Item 1.01 Entry Into Material Definitive Agreements
Golden Queen Mining Co., Ltd. (the "GQM") entered into a Share Purchase
Agreement dated February 7, 2019 (the "Purchase Agreement"), with Estate of
Landon Thomas Clay, Thomas M. Clay, Lavinia D. Clay, Cassius M.C. Clay, Landon
H. Clay, Richard T. Clay, Jonathan Clay, James Clay, Clay Family 2009
Irrevocable Trust, LTC 2009 Irrevocable Trust, EHT, LLC, Monadnock Charitable
Lead Annuity Trust dated May 31, 1996, Arctic Coast Petroleums, Ltd., and 933
Milledge, LLC (the "Purchasers").
Purchase of Acquired Assets
Under the terms of the Purchase Agreement, the Purchasers agreed to purchase all
of the outstanding shares (the "Acquired Assets") of Golden Queen Mining
Holdings Inc. (the "GQM US"), an indirect, wholly owned subsidiary of GQM
through Golden Queen Mining Canada Ltd. ("GQM Canada"), subject to the terms of
the Purchase Agreement (the "Transaction"). GQM US holds a 50% interest in
Golden Queen Mining Company, LLC (the "LLC"), the owner of a 100% interest in
the Soledad Mountain Project, located at Soledad Mountain, Mojave Mining
District, Kern County, California. The Purchasers shall acquire only