay or stop us from proceeding with the development of the Hycroft Mine or increase the costs of development or production, any or all of which may materially adversely affect our business, prospects, results of operations, financial condition and liquidity.

 

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Failure to comply with environmental regulations could result in penalties and costs.

 

While the Hycroft Mine is not conducting active mining operations, our facilities and prior operations have been and are, and our future development plans may continue to be, subject to extensive federal and state environmental regulation, including those enacted under the following laws:

 

Comprehensive Environmental Response, Compensation, and Liability Act;
Resource Conservation and Recovery Act;
Clean Air Act;
National Environmental Policy Act;
Clean Water Act;
Safe Drinking Water Act;
Federal Land Policy and Land Management Act; and
Bald and Golden Eagle Protection Act;

 

Additional regulatory authorities may also have or have had jurisdiction over some of our operations and mining projects including the Environmental Protection Agency, the Nevada Division of Environmental Protection, the U.S. Fish and Wildlife Service, BLM, and the Nevada Department of Wildlife.

 

These environmental regulations require us to obtain various permits, approvals and licenses and also impose standards and controls relating to development and production activities. For instance, we are required to hold a Nevada Reclamation Permit with respect to the Hycroft Mine. This permit mandates concurrent and post-mining reclamation of mines and requires the posting of reclamation bonds sufficient to guarantee the cost of mine reclamation. Changes to the amount required to be posted for reclamation bonds could materially affect our financial position, results of operations, cash flows and liquidity following consummation of the business combination. Also, the U.S. Fish and Wildlife Service may designate critical habitat and suitable habitat areas it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for our development. For example, we had to obtain certain permits associated with mining in the area of an eagle habitat. Failure to obtain such required permits or failure to comply with federal and state regulations could also result in delays in beginning or expanding exploration, future operations, incurring additional costs for investigation or cleanup of hazardous substances, payment of penalties for non-compliance or discharge of pollutants, and post-mining closure, reclamation and bonding, all of which could have a material adverse impact on our financial performance, results of operations and liquidity.

 

Compliance with current and future government regulations may cause us to incur significant costs.

 

Mining operations are subject to extensive federal and state legislation governing matters such as mine safety, occupational health, labor standards, prospecting, exploration, production, exports, toxic and hazardous substances, explosives, management of natural resources, land use, water use, air emissions, waste disposal, environmental review and taxes. While we have ceased operations at the Hycroft Mine, continued compliance with these regulations and other legislation relating to our obligations with respect to the Hycroft Mine and its future development could require us to make significant financial outlays to comply with these laws. The enactment of new legislation or more stringent enforcement of current legislation may also increase these costs, which could have a negative effect on our financial position, results of operations, and liquidity. We cannot provide any assurances that we will be able to adapt to these regulatory developments on a timely or cost-effective basis. Violations of these laws, regulations and other regulatory requirements could lead to substantial fines, penalties or other sanctions, including possible shutdown of future operations, as applicable.

 

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There are uncertainties as to title matters in the mining industry. Any defects in such title could cause us to lose our rights in mineral properties and jeopardize our business.

 

Our mineral properties consist of private mineral rights, leases covering private lands, leases of patented mining claims and unpatented mining claims. Areas of the Hycroft Mine are unpatented mining claims located on lands administered by the Bureau of Land Management (“BLM”), Nevada State office to which we have only possessory title. Because title to unpatented mining claims is subject to inherent uncertainties, it is difficult to determine conclusively ownership of such claims. These uncertainties relate to such things as sufficiency of mineral discovery, proper location and posting and marking of boundaries, and possible conflicts with other claims not determinable from descriptions of record. We believe a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, and this uncertainty is inherent in the mining industry.

 

The present status of our unpatented mining claims located on public lands allows us the right to mine and remove valuable minerals, such as precious and base metals, from the claims conditioned upon applicable environmental reviews and permitting programs. We also are generally allowed to use the surface of the land solely for purposes related to mining and processing the mineral-bearing ores. However, legal ownership of the land remains with the United States. We remain at risk that the mining claims may be forfeited either to the United States or to rival private claimants due to failure to comply with statutory requirements. Prior to 1994, a mining claim locator who was able to prove the discovery of valuable, locatable minerals on a mining claim, and to meet all other applicable federal and state requirements and procedures pertaining to the location and maintenance of federal unpatented mining claims, had the right to prosecute a patent application to secure fee title to the mining claim from the Federal government. The right to pursue a patent, however, has been subject to a moratorium since October 1994, through federal legislation restricting the BLM from accepting any new mineral patent applications. If we do not obtain fee title to our unpatented mining claims, we can provide no assurance that we will be able to obtain compensation in connection with the forfeiture of such claims.

 

There may be challenges to title to the mineral properties in which we hold a material interest. If there are title defects with respect to any properties, we might be required to compensate other persons or perhaps reduce our interest in the affected property. Also, in any such case, the investigation and resolution of title issues would divert our management’s time from ongoing business operations.

 

Our insurance may not cover all of the risks associated with our business.

 

The mining business is subject to risks and hazards, including, but not limited to, environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, slide-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or destruction of, mineral properties, equipment or facilities, personal injury or death, environmental damage, asset write-downs, monetary losses and possible legal liability. Insurance fully covering many of these risks is not generally available to us and if it is, we may elect not to obtain it because of the high premium costs or commercial impracticality. Any liabilities incurred for these risks and hazards could be significant and could materially and adversely affect our results of operations, cash flows and financial condition.

 

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Legislation has been proposed periodically that could, if enacted, significantly affect the cost of mine development on our unpatented mining claims.

 

Members of the U.S. Congress have periodically introduced bills which would supplant or alter the provisions of the Mining Law of 1872. Such bills have proposed, among other things, to either eliminate or greatly limit the right to a mineral patent and to impose a federal royalty on production from unpatented mining claims. Such proposed legislation could change the cost of holding unpatented mining claims and could significantly impact our ability to develop mineralized material on unpatented mining claims. A majority of our mining claims are unpatented claims. Although we cannot predict what legislated royalties might be, the enactment of these proposed bills could adversely affect the potential for development of our unpatented mining claims and the economics of any future mine operations on federal unpatented mining claims. Passage of such legislation could adversely affect our financial performance and results of operations.

 

Regulations and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material adverse effect on our business.

 

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could materially increase our costs, and the costs of our suppliers, for further exploration and development of the Hycroft Mine, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such regulations. Given the emotion, political significance and uncertainty around the impact of climate change and how it should be dealt with, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation.

 

Climate change could have an adverse impact on our cost of operations.

 

The potential physical impacts of climate change on our development activities or future operations are highly uncertain and would be particular to the area in which we operate. These climate changes may include changes in rainfall and storm patterns and intensities, water shortages and changing temperatures. These changes in climate could adversely affect our mining operations, including by affecting the moisture levels and pH of ore on our leach pads, could materially and adversely affect the cost to construct and operate the Hycroft Mine and materially and adversely affect the financial performance of our operations.

 

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Business-Related Risks

 

Our consolidated interim financial statements have been prepared assuming we will continue on a going concern basis and if our plans to alleviate the substantial doubt about our ability to continue as a going concern are not successful, we may be unable to continue as a going concern, which would have a material adverse effect on our results of operations and financial condition.

 

The financial statements of the Company have been prepared on a “going concern” basis, which contemplates the presumed continuation of the Company even though events and conditions exist that, when considered individually or in the aggregate, raise substantial doubt about our ability to continue as a going concern because it is probable that, without additional capital injections, we may be unable to meet our obligations as they become due within one year after the date of such financial statements.

 

We ceased active mining operations in November 2020 and incurred net losses, negative operating cash flow and required cash flow from financing to meet our operating and capital spending needs for both the years ended December 31, 2021 and 2020. Historically, the Company has been dependent on various forms of debt and equity financing to fund its business.

 

While the Company plans to continue processing the remaining gold and silver ore on the leach pads after ceasing mining operations for the pre-commercial scale ROM operation and partially offset the cash that is projected to be used in its operations and investing activities, the Company does not expect to generate net positive cash for the foreseeable future. Accordingly, the Company will be dependent on its unrestricted cash and other sources of cash to fund its business. The Company is actively evaluating alternatives to raise additional capital necessary to fund future development and ongoing working capital needs.

 

Our ability to continue as a going concern is contingent upon securing additional funding for working capital, capital and project expenditures, satisfying debt covenants required under the Sprott Credit Agreement, and other corporate expenses so that we can continue to develop the Hycroft Mine by conducting targeted exploration and completing the necessary technical studies to determine the likely timeline to bring the sulfides into commercial scale operation. Management’s expectations regarding our liquidity and capital resources are based on a number of assumptions that we believe are reasonable, but could prove to be incorrect. For example, our expectations are based on assumptions regarding commodity prices, gold and silver recovery percentages and rates, production estimates, timing of oxidation, anticipated costs and other factors that are subject to a number of risks, many of which are beyond our control. If our assumptions prove to be incorrect, we may require additional financing sooner than we expect to continue to operate our business, which may not be available on favorable terms or at all and which could have a material adverse effect on our results of operations, financial condition and liquidity.

 

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We may need to raise additional capital, but such capital may not be available on favorable terms or at all

 

The exploration and development of our Hycroft Mine for mining and processing our mineral resources will require significant investment. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration, development or production at the Hycroft Mine. The covenants in the Sprott Credit Agreement could significantly limit our ability to secure new or additional credit facilities, increase our cost of borrowing, and make it difficult or impossible to raise additional capital on favorable terms or at all.

 

Our primary future cash requirements for 2022 will be to fund working capital needs, capital and project expenditures, satisfying debt covenants required under the Sprott Credit Agreement, and other corporate expenses so that we can continue to develop the Hycroft Mine by conducting targeted exploration and completing the necessary technical studies to determine the likely timeline to bring the sulfides into commercial scale operation. As of December 31, 2021 we had cash of $12.3 million (unaudited). We currently expect to fund negative net cash flows from cash on hand during the fiscal year ending December 31, 2022. You are cautioned that management’s expectations regarding our liquidity and capital resources are based on a number of assumptions that we believe are reasonable but could prove to be incorrect. For example, our expectations are based on assumptions regarding commodity prices, gold and silver recovery percentages and rates, production estimates, anticipated costs and other factors that are subject to a number of risks, many of which are beyond our control. If our assumptions prove to be incorrect, we may require additional financing sooner than we expect to continue to operate our business, which may not be available on favorable terms or at all and which could have a material adverse effect on our results of operations, financial condition and liquidity.

 

If we lose key personnel or are unable to attract and retain additional personnel, we may be unable to develop our business.

 

Our development in the future will be highly dependent on the efforts of key management employees, specifically, Diane Garrett, our President and Chief Executive Officer, Stanton Rideout, our Executive Vice President and Chief Financial Officer, and other key employees that we may hire in the future. We will need to recruit and retain other qualified managerial and technical employees to build and maintain our operations. If we are unable to successfully recruit and retain such persons, our development and growth could be significantly curtailed.

 

The Sprott Credit Agreement imposes significant operating and financial restrictions that may limit our ability to operate our business.

 

The Sprott Credit Agreement imposes significant operating and financial restrictions on us and our restricted subsidiaries. These restrictions limit our ability and the ability of our restricted subsidiaries to, among other things, as applicable:

 

incur additional debt;
pay dividends or make other restricted payments, including certain investments;
create or permit certain liens;
sell assets;
engage in certain transactions with affiliates; and
consolidate or merge with or into other companies, or transfer all or substantially all of our assets or the assets of our restricted subsidiaries.

 

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These restrictions could limit our ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities.

 

In addition, the Sprott Credit Agreement requires us to comply with a number of customary covenants, including:

 

covenants related to the delivery of monthly, quarterly and annual financial statements, budgets and annual projections;
maintaining required insurance;
compliance with laws (including environmental);
compliance with ERISA;
maintenance of ownership of 100% of Hycroft Mine;
restrictions on consolidations, mergers or sales of assets;
limitations on liens;
limitations on issuance of certain equity interests;
limitations on issuance of additional indebtedness;
limitations on transactions with affiliates; and
other customary covenants.

 

We have received several waivers to date from covenant obligations under the Sprott Credit Agreement. We cannot assure you that we will satisfy these covenants or that our lenders will continue to waive any future failure to do so. A breach of any of the covenants under the Sprott Credit Agreement could result in a default. See Note 9 — Debt and Note 22 – Subsequent Events in the Notes to the Financial Statements included in our Quarterly Report on Form 10-Q for the Quarterly period ended September 30, 2021 filed with the SEC on November 12, 2021 for further information. If a default occurs under the Sprott Credit Agreement and/or the Royalty Agreement among Hycroft Mining Holding Corporation, its wholly owned subsidiary Hycroft Resources and Development, LLC and Sprott Private Resource Lending II (CO) Inc., (the “Sprott Royalty Agreement”), the lenders could elect to declare the debt, together with accrued interest and other fees, to be immediately due and payable and proceed against the collateral securing that debt, which, in the case of the Sprott Credit Agreement and the Sprott Royalty Agreement, constitutes all or substantially all of our assets.

 

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Our substantial indebtedness could adversely affect our financial condition.

 

As of December 31, 2021, we had substantial outstanding indebtedness under the Sprott Credit Agreement and the Subordinated Notes. Subject to the limits and terms contained in the Sprott Credit Agreement, if we are able to incur additional debt or grant additional security interests from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes, then the risks related to our high level of debt could intensify. Our high level of debt and royalty payment obligations could:

 

make it more difficult for us to satisfy our obligations with respect to our outstanding debt;

 

require a substantial portion of our cash flows to be dedicated to debt service and/or royalty payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

 

limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

 

increase our vulnerability to commodity price volatility, including increases in prices of commodities that we purchase and decreases in prices of gold and silver that we sell, each as part of our operations, general adverse economic and industry conditions;

 

limit our flexibility in planning for and reacting to changes in the industry in which we compete;

 

place us at a disadvantage compared to other, less leveraged competitors; and

 

increase our cost of borrowing.

 

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under our debt, and the price of our common stock. The Sprott Credit Agreement contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of nearly all of our debt.

 

If we default on our obligations to pay any of our indebtedness or otherwise default under the agreements governing our indebtedness, lenders could accelerate such debt and we may be subject to restrictions on the payment of our other debt obligations or cause a cross-acceleration.

 

Any default under the agreements governing our indebtedness that is not waived by the required lenders or holders of such indebtedness, and the remedies sought by the holders of such indebtedness, could prevent us from paying principal, premium, if any, and interest on other debt instruments. If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness and royalty payment obligations, or if we otherwise fail to comply with the various covenants in any agreement governing our indebtedness, we would be in default under the terms of the agreements governing such indebtedness and other indebtedness under the cross- default and cross-acceleration provisions of such agreements. In the event of such default:

 

the lenders or holders of such indebtedness could elect to terminate any commitments thereunder, declare all the funds borrowed thereunder to be due and payable and, if not promptly paid, in the case of our secured debt, institute foreclosure proceedings against our assets; and

 

even if these lenders or holders do not declare a default, they may be able to cause all of our available cash to be used to repay indebtedness owed to them.

 

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As a result of such default and any actions the lenders may take in response thereto, we could be forced into bankruptcy or liquidation.

 

We may not be able to generate sufficient cash to service our outstanding indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

 

Our ability to make scheduled payments on our debt and royalty obligations or refinance our debt obligations (if necessary) depends on our financial condition, which is subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control, including the market prices of gold and silver. We may be unable to maintain a level of cash flow sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness and our royalty obligations.

 

If our cash flows and capital resources are insufficient to fund our debt service obligations and our royalty obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Sprott Credit Agreement restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service and royalty payment obligations then due.

 

Our inability to generate sufficient cash flows to satisfy our debt and royalty obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations.

 

If we cannot make scheduled payments on our debt, we will be in default and the lenders under the Sprott Credit Agreement and the Sprott Royalty Agreement could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

 

Land reclamation requirements for the Hycroft Mine may be burdensome and expensive and include requirements that we provide financial assurance supporting those requirements.

 

Land reclamation requirements are generally imposed on companies with mining operations in order to minimize long-term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents, treat ground and surface water to drinking water standards, and reasonably re-establish pre-disturbance landforms and vegetation.

 

In order to carry out reclamation obligations imposed on us in connection with our activities, we must allocate financial resources that might otherwise be spent on further development programs. We have established a provision for our reclamation obligations on the Hycroft Mine property, as appropriate, but this provision may not be adequate. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.

 

We are also required by U.S. federal and state laws and regulations to provide financial assurance sufficient to allow a third party to implement approved reclamation plans for the Hycroft Mine if we are unable to do so. Third party financial assurances may not be available to us or we may elect not to obtain it because of the high costs, associated collateral requirements may be too expensive or it may be commercially impractical which could adversely affect our financial position.

 

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We are dependent upon information technology systems that are subject to disruption, damage, failure and risks associated with implementation and integration.

 

We are dependent upon information technology systems in the conduct of our operations. Our information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks, natural disasters and defects in design. Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, extortion to prevent or the unauthorized release of confidential or otherwise protected information and the corruption of data. Given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to production downtimes, operational delays, extortion, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, financial condition or results of operations.

 

We could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into our operations. System modification failures could have a material adverse effect on our business, financial position and results of operations and could, if not successfully implemented, adversely impact the effectiveness of our internal controls over financial reporting.

 

We have identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective which, if not remediated, may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

 

In connection with the restatement of our financial statements on Form 10-K/A for the year ended December 31, 2020, management concluded there was a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

 

Management identified a material weakness in our controls over the accounting for the 5-Year Private Warrants issued in connection with the initial public offering of MUDS and recorded to our consolidated financial statements as a result of the Recapitalization Transaction that was consummated on May 29, 2020. Our controls to evaluate the accounting for complex financial instruments, such as for warrants issued by MUDS, did not operate effectively to appropriately apply the provisions of ASC 815-40. This material weakness resulted in a material error in our accounting for the 5-Year Private Warrants recorded as part of the Recapitalization Transaction and a restatement of our previously issued financial statements as more fully described in Note 25 - Restatement of Previously Issued Financial Statements to the Notes to Consolidated Financial Statements set forth in our Annual Report on Form 10-K/A for the year ended December 31, 2020. As a result, Management concluded that, as of December 31, 2020, our internal control over financial reporting and our disclosure controls and procedures were not effective.

 

To remediate the material weakness in our internal control over financial reporting, management implemented additional review procedures, and additional training and enhancements to the accounting policy related to the accounting for equity and liability instruments (including those with warrants) to determine proper accounting in accordance with GAAP.

 

Although our remediation plan has been implemented and is expected to be completed as of the filing date of our Annual Report on Form 10-K for the year ended December 31, 2021, the material weakness cannot be considered remediated until the controls operate for a sufficient period and management has concluded, through testing, that our internal controls are operating effectively. While management believes that the remedial efforts will resolve the identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be sufficient or that additional remedial actions will not be necessary. In addition, there can be no assurance that additional material weaknesses will not be identified in the future. If we are unsuccessful in remediating our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or disclosure controls and procedures, investors may lose confidence in our financial reporting and the accuracy and timing of our financial reporting and disclosures and our business, reputation, results of operations, liquidity, financial condition, ability to access the capital markets, perceptions of our creditworthiness, and stock price could be adversely affected. In addition, we may be unable to maintain or regain compliance with applicable securities laws or stock market listing requirements.

 

In addition, there can be no assurance that additional material weaknesses will not be identified in the future. If we are unsuccessful in remediating our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or disclosure controls and procedures, investors may lose confidence in our financial reporting and the accuracy and timing of our financial reporting and disclosures and our business, reputation, results of operations, liquidity, financial condition, ability to access the capital markets, perceptions of our creditworthiness, and stock price could be adversely affected. In addition, we may be unable to maintain or regain compliance with applicable securities laws or stock market listing requirements.

 

The three largest stockholders of the Company are able to exert significant influence over matters submitted to stockholders for approval, which could delay or prevent a change in corporate control or result in the entrenchment of management or the Board of Directors, possibly conflicting with the interests of our other stockholders.

 

As of March 15, 2022, Mudrick Capital Management LP, (“Mudrick Capital”), owned, and following consummation of the private placement 2176423 Ontario Limited, an entity affiliated with Eric Sprott (“Eric Sprott”) and American Multi-Cinema, Inc. (“AMC”) will own approximately 22.7%, 21.8% and 21.8% of the outstanding shares of our common stock, respectively, and will have the right to acquire additional shares of common stock upon the exercise of warrants held by them. Because of their significant stockholdings, each of Mudrick Capital, Eric Sprott and AMC could exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise influence our business. This influence could have the effect of delaying or preventing a change in control of the Company or entrenching management or the Board of Directors, which could conflict with the interests of other stockholders and, consequently, could adversely affect the market price of our common stock.

 

Risks related to our Common Stock and Warrants

 

The market price of our shares of common stock and publicly traded warrants may fluctuate widely.

 

The trading price of our common stock and warrants listed for trading may fluctuate substantially and may be lower than their current prices. The market prices and trading volume of shares of our common stock have recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our common stock to incur substantial losses. We may continue to incur rapid and substantial increases or decreases in our stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or affecting us. Accordingly, the market price of shares of our common stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in our business. Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock, including:

 

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·the ongoing impacts and developments relating to the COVID-19 pandemic;

 

·publication of research reports by analysts or others about us or the precious metals market, which may be unfavorable, inaccurate, inconsistent or not disseminated on a regular basis;

 

·changes in market interest rates that may cause purchasers of shares of our common stock to demand a different yield;

 

·changes in market valuations of similar companies;

 

·market reaction to any additional equity, debt or other securities that we may issue in the future, and which may or may not dilute the holdings of our existing stockholders;

 

·actual or anticipated variations in our annual or quarterly results of operations;

 

·additions or departures of key personnel or Board members;

 

·actions by institutional or significant stockholders;

 

·short interest in our stock and the market response to such short interest;

 

·the dramatic increase in the number of individual holders of our stock and their participation in social media platforms targeted at speculative investing;

 

·speculation in the press or investment community about our company or industry;

 

·strategic actions by us or our competitors, such as acquisitions or other investments;

 

·legislative, administrative, regulatory or other actions affecting our business, our industry;

 

·investigations, proceedings, or litigation that involve or affect us;

 

·general market, economic and political conditions, such reductions in precious metals prices, increases in fuel and other commodity prices used in the operation of our business, currency fluctuations and acts of war or terrorism.

 

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In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments.

 

We have received a delisting notice from the Nasdaq Stock Market and our common stock and warrants will be delisted from trading unless our common stock price trades above $1.00 per share for a period of time.

 

On December 29, 2021, we received a written notice from the Listing Qualifications department of The Nasdaq Stock Market (“Nasdaq”) indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. We are currently monitoring the closing bid price of our common stock and evaluating alternatives, if appropriate, to resolve the deficiency and regain compliance with this rule, including a reverse stock split of our common stock. We can provide no assurance that the we will be able to regain compliance with the minimum bid price requirement, even if we maintain compliance with the other listing requirements.

 

Even if the market price per share of our common stock after the effective time of a reverse stock remains in excess of $1.00 per share, we may be delisted due to a failure to meet other continued listing requirements, including Nasdaq requirements related to the minimum number of shares that must be in the public float, the minimum market value of the public float and the minimum number of “round lot” holders.

 

You may experience dilution as a result of future equity offerings.

 

On March 14, 2022, we entered into Subscriptions Agreement with each of AMC and Sprott pursuant to which the Company agreed to sell Units consisting of 46,816,480 shares of our Common Stock and 46,816,480 Warrants to purchase shares of our Common Stock with such shares of Common Stock representing approximately 44% of our outstanding shares in the aggregate, exclusive of warrants. We may in the future offer additional shares of our common stock or other securities convertible into, exercisable or exchangeable for shares of our common stock (including convertible debt or convertible preferred stock) at prices that may not be the same as the prices per share in this offering. We may sell shares or other securities in any other offering at a price per share that is less than the prices per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing shareholders. The price per share at which we sell additional shares of our common stock, or securities convertible into, exercisable or exchangeable for shares of our common stock, in future transactions may be higher or lower than the prices per share paid by investors in this offering. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Further, sales of substantial amounts of our common stock, or the perception that these sales could occur, could have a material adverse effect on the price of our common stock.

  

Future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities, which may be senior to our common stock for purposes of distributions or upon liquidation, could adversely affect the market price of our common stock.

 

In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities, including convertible or non-convertible senior or subordinated notes, convertible or non-convertible preferred stock, medium-term notes and trust preferred securities. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock. In addition, any preferred stock we may issue could have a preference on liquidating distributions or a preference on distribution payments that could limit our ability to make a distribution to the holders of our common stock. Since our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock.

 

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There is no guarantee that our outstanding public warrants will ever be in the money, and they may expire worthless.

 

We have 34,289,898 publicly traded warrants outstanding that entitle holders to purchase one share of our common stock at an exercise price of $11.50 per share for a period of five years from the May 29, 2020 Recapitalization Transaction. On October 6, 2020, we issued 9,583,334 units in an underwritten public offering at an offering price to of $9.00 per unit, with each unit consisting of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price of $10.50 per share.

 

Additionally, we assumed the obligations and liabilities under that certain warrant agreement, dated as of October 22, 2015, by and between Seller and Computershare Inc., a Delaware corporation, and its wholly owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as initial warrant agent; and Continental Stock Transfer & Trust Company, LLC was named as the successor warrant agent (the “Seller Warrant Agreement”). Pursuant to the assumption of the Seller Warrant Agreement, the warrants issued thereunder (the “Seller Warrants”) became exercisable into shares of our common stock. The Seller Warrants will expire by the terms on October 22, 2022. As of March 14, 2022, the exercise price for the Seller Warrants was $40.31 per share of our common stock.

 

There is no guarantee that any or all of the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

 

Our 5-Year Private Warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which could increase the volatility in our net income (loss) and may have an adverse effect on the market price of our common stock.

 

In addition to other securities, warrants to purchase shares of the Company’s common stock were issued in a private placement to the SPAC sponsor and underwriter (the “5 Year Private Warrants”) in the aggregate amount of 7,740,000 shares of our common stock at an exercise price of $11.50 per share on May 29, 2020, and concurrently with the closing of the Recapitalization Transaction, as part of a forward purchase unit offering, the Company issued an additional 2,500,000 5-Year Private Warrants to the SPAC sponsor at an exercise price of $11.50 per share.

 

We have determined that the 5-Year Private Warrants are a liability that is marked-to-market with the non-cash fair value adjustments recorded in earnings at each reporting period. Changes in the trading price of our common stock and the fair value of the 5-Year Private Warrants could result in significant volatility in our warrant liability and our net income (loss) in our consolidated statement of operations.

 

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Anti-takeover provisions contained in our charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

 

Our charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make it more difficult to remove management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

 

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

the right of our Board of Directors to appoint a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies our Board of Directors;

 

a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members our Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

the ability of our Board of Directors to determine whether to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

limiting the liability of, and providing indemnification to, the directors and officers; and

 

advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

 

We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to us as such may make our common stock less attractive to our stockholders.

 

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we have elected to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following February 12, 2023, the fifth anniversary of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that are held by non-affiliates exceeds $700 million as of the last business day of the Company’s prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we qualify as an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

We are also a “smaller reporting company”, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are $100 million or more during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosure and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements. Our stockholders may find our common stock less attractive as a result of our status as an “emerging growth company” and “smaller reporting company” and our reliance on the reduced disclosure requirements afforded to these companies.

 

Cautionary Note Regarding Forward-Looking Statements

 

This Form 8-K contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, Section 21E of the Unites States Securities Exchange Act of 1934, as amended, or the Unites States Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included herein and public statements by our officers or representatives, that address activities, events or developments that our management expects or anticipates will or may occur in the future, are forward-looking statements, including but not limited to such things as future business strategy, plans and goals, competitive strengths and expansion and growth of our business. The words “estimate”, “plan”, “anticipate”, “expect”, “intend”, “believe” “target”, “budget”, “may”, “can”, “will”, “would”, “could”, “should”, “seeks”, or “scheduled to” and similar words or expressions, or negatives of these terms or other variations of these terms or comparable language or any discussion of strategy or intention identify forward-looking statements. Forward-looking statements address activities, events or developments that the Company expects or anticipates will or may occur in the future and are based on current expectations and assumptions. These risks may include the following and the occurrence of one or more of the events or circumstances alone or in combination with other events or circumstances, may have a material adverse effect on the Company’s business, cash flows, financial condition and results of operations. Forward-looking statements include, but are not limited to:

 

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industry related risks including:
fluctuations in the price of gold and silver;
uncertainties concerning estimates of mineral resources and the ability to report mineral resources;
risks related to ceasing active mining operations;
risk related to issuing a new initial assessment technical report and no longer relying upon the 2019 Hycroft TRS;
risks and uncertainties relating to potential opportunities to increase resources in block model;
risks and uncertainties relating to identifying higher grades of gold and silver and identifying additional silver assays to expand the silver estimate and increase mineral resources;
uncertainties relating to the ongoing COVID-19 pandemic;
the intense competition within the mining industry;
the inherently hazardous nature of mining activities, including environmental risks;
our insurance may not be adequate to cover all risks associated with our business, or cover the replacement costs of our assets;
potential effects on our operations of U.S. federal and state governmental regulations, including environmental regulation and permitting requirements;
cost of compliance with current and future government regulations;
uncertainties relating to obtaining or retaining approvals and permits from governmental regulatory authorities;
potential challenges to title in our mineral properties;
risks associated with proposed legislation in Nevada that could significantly increase the costs or taxation of our operations; and
and changes to the climate and regulations and pending legislation regarding climate change;

 

business-related risks including:
risks related to our liquidity, compliance with our credit agreements and going concern considerations;
risks related to our ability to raise capital on favorable terms or at all;
risks related to proprietary novel two-stage heap oxidation and leach process at the Hycroft Mine and estimates of production;
risks related to development of an initial assessment and a pre-feasibility study for the acid POX milling process;
our ability to achieve our estimated production and sales rates and stay within our estimated operating and production costs and capital expenditure projections;
risks related to a decline in our production of gold and silver and the ceasing of active mining operations;
risk related to our ability to successfully eliminate or meaningfully reduce processing and mining constraints and related the results of our planned 2021 technical efforts and how the data resulting from such efforts could adversely impact processing technologies applied to our ore, future operations and profitability;

 

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risks related to our reliance on one mine with mining operations ceased;
risks related to our limited experience with a largely untested process of oxidizing and heap leaching sulfide ores; uncertainties and risks related to our reliance on contractors and consultants;
risks related to the availability and cost of equipment, supplies, energy, or commodities;
the commercial success of, and risks relating to, our development activities;
risks related to slope stability;
risks related to our substantial indebtedness, including cross acceleration and our ability to generate sufficient cash to service our indebtedness;
uncertainties related to our ability to replace and expand our mineral resources;
costs related to our land reclamation requirements; 
uncertainties resulting from the possible incurrence of operating and net losses in the future;
the loss of key personnel or our failure to attract and retain personnel;
risks related to technology systems and security breaches;
any failure to remediate and possible litigation as a result of a material weakness in our internal controls over financial reporting;
risks related to current and future legal proceedings; and
and risks that our principal stockholders will be able to exert significant influence over matters submitted to stockholders for approval;

 

risks related to our securities, including:
volatility in the price of our common stock and warrants and possible delisting of securities if our trading price drops below $1.00 per share for an extended period of time;
risks that our warrants may expire worthless;
the valuation of our private warrants could increase the volatility in our net income (loss);
anti–takeover provisions could make a third-party acquisition of us difficult;
risks related to limited access to our financial information, as we have elected to take advantage of the disclosure requirement exemptions granted to emerging growth companies and smaller reporting companies; and
forward looking statements that we do not intend to pay cash dividends and depending upon results of testing and analysis, we may determine to continue to cease mining until a new mining approach is determined and a new technical report is issued.

 

These statements involve known and unknown risks, uncertainties, assumptions and other factors which may cause our actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements.   Please see our other reports filed with the SEC for more information about these and other risks. You are cautioned against attributing undue certainty to forward-looking statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although these forward-looking statements were based on assumptions that the Company believes are reasonable when made, you are cautioned that forward-looking statements are not guarantees of future performance and that actual results, performance or achievements may differ materially from those made in or suggested by the forward-looking statements contained in this news release. In addition, even if our results, performance, or achievements are consistent with the forward-looking statements contained in this news release, those results, performance or achievements may not be indicative of results, performance or achievements in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements made in this news release speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

 

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Cautionary Note to U.S. Investors Regarding Mineral Resources

 

The mineral resource estimates included herein or incorporated by reference herein, including in the 2022 Hycroft TRS, have been prepared in accordance with the requirements of the Modernization Rules as set forth in subpart 1300 of Regulation S-K which became widely applicable on January 1, 2021. These disclosures differ in material respects from the prior requirements set forth in Industry Guide 7, including in that mineral resource information was not permitted and mineral resources have been calculated in accordance with the provision of subpart 1300 of Regulation S-K.These standards differ significantly from the disclosure requirements of Industry Guide 7 in that mineral resource information contained herein may not be comparable to similar information disclosed by U.S. companies that have not early adopted the Modernization Rules promulgated by the SEC. Under SEC standards, mineralization, such are Mineral Resources, may not be classified as a “mineral reserve” unless the determination has been made that the mineralization could be economically and legally produce or extracted at the time of the reserve determination. The term “economically,” as was used in the SEC’s Industry Guide 7 definition of mineral reserves, means that profitable extraction or production has been established or analytically demonstrated in a feasibility study to be viable and justifiable under reasonable investment and market assumptions. The term “legally” as used in the SEC’s Industry Guide 7 definition of mineral reserves, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, we must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with our current mine plans. The terms “Mineral Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource” and “Inferred Mineral Resource” are defined and used in accordance with the Modernization Rules. You are specifically cautioned not to assume that any part or all of the mineral deposits (including mineral resources) in these categories will ever be converted into mineral reserves, as defined by the SEC. You are further cautioned that, except for any portion of mineral resources, as applicable, classified as mineral reserves, mineral resources do not have demonstrated economic value. Inferred mineral resources have a high degree of uncertainty as to their existence as to whether they can be economically or legally mined. Under the Modernization Rules, estimates of inferred mineral resources may not form the basis of an economic analysis. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category. Therefore, you are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, you are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded to mineral reserves.

 

Technical Report Summaries and Qualified Persons

 

The scientific and technical information concerning our mineral projects in this Form 8-K have been reviewed and approved by third-party “qualified persons” under S-K 1300 , including Ausenco Engineering USA South Inc., Independent Mining Consultants, Inc, and WestLand Engineering & Environmental Services, Inc.. For a description of the key assumptions, parameters and methods used to estimate mineral resources included in this Form 8-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other relevant factors, please review the 2022 Hycroft TRS.

 

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Item 9.01. Financial Statements and Exhibits.

 

(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.

 

EXHIBIT INDEX

 

Exhibit
Number
  Description
     
10.1   Letter Agreement dated March 11, 2022, between Hycroft Mining Holding Corporation and Sprott Private Resource Lending II (Collector), LP.
     
10.2   Amendment to the 10% Senior Secured Notes and Note Exchange Agreement dated as of March 14, 2022 among Hycroft Mining Holding Corporation, certain subsidiaries of Hycroft Mining Holding Corporation and holders of the Notes, including certain funds affiliated with, or managed by, Mudrick Capital Management, L.P, Whitebox Advisors, LLC, Highbridge Capital Management, LLC, Aristeia Highbridge Capital Management, LLC and Wolverine Asset Management, LLC and Wilmington Trust, National Association, in its capacity as collateral agent
     
10.3   Subscription Agreement dated March 14, 2022 between Hycroft Mining Holding Corporation and American Multi-Cinemas, Inc.
     
10.4   Subscription Agreement dated March 14, 2022 between Hycroft Mining Holding Corporation and 2176423 Ontario Limited 
     
10.5   Warrant Agreement dated March 14, 2022 between Hycroft Mining Holding Corporation and American Multi-Cinemas, Inc.
     
10.6   Form of Warrant Agreement dated March ____, 2022 between Hycroft Mining Holding Corporation and 2176423 Ontario Limited
     
23.7   Consent of Ausenco Engineering South USA, Inc.
     
23.8   Consent of Independent Mining Consultants, Inc.
     
23.9   Consent of Westland Engineering & Environmental Services, Inc.
     
99.1   Press Release dated March 14, 2022*
     
104   Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document) 

 

* Furnished pursuant to Regulation FD.

 

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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:  March 15, 2022   Hycroft Mining Holding Corporation
   
   
  By: /s/ Stanton Rideout
    Stanton Rideout
    Executive Vice President and Chief Financial Officer

 

 

 

 

 

 

 

 

Exhibit 10.1

 

  SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP
200 Bay Street
Suite 2600
Toronto, ON  M5J 2J1
 
     
  March 11, 2022  

 

CONFIDENTIAL

 

Hycroft Mining Holding Corporation

8181 E. Tufts Ave.

Suite 510
Denver, CO 80237

Re:Credit Agreement

 

Ladies and Gentlemen:

 

Reference is made to that certain Amended and Restated Credit Agreement, dated as of May 29, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and between HYCROFT MINING HOLDING CORPORATION, a Delaware corporation (the “Borrower” or “you”), SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP, a limited partnership organized and existing under the laws of the Province of Ontario (the “Lender,” “us” or “we”), the Guarantors (as defined therein) and the other parties thereto. Capitalized terms used but not otherwise defined in this agreement (this “Agreement”) shall have the respective meanings ascribed thereto in the Credit Agreement.

 

This Agreement contains certain basic terms of the parties’ understanding and agreement. The parties’ final agreement will be set forth in a written agreement or agreements (which may be an amendment to the Credit Agreement) (the “Definitive Agreement”) which will supersede and replace this Agreement upon execution and delivery thereof.

 

In consideration of the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Lender and the Borrower, intending to be legally bound, agree as follows:

 

We understand that the Borrower contemplates the sale or issuance of its equity securities pursuant to one or more transactions to be completed on or before March 31, 2022 (the “Equity Financing Transactions”) to raise capital for working capital and other general corporate purposes.

 

 

 

 

If the Equity Financing Transactions result (or are likely to result pursuant to definitive subscription underwriting and/or similar legally binding agreements) in the Borrower’s receipt of total gross cash proceeds (before deduction of fees and expenses) of at least USD $50,000,000 on or before March 31, 2022, the Lender and the Borrower will amend the principal repayment terms under the Credit Agreement such that no further scheduled payments of principal shall be required prior to the Maturity Date (i.e., there will be no required regular amortization payments of the Facility and the full principal balance of the Facility shall be due and payable in a single “bullet” payment on the Maturity Date).

 

In consideration for entering into this Agreement, and subject to the completion of one or more Equity Financing Transactions resulting in the Borrower’s receipt of total gross cash proceeds (before deduction of fees and expenses) of at least USD $50,000,000 on or before March 31, 2022, the Borrower shall pay to the Lender amendment interest in an amount equal to USD $3,300,000, with such amendment interest to be capitalized and added to the principal amount owing under the Credit Agreement, effective on the closing date of the Equity Financing Transaction resulting in the Borrower’s receipt of total gross cash proceeds (before deduction of fees and expenses) of at least USD $50,000,000; provided, the payment or prepayment of such capitalized principal amount shall not be subject to the Prepayment Premim or any other penalty or premium.

 

The Borrower hereby covenants and agrees to use its reasonable commercial efforts to cause the holders of all outstanding subordinated debt issued by the Borrower to convert all such subordinate debt into common shares in the capital of the Borrower on or before the date which is 12 months after the date of this Agreement.

 

Subject to the conditions described above, the Borrower, the Lender and other parties to the Credit Agreement shall work together in good faith to negotiate the Definitive Agreement to effect the foregoing. It being understood and acknowledged that the effectiveness of the Definitive Agreement prior to the consummation of the Equity Financing Transactions may be necessary (whether as an express condition precedent or otherwise).

 

The Definitive Agreement will reflect these terms and other terms to be mutually agreed. Upon execution, the Definitive Agreement will supersede and replace this Agreement in its entirety.

 

This Agreement shall be governed by and construed in accordance with the laws of the Province ‎of Ontario and the federal laws of Canada applicable therein.

 

This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and permitted assigns. This Agreement may not be assigned by the Borrower without the prior written consent of the Lender.

 

This Agreement may be executed by facsimile or other electronic means and in counterparts, each ‎of which shall be considered an original and which taken together shall constitute a single ‎agreement.

 

[Remainder of page intentionally left blank.]

 

- 2 -

 

 

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

 

  SPROTT PRIVATE RESOURCE LENDING II (COLLECTOR), LP, by its general partner, SPROTT RESOURCE LENDING CORP.
   
  Per: /s/ Narinda Nagra
    Authorized Signatory
   
  Per: /s/ Jim Grosdanis
    Authorized Signatory
   

 

   
   
ACKNOWLEDGED AND AGREED BY:  
   
HYCROFT MINING HOLDING CORPORATION  
   
   
By: /s/ Stanton Rideout  
Name: Stanton Rideout  
Title: Executive Vice President and Chief Financial Officer  

 

 

 

 

Exhibit 10.2

 

AMENDMENT TO 10% SENIOR SECURED NOTES

AND NOTE EXCHANGE AGREEMENT

 

This Amendment to the 10% Senior Secured Notes and Note Exchange Agreement (this “Amendment”) is made and entered into effective as of March 14, 2022, by and among (a) Hycroft Mining Holding Corporation (as successor-in-interest to Hycroft Mining Corporation), a Delaware corporation (the “Company”), (b) each of the direct or indirect subsidiaries of the Company listed on the signature pages hereto as a Guarantor (the “Guarantors”), (c) each of the undersigned entities listed on the signature pages hereto as a Holder (each, an “Amending Holder” and, collectively, the “Amending Holders”) and (d) Wilmington Trust, National Association, solely in its capacity as collateral agent under the Note Exchange Agreement (as defined below) (the “Collateral Agent”). The parties hereto shall be collectively referred to as the “Parties.” Capitalized terms not otherwise defined herein shall have the meanings set forth in the Notes or the Note Exchange Agreements, as applicable.

 

Recitals

 

A.                The Company previously entered into that certain Note Exchange Agreement on January 13, 2020, as amended by the Omnibus Amendment to Note Purchase Agreements and Note Exchange Agreement, dated as of May 28, 2020 (as further amended, restated, supplemented or otherwise modified from time to time, the “Note Exchange Agreement”) and issued its 10% Senior Secured Notes (the “Notes”) pursuant to the Note Exchange Agreement.

 

B.                 Section 9.2 of the Note Exchange Agreement requires that any amendment or waiver that changes the stated maturity of any Note or extends the payment of interest on any Note, may be effected with the consent of each effected Holder (as defined in the Note Exchange Agreement).

 

C.                 The undersigned Amending Holders are the Holders of all Notes issued pursuant to the 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 Exchange Agreement and the Notes as follows.

 

1.                  Amendment to Section 17.3 of the Note Exchange Agreement. Section 17.3 of the Note Exchange Agreement is hereby amended by amending and restating the definition of “Stated Maturity” as follows:

 

Stated Maturity” means, with respect to any installment of interest or principal on any Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, in each case, as amended from time to time, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof, as amended from time to time. The Stated Maturity of any intercompany Indebtedness payable upon demand shall be the date of demand of payment under such Indebtedness.

 

 

 

 

2.                  Amendment to Section 16.5 of the Note Exchange Agreement. Section 16.5 of the Note Exchange Agreement is hereby amended and restated in its entirety as follows:

 

16.5       Assignments. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Except as expressly contemplated in Section 6.19(c), neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by the Company (whether by operation of Law or otherwise) without the prior written consent of the Requisite Holders. Any Exchanging Holder’s rights, obligations or interests hereunder may be freely assigned, delegated or transferred, in whole or in part, by such Exchanging Holder, to any Person subject to, and in accordance with, the terms of Section 7.2; provided, that any such assignee assumes the obligations of the assigning Exchanging Holder hereunder and agrees in writing prior to such assignment to be bound by the terms hereof in the same manner as the assigning Exchanging Holder (including by making all of the representations and warranties set forth in Section 4 as to such assignee). Following any assignment described in the immediately preceding sentence, Schedule 1.1 hereto shall be updated by the Company and its Subsidiaries (in consultation with the assigning Exchanging Holder and the assignee) solely to reflect the name and address of the applicable assignee or assignees. Any update to Schedule 1.1 hereto described in the immediately preceding sentence shall not be deemed an amendment to this Agreement.

 

3.                  Amendment to Notes. Each Note is hereby amended by deleting each instance of “December 1, 2025” and inserting “December 1, 2027” in its place.

 

4.                  Conditions Precedent. This Amendment shall be effective upon the satisfaction or waiver of each of the following:

 

(a)               This Amendment shall have been signed by Amending Holders who collectively constitute the Holders of all outstanding Notes.

 

(b)               The consummation of one or more transactions for the sale or issuance of equity interests of the Company pursuant to which the Company receives total gross cash proceeds (before deduction of fees and expenses) of at least USD $50,000,000 on or before March 31, 2022.

 

The Company shall provide written notice to the Collateral Agent of the occurrence of the effectiveness of this Amendment, which notice may be by e-mail.

 

5.                  Miscellaneous

 

5.1              Entire Agreement. Except as specifically amended in this Amendment, the Notes shall otherwise continue in full force and effect. This Amendment, together with the Notes (as amended by this Amendment), the Note Exchange Agreement and the other Note Documents constitute the entire understanding among the parties hereto and 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 hereto and thereto with respect to the subject matter hereof and thereof.

 

 

 

 

5.2              Governing Law. THIS 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).

 

5.3              Judicial Interpretation. The parties hereto agree that they have been represented by legal counsel during the negotiation and execution of this 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.

 

5.4              Counterparts. This 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 Agreement by facsimile or portable document format (PDF) will be effective as delivery of a manually executed counterpart of this Agreement.

 

5.5              Amendment. A copy of this Amendment shall be attached to each Note and made a part of such Note, provided, however, that failure to attach a copy of this Amendment to such Note shall not impact the effectiveness of this Amendment and this Amendment shall nonetheless be valid, binding and enforceable. This Amendment and each Note, as modified by this Amendment, shall be a Note Document under the Note Exchange Agreement and all references in the Note Documents to such Note or the Note Exchange Agreement shall refer to the Note and the Note Exchange Agreement, as applicable, as modified by this Amendment.

 

5.6              Direction to the Collateral Agent. Each of the Holders party hereto by its signature below, (a) authorizes and directs the Collateral Agent to execute and deliver this Amendment, and (b) acknowledges that its indemnity obligations set forth in Section 12 of the Note Exchange Agreement shall apply to this Amendment.

 

[signature pages to follow]

 

 

 

 

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first above written.

 

  COMPANY:
   
  HYCROFT MINING HOLDING CORPORATION
   
   
  By: /s/ Stanton Rideout
    Name: Stanton Rideout
    Title: Chief Financial Officer
   
   
  GUARANTORS:
   
  AUTAR GOLD CORPORATION (f/k/a Muds Acquisition Sub, Inc.)
  AUXAG MINING CORPORATION (f/k/a Muds Holdco, Inc.)
  HYCROFT RESOURCES & ‎DEVELOPMENT, LLC
  ALLIED VGH LLC
   
  By: /s/ Stanton Rideout
    Name: Stanton Rideout
    Title: Chief Financial Officer

 

[Signature Page to Amendment]

 

 

 

 

 

  COLLATERAL AGENT:  
   
  WILMINGTON TRUST, NATIONAL ASSOCIATION, as Collateral Agent
   
  By: /s/ Sarah Vilhauer
    Name: Sarah Vilhauer
    Title: Banking Officer

 

 

 

 

  HIGHBRIDGE TACTICAL CREDIT MASTER FUND, L.P.
  as an Amending Holder
   
  By: Highbridge Capital Management, LLC,
its Trading Manager
   
   
  By: /s/ Jonathan Segal
    Name: Jonathan Segal
    Title: Managing Director, Co-CIO

 

 

 

 

  highbridge msf international ltd. (f/k/a 1992 MSF INternational LTD.),
  as an Amending Holder
   
  By: Highbridge Capital Management, LLC,
its Trading Manager
   
   
  By:  /s/ Jonathan Segal
    Name: Jonathan Segal
    Title: Managing Director, Co-CIO

 

 

 

 

  boston patriot batterymarch st llc,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  Mudrick Distressed Opportunity Specialty Fund, L.P,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  Mudrick Distressed Opportunity Drawdown Fund, L.P. ,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  Mudrick DISTRESSED OPPORTUNITY FUND GLOBAL LP,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  BLACKWELL PARTNERS LLC – Series A,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  MERCER QIF FUND PLC,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  Mudrick Distressed Opportunity DRAWDOWN Fund II, L.P,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
  its investment manager
   
   
  By: /s/Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  Mudrick Distressed Opportunity DRAWDOWN Fund II SC, L.P,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
  its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  BOSTON PATRIOT NEWBURY ST LLC,
  as an Amending Holder
   
  By: Mudrick Capital Management, LP,
  its investment manager
   
   
  By: /s/ Jason Mudrick
    Name: Jason Mudrick
    Title: Chief Investment Officer

 

[Signature Page to Amendment]

 

 

 

 

  ASPV, L.L.C.,
  as an Amending Holder
   
  By: Aristeia Capital, L.L.C., Investment Manager
   
   
  By: /s/ Andrew B. David
    Name: Andrew B. David
    Title: Chief Operating Officer

 

[Signature Page to Amendment]

 

 

 

 

  DS LIQUID DIV RVA ARST LLC,
  as an Amending Holder
   
  By: Aristeia Capital, L.L.C., Investment Manager
   
   
  By: /s/ Andrew B. David
    Name: Andrew B. David
    Title: Chief Operating Officer

 

[Signature Page to Amendment]

 

 

 

 

  ALSV LIMITED,
  as an Amending Holder
   
  By: Aristeia Capital, L.L.C., Investment Manager
   
   
  By: /s/ Andrew B. David
    Name: Andrew B. David
    Title: Chief Operating Officer

 

[Signature Page to Amendment]

 

 

 

 

  BLUE PEAK LIMITED,
  as an Amending Holder
   
  By: Aristeia Capital, L.L.C., Investment Manager
   
   
  By: /s/ Andrew B. David
    Name: Andrew B. David
    Title: Chief Operating Officer

 

[Signature Page to Amendment]

 

 

 

 

  WBOX 2015-5 LTD.,
  as an Amending Holder
   
   
  By: /s/ Lisa Conrad
    Name: Lisa Conrad
    Title: Chief Compliance Officer

 

[Signature Page to Amendment]

 

 

 

 

  WHITEBOX MULTI-STRATEGY PARTNERS, LP,
  as an Amending Holder
   
   
  By: /s/ Lisa Conrad
    Name: Lisa Conrad
    Title: Chief Compliance Officer

 

[Signature Page to Amendment]

 

 

 

 

  WHITEBOX INSTITUTIONAL PARTNERS, LP,
  as an Amending Holder
   
   
  By: /s/ Lisa Conrad
    Name: Lisa Conrad
    Title: Chief Compliance Officer

 

[Signature Page to Amendment]

 

 

 

 

  WHITEBOX CREDIT PARTNERS, LP,
  as an Amending Holder
   
   
  By: /s/ Lisa Conrad
    Name: Lisa Conrad
    Title: Chief Compliance Officer

 

[Signature Page to Amendment]

 

 

 

 

  WHITEBOX ASYMMETRIC PARTNERS, LP,
  as an Amending Holder
   
   
  By: /s/ Lisa Conrad
    Name: Lisa Conrad
    Title: Chief Compliance Officer

 

[Signature Page to Amendment]

 

 

 

 

  WFF CAYMAN II LTD.,
  as an Amending Holder
   
   
  By:  /s/ Andrew Sujdak
    Name: Andrew Sujdak
    Title: Authorized Signatory

 

[Signature Page to Amendment]

 

 

 

 

Exhibit 10.3

 

Subscription Agreement

 

This SUBSCRIPTION AGREEMENT (this “Subscription Agreement”) is entered into this 14th day of March, 2022, by and between Hycroft Mining Holding Corporation, a Delaware corporation (the “Company”), and the undersigned (“Subscriber” or “you”).

 

WHEREAS, Subscriber desires to subscribe for and purchase from the Company a unit consisting of (i) a number of shares of the Company’s Class A common stock, par value $0.0001 per share (the “Shares”) and (ii) an equal number of warrants to purchase Shares exercisable for a period of five years at an exercise price of $1.068 (the “Warrants” and together with the Shares, “Units”), each set forth on the signature page hereto, for a purchase price of $1.193 per Unit, which is the “Minimum Price” required by Nasdaq Stock Market Rule 5635(d) such that approval of the Company’s stockholders is not required, and the Company desires to issue and sell to Subscriber the Units in consideration of the payment of the applicable purchase price by or on behalf of Subscriber to the Company on or prior to the Closing (as defined below).

 

WHEREAS, concurrently with the Closing, the Company and Subscriber desire to enter into a Warrant Agreement (the “Warrant Agreement”), substantially in the form attached hereto as Exhibit B, pursuant to which the Warrants shall be governed.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants, and subject to the conditions, herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

1.             Subscription. Subject to the terms and conditions hereof, Subscriber hereby agrees to subscribe for and purchase, and the Company hereby agrees to issue and sell to Subscriber, upon the payment of the applicable purchase price, the Units (such subscription and issuance, the “Subscription”).

 

2.             Representations, Warranties and Agreements.

 

2.1          Subscriber’s Representations, Warranties and Agreements. To induce the Company to issue the Units to Subscriber, Subscriber hereby represents and warrants to the Company and agrees with the Company as follows:

 

2.1.1        If Subscriber is not an individual, Subscriber has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation, with power and authority to enter into, deliver and perform its obligations under this Subscription Agreement. If Subscriber is an individual, Subscriber has the authority to enter into, deliver and perform its obligations under this Subscription Agreement.

 

2.1.2        If Subscriber is not an individual, this Subscription Agreement has been duly authorized, executed and delivered by Subscriber. If Subscriber is an individual, the signature on this Subscription Agreement is genuine, and Subscriber has legal competence and capacity to execute the same. This Subscription Agreement is enforceable against Subscriber in accordance with its terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.

 

 

 

2.1.3        The execution, delivery and performance by Subscriber of this Subscription Agreement and the consummation of the transactions contemplated herein will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Subscriber or any of its subsidiaries pursuant to1 the terms of any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which Subscriber or any of its subsidiaries is a party or by which Subscriber or any of its subsidiaries is bound or to which any of the property or assets of Subscriber or any of its subsidiaries is subject, which would reasonably be expected to have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of Subscriber and its subsidiaries, taken as a whole (a “Subscriber Material Adverse Effect”) or materially affect the legal authority of Subscriber to comply in all material respects with the terms of this Subscription Agreement; (ii) if Subscriber is not an individual, result in any violation of the provisions of the organizational documents of Subscriber or any of its subsidiaries; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Subscriber or any of its subsidiaries or any of their respective properties that would reasonably be expected to have a Subscriber Material Adverse Effect or materially affect the legal authority of Subscriber to comply in all material respects with this Subscription Agreement.

 

2.1.4        Subscriber is an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”)) satisfying the applicable requirements set forth on Schedule A, (i) is acquiring the Units only for its own account and not for the account of others, and (ii) is not acquiring the Units with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act (and shall provide the requested information on Schedule A following the signature page hereto). Subscriber is not an entity formed for the specific purpose of acquiring the Shares.

 

2.1.5        Subscriber understands that the Units are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Shares have not been registered under the Securities Act. Subscriber understands that the Units may not be resold, transferred, pledged or otherwise disposed of by Subscriber absent an effective registration statement under the Securities Act, except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities Act, and that any certificates representing the Shares and Warrants shall contain a legend to such effect. Subscriber acknowledges that the Shares and Warrants will not be eligible for resale pursuant to Rule 144A promulgated under the Securities Act. Subscriber understands and agrees that the Shares and Warrants will be subject to transfer restrictions and, as a result of these transfer restrictions, Subscriber may not be able to readily resell the Shares and/or Warrants and may be required to bear the financial risk of an investment in the Shares and Warrants for an indefinite period of time. Subscriber understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Shares and/or Warrants.

 

2

 

 

2.1.6        Subscriber understands and agrees that Subscriber is purchasing the Units directly from the Company. Subscriber further acknowledges that there have been no representations, warranties, covenants and agreements made to Subscriber by the Company or any of its officers or directors, expressly or by implication, other than those representations, warranties, covenants and agreements included in this Subscription Agreement.

 

2.1.7        Subscriber represents and warrants that its acquisition and holding of the Shares and Warrants will not constitute or result in a non-exempt prohibited transaction under Section 406 of the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or any applicable similar law.

 

2.1.8        In making its decision to purchase the Units, Subscriber represents that it has relied solely upon independent investigation made by Subscriber. Subscriber represents that it has received such information as Subscriber deems necessary in order to make an investment decision with respect to the Units. Subscriber represents and agrees that Subscriber and Subscriber’s professional advisor(s), if any, have had the full opportunity to ask such questions, receive such answers and obtain such information as Subscriber and such Subscriber’s professional advisor(s), if any, have deemed necessary to make an investment decision with respect to the Units.

 

2.1.9        Subscriber acknowledges that the Company represents and warrants that the Units (i) were not offered by any form of general solicitation or general advertising and (ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or any state securities laws. Subscriber acknowledges that it is not relying upon, and has not relied upon, any statement, representation or warranty made by any person, except for the statements, representations and warranties contained in the private placement documentation.

 

2.1.10    Subscriber acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Units. Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Units, and Subscriber has sought such accounting, legal and tax advice as Subscriber has considered necessary to make an informed investment decision.

 

2.1.11    Alone, or together with any professional advisor(s), Subscriber represents and acknowledges that Subscriber has adequately analyzed and fully considered the risks of an investment in the Units and determined that the Shares are a suitable investment for Subscriber and that Subscriber is able at this time and in the foreseeable future to bear the economic risk of a total loss of Subscriber’s investment in the Company. Subscriber acknowledges specifically that a possibility of total loss exists.

 

3

 

 

2.1.12    Subscriber understands and agrees that no federal or state agency has passed upon or endorsed the merits of the offering of the Units or made any findings or determination as to the fairness of this investment.

 

2.1.13    Subscriber represents and warrants that Subscriber is not (i) a person or entity named on the List of Specially Designated Nationals and Blocked Persons administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or in any Executive Order issued by the President of the United States and administered by OFAC (“OFAC List”), or a person or entity prohibited by any OFAC sanctions program, (ii) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank (collectively, a “Prohibited Investor”). Subscriber agrees to provide law enforcement agencies, if requested thereby, such records as required by applicable law, provided that Subscriber is permitted to do so under applicable law. Subscriber represents that if it is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) (the “BSA”), as amended by the USA PATRIOT Act of 2001 (the “PATRIOT Act”), and its implementing regulations (collectively, the “BSA/PATRIOT Act”), that Subscriber maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act. Subscriber also represents that, to the extent required, it maintains policies and procedures reasonably designed for the screening of its investors against the OFAC sanctions programs, including the OFAC List. Subscriber further represents and warrants that, to the extent required, it maintains policies and procedures reasonably designed to ensure that the funds held by Subscriber and used to purchase the Units were legally derived.

 

2.1.14    Subscriber has, and at the Closing will have, sufficient funds to pay the applicable purchase price pursuant to Section 3.1.

 

2.1.15    Subscriber represents that no disqualifying event described in Rule 506(d)(1)(i-viii) of the Securities Act (a “Disqualification Event”) is applicable to Subscriber or any of its Rule 506(d) Related Parties (as defined below), except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Subscriber hereby agrees that it shall notify the Company promptly in writing in the event a Disqualification Event becomes applicable to Subscriber or any of its Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. For purposes of this Section 2.1.15, “Rule 506(d) Related Party” shall mean a person or entity that is a beneficial owner of Subscriber’s securities for purposes of Rule 506(d) of the Securities Act.

 

4

 

 

2.2           Company’s Representations, Warranties and Agreements. Except as otherwise disclosed in writing to the Subscriber prior to the Closing Date, the Company and each of its direct or indirect subsidiaries listed on the signature pages hereto (“Subsidiaries”), jointly and severally, represent and warrant to the Subscriber as set forth below as of the date hereof.

 

2.2.1        Organization of the Company and its Subsidiaries. The Company and each of its Subsidiaries is a corporation or limited liability company (as the case may be) duly organized or formed (as applicable), validly existing and in good standing (to the extent such concept is applicable) under the Laws (as defined below) of its jurisdiction of organization or formation (as applicable), and has full corporate or limited liability company (as applicable) power and authority to conduct its business as it is now conducted. The Company and each of its Subsidiaries is duly qualified or registered to do business as a foreign corporation or limited liability company (as the case may be) and is in good standing (to the extent such concept is applicable) under the Laws of each jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification or registration, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to result in a conflict with or a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, which would reasonably be expected to have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of the Company (a “Material Adverse Effect”).

 

2.2.2        Authority; No Conflict; Consents.

 

(a)   The Company (i) has the requisite corporate or limited liability company (as applicable) power and authority (A) to enter into, execute and deliver this Agreement and the Warrant Agreement, and (B) to perform and consummate any of the transactions contemplated by this Agreement and the Warrant Agreement, and (ii) has taken all necessary corporate action required for (x) the due authorization, execution and delivery of this Agreement, the Shares and the Warrant Agreement and (y) the performance and consummation of the transactions contemplated by this Agreement and the Warrant Agreement. This Agreement has been (or, in the case of the Warrant Agreement to be entered into by the Company at or prior to the Closing, will be) duly executed and delivered by the Company. This Agreement constitutes (or, in the case of the Warrant Agreement to be entered into by the Company, as the case may be, at or prior to the Closing, will constitute) the legal, valid and binding obligation of each of the Company, enforceable against the Company in accordance with its terms, except to the extent that the enforceability thereof may be limited by (I) applicable bankruptcy, insolvency, moratorium, reorganization and other laws of general application limiting the enforcement of creditors’ rights generally and (II) the fact that the courts may deny the granting or enforcement of equitable remedies.

 

(b)   Neither the execution and delivery by the Company of this Agreement or the Warrant Agreement, nor the execution or the performance or consummation by the Company of any of the transactions contemplated by this Agreement or the Warrant Agreement will, directly or indirectly (with or without notice or lapse of time or both):

 

(i)          contravene, conflict with or result in a violation or breach of the second amended and restated certificate of incorporation of the Company, or the amended and restated by-laws of the Company (“Organizational Documents”);

 

(ii)         contravene, conflict with or result in a violation of any Law or order, writ, judgment, injunction, decree, rule, ruling, directive, stipulation, determination or award made, issued or entered by or with any Governmental Body (as defined below), whether preliminary, interlocutory or final (each, an “Order”) to which the Company or any of the properties, assets, rights or interests owned or used by any of the Company may be subject;

 

5

 

 

(iii)        contravene, conflict with or result in a violation or breach of any provision of, or give rise to any right of termination, acceleration or cancellation under, any agreement, contract, obligation, promise, undertaking or understanding, whether written or oral to which any of the Company is a party or which any of the Company’s properties, assets, rights or interests are bound; or

 

(iv)        result in the imposition or creation of any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership (collectively, “Liens”) upon or with respect to any of the assets, properties, rights, interests or businesses owned or used by any of the Company;

 

except, in the case of clauses (ii) and (iii) above, where such occurrence, event or result, would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company.

 

(c)The Company will not be required to give any notice to, make any filing with or obtain any consent, waiver, approval, order or authorization from, any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization or Governmental Body (each, a “Person”) in connection with the execution and delivery of this Agreement or the Warrant Agreement, or the performance or consummation of any of the transactions contemplated by this Agreement or the Warrant Agreement.

 

2.2.3        Proceedings. There are no pending, outstanding or, to the knowledge of the Company, threatened actions, arbitrations, audits, hearings, investigations, inquires, litigation or suits (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any federal, national, supranational, foreign, state, provincial, local, county, municipal or other government, any governmental, regulatory or administrative authority, agency, department, bureau, board, commission or official or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, or any court, tribunal, judicial or arbitral body to which any of the Company or any of its Subsidiaries is a party or to which any properties, assets, rights or interests of any of them are subject.

 

6

 

 

2.2.4        Brokers or Finders. Neither the Company nor any of its Subsidiaries nor any of their respective employees, officers, directors, accountants, attorneys and other advisors or other representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payments in connection with this Agreement or Warrant Agreement.

 

2.2.5        Exemption from Registration. Assuming the accuracy of the Subscriber’s representations set forth in Section 4 hereof, the issuance of the Units, including the Shares and Warrants hereunder will be exempt from the registration and prospectus delivery requirements of the Securities Act.

 

2.2.6        Issuance. The Units issued and delivered to the Subscriber pursuant to this Agreement will be free and clear of all taxes, Liens, pre-emptive rights, rights of first refusal, subscription and similar rights (other than any such Liens created by a Subscriber).

 

2.2.7        No Violation or Default. Neither the Company nor any of its Subsidiaries is in violation of its Organizational Documents. Neither the Company nor any of its Subsidiaries is: (a) in default, and no event has occurred that, with notice or lapse of time or both, would constitute a default, under any agreement, contract, obligation, promise, undertaking or understanding, whether written or oral to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the properties, assets, rights or interests of the Company or any of its Subsidiaries is subject; or (b) in violation of any Law or Order, except, in the case of clauses (a) and (b) above, for any such default or violation that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries taken as a whole.

 

2.2.8        Title to Intellectual Property. Each of the Company and its Subsidiaries owns, or is licensed or otherwise has the right to use, all patents, inventions and discoveries (whether patentable or not), trademarks, service marks, trade names, trade dress, internet domain names, copyrights, published and unpublished works of authorship (including software), and all registrations, recordations and applications of the foregoing and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and licenses related to any of the foregoing (“IP Rights”) owned by or used in the conduct of the businesses of each of the Company and its Subsidiaries (“Company IP Rights”), except where the failure to own or possess such rights to (or have licenses related to) any such IP Rights would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to any of the Company and its Subsidiaries, taken as a whole; and, to the knowledge of the Company, the conduct of the businesses of each of the Company and its Subsidiaries does not infringe or misappropriate in any material respect with any IP Rights of others, and each of the Company and its Subsidiaries has not received any written notice of any claim of infringement or misappropriation of any IP Rights of others. None of the Company IP Rights owned by any of the Company and/or any of its Subsidiaries have been adjudged invalid or unenforceable, and the Company and its Subsidiaries have maintained all registered patents, trademarks and copyrights in full force and effect and used commercially reasonable efforts to protect all trade secrets, except where such adjudication or failure to maintain would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company and its Subsidiaries, taken as a whole. To the knowledge of the Company, no third party has infringed or misappropriated any Company IP Rights, except where such infringement or misappropriation of any such IP Rights would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or its Subsidiaries taken as a whole.

 

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2.2.9        Licenses and Permits. Each of the Company and its Subsidiaries holds all material licenses, certificates of approval, approvals, registrations, permits and consents by, and have given all material notices to, the appropriate Governmental Bodies that are required to operate their businesses where they are currently being operated, except where the failure to have such licenses, certificates of approval, approvals, registrations, permits and consents could not reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has received notice of any revocation or modification of any such license, certificate, permit, or authorization, or has any reason to believe that any such license, certificate, permit, or authorization will not be renewed in the ordinary course, or that any such renewal will be materially impeded, delayed, hindered or burdensome to obtain, except to the extent that any of the foregoing would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries.

 

2.2.10       Compliance with Environmental Laws. Except in the case of any of the following that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries, each of the Company and its Subsidiaries:

 

(a)              is in compliance with any and all material applicable Laws and Orders relating to pollution or the regulation and protection of human or animal health, safety, the environment or natural resources, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Materials Transportation Uniform Safety Act, as amended (49 U.S.C. 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Oil Pollution Act of 1990, as amended (33 U.S.C. § 2701 et seq.); the Toxic Substances Control Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.); and their state, municipal and local counterparts or equivalents and any transfer of ownership notification or approval statutes (collectively, “Environmental Laws”);

 

(b)             have received and are in compliance with all material permits, licenses, approvals or other consent, waiver, approval, Order or authorization of, or registration, declaration or filing with or notice to, any Governmental Body or other Person required of them under applicable Environmental Laws to conduct their respective businesses; and

 

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(c)            have no knowledge and have not received written notice from any federal, national, supranational, foreign, state, provincial, local, county, municipal or other government, any governmental, regulatory or administrative authority, agency, department, bureau, board, commission or official or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, or any court, tribunal, judicial or arbitral body (in each case, a “Governmental Body”) or any Person of (i) any material violations of, or liability under, Environmental Laws with respect to the presence of any hazardous or toxic substances or wastes, pollutants or contaminants at, on, under, or emanating from any of their respective businesses and (ii) any actual or potential material liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants at, on, under or emanating from any of their respective currently owned, operated or leased real properties or tangible personal properties, or any of their respective formerly owned, operated or leased real properties or tangible personal properties, or any of their respective divested businesses or predecessors in interest. For purposes of this Section 2.2.10 , “Disposal” and “Release” shall have the same meanings as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.).

 

2.2.11       Compliance with ERISA. All material employee benefit, compensation and incentive plans, arrangements and agreements (including, but not limited to, employee benefit plans within the meaning of Section 3(3) of Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) (all such plans, arrangements and agreements, whether or not material, the “Benefit Plans”) maintained, administered or contributed to by the Company or any of its Subsidiaries for or on behalf of any employees or former employees of the Company or any of its affiliates have been maintained in compliance in all material respects with its terms and the requirements of any applicable [Laws or Orders], including, but not limited to, ERISA and the Code. None of the Benefit Plans are, and neither the Company and its Subsidiaries, nor any of their respective members of any of the Company or its Subsidiaries’ controlled group, or under common control with any of the Company or its Subsidiaries, within the meaning of Section 414 of the Code, maintain, contribute to, or have an obligation to contribute to, or in the past six (6) years has maintained, contributed to, or had an obligation to contribute to, or have any liability with respect to, (i) a plan subject to Title IV of ERISA or Sections 412 or 4971 of the Code or (ii) a multiemployer plan (within the meaning of Section 4001(3) of ERISA or 413(c) of the Code).

 

2.2.12       No Unlawful Payments. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any current or former director, officer or employee of the Company or any of its Subsidiaries has, directly or indirectly: (a) made, offered or promised to make or offer any payment, loan or transfer of anything of value, including any reward, advantage or benefit of any kind, to or for the benefit of any employee or official of a Governmental Body, candidate for public office, political party or political campaign, for the purpose of (i) influencing any act or decision of such employee, official, candidate, party or campaign, (ii) inducing such employee, official, candidate, party or campaign to do or omit to do any act in violation of a lawful duty, (iii) obtaining or retaining business for or with any Person, (iv) expediting or securing the performance of official acts of a routine nature, or (v) otherwise securing any improper advantage; (b) paid, offered or promised to pay or offer any bribe, payoff, influence payment, kickback, unlawful rebate, or other similar unlawful payment of any nature; (c) made, offered or promised to make or offer any unlawful contributions, gifts, entertainment or other unlawful expenditures; (d) established or maintained any unlawful fund of corporate monies or other properties; (e) created or caused the creation of any false or inaccurate books and records of any of the Company or any of its Subsidiaries related to any of the foregoing; or (f) otherwise violated any provision of the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq., or any other applicable anti-corruption or anti-bribery law.

 

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2.2.13        Title to Property; Leases.

 

(a)             The Company and its Subsidiaries have good, valid and marketable title to (or, (i) in the case of leased assets or property (including, without limitation, all real property rights and interests, mining claims (whether patented or unpatented), mining leases or concessions leased by each of the Company or any of its Subsidiaries (the “Leased Real Property”)), a valid and subsisting leasehold interest in, or (ii) in the case of real property rights and interests, mining claims (whether patented or unpatented), mining leases or concessions owned by each of the Company or any of its Subsidiaries (the “Owned Real Property”), good, valid and marketable title to) all assets and properties that, individually or in the aggregate, are material to the conduct of the business of each of the Company and its Subsidiaries, free and clear of all Liens other Liens permitted under the Company’s existing indebtedness. As of the date hereof all leases relating to the Leased Real Property are in full force and effect and enforceable by the Company and its Subsidiaries in accordance with their respective terms.

 

(b)             To the knowledge of the Company, none of the buildings or structures situated on or forming part of the Owned Real Property or the Leased Real Property, or the operation or maintenance thereof, encroaches on any property owned by others, other than any such encroachments that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. To the knowledge of the Company, the Owned Real Property and the Leased Real Property and the current uses thereof by the Company and its Subsidiaries comply in all respects with applicable federal, national, supranational, foreign, state, provincial, local, county, municipal or similar statute, law, common law, writ, injunction, decree, guideline, policy, ordinance, regulation, rule, code, Order, constitution, treaty, requirement, judgment or judicial or administrative doctrines enacted, promulgated, issued, enforced or entered by any Governmental Body (collectively, “Laws”), other than any such noncompliance that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. No taking has been commenced or, to the knowledge of the Company, is contemplated with respect to all or any portion of any Owned Real Property or Leased Real Property.

 

(c)            With respect to all patented and unpatented mining claims included in the Leased Real Property and the Owned Real Property (the “Mining Claims”), (i) such Mining Claims are validly located and recorded and are maintained, in each case, in accordance, in all material respects, with the Laws of the United States and the State of Nevada, (ii) neither the Company nor any of its Subsidiaries have any liability or obligations to any Person with respect to any Mining Claims (other than obligations in respect of the payment of royalties under a mining lease with the owner of certain patented and unpatented Mining Claims relating to the gold and silver mine commonly referred to as the “Hycroft Mine”), (iii) there is no material adverse claim against or challenge to the title of the Company or any of its Subsidiaries with respect to any Mining Claim that, if determined adversely to the Company or any of its Subsidiaries, would materially and adversely affect the ability of the Company or any of its Subsidiaries to make use of, transfer or otherwise exploit such Mining Claim, (iv) no other Person has any material interest in any Mining Claim that would affect the interest of the Company or any of its Subsidiaries in the Mining Claims, and (v) neither the Company nor any of its Subsidiaries has received any written notice or, to the knowledge of the Company, any oral notice from any Governmental Body of any revocation or intent to revoke any of the Company’s or any of its Subsidiaries’ interest in any of the Mining Claims.

 

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(d)            The Company and its Subsidiaries own or have valid rights to use all water rights, surface use rights, access rights or agreement, easements and rights of way, tunnels, drifts, powerlines and roads that are necessary for the Company and its Subsidiaries to operate their business in the ordinary course of business.

 

2.3          Reports. Reports. The Company has filed or furnished, as applicable all forms, reports, schedules, prospectuses, registration statements and other statements and documents required to be filed or furnished by it with the SEC under the Exchange Act or the Securities Act since January 1, 2021, or prior to the date of this Subscription Agreement (each, a “Company Report”). As of its respective date, and, if amended, as of the date of the last such amendment, each Company Report complied in all material respects as to form with the applicable requirements of the Securities Act and the Exchange Act, and any rules and regulations promulgated thereunder applicable to such Company Report. As of its respective date, and, if amended, as of the date of the last such amendment, no Company Report contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The consolidated financial statements of the Company and its subsidiaries included in the Company Reports present fairly, in all material respects, the financial condition, results of operations and cash flows of the Company on a consolidated basis as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Exchange Act and have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein).

 

2.3.1          Tax Matters.

 

(a)             (i) All tax returns required to be filed by or on behalf of the Company or any of its Subsidiaries, or any Affiliated Group (as defined in Section 1504(a) of the Code) of which the Company or any of its Subsidiaries is or was a member, have been properly prepared and duly and timely filed with the appropriate taxing authorities in all jurisdictions in which such tax returns are required to be filed (after giving effect to any valid extensions of time in which to make such filings); (ii) all material taxes payable by or on behalf of the Company or any of its Subsidiaries either directly, as part of the consolidated tax return of another taxpayer, or otherwise, have been fully and timely paid, and adequate reserves or accruals for taxes have been provided in the balance sheet included as part of the Financial Statements in respect of any period for which tax returns have not yet been filed or for which taxes are not yet due and owing; (iii) no agreement, waiver or other document or arrangement extending or having the effect of extending the period for assessment or collection of a material amount of taxes (including any applicable statute of limitations) has been executed or filed with the IRS or any other Governmental Body by or on behalf of any the Company, any of its Subsidiaries or any Affiliated Group of which the Company or any of its Subsidiaries is or was a member, and no power of attorney in respect of any tax matter is currently in force.

 

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(b)            Each of the Company and its Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of taxes and have duly and timely withheld from employee salaries, wages, and other compensation and have paid over to the appropriate taxing authorities or other applicable Governmental Bodies all amounts required to be so withheld and paid over for all periods under all applicable Laws.

 

(c)            (i) All material deficiencies asserted or assessments made as a result of any examinations by the IRS or any other Governmental Body of the tax returns of or covering or including the Company or any of its Subsidiaries have been fully paid, and there are no other material audits or investigations by any taxing authority or any other Governmental Body in progress, nor has the Company, any of its Subsidiaries or any Affiliated Group of which the Company or any of its Subsidiaries is or was a member received notice from any taxing authority or other applicable Governmental Body that it intends to conduct such an audit or investigation; (ii) no issue has been raised by a federal, state, local, or foreign taxing authority or other applicable Governmental Body in any current or prior examination that, by application of the same or similar principles, could reasonably be expected to result in a material proposed deficiency for any subsequent taxable period; and (iii) there are no Liens for taxes with respect to the Company or any of its Subsidiaries, or with respect to the assets or business of the Company or any of its Subsidiaries, nor is there any such Lien that is pending or threatened, other than Liens permitted under the Company existing indebtedness.

 

2.3.2          Labor and Employment Compliance. Each of the Company and its Subsidiaries is in compliance with all applicable Laws or Orders respecting employment and employment practices, except where the failure to comply with such applicable Laws or Orders would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. There is no action, arbitration, audit, hearing, investigation, inquiry, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body (in each case, a “Proceeding”) pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries alleging unlawful discrimination in employment before any Governmental Body and there is no Proceeding with regard to any unfair labor practice against the Company or any of its Subsidiaries pending before the National Labor Relations Board or any other Governmental Body, except for any such Proceedings that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. None of the employees of the Company or any of its Subsidiaries is covered by any collective bargaining agreement, and no collective bargaining agreement is currently being negotiated by the Company or any of its Subsidiaries.

 

2.3.3         Internal Control Over Financial Reporting. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

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2.3.4        Disclosure Controls and Procedures. The Company and its Subsidiaries maintain “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) under the Exchange Act) and to the extent required thereunder and except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, such disclosure controls and procedures are effective.

 

2.3.5         Full Disclosure. No representations or warranties by any of the Company or its Subsidiaries in this Subscription Agreement, and no statement contained in any document (including the Financial Statements, certificates or other writing furnished or to be furnished by Company pursuant to the provisions hereof or in connection with this Subscription Agreement), contains any untrue statement of material fact or omits to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which it was made, not misleading in any material respect.

 

2.3.6         Authorization. The Shares and Warrants (including the Shares underlying the Warrants) have been duly authorized and the Shares and Warrants (including the Shares underlying the Warrants) will not have been authorized in violation of or subject to any preemptive or similar rights created under the Company’s amended and restated certificate of incorporation or under the Delaware General Corporation Law. Neither the Company, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(a)(2) of the Securities Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Shares and/or Warrants under the Securities Act.

 

2.3.7         No Solicitation. Neither the Company nor any person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D of the Securities Act) in connection with the offer or sale of any of the Units.

 

2.3.8         Access to Information. The Company has provided Subscriber an opportunity to ask questions regarding the Company and made available to Subscriber all the information reasonably available to the Company that Subscriber has requested for deciding whether to acquire the Units.

 

2.3.9         No Disqualification Event. No Disqualification Event is applicable to the Company or, to the Company’s knowledge, any Company Covered Person (as defined below), except for a Disqualification Event as to which Rule 506(d)(2)(ii-iv) or (d)(3) of the Securities Act is applicable. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. “Company Covered Person” means, with respect to the Company as an “issuer” for purposes of Rule 506 of the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1) of the Securities Act.

 

2.3.10       Restrictive Legend. The Shares and Warrants shall contain a legend to the effect that they may not be resold, transferred, pledged or otherwise disposed of by Subscriber absent an effective registration statement under the Securities Act, except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities Act.

 

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3.             Settlement Date and Delivery.

 

3.1            Closing. The closing of the Subscription contemplated hereby (the “Closing”) shall occur on March 152, 2022 (the “Closing Date”). Subscriber shall deliver to the Company on the Closing Date the applicable purchase price for the Units by wire transfer of United States dollars in immediately available funds to the account specified by the Company in against delivery by the Company to Subscriber of the Shares and Warrants in book entry form.

 

3.2            Conditions to Closing.

 

The Closing shall be subject to the conditions that, on the Closing Date:

 

3.2.1        No suspension of the qualification of the Units for offering or sale or trading in any jurisdiction, or initiation or threatening of any proceedings for any of such purposes, shall have occurred.

 

3.2.2        All representations and warranties of the Company and Subscriber contained in this Subscription Agreement shall be true and correct in all material respects as of the Closing Date, and consummation of the Closing shall constitute a reaffirmation by Subscriber of each of the representations, warranties and agreements contained in this Subscription Agreement as of the Closing Date.

 

3.2.3        No governmental authority shall have enacted, issued, promulgated, enforced or entered any judgment, order, rule or regulation (whether temporary, preliminary or permanent) which is then in effect and has the effect of making consummation of the transactions contemplated hereby illegal or otherwise preventing or prohibiting consummation of the transactions contemplated hereby.

 

3.2.4        The Company shall have concurrently: (a) entered into binding commitments to raise an additional $25 million of equity capital with an entity affiliated with Eric Sprott, (b) entered into (i) that certain letter agreement dated March 11, 2022 with Sprott Private Resource Lending II (Collector), LP to amend the principal repayment terms under the Sprott Credit Agreement such that no further scheduled payments of principal shall be required prior to the Maturity Date conditioned upon receipt by the Company of at least $50 million in gross proceeds from equity financing transactions, and (ii) an Amendment to 10% Senior Secured Notes and Note Exchange Agreement to amend the maturity from December 1, 2025 until December 1, 2027 conditioned upon receipt by the Company of at least $50 million in gross proceeds from equity financing transactions and (c) has executed an equity distribution or similar agreement to facilitate a public “at the market” offering that will enable the Company to raise additional equity capital.

 

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4.             Registration Rights and Board Representation.

 

4.1              The Company and Subscriber agree that, within ten (10) business days after the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company will use its commercially reasonable efforts to file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement registering the resale of the Shares and Warrants (the “Registration Statement”), and the Company shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof; providedhowever, that the Company’s obligations to include the Shares and Warrants, including Shares issuable upon exercise of the Warrants, and those other Shares and warrants of the Company held by any Subscriber in the Registration Statement are contingent upon such Subscriber furnishing in writing to the Company such information regarding such Subscriber, the securities of the Company held by such Subscriber and the intended method of disposition of the Shares and Warrants as shall be reasonably requested by the Company to effect the registration of the Shares, and shall execute such documents in connection with such registration as the Company may reasonably request that are customary of a selling stockholder in similar situations. The Company shall use its commercially reasonable efforts to maintain the continuous effectiveness of the Registration Statement until the earliest of (i) the date on which the Shares and Warrants may be resold without volume, manner of sale or current public information limitations pursuant to Rule 144 promulgated under the Securities Act (“Rule 144”), (ii) the date on which such Shares have actually been sold and (iii) the date which is three years after the Closing.

 

4.2              Notwithstanding anything to the contrary in this Subscription Agreement, the Company shall be entitled to delay or postpone the effectiveness of the Registration Statement, and from time to time to require any Subscriber not to sell under the Registration Statement or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by the Company or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the Company’s board of directors reasonably believes, upon the advice of legal counsel, would require additional disclosure by the Company in the Registration Statement of material information that the Company has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Company’s board of directors, upon the advice of legal counsel, to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); providedhowever, that the Company may not delay or suspend the Registration Statement on more than two occasions or for more than sixty (60) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve-month period. Upon receipt of any written notice from the Company of the happening of any Suspension Event (which notice shall not contain material non-public information) during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, each Subscriber agrees that (i) it will immediately discontinue offers and sales of the Shares and Warrants under the Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until such Subscriber receives copies of a supplemental or amended prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in such written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, each Subscriber will deliver to the Company or, in such Subscriber’s sole discretion destroy, all copies of the prospectus covering the Shares and Warrants in such Subscriber’s possession; providedhowever, that this obligation to deliver or destroy all copies of the prospectus covering the Shares and Warrants shall not apply (i) to the extent such Subscriber is required to retain a copy of such prospectus (a) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (b) in accordance with a bona fide preexisting document retention policy or (ii) to copies stored electronically on archival servers as a result of automatic data back-up.

 

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4.3               The Company shall, notwithstanding any termination of this Subscription Agreement, indemnify, defend and hold harmless the Subscriber (to the extent a seller under the Registration Statement), the officers, directors and agents of each of them, and each person who controls such Subscriber (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included in the Registration Statement or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Section 4, except to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based upon information regarding such Subscriber furnished in writing to the Company by such Subscriber expressly for use therein or such Subscriber has omitted a material fact from such information or otherwise violated the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder; providedhowever, that the indemnification contained in this Section 4 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall the Company be liable for any Losses to the extent they arise out of or are based upon a violation which occurs (A) in reliance upon and in conformity with written information furnished by a Subscriber, (B) in connection with any failure of such person to deliver or cause to be delivered a prospectus made available by the Company in a timely manner, (C) as a result of offers or sales effected by or on behalf of any person by means of a “free writing prospectus” (as defined in Rule 405 under the Securities Act) that was not authorized in writing by the Company, or (D) in connection with any offers or sales effected by or on behalf of a Subscriber in violation of Section 4.2 hereof. The Company shall notify such Subscriber promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 4 of which the Company is aware (provided, that the failure to give prompt notice shall not impair any person’s or entity’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Shares by such Subscriber.

 

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4.4              The Subscriber shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, and each person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in the Registration Statement, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statements or omissions are based upon information regarding the Subscriber furnished in writing to the Company by such Subscriber expressly for use therein; providedhowever, that the indemnification contained in this Section 4 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the Subscriber (which consent shall not be unreasonably withheld, conditioned or delayed). In no event shall the liability of the Subscriber be greater in amount than the dollar amount of the net proceeds received by such Subscriber upon the sale of the Shares giving rise to such indemnification obligation. The Subscriber shall notify the Company promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 4 of which the Subscriber is aware (provided, that the failure to give prompt notice shall not impair any person’s or entity’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Shares by the Subscriber.

 

4.5              For so long as Subscriber continues to beneficially own and retain the voting power of at 50% of the Shares purchased pursuant to this Agreement, the Company, the Nominating and Corporate Governance Committee of the Company’s board of directors (the “Board”) and the Board will take all actions to appoint a representative of the Subscriber, including any substitutions or replacements (the “Board Designee”) to the Company’s Board within 30 days of the date hereof and in connection with any annual meeting of the stockholders of the Company or any special meeting of the stockholders of the Company at which directors are to be elected, the Nominating and Corporate Governance Committee of the Board shall recommend the nomination of, and the Board shall nominate for reelection, recommend that the Company’s stockholders vote in favor of election to the Board of, and solicit proxies in favor of the election of, and the Company and the Board shall otherwise take all actions as are reasonable necessary or desirable to reelect, the Board Designee.

 

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5.             Termination. This Subscription Agreement shall terminate and be void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earlier to occur of (i) upon the mutual written agreement of each of the parties hereto to terminate this Subscription Agreement or (ii) if any of the conditions to Closing set forth in Section 3.2 of this Subscription Agreement are not satisfied on or prior to the Closing and, as a result thereof, the transactions contemplated by this Subscription Agreement are not consummated at the Closing; provided, that nothing herein will relieve any party from liability for any willful breach hereof prior to the time of termination, and each party will be entitled to any remedies at law or in equity to recover losses, liabilities or damages arising from such breach.

 

6.             Miscellaneous.

 

6.1            Further Assurances. At the Closing, the parties hereto shall execute and deliver such additional documents and take such additional actions as the parties reasonably may deem to be practical and necessary in order to consummate the Subscription as contemplated by this Subscription Agreement.

 

6.1.1        Subscriber acknowledges that the Company and others will rely on the acknowledgments, understandings, agreements, representations and warranties contained in this Subscription Agreement. Prior to the Closing, Subscriber agrees to promptly notify the Company if any of the acknowledgments, understandings, agreements, representations and warranties set forth herein are no longer accurate in all material respects.

 

6.1.2        The Company is entitled to rely upon this Subscription Agreement and is irrevocably authorized to produce this Subscription Agreement or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

 

6.1.3        The Company may request from Subscriber such additional information as the Company may deem necessary to evaluate the eligibility of Subscriber to acquire the Units, and Subscriber shall provide such information as may be reasonably requested, to the extent readily available and to the extent consistent with its internal policies and procedures.

 

6.1.4        The Company shall pay all of the reasonable documented out-of-pocket expenses of the Subscriber, including the reasonable fees, disbursements and expenses of counsel for the Subscriber in connection with this Subscription Agreement and the transactions contemplated herein.

 

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6.2            Notices. Any notice or communication required or permitted hereunder shall be in writing and either delivered personally, emailed or sent by overnight mail via a reputable overnight carrier, or sent by certified or registered mail, postage prepaid, and shall be deemed to be given and received (i) when so delivered personally, (ii) when sent, with no mail undeliverable or other rejection notice, if sent by email, or (iii) three (3) business days after the date of mailing to the address below or to such other address or addresses as such person may hereafter designate by notice given hereunder:

 

(i)             if to Subscriber, to such address or addresses set forth on the signature page hereto;

 

(ii)            if to the Company, to:

 

Hycroft Mining Holding Corporation

4300 Water Canyon Road, Unit 1
Winnemucca, NV 89445 

Attention:

Telephone:

Email:

 

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

 

Neal, Gerber & Eisenberg LLP

2 N. LaSalle Street, Suite 1700

Chicago, IL 60602

Attention: David S. Stone

Email: dstone@nge.com

 

6.3           Entire Agreement. This Subscription Agreement constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof. This Subscription Agreement shall not confer rights or remedies upon any person other than the parties hereto and their respective successors and assigns.

 

6.4            Modifications and Amendments. This 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.

 

6.5           Waivers and Consents. The terms and provisions of this Subscription Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Subscription Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

6.6            Assignment. Neither this Subscription Agreement nor any rights that may accrue to Subscriber hereunder (other than the Shares, if any, acquired hereunder) may be transferred or assigned

 

6.7           Benefit. Except as otherwise provided herein, this Subscription Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

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6.8            Governing Law. This Subscription Agreement, and any claim or cause of action hereunder based upon, arising out of or related to this Subscription Agreement (whether based on law, in equity, in contract, in tort or any other theory) or the negotiation, execution, performance or enforcement of this Subscription 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.

 

6.9            Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties irrevocably consents to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware, provided, that if subject matter jurisdiction over the matter that is the subject of the legal proceeding is vested exclusively in the U.S. federal courts, such legal proceeding shall be heard in the U.S. District Court for the District of Delaware (together with the Court of Chancery of the State of Delaware, “Chosen Courts”), in connection with any matter based upon or arising out of this Subscription Agreement and each other document executed in connection with the transaction contemplated hereby, and the consummation thereof, agrees that process may be served upon them in any manner authorized by the Laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such manner of service of process. Each party may do so only if he, she or it hereby waives, and shall not assert as a defense in any legal dispute, that (i) such person is not personally subject to the jurisdiction of the Chosen Courts for any reason, (ii) such legal proceeding may not be brought or is not maintainable in the Chosen Courts, (iii) such person’s property is exempt or immune from execution, (iv) such legal proceeding is brought in an inconvenient forum or (v) the venue of such legal proceeding is improper. Each party hereby agrees not to commence or prosecute any such action, claim, cause of action or suit other than before the Chosen Courts, nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit to any court other than the Chosen Courts, whether on the grounds of inconvenient forum or otherwise. Each party hereby consents to service of process in any such proceeding in any manner permitted by Delaware law, and further consents to service of process by nationally recognized overnight courier service guaranteeing overnight delivery, or by registered or certified mail, return receipt requested, at its address specified pursuant to Section 6.2. Notwithstanding the foregoing in this Section 6.9, a party may commence any action, claim, cause of action or suit in a court other than the Chosen Courts solely for the purpose of enforcing an order or judgment issued by the Chosen Courts. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES MAY DO SO ONLY IF HE, SHE OR IT IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIMS OR COUNTERCLAIMS ASSERTED IN ANY LEGAL DISPUTE RELATING TO THIS SUBSCRIPTION AGREEMENT AND EACH OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE TRANSACTION, AND THE CONSUMMATION THEREOF, AND FOR ANY COUNTERCLAIM RELATING THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. IF THE SUBJECT MATTER OF ANY SUCH LEGAL DISPUTE IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY SHALL ASSERT IN SUCH LEGAL DISPUTE A NONCOMPULSORY COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT AND EACH OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE TRANSACTION, AND THE CONSUMMATION THEREOF. FURTHERMORE, NO PARTY SHALL SEEK TO CONSOLIDATE ANY SUCH LEGAL DISPUTE WITH A SEPARATE ACTION OR OTHER LEGAL PROCEEDING IN WHICH A JURY TRIAL CANNOT BE WAIVED.

 

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6.10         Severability. If any provision of this Subscription Agreement shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Subscription Agreement shall not in any way be affected or impaired thereby and shall continue in full force and effect.

 

6.11          No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this Subscription Agreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of such party. No single or partial exercise of any right, power or remedy under this Subscription Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a party not expressly required under this Subscription Agreement shall entitle the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand.

 

6.12          Survival of Representations and Warranties. All representations and warranties made by the parties hereto in this Subscription Agreement or in any other agreement, certificate or instrument provided for or contemplated hereby, shall survive the execution and delivery hereof and any investigations made by or on behalf of the parties.

 

6.13          No Broker or Finder. Each of the parties hereto represents and warrants to the other that no broker, finder or other financial consultant has acted on its behalf in connection with this Subscription Agreement or the transactions contemplated hereby in such a way as to create any liability on the other. Each of the parties hereto agrees to indemnify and save the other harmless from any claim or demand for commission or other compensation by any broker, finder, financial consultant or similar agent claiming to have been employed by or on behalf of such party and to bear the cost of legal expenses incurred in defending against any such claim.

 

6.14          Headings and Captions. The headings and captions of the various subdivisions of this Subscription Agreement are for convenience of reference only and shall in no way modify or affect the meaning or construction of any of the terms or provisions hereof.

 

6.15          Counterparts. This Subscription Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or any other form of electronic delivery, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

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6.16          Construction. The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Subscription Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Subscription Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty, and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party hereto has not breached will not detract from or mitigate the fact that such party hereto is in breach of the first representation, warranty, or covenant.

 

6.17          Mutual Drafting. This Subscription Agreement is the joint product of Subscriber and the Company and each provision hereof has been subject to the mutual consultation, negotiation and agreement of such parties and shall not be construed for or against any party hereto.

 

7.             Disclosure. Subscriber hereby acknowledges that the terms of this Subscription Agreement will be disclosed by the Company in a Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on or around the date hereof, and a form of this Subscription Agreement will be filed with the Securities and Exchange Commission as an exhibit thereto.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the Company and Subscriber has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.

 

  HYCROFT MINING HOLDING CORPORATION
     
  By: /s/ Diane Garrett
  Name:   Diane Garrett
  Title: President and Chief Executive Officer

 

Accepted and agreed this 14th day of March, 2022.

 

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SUBSCRIBER:  
   
AMERICAN MULTI-CINEMA, INC.  
   
By: /s/ Adam Aron  
Name:   Adam Aron  
Title: Chief Executive Officer & President  

 

Date: March 14, 2022

 

   
Name in which securities are to be registered  

(if different from the name of Subscriber listed directly above):

 

Email Address: kconnor@amctheaters

 

Subscriber’s EIN:    

 

Business Address-Street:

 

11500 Ash Street  
   
Leawood, Kansas 66211  
City, State, Zip:  

 

Attn: Kevin Connor, SVP, General Counsel and Secretary

 

Telephone No.:    

 

Facsimile No.:    

 

Units of One Share and One Warrant issued in the Subscription:

 

23,408,240 Units

 

Unit Purchase Price: $27,926,030.32

 

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SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF SUBSCRIBER

 

INSTITUTIONAL ACCREDITED INVESTOR STATUS
(Please check the applicable subparagraphs):

 

1.x       We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act, and have marked and initialed the appropriate box on the following page indicating the provision under which we qualify as an “accredited investor.”

 

2.x       We are not a natural person.

 

*** AND ***

 

AFFILIATE STATUS

(Please check the applicable box)

 

SUBSCRIBER:

¨is:

 

x

is not:

 

an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company or acting on behalf of an affiliate of the Company.

 

This page should be completed by Subscriber
and constitutes a part of the Subscription Agreement.

 

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Rule 501(a), in relevant part, states that an “accredited investor” shall mean any person who comes within any of the below listed categories, or who the issuer reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. Subscriber has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to Subscriber and under which Subscriber accordingly qualifies as an “accredited investor.”

 

If Subscriber is an entity:

 

¨ A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity.
   
¨ A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934.
   
¨ An investment adviser registered pursuant to Section 203 of the Investment Advisers Act or registered pursuant to the laws of a state.
   
¨ An investment adviser relying on the exemption from registering with the SEC under Section 203(l) or (m) of the Investment Advisers Act.
   
¨ An insurance company as defined in Section 2(a)(13) of the Securities Act.
   
¨ An investment company registered under the Investment Company Act or a business development company as defined in Section 2(a)(48) of the Investment Company Act.
   
¨ A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
   
¨ A Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act.
   
¨ A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000.
   
¨ An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (i) the investment decisions of which are made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment adviser, or (ii) which has total assets in excess of $5,000,000.
   
¨ A self-directed employee benefit plan within the meaning of ERISA, the investment decisions of which are made solely by persons that are “Accredited Investors.”
   
¨ A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act.

 

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x

An entity with total assets in excess of $5,000,000 which was not formed for the specific purpose of investing in the Company and is one or more of the following (check one or more, as appropriate):

 

¨ (i) an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”),

 

x (ii) a corporation,

 

¨ (iii) a Massachusetts business trust or similar business trust,

 

¨ (iv) a partnership, or

 

¨ (v) a limited liability company.

 

¨

A trust with total assets exceeding $5,000,000, which was not formed for the specific purpose of investing in the Company and whose investment decisions are directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the investment in the Company.

 

¨

An entity, of a type not listed in the foregoing subsections, not formed for the specific purpose of investing in the Company, and which owns investments in excess of $5,000,000.

 

¨

A “family office,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act: (i) with assets under management in excess of $5,000,000, (ii) that is not formed for the specific purpose of investing in the Company, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment in the Company.

 

¨ A “family client,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act, of a family office meeting the requirements in the paragraph above and whose prospective investment in the Company is directed by such family office pursuant to the paragraph above.
   
¨ An entity in which all of the beneficial equity owners qualify as accredited individual investors.

 

If Subscriber is an individual:

 

¨ The Subscriber has a net worth (or joint net worth together with his or her spouse or spousal equivalent) in excess of $1,000,000 (excluding the value of his/her/their primary residence3), and he or she has no reason to believe that his or her net worth will not remain in excess of $1,000,000 for the foreseeable future.

 

 

3        The related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded from calculating the Investor’s net worth; provided, however, (a) indebtedness secured by the primary residence in excess of the value of the primary residence and (b) any increase in the indebtedness secured by the primary residence within the past 60 days, should be considered a liability and deducted from the Investor’s net worth.

 

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¨ The Subscriber has had an annual income during the last two full calendar years in excess of $200,000 (or joint annual income together with his or her spouse or spousal equivalent in excess of $300,000) and reasonably expects to have an annual income in excess of $200,000 (or joint annual income together with his or her spouse in excess of $300,000) during the current calendar year.  The Subscriber has no reason to believe that his or her income will not remain in excess of $200,000 (or joint annual income in excess of $300,000) for the foreseeable future.
   
¨ The Subscriber is an IRA in which there is one beneficial owner and such beneficial owner is an “Accredited Investor.” If this box is checked, please also check the box in this Section V indicating the basis upon which such beneficial owner qualifies as an “Accredited Investor.”
   
¨ The Subscriber is a Keogh Plan in which the participants are limited to an individual and his or her spouse, the Keogh Plan was established with respect to a business that is wholly owned by the participant and his or her spouse and such participant is an “Accredited Investor.”  If this box is checked, please also check the box in this section indicating the basis upon which such participant qualifies as an “Accredited Investor.”
   
¨ The Subscriber is a revocable trust whose grantor is an “Accredited Investor.”  If this box is checked, please also check the box in this section indicating the basis upon which such grantor qualifies as an “Accredited Investor.”
   
¨ The Subscriber is an executive officer or manager of the Company, or a manager, director, general partner or executive officer of a manager of the Company.
   
¨

The Subscriber is a “knowledgeable employee,” as defined in Rule 3c5(a)(4) under the Investment Company Act, of the Company.

   
¨ The Subscriber holds one of the following licenses in good standing:  General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Investment Adviser Representative license (Series 65).

 

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Exhibit 10.4

 

Subscription Agreement

 

This SUBSCRIPTION AGREEMENT (this “Subscription Agreement”) is entered into this 14th day of March, 2022, by and between Hycroft Mining Holding Corporation, a Delaware corporation (the “Company”), and the undersigned (“Subscriber” or “you”).

 

WHEREAS, Subscriber desires to subscribe for and purchase from the Company a unit consisting of (i) a number of shares of the Company’s Class A common stock, par value $0.0001 per share (the “Shares”) and (ii) an equal number of warrants to purchase Shares exercisable for a period of five years at an exercise price of $1.068 (the “Warrants” and together with the Shares, “Units”), each set forth on the signature page hereto, for a purchase price of $1.193 per Unit, which is the “Minimum Price” required by Nasdaq Stock Market Rule 5635(d) such that approval of the Company’s stockholders is not required, and the Company desires to issue and sell to Subscriber the Units in consideration of the payment of the applicable purchase price by or on behalf of Subscriber to the Company on or prior to the Closing (as defined below).

 

WHEREAS, concurrently with the Closing, the Company and Subscriber desire to enter into a Warrant Agreement (the “Warrant Agreement”), substantially in the form attached hereto as Exhibit B, pursuant to which the Warrants shall be governed.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants, and subject to the conditions, herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

1.                  Subscription. Subject to the terms and conditions hereof, Subscriber hereby agrees to subscribe for and purchase, and the Company hereby agrees to issue and sell to Subscriber, upon the payment of the applicable purchase price, the Units (such subscription and issuance, the “Subscription”).

 

2.                  Representations, Warranties and Agreements.

 

2.1              Subscriber’s Representations, Warranties and Agreements. To induce the Company to issue the Units to Subscriber, Subscriber hereby represents and warrants to the Company and agrees with the Company as follows:

 

2.1.1        If Subscriber is not an individual, Subscriber has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation, with power and authority to enter into, deliver and perform its obligations under this Subscription Agreement. If Subscriber is an individual, Subscriber has the authority to enter into, deliver and perform its obligations under this Subscription Agreement.

 

2.1.2        If Subscriber is not an individual, this Subscription Agreement has been duly authorized, executed and delivered by Subscriber. If Subscriber is an individual, the signature on this Subscription Agreement is genuine, and Subscriber has legal competence and capacity to execute the same. This Subscription Agreement is enforceable against Subscriber in accordance with its terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.

 

 

 

 

2.1.3        The execution, delivery and performance by Subscriber of this Subscription Agreement and the consummation of the transactions contemplated herein will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Subscriber or any of its subsidiaries pursuant to[1] the terms of any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which Subscriber or any of its subsidiaries is a party or by which Subscriber or any of its subsidiaries is bound or to which any of the property or assets of Subscriber or any of its subsidiaries is subject, which would reasonably be expected to have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of Subscriber and its subsidiaries, taken as a whole (a “Subscriber Material Adverse Effect”) or materially affect the legal authority of Subscriber to comply in all material respects with the terms of this Subscription Agreement; (ii) if Subscriber is not an individual, result in any violation of the provisions of the organizational documents of Subscriber or any of its subsidiaries; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Subscriber or any of its subsidiaries or any of their respective properties that would reasonably be expected to have a Subscriber Material Adverse Effect or materially affect the legal authority of Subscriber to comply in all material respects with this Subscription Agreement.

 

2.1.4        Subscriber is an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”)) satisfying the applicable requirements set forth on Schedule A, (i) is acquiring the Units only for its own account and not for the account of others, and (ii) is not acquiring the Units with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act (and shall provide the requested information on Schedule A following the signature page hereto). Subscriber is not an entity formed for the specific purpose of acquiring the Shares.

 

2.1.5        Subscriber understands that the Units are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Shares have not been registered under the Securities Act. Subscriber understands that the Units may not be resold, transferred, pledged or otherwise disposed of by Subscriber absent an effective registration statement under the Securities Act, except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities Act, and that any certificates representing the Shares and Warrants shall contain a legend to such effect. Subscriber acknowledges that the Shares and Warrants will not be eligible for resale pursuant to Rule 144A promulgated under the Securities Act. Subscriber understands and agrees that the Shares and Warrants will be subject to transfer restrictions and, as a result of these transfer restrictions, Subscriber may not be able to readily resell the Shares and/or Warrants and may be required to bear the financial risk of an investment in the Shares and Warrants for an indefinite period of time. Subscriber understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Shares and/or Warrants.

 

 

 

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2.1.6        Subscriber understands and agrees that Subscriber is purchasing the Units directly from the Company. Subscriber further acknowledges that there have been no representations, warranties, covenants and agreements made to Subscriber by the Company or any of its officers or directors, expressly or by implication, other than those representations, warranties, covenants and agreements included in this Subscription Agreement.

 

2.1.7        Subscriber represents and warrants that its acquisition and holding of the Shares and Warrants will not constitute or result in a non-exempt prohibited transaction under Section 406 of the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or any applicable similar law.

 

2.1.8        In making its decision to purchase the Units, Subscriber represents that it has relied solely upon independent investigation made by Subscriber. Subscriber represents that it has received such information as Subscriber deems necessary in order to make an investment decision with respect to the Units. Subscriber represents and agrees that Subscriber and Subscriber’s professional advisor(s), if any, have had the full opportunity to ask such questions, receive such answers and obtain such information as Subscriber and such Subscriber’s professional advisor(s), if any, have deemed necessary to make an investment decision with respect to the Units.

 

2.1.9        Subscriber acknowledges that the Company represents and warrants that the Units (i) were not offered by any form of general solicitation or general advertising and (ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or any state securities laws. Subscriber acknowledges that it is not relying upon, and has not relied upon, any statement, representation or warranty made by any person, except for the statements, representations and warranties contained in the private placement documentation.

 

2.1.10     Subscriber acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Units. Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Units, and Subscriber has sought such accounting, legal and tax advice as Subscriber has considered necessary to make an informed investment decision.

 

2.1.11     Alone, or together with any professional advisor(s), Subscriber represents and acknowledges that Subscriber has adequately analyzed and fully considered the risks of an investment in the Units and determined that the Shares are a suitable investment for Subscriber and that Subscriber is able at this time and in the foreseeable future to bear the economic risk of a total loss of Subscriber’s investment in the Company. Subscriber acknowledges specifically that a possibility of total loss exists.

 

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2.1.12      Subscriber understands and agrees that no federal or state agency has passed upon or endorsed the merits of the offering of the Units or made any findings or determination as to the fairness of this investment.

 

2.1.13      Subscriber represents and warrants that Subscriber is not (i) a person or entity named on the List of Specially Designated Nationals and Blocked Persons administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or in any Executive Order issued by the President of the United States and administered by OFAC (“OFAC List”), or a person or entity prohibited by any OFAC sanctions program, (ii) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank (collectively, a “Prohibited Investor”). Subscriber agrees to provide law enforcement agencies, if requested thereby, such records as required by applicable law, provided that Subscriber is permitted to do so under applicable law. Subscriber represents that if it is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) (the “BSA”), as amended by the USA PATRIOT Act of 2001 (the “PATRIOT Act”), and its implementing regulations (collectively, the “BSA/PATRIOT Act”), that Subscriber maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act. Subscriber also represents that, to the extent required, it maintains policies and procedures reasonably designed for the screening of its investors against the OFAC sanctions programs, including the OFAC List. Subscriber further represents and warrants that, to the extent required, it maintains policies and procedures reasonably designed to ensure that the funds held by Subscriber and used to purchase the Units were legally derived.

 

2.1.14      Subscriber has, and at the Closing will have, sufficient funds to pay the applicable purchase price pursuant to Section 3.1.

 

2.1.15     Subscriber represents that no disqualifying event described in Rule 506(d)(1)(i-viii) of the Securities Act (a “Disqualification Event”) is applicable to Subscriber or any of its Rule 506(d) Related Parties (as defined below), except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Subscriber hereby agrees that it shall notify the Company promptly in writing in the event a Disqualification Event becomes applicable to Subscriber or any of its Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. For purposes of this Section 2.1.15, “Rule 506(d) Related Party” shall mean a person or entity that is a beneficial owner of Subscriber’s securities for purposes of Rule 506(d) of the Securities Act.

 

2.2              Company’s Representations, Warranties and Agreements. Except as otherwise disclosed in writing to the Subscriber prior to the Closing Date, the Company and each of its direct or indirect subsidiaries listed on the signature pages hereto (“Subsidiaries”), jointly and severally, represent and warrant to the Subscriber as set forth below as of the date hereof.

 

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2.2.1        Organization of the Company and its Subsidiaries. The Company and each of its Subsidiaries is a corporation or limited liability company (as the case may be) duly organized or formed (as applicable), validly existing and in good standing (to the extent such concept is applicable) under the Laws (as defined below) of its jurisdiction of organization or formation (as applicable), and has full corporate or limited liability company (as applicable) power and authority to conduct its business as it is now conducted. The Company and each of its Subsidiaries is duly qualified or registered to do business as a foreign corporation or limited liability company (as the case may be) and is in good standing (to the extent such concept is applicable) under the Laws of each jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification or registration, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to result in a conflict with or a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, which would reasonably be expected to have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of the Company (a “Material Adverse Effect”).

 

2.2.2        Authority; No Conflict; Consents.

 

(a)   The Company (i) has the requisite corporate or limited liability company (as applicable) power and authority (A) to enter into, execute and deliver this Agreement and the Warrant Agreement, and (B) to perform and consummate any of the transactions contemplated by this Agreement and the Warrant Agreement, and (ii) has taken all necessary corporate action required for (x) the due authorization, execution and delivery of this Agreement, the Shares and the Warrant Agreement and (y) the performance and consummation of the transactions contemplated by this Agreement and the Warrant Agreement. This Agreement has been (or, in the case of the Warrant Agreement to be entered into by the Company at or prior to the Closing, will be) duly executed and delivered by the Company. This Agreement constitutes (or, in the case of the Warrant Agreement to be entered into by the Company, as the case may be, at or prior to the Closing, will constitute) the legal, valid and binding obligation of each of the Company, enforceable against the Company in accordance with its terms, except to the extent that the enforceability thereof may be limited by (I) applicable bankruptcy, insolvency, moratorium, reorganization and other laws of general application limiting the enforcement of creditors’ rights generally and (II) the fact that the courts may deny the granting or enforcement of equitable remedies.

 

(b)   Neither the execution and delivery by the Company of this Agreement or the Warrant Agreement, nor the execution or the performance or consummation by the Company of any of the transactions contemplated by this Agreement or the Warrant Agreement will, directly or indirectly (with or without notice or lapse of time or both):

 

(i)contravene, conflict with or result in a violation or breach of the second amended and restated certificate of incorporation of the Company, or the amended and restated by-laws of the Company (“Organizational Documents”);

 

(ii)contravene, conflict with or result in a violation of any Law or order, writ, judgment, injunction, decree, rule, ruling, directive, stipulation, determination or award made, issued or entered by or with any Governmental Body (as defined below), whether preliminary, interlocutory or final (each, an “Order”) to which the Company or any of the properties, assets, rights or interests owned or used by any of the Company may be subject;

 

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(iii)contravene, conflict with or result in a violation or breach of any provision of, or give rise to any right of termination, acceleration or cancellation under, any agreement, contract, obligation, promise, undertaking or understanding, whether written or oral to which any of the Company is a party or which any of the Company’s properties, assets, rights or interests are bound; or

 

(iv)result in the imposition or creation of any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership (collectively, “Liens”) upon or with respect to any of the assets, properties, rights, interests or businesses owned or used by any of the Company;

 

except, in the case of clauses (ii) and (iii) above, where such occurrence, event or result, would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company.

 

(c)   The Company will not be required to give any notice to, make any filing with or obtain any consent, waiver, approval, order or authorization from, any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization or Governmental Body (each, a “Person”) in connection with the execution and delivery of this Agreement or the Warrant Agreement, or the performance or consummation of any of the transactions contemplated by this Agreement or the Warrant Agreement.

 

2.2.3        Proceedings. There are no pending, outstanding or, to the knowledge of the Company, threatened actions, arbitrations, audits, hearings, investigations, inquires, litigation or suits (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any federal, national, supranational, foreign, state, provincial, local, county, municipal or other government, any governmental, regulatory or administrative authority, agency, department, bureau, board, commission or official or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, or any court, tribunal, judicial or arbitral body to which any of the Company or any of its Subsidiaries is a party or to which any properties, assets, rights or interests of any of them are subject.

 

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2.2.4        Brokers or Finders. Neither the Company nor any of its Subsidiaries nor any of their respective employees, officers, directors, accountants, attorneys and other advisors or other representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payments in connection with this Agreement or Warrant Agreement.

 

2.2.5        Exemption from Registration. Assuming the accuracy of the Subscriber’s representations set forth in Section 4 hereof, the issuance of the Units, including the Shares and Warrants hereunder will be exempt from the registration and prospectus delivery requirements of the Securities Act.

 

2.2.6        Issuance. The Units issued and delivered to the Subscriber pursuant to this Agreement will be free and clear of all taxes, Liens, pre-emptive rights, rights of first refusal, subscription and similar rights (other than any such Liens created by a Subscriber).

 

2.2.7        No Violation or Default. Neither the Company nor any of its Subsidiaries is in violation of its Organizational Documents. Neither the Company nor any of its Subsidiaries is: (a) in default, and no event has occurred that, with notice or lapse of time or both, would constitute a default, under any agreement, contract, obligation, promise, undertaking or understanding, whether written or oral to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the properties, assets, rights or interests of the Company or any of its Subsidiaries is subject; or (b) in violation of any Law or Order, except, in the case of clauses (a) and (b) above, for any such default or violation that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries taken as a whole.

 

2.2.8        Title to Intellectual Property. Each of the Company and its Subsidiaries owns, or is licensed or otherwise has the right to use, all patents, inventions and discoveries (whether patentable or not), trademarks, service marks, trade names, trade dress, internet domain names, copyrights, published and unpublished works of authorship (including software), and all registrations, recordations and applications of the foregoing and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and licenses related to any of the foregoing (“IP Rights”) owned by or used in the conduct of the businesses of each of the Company and its Subsidiaries (“Company IP Rights”), except where the failure to own or possess such rights to (or have licenses related to) any such IP Rights would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to any of the Company and its Subsidiaries, taken as a whole; and, to the knowledge of the Company, the conduct of the businesses of each of the Company and its Subsidiaries does not infringe or misappropriate in any material respect with any IP Rights of others, and each of the Company and its Subsidiaries has not received any written notice of any claim of infringement or misappropriation of any IP Rights of others. None of the Company IP Rights owned by any of the Company and/or any of its Subsidiaries have been adjudged invalid or unenforceable, and the Company and its Subsidiaries have maintained all registered patents, trademarks and copyrights in full force and effect and used commercially reasonable efforts to protect all trade secrets, except where such adjudication or failure to maintain would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company and its Subsidiaries, taken as a whole. To the knowledge of the Company, no third party has infringed or misappropriated any Company IP Rights, except where such infringement or misappropriation of any such IP Rights would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or its Subsidiaries taken as a whole.

 

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2.2.9        Licenses and Permits. Each of the Company and its Subsidiaries holds all material licenses, certificates of approval, approvals, registrations, permits and consents by, and have given all material notices to, the appropriate Governmental Bodies that are required to operate their businesses where they are currently being operated, except where the failure to have such licenses, certificates of approval, approvals, registrations, permits and consents could not reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has received notice of any revocation or modification of any such license, certificate, permit, or authorization, or has any reason to believe that any such license, certificate, permit, or authorization will not be renewed in the ordinary course, or that any such renewal will be materially impeded, delayed, hindered or burdensome to obtain, except to the extent that any of the foregoing would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries.

 

2.2.10     Compliance with Environmental Laws. Except in the case of any of the following that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries, each of the Company and its Subsidiaries:

 

(a)               is in compliance with any and all material applicable Laws and Orders relating to pollution or the regulation and protection of human or animal health, safety, the environment or natural resources, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Materials Transportation Uniform Safety Act, as amended (49 U.S.C. 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Oil Pollution Act of 1990, as amended (33 U.S.C. § 2701 et seq.); the Toxic Substances Control Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.); and their state, municipal and local counterparts or equivalents and any transfer of ownership notification or approval statutes (collectively, “Environmental Laws”);

 

(b)               have received and are in compliance with all material permits, licenses, approvals or other consent, waiver, approval, Order or authorization of, or registration, declaration or filing with or notice to, any Governmental Body or other Person required of them under applicable Environmental Laws to conduct their respective businesses; and

 

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(c)               have no knowledge and have not received written notice from any federal, national, supranational, foreign, state, provincial, local, county, municipal or other government, any governmental, regulatory or administrative authority, agency, department, bureau, board, commission or official or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, or any court, tribunal, judicial or arbitral body (in each case, a “Governmental Body”) or any Person of (i) any material violations of, or liability under, Environmental Laws with respect to the presence of any hazardous or toxic substances or wastes, pollutants or contaminants at, on, under, or emanating from any of their respective businesses and (ii) any actual or potential material liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants at, on, under or emanating from any of their respective currently owned, operated or leased real properties or tangible personal properties, or any of their respective formerly owned, operated or leased real properties or tangible personal properties, or any of their respective divested businesses or predecessors in interest. For purposes of this Section 2.2.10 , “Disposal” and “Release” shall have the same meanings as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.).

 

2.2.11      Compliance with ERISA. All material employee benefit, compensation and incentive plans, arrangements and agreements (including, but not limited to, employee benefit plans within the meaning of Section 3(3) of Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) (all such plans, arrangements and agreements, whether or not material, the “Benefit Plans”) maintained, administered or contributed to by the Company or any of its Subsidiaries for or on behalf of any employees or former employees of the Company or any of its affiliates have been maintained in compliance in all material respects with its terms and the requirements of any applicable [Laws or Orders], including, but not limited to, ERISA and the Code. None of the Benefit Plans are, and neither the Company and its Subsidiaries, nor any of their respective members of any of the Company or its Subsidiaries’ controlled group, or under common control with any of the Company or its Subsidiaries, within the meaning of Section 414 of the Code, maintain, contribute to, or have an obligation to contribute to, or in the past six (6) years has maintained, contributed to, or had an obligation to contribute to, or have any liability with respect to, (i) a plan subject to Title IV of ERISA or Sections 412 or 4971 of the Code or (ii) a multiemployer plan (within the meaning of Section 4001(3) of ERISA or 413(c) of the Code).

 

2.2.12      No Unlawful Payments. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any current or former director, officer or employee of the Company or any of its Subsidiaries has, directly or indirectly: (a) made, offered or promised to make or offer any payment, loan or transfer of anything of value, including any reward, advantage or benefit of any kind, to or for the benefit of any employee or official of a Governmental Body, candidate for public office, political party or political campaign, for the purpose of (i) influencing any act or decision of such employee, official, candidate, party or campaign, (ii) inducing such employee, official, candidate, party or campaign to do or omit to do any act in violation of a lawful duty, (iii) obtaining or retaining business for or with any Person, (iv) expediting or securing the performance of official acts of a routine nature, or (v) otherwise securing any improper advantage; (b) paid, offered or promised to pay or offer any bribe, payoff, influence payment, kickback, unlawful rebate, or other similar unlawful payment of any nature; (c) made, offered or promised to make or offer any unlawful contributions, gifts, entertainment or other unlawful expenditures; (d) established or maintained any unlawful fund of corporate monies or other properties; (e) created or caused the creation of any false or inaccurate books and records of any of the Company or any of its Subsidiaries related to any of the foregoing; or (f) otherwise violated any provision of the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq., or any other applicable anti-corruption or anti-bribery law.

 

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2.2.13      Title to Property; Leases.

 

(a)            The Company and its Subsidiaries have good, valid and marketable title to (or, (i) in the case of leased assets or property (including, without limitation, all real property rights and interests, mining claims (whether patented or unpatented), mining leases or concessions leased by each of the Company or any of its Subsidiaries (the “Leased Real Property”)), a valid and subsisting leasehold interest in, or (ii) in the case of real property rights and interests, mining claims (whether patented or unpatented), mining leases or concessions owned by each of the Company or any of its Subsidiaries (the “Owned Real Property”), good, valid and marketable title to) all assets and properties that, individually or in the aggregate, are material to the conduct of the business of each of the Company and its Subsidiaries, free and clear of all Liens other Liens permitted under the Company’s existing indebtedness. As of the date hereof all leases relating to the Leased Real Property are in full force and effect and enforceable by the Company and its Subsidiaries in accordance with their respective terms.

 

(b)            To the knowledge of the Company, none of the buildings or structures situated on or forming part of the Owned Real Property or the Leased Real Property, or the operation or maintenance thereof, encroaches on any property owned by others, other than any such encroachments that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. To the knowledge of the Company, the Owned Real Property and the Leased Real Property and the current uses thereof by the Company and its Subsidiaries comply in all respects with applicable federal, national, supranational, foreign, state, provincial, local, county, municipal or similar statute, law, common law, writ, injunction, decree, guideline, policy, ordinance, regulation, rule, code, Order, constitution, treaty, requirement, judgment or judicial or administrative doctrines enacted, promulgated, issued, enforced or entered by any Governmental Body (collectively, “Laws”), other than any such noncompliance that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. No taking has been commenced or, to the knowledge of the Company, is contemplated with respect to all or any portion of any Owned Real Property or Leased Real Property.

 

(c)            With respect to all patented and unpatented mining claims included in the Leased Real Property and the Owned Real Property (the “Mining Claims”), (i) such Mining Claims are validly located and recorded and are maintained, in each case, in accordance, in all material respects, with the Laws of the United States and the State of Nevada, (ii) neither the Company nor any of its Subsidiaries have any liability or obligations to any Person with respect to any Mining Claims (other than obligations in respect of the payment of royalties under a mining lease with the owner of certain patented and unpatented Mining Claims relating to the gold and silver mine commonly referred to as the “Hycroft Mine”), (iii) there is no material adverse claim against or challenge to the title of the Company or any of its Subsidiaries with respect to any Mining Claim that, if determined adversely to the Company or any of its Subsidiaries, would materially and adversely affect the ability of the Company or any of its Subsidiaries to make use of, transfer or otherwise exploit such Mining Claim, (iv) no other Person has any material interest in any Mining Claim that would affect the interest of the Company or any of its Subsidiaries in the Mining Claims, and (v) neither the Company nor any of its Subsidiaries has received any written notice or, to the knowledge of the Company, any oral notice from any Governmental Body of any revocation or intent to revoke any of the Company’s or any of its Subsidiaries’ interest in any of the Mining Claims.

 

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(d)           The Company and its Subsidiaries own or have valid rights to use all water rights, surface use rights, access rights or agreement, easements and rights of way, tunnels, drifts, powerlines and roads that are necessary for the Company and its Subsidiaries to operate their business in the ordinary course of business.

 

2.3              Reports. Reports. The Company has filed or furnished, as applicable all forms, reports, schedules, prospectuses, registration statements and other statements and documents required to be filed or furnished by it with the SEC under the Exchange Act or the Securities Act since January 1, 2021, or prior to the date of this Subscription Agreement (each, a “Company Report”). As of its respective date, and, if amended, as of the date of the last such amendment, each Company Report complied in all material respects as to form with the applicable requirements of the Securities Act and the Exchange Act, and any rules and regulations promulgated thereunder applicable to such Company Report. As of its respective date, and, if amended, as of the date of the last such amendment, no Company Report contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The consolidated financial statements of the Company and its subsidiaries included in the Company Reports present fairly, in all material respects, the financial condition, results of operations and cash flows of the Company on a consolidated basis as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Exchange Act and have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein).

 

2.3.1        Tax Matters.

 

(a)               (i) All tax returns required to be filed by or on behalf of the Company or any of its Subsidiaries, or any Affiliated Group (as defined in Section 1504(a) of the Code) of which the Company or any of its Subsidiaries is or was a member, have been properly prepared and duly and timely filed with the appropriate taxing authorities in all jurisdictions in which such tax returns are required to be filed (after giving effect to any valid extensions of time in which to make such filings); (ii) all material taxes payable by or on behalf of the Company or any of its Subsidiaries either directly, as part of the consolidated tax return of another taxpayer, or otherwise, have been fully and timely paid, and adequate reserves or accruals for taxes have been provided in the balance sheet included as part of the Financial Statements in respect of any period for which tax returns have not yet been filed or for which taxes are not yet due and owing; (iii) no agreement, waiver or other document or arrangement extending or having the effect of extending the period for assessment or collection of a material amount of taxes (including any applicable statute of limitations) has been executed or filed with the IRS or any other Governmental Body by or on behalf of any the Company, any of its Subsidiaries or any Affiliated Group of which the Company or any of its Subsidiaries is or was a member, and no power of attorney in respect of any tax matter is currently in force.

 

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(b)            Each of the Company and its Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of taxes and have duly and timely withheld from employee salaries, wages, and other compensation and have paid over to the appropriate taxing authorities or other applicable Governmental Bodies all amounts required to be so withheld and paid over for all periods under all applicable Laws.

 

(c)            (i) All material deficiencies asserted or assessments made as a result of any examinations by the IRS or any other Governmental Body of the tax returns of or covering or including the Company or any of its Subsidiaries have been fully paid, and there are no other material audits or investigations by any taxing authority or any other Governmental Body in progress, nor has the Company, any of its Subsidiaries or any Affiliated Group of which the Company or any of its Subsidiaries is or was a member received notice from any taxing authority or other applicable Governmental Body that it intends to conduct such an audit or investigation; (ii) no issue has been raised by a federal, state, local, or foreign taxing authority or other applicable Governmental Body in any current or prior examination that, by application of the same or similar principles, could reasonably be expected to result in a material proposed deficiency for any subsequent taxable period; and (iii) there are no Liens for taxes with respect to the Company or any of its Subsidiaries, or with respect to the assets or business of the Company or any of its Subsidiaries, nor is there any such Lien that is pending or threatened, other than Liens permitted under the Company existing indebtedness.

 

2.3.2        Labor and Employment Compliance. Each of the Company and its Subsidiaries is in compliance with all applicable Laws or Orders respecting employment and employment practices, except where the failure to comply with such applicable Laws or Orders would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. There is no action, arbitration, audit, hearing, investigation, inquiry, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body (in each case, a “Proceeding”) pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries alleging unlawful discrimination in employment before any Governmental Body and there is no Proceeding with regard to any unfair labor practice against the Company or any of its Subsidiaries pending before the National Labor Relations Board or any other Governmental Body, except for any such Proceedings that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect to the Company or any of its Subsidiaries. None of the employees of the Company or any of its Subsidiaries is covered by any collective bargaining agreement, and no collective bargaining agreement is currently being negotiated by the Company or any of its Subsidiaries.

 

2.3.3        Internal Control Over Financial Reporting. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

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2.3.4        Disclosure Controls and Procedures. The Company and its Subsidiaries maintain “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) under the Exchange Act) and to the extent required thereunder and except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, such disclosure controls and procedures are effective.

 

2.3.5        Full Disclosure. No representations or warranties by any of the Company or its Subsidiaries in this Subscription Agreement, and no statement contained in any document (including the Financial Statements, certificates or other writing furnished or to be furnished by Company pursuant to the provisions hereof or in connection with this Subscription Agreement), contains any untrue statement of material fact or omits to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which it was made, not misleading in any material respect.

 

2.3.6        Authorization. The Shares and Warrants (including the Shares underlying the Warrants) have been duly authorized and the Shares and Warrants (including the Shares underlying the Warrants) will not have been authorized in violation of or subject to any preemptive or similar rights created under the Company’s amended and restated certificate of incorporation or under the Delaware General Corporation Law. Neither the Company, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(a)(2) of the Securities Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Shares and/or Warrants under the Securities Act.

 

2.3.7        No Solicitation. Neither the Company nor any person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D of the Securities Act) in connection with the offer or sale of any of the Units.

 

2.3.8        Access to Information. The Company has provided Subscriber an opportunity to ask questions regarding the Company and made available to Subscriber all the information reasonably available to the Company that Subscriber has requested for deciding whether to acquire the Units.

 

2.3.9        No Disqualification Event. No Disqualification Event is applicable to the Company or, to the Company’s knowledge, any Company Covered Person (as defined below), except for a Disqualification Event as to which Rule 506(d)(2)(ii-iv) or (d)(3) of the Securities Act is applicable. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. “Company Covered Person” means, with respect to the Company as an “issuer” for purposes of Rule 506 of the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1) of the Securities Act.

 

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2.3.10      Restrictive Legend. The Shares and Warrants shall contain a legend to the effect that they may not be resold, transferred, pledged or otherwise disposed of by Subscriber absent an effective registration statement under the Securities Act, except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities Act.

 

3.                  Settlement Date and Delivery.

 

3.1              Closing. The closing of the Subscription contemplated hereby (the “Closing”) shall occur on March 15[2], 2022 (the “Closing Date”). Subscriber shall deliver to the Company on the Closing Date the applicable purchase price for the Units by wire transfer of United States dollars in immediately available funds to the account specified by the Company in against delivery by the Company to Subscriber of the Shares and Warrants in book entry form.

 

3.2              Conditions to Closing.

 

The Closing shall be subject to the conditions that, on the Closing Date:

 

3.2.1        No suspension of the qualification of the Units for offering or sale or trading in any jurisdiction, or initiation or threatening of any proceedings for any of such purposes, shall have occurred.

 

3.2.2        All representations and warranties of the Company and Subscriber contained in this Subscription Agreement shall be true and correct in all material respects as of the Closing Date, and consummation of the Closing shall constitute a reaffirmation by Subscriber of each of the representations, warranties and agreements contained in this Subscription Agreement as of the Closing Date.

 

3.2.3        No governmental authority shall have enacted, issued, promulgated, enforced or entered any judgment, order, rule or regulation (whether temporary, preliminary or permanent) which is then in effect and has the effect of making consummation of the transactions contemplated hereby illegal or otherwise preventing or prohibiting consummation of the transactions contemplated hereby.

 

3.2.4        The Company shall have concurrently: (a) entered into binding commitments to raise an additional $25 million of equity capital with American Multi-Cinema, Inc., (b) entered into (i) that certain letter agreement dated March 11, 2022 with Sprott Private Resource Lending II (Collector), LP to amend the principal repayment terms under the Sprott Credit Agreement such that no further scheduled payments of principal shall be required prior to the Maturity Date conditioned upon receipt by the Company of at least $50 million in gross proceeds from equity financing transactions and a commitment reasonably satisfactory to the Subscribers to extend the scheduled maturity of the Sprott Credit Agreement for a period of two years, and (ii) an Amendment to 10% Senior Secured Notes and Note Exchange Agreement, to amend the maturity from December 1, 2025 until December 1, 2027 conditioned upon receipt by the Company of at least $50 million in gross proceeds from equity financing transactions; and (c) has executed an equity distribution or similar agreement to facilitate a public “at the market” offering that will enable the Company to raise additional equity capital. Commitment

 

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4.                  Registration Rights.

 

4.1              The Company and Subscriber agree that, within ten (10) business days after the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company will use its commercially reasonable efforts to file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement registering the resale of the Shares and Warrants, including Shares issuable upon the exercise of the Warrants (the “Registration Statement”), and the Company shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof; providedhowever, that the Company’s obligations to include the Shares and Warrants, including Shares issuable upon exercise of the Warrants, and those other Shares and warrants of the Company held by any Subscriber in the Registration Statement are contingent upon such Subscriber furnishing in writing to the Company such information regarding such Subscriber, the securities of the Company held by such Subscriber and the intended method of disposition of the Shares and Warrants as shall be reasonably requested by the Company to effect the registration of the Shares, and shall execute such documents in connection with such registration as the Company may reasonably request that are customary of a selling stockholder in similar situations. The Company shall use its commercially reasonable efforts to maintain the continuous effectiveness of the Registration Statement until the earliest of (i) the date on which the Shares and Warrants may be resold without volume, manner of sale or current public information limitations pursuant to Rule 144 promulgated under the Securities Act (“Rule 144”), (ii) the date on which such Shares have actually been sold and (iii) the date which is three years after the Closing.

 

4.2              Notwithstanding anything to the contrary in this Subscription Agreement, the Company shall be entitled to delay or postpone the effectiveness of the Registration Statement, and from time to time to require any Subscriber not to sell under the Registration Statement or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by the Company or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the Company’s board of directors reasonably believes, upon the advice of legal counsel, would require additional disclosure by the Company in the Registration Statement of material information that the Company has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Company’s board of directors, upon the advice of legal counsel, to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); providedhowever, that the Company may not delay or suspend the Registration Statement on more than two occasions or for more than sixty (60) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve-month period. Upon receipt of any written notice from the Company of the happening of any Suspension Event (which notice shall not contain material non-public information) during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, each Subscriber agrees that (i) it will immediately discontinue offers and sales of the Shares and Warrants under the Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until such Subscriber receives copies of a supplemental or amended prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in such written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, each Subscriber will deliver to the Company or, in such Subscriber’s sole discretion destroy, all copies of the prospectus covering the Shares and Warrants in such Subscriber’s possession; providedhowever, that this obligation to deliver or destroy all copies of the prospectus covering the Shares and Warrants shall not apply (i) to the extent such Subscriber is required to retain a copy of such prospectus (a) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (b) in accordance with a bona fide pre-existing document retention policy or (ii) to copies stored electronically on archival servers as a result of automatic data back-up.

 

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4.3               The Company shall, notwithstanding any termination of this Subscription Agreement, indemnify, defend and hold harmless the Subscriber (to the extent a seller under the Registration Statement), the officers, directors and agents of each of them, and each person who controls such Subscriber (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included in the Registration Statement or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Section 4, except to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based upon information regarding such Subscriber furnished in writing to the Company by such Subscriber expressly for use therein or such Subscriber has omitted a material fact from such information or otherwise violated the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder; providedhowever, that the indemnification contained in this Section 4 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall the Company be liable for any Losses to the extent they arise out of or are based upon a violation which occurs (A) in reliance upon and in conformity with written information furnished by a Subscriber, (B) in connection with any failure of such person to deliver or cause to be delivered a prospectus made available by the Company in a timely manner, (C) as a result of offers or sales effected by or on behalf of any person by means of a “free writing prospectus” (as defined in Rule 405 under the Securities Act) that was not authorized in writing by the Company, or (D) in connection with any offers or sales effected by or on behalf of a Subscriber in violation of Section 4.2 hereof. The Company shall notify such Subscriber promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 4 of which the Company is aware (provided, that the failure to give prompt notice shall not impair any person’s or entity’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Shares by such Subscriber.

 

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4.4              The Subscriber shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, and each person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in the Registration Statement, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statements or omissions are based upon information regarding the Subscriber furnished in writing to the Company by such Subscriber expressly for use therein; providedhowever, that the indemnification contained in this Section 4 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the Subscriber (which consent shall not be unreasonably withheld, conditioned or delayed). In no event shall the liability of the Subscriber be greater in amount than the dollar amount of the net proceeds received by such Subscriber upon the sale of the Shares giving rise to such indemnification obligation. The Subscriber shall notify the Company promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 4 of which the Subscriber is aware (provided, that the failure to give prompt notice shall not impair any person’s or entity’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Shares by the Subscriber.

 

5.                  Termination. This Subscription Agreement shall terminate and be void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earlier to occur of (i) upon the mutual written agreement of each of the parties hereto to terminate this Subscription Agreement or (ii) if any of the conditions to Closing set forth in Section 3.2 of this Subscription Agreement are not satisfied on or prior to the Closing and, as a result thereof, the transactions contemplated by this Subscription Agreement are not consummated at the Closing; provided, that nothing herein will relieve any party from liability for any willful breach hereof prior to the time of termination, and each party will be entitled to any remedies at law or in equity to recover losses, liabilities or damages arising from such breach.

 

6.                  Miscellaneous.

 

6.1              Further Assurances. At the Closing, the parties hereto shall execute and deliver such additional documents and take such additional actions as the parties reasonably may deem to be practical and necessary in order to consummate the Subscription as contemplated by this Subscription Agreement.

 

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6.1.1        Subscriber acknowledges that the Company and others will rely on the acknowledgments, understandings, agreements, representations and warranties contained in this Subscription Agreement. Prior to the Closing, Subscriber agrees to promptly notify the Company if any of the acknowledgments, understandings, agreements, representations and warranties set forth herein are no longer accurate in all material respects.

 

6.1.2        The Company is entitled to rely upon this Subscription Agreement and is irrevocably authorized to produce this Subscription Agreement or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

 

6.1.3        The Company may request from Subscriber such additional information as the Company may deem necessary to evaluate the eligibility of Subscriber to acquire the Units, and Subscriber shall provide such information as may be reasonably requested, to the extent readily available and to the extent consistent with its internal policies and procedures.

 

6.1.4        The Company shall pay all of the reasonable documented out-of-pocket expenses of the Subscriber, including the reasonable fees, disbursements and expenses of counsel for the Subscriber in connection with this Subscription Agreement and the transactions contemplated herein.

 

6.2              Notices. Any notice or communication required or permitted hereunder shall be in writing and either delivered personally, emailed or sent by overnight mail via a reputable overnight carrier, or sent by certified or registered mail, postage prepaid, and shall be deemed to be given and received (i) when so delivered personally, (ii) when sent, with no mail undeliverable or other rejection notice, if sent by email, or (iii) three (3) business days after the date of mailing to the address below or to such other address or addresses as such person may hereafter designate by notice given hereunder:

 

(i)       if to Subscriber, to such address or addresses set forth on the signature page hereto;

 

(ii)      if to the Company, to:

 

Hycroft Mining Holding Corporation

4300 Water Canyon Road, Unit 1
Winnemucca, NV 89445 

Attention:

Telephone:

Email:

 

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

 

Neal, Gerber & Eisenberg LLP

2 N. LaSalle Street, Suite 1700

Chicago, IL 60602

Attention: David S. Stone

Email: dstone@nge.com

 

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6.3              Entire Agreement. This Subscription Agreement constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof. This Subscription Agreement shall not confer rights or remedies upon any person other than the parties hereto and their respective successors and assigns.

 

6.4              Modifications and Amendments. This 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.

 

6.5              Waivers and Consents. The terms and provisions of this Subscription Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Subscription Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

6.6              Assignment. Neither this Subscription Agreement nor any rights that may accrue to Subscriber hereunder (other than the Shares, if any, acquired hereunder) may be transferred or assigned

 

6.7              Benefit. Except as otherwise provided herein, this Subscription Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

6.8              Governing Law. This Subscription Agreement, and any claim or cause of action hereunder based upon, arising out of or related to this Subscription Agreement (whether based on law, in equity, in contract, in tort or any other theory) or the negotiation, execution, performance or enforcement of this Subscription 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.

 

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6.9              Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties irrevocably consents to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware, provided, that if subject matter jurisdiction over the matter that is the subject of the legal proceeding is vested exclusively in the U.S. federal courts, such legal proceeding shall be heard in the U.S. District Court for the District of Delaware (together with the Court of Chancery of the State of Delaware, “Chosen Courts”), in connection with any matter based upon or arising out of this Subscription Agreement and each other document executed in connection with the transaction contemplated hereby, and the consummation thereof, agrees that process may be served upon them in any manner authorized by the Laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such manner of service of process. Each party may do so only if he, she or it hereby waives, and shall not assert as a defense in any legal dispute, that (i) such person is not personally subject to the jurisdiction of the Chosen Courts for any reason, (ii) such legal proceeding may not be brought or is not maintainable in the Chosen Courts, (iii) such person’s property is exempt or immune from execution, (iv) such legal proceeding is brought in an inconvenient forum or (v) the venue of such legal proceeding is improper. Each party hereby agrees not to commence or prosecute any such action, claim, cause of action or suit other than before the Chosen Courts, nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit to any court other than the Chosen Courts, whether on the grounds of inconvenient forum or otherwise. Each party hereby consents to service of process in any such proceeding in any manner permitted by Delaware law, and further consents to service of process by nationally recognized overnight courier service guaranteeing overnight delivery, or by registered or certified mail, return receipt requested, at its address specified pursuant to Section 6.2. Notwithstanding the foregoing in this Section 6.9, a party may commence any action, claim, cause of action or suit in a court other than the Chosen Courts solely for the purpose of enforcing an order or judgment issued by the Chosen Courts. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES MAY DO SO ONLY IF HE, SHE OR IT IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIMS OR COUNTERCLAIMS ASSERTED IN ANY LEGAL DISPUTE RELATING TO THIS SUBSCRIPTION AGREEMENT AND EACH OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE TRANSACTION, AND THE CONSUMMATION THEREOF, AND FOR ANY COUNTERCLAIM RELATING THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. IF THE SUBJECT MATTER OF ANY SUCH LEGAL DISPUTE IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY SHALL ASSERT IN SUCH LEGAL DISPUTE A NONCOMPULSORY COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT AND EACH OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE TRANSACTION, AND THE CONSUMMATION THEREOF. FURTHERMORE, NO PARTY SHALL SEEK TO CONSOLIDATE ANY SUCH LEGAL DISPUTE WITH A SEPARATE ACTION OR OTHER LEGAL PROCEEDING IN WHICH A JURY TRIAL CANNOT BE WAIVED.

 

6.10          Severability. If any provision of this Subscription Agreement shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Subscription Agreement shall not in any way be affected or impaired thereby and shall continue in full force and effect.

 

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6.11          No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this Subscription Agreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of such party. No single or partial exercise of any right, power or remedy under this Subscription Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a party not expressly required under this Subscription Agreement shall entitle the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand.

 

6.12          Survival of Representations and Warranties. All representations and warranties made by the parties hereto in this Subscription Agreement or in any other agreement, certificate or instrument provided for or contemplated hereby, shall survive the execution and delivery hereof and any investigations made by or on behalf of the parties.

 

6.13          No Broker or Finder. Each of the parties hereto represents and warrants to the other that no broker, finder or other financial consultant has acted on its behalf in connection with this Subscription Agreement or the transactions contemplated hereby in such a way as to create any liability on the other. Each of the parties hereto agrees to indemnify and save the other harmless from any claim or demand for commission or other compensation by any broker, finder, financial consultant or similar agent claiming to have been employed by or on behalf of such party and to bear the cost of legal expenses incurred in defending against any such claim.

 

6.14          Headings and Captions. The headings and captions of the various subdivisions of this Subscription Agreement are for convenience of reference only and shall in no way modify or affect the meaning or construction of any of the terms or provisions hereof.

 

6.15          Counterparts. This Subscription Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or any other form of electronic delivery, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

6.16          Construction. The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Subscription Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Subscription Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty, and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party hereto has not breached will not detract from or mitigate the fact that such party hereto is in breach of the first representation, warranty, or covenant.

 

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6.17          Mutual Drafting. This Subscription Agreement is the joint product of Subscriber and the Company and each provision hereof has been subject to the mutual consultation, negotiation and agreement of such parties and shall not be construed for or against any party hereto.

 

7.                  Disclosure. Subscriber hereby acknowledges that the terms of this Subscription Agreement will be disclosed by the Company in a Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on or around the date hereof, and a form of this Subscription Agreement will be filed with the Securities and Exchange Commission as an exhibit thereto.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the Company and Subscriber has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.

 

 

  HYCROFT MINING HOLDING CORPORATION
     
  By: /s/ Diane Garrett
  Name: Diane Garrett
  Title: President and Chief Executive Officer

 

Accepted and agreed this 14th day of March, 2022.

 

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SUBSCRIBER:  
   
2176423 ONTARIO LTD.  
   
By: /s/ Eric Sprott  
Name: Eric Sprott  
Title: Director & President  
   
Date: March 14, 2022  

 

2176423 Ontario Ltd.  
Name in which securities are to be registered  
(if different from the name of Subscriber listed directly above):  

 

Email Address:  
Subscriber’s EIN:    
Business Address-Street:  
Royal Bank Plaza, South Tower  
200 Bay Street, Suite 2600  
City, State, Zip:  

Toronto, ON M5J 2J1

Attn:  
Telephone No.: 415-274-7242  
Facsimile No.:    
   
Units of One Share and One Warrant issued in the Subscription:  
23,408,240 Units  
Unit Purchase Price: $27,926,030.32  
   
   

 

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You must pay the applicable purchase price by wire transfer of U.S. dollars in immediately available funds to the account specified by the Company.

 

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SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF SUBSCRIBER

 

INSTITUTIONAL ACCREDITED INVESTOR STATUS
(Please check the applicable subparagraphs):

 

1.¨     We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act, and have marked and initialed the appropriate box on the following page indicating the provision under which we qualify as an “accredited investor.”

 

2.¨     We are not a natural person.

 

*** AND ***

 

AFFILIATE STATUS

(Please check the applicable box)

SUBSCRIBER:

¨is:

 

¨is not:

an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company or acting on behalf of an affiliate of the Company.

 

This page should be completed by Subscriber
and constitutes a part of the Subscription Agreement.

 

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Rule 501(a), in relevant part, states that an “accredited investor” shall mean any person who comes within any of the below listed categories, or who the issuer reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. Subscriber has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to Subscriber and under which Subscriber accordingly qualifies as an “accredited investor.”

 

If Subscriber is an entity:

 

¨ A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity.
¨ A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934.
¨ An investment adviser registered pursuant to Section 203 of the Investment Advisers Act or registered pursuant to the laws of a state.
¨ An investment adviser relying on the exemption from registering with the SEC under Section 203(l) or (m) of the Investment Advisers Act.
¨ An insurance company as defined in Section 2(a)(13) of the Securities Act.
¨ An investment company registered under the Investment Company Act or a business development company as defined in Section 2(a)(48) of the Investment Company Act.
¨ A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
¨ A Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act.
¨ A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000.
¨ An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (i) the investment decisions of which are made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment adviser, or (ii) which has total assets in excess of $5,000,000.
¨ A self-directed employee benefit plan within the meaning of ERISA, the investment decisions of which are made solely by persons that are “Accredited Investors.”
¨ A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act.

 

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¨

An entity with total assets in excess of $5,000,000 which was not formed for the specific purpose of investing in the Company and is one or more of the following (check one or more, as appropriate):

 

¨ (i) an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”),

 

¨ (ii) a corporation,

 

¨ (iii) a Massachusetts business trust or similar business trust,

 

¨ (iv) a partnership, or

 

¨ (v) a limited liability company.

 

¨

A trust with total assets exceeding $5,000,000, which was not formed for the specific purpose of investing in the Company and whose investment decisions are directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the investment in the Company.

 

¨

An entity, of a type not listed in the foregoing subsections, not formed for the specific purpose of investing in the Company, and which owns investments in excess of $5,000,000.

 

¨

A “family office,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act: (i) with assets under management in excess of $5,000,000, (ii) that is not formed for the specific purpose of investing in the Company, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment in the Company.

 

¨ A “family client,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act, of a family office meeting the requirements in the paragraph above and whose prospective investment in the Company is directed by such family office pursuant to the paragraph above.
¨ An entity in which all of the beneficial equity owners qualify as accredited individual investors.

 

If Subscriber is an individual:

 

¨ The Subscriber has a net worth (or joint net worth together with his or her spouse or spousal equivalent) in excess of $1,000,000 (excluding the value of his/her/their primary residence[3]), and he or she has no reason to believe that his or her net worth will not remain in excess of $1,000,000 for the foreseeable future.

 

 

 

3             The related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded from calculating the Investor’s net worth; provided, however, (a) indebtedness secured by the primary residence in excess of the value of the primary residence and (b) any increase in the indebtedness secured by the primary residence within the past 60 days, should be considered a liability and deducted from the Investor’s net worth.

 

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¨ The Subscriber has had an annual income during the last two full calendar years in excess of $200,000 (or joint annual income together with his or her spouse or spousal equivalent in excess of $300,000) and reasonably expects to have an annual income in excess of $200,000 (or joint annual income together with his or her spouse in excess of $300,000) during the current calendar year.  The Subscriber has no reason to believe that his or her income will not remain in excess of $200,000 (or joint annual income in excess of $300,000) for the foreseeable future.
¨ The Subscriber is an IRA in which there is one beneficial owner and such beneficial owner is an “Accredited Investor.”  If this box is checked, please also check the box in this Section V indicating the basis upon which such beneficial owner qualifies as an “Accredited Investor.”
¨ The Subscriber is a Keogh Plan in which the participants are limited to an individual and his or her spouse, the Keogh Plan was established with respect to a business that is wholly owned by the participant and his or her spouse and such participant is an “Accredited Investor.”  If this box is checked, please also check the box in this section indicating the basis upon which such participant qualifies as an “Accredited Investor.”
¨ The Subscriber is a revocable trust whose grantor is an “Accredited Investor.”  If this box is checked, please also check the box in this section indicating the basis upon which such grantor qualifies as an “Accredited Investor.”
¨ The Subscriber is an executive officer or manager of the Company, or a manager, director, general partner or executive officer of a manager of the Company.
¨

The Subscriber is a “knowledgeable employee,” as defined in Rule 3c5(a)(4) under the Investment Company Act, of the Company.

 

¨ The Subscriber holds one of the following licenses in good standing:  General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Investment Adviser Representative license (Series 65).

 

33426877.3

 

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Exhibit 10.5

 

WARRANT AGREEMENT

 

THIS WARRANT AGREEMENT (this “Agreement”), dated as of March 14, 2022, is by and between Hycroft Mining Holding Corporation, a Delaware corporation (the “Company”), and American Multi-Cinema, Inc., a Missouri corporation (such entity, or its successors or permitted assignees, a “Holder”).

 

WHEREAS, the Company and the Holder entered into a Subscription Agreement, dated as of March 14, 2022, pursuant to which the Company agreed to issue to the Holder an aggregate of 23,408,240 warrants (the “Warrants”) to purchase one (1) share of Class A common stock of the Company (the “Common Stock”) per Warrant, bearing the Legend set forth in Exhibit B hereto;

 

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 and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants 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.             [Reserved].

 

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 Company 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 Company 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 Company 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 Company by the holder.

 

 

 

 

2.3.2        Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company 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), for the purpose of any exercise thereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary.

 

2.4           Transfer of Warrants. Subject to the transfer conditions referred to in the legend endorsed hereon, the Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices. Upon such compliance, surrender and delivery, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

3.             Terms and Exercise of Warrants.

 

3.1           Warrant Price. Each Warrant shall entitle the Registered Holder thereof, subject to the provisions of this Agreement, to purchase from the Company one share of Common Stock, at the price of $1.068 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 hereof and terminating at 5:00 p.m., New York City time on the date that is five (5) years after the date hereof (the “Expiration Date”). 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 this Agreement, a Warrant may be exercised by the Registered Holder thereof by delivering to the Company (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 on the records of the Company, (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 in the form presented on the reverse of the Physical Certificate attached hereto as Exhibit A, 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 Company or by wire transfer;

 

(b)           [Reserved];

 

(c)           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 Company; or

 

(d)           [Reserved].

 

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 Company, evidencing the balance of the Warrants remaining after such exercise. 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.

 

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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 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 Company 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 Company’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 Securities and Exchange Commission (the “Commission”) as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company 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.

 

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 $0.05.

 

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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.

 

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 Company 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) 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 each holder of the Warrant the , 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.

 

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 Company 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 Company.

 

5.2           Procedure for Surrender of Warrants. Warrants may be surrendered to the Company, together with a written request for exchange or transfer, and thereupon the Company 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; .

 

7 

 

 

5.3           Fractional Warrants. The Company 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.

 

5.5           [Reserved]

 

6.             [Reserved]

 

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.

 

7.2           Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company 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.

 

8.             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 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.

 

8.2           [Reserved]

 

8.3           [Reserved]

 

8.4           [Reserved]

 

8.5           [Reserved]

 

8.6           [Reserved]

 

8 

 

 

9.             Miscellaneous Provisions.

 

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

 

9.2           Notices. Any notice, statement or demand authorized by this Agreement to be given or made 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, as follows:

 

Hycroft Mining Holding Corporation
4300 Water Canyon Road, Unit 1

Winnemucca, Nevada 89445
Attention: Corporate Secretary

 

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.

 

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 Company, for inspection by the Registered Holder of any Warrant.

 

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]

 

9 

 

 

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/ Diane Garrett  
  Name: Diane Garrett  
  Title: President and Chief Executive Officer  
   
   
AMERICAN MULTI-CINEMA, INC.  
   
By: /s/ Adam Aron  
  Name: Adam Aron  
  Title: Chief Executive Officer & President  

 

 

[Signature Page to Warrant Agreement]

 

 

 

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

 

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 Company 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 $1.068 per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

 

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 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.

 

  HYCROFT MINING HOLDING CORPORATION
   
  By:  
    Name:
    Title:

 

 

 

[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 [●], 2022 (the “Warrant Agreement”), duly executed by the Company and the Holder, 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 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 office of the Company. 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 Company 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 Company 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 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 the Company shall not 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.

 

 

 

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 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 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]

 

 

 

Date:

 

 

   
(Signature)  
   
   
   
   
(Address)  
   
   
(Tax Identification Number)  

 

 

 

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. SECURITIES EVIDENCED BY THIS CERTIFICATE AND SHARES OF COMMON STOCK OF THE COMPANY ISSUED UPON EXERCISE OF SUCH SECURITIES ARE ENTITLED TO REGISTRATION RIGHTS, AS SET FORTH IN A SUBSCRIPTION AGREEMENT (THE “AGREEMENT”) DATED AS OF MARCH 14, 2022 BY AND AMONG THE COMPANY AND AMERICAN MULTI-CINEMA, INC.

 

 

Exhibit 10.6

 

FORM OF WARRANT AGREEMENT

 

 

THIS WARRANT AGREEMENT (this “Agreement”), dated as of __________, 2022, is by and between Hycroft Mining Holding Corporation, a Delaware corporation (the “Company”), and 2176423 Ontario Ltd., an Ontario corporation (such entity, or its successors or permitted assignees, a “Holder”).

 

WHEREAS, the Company and the Holder entered into a Subscription Agreement, dated as of March 14, 2022, pursuant to which the Company agreed to issue to the Holder an aggregate of 23,408,240 warrants (the “Warrants”) to purchase one (1) share of Class A common stock of the Company (the “Common Stock”) per Warrant, bearing the Legend set forth in Exhibit B hereto;

 

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 and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants 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.             [Reserved].

 

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 Company 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 Company 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 Company 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 Company by the holder.

 

 

 

2.3.2        Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company 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), for the purpose of any exercise thereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary.

 

2.4           Transfer of Warrants. Subject to the transfer conditions referred to in the legend endorsed hereon, the Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices. Upon such compliance, surrender and delivery, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

3.             Terms and Exercise of Warrants.

 

3.1           Warrant Price. Each Warrant shall entitle the Registered Holder thereof, subject to the provisions of this Agreement, to purchase from the Company one share of Common Stock, at the price of $1.068 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 hereof and terminating at 5:00 p.m., New York City time on the date that is five (5) years after the date hereof (the “Expiration Date”). 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.

 

2

 

 

3.3           Exercise of Warrants.

 

3.3.1        Payment. Subject to the provisions of this Agreement, a Warrant may be exercised by the Registered Holder thereof by delivering to the Company (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 on the records of the Company, (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 in the form presented on the reverse of the Physical Certificate attached hereto as Exhibit A, 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 Company or by wire transfer;

 

(b)           [Reserved];

 

(c)           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 Company; or

 

(d)           [Reserved].

 

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 Company, evidencing the balance of the Warrants remaining after such exercise. 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

 

 

3.3.3        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 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 Company 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 Company’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 Securities and Exchange Commission (the “Commission”) as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company 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.

 

4

 

 

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.

 

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 $0.05.

 

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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.

 

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 Company 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) 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 each holder of the Warrant the , 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.

 

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 Company 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 Company.

 

5.2           Procedure for Surrender of Warrants. Warrants may be surrendered to the Company, together with a written request for exchange or transfer, and thereupon the Company 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; .

 

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5.3           Fractional Warrants. The Company 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.

 

5.5           [Reserved]

 

6.             [Reserved]

 

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.

 

7.2           Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company 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.

 

8.             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 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.

 

8.2           [Reserved]

 

8.3           [Reserved]

 

8.4           [Reserved]

 

8.5           [Reserved]

 

8.6           [Reserved]

 

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9.             Miscellaneous Provisions.

 

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

 

9.2           Notices. Any notice, statement or demand authorized by this Agreement to be given or made 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, as follows:

 

Hycroft Mining Holding Corporation
4300 Water Canyon Road, Unit 1

Winnemucca, Nevada 89445
Attention: Corporate Secretary

 

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.

 

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 Company, for inspection by the Registered Holder of any Warrant.

 

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]

 

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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:    
  Name: Diane Garrett  
  Title: President and Chief Executive Officer  
   
   
2176423 ONTARIO LTD.  
   
By:    
  Name: Eric Sprott  
  Title: Director & President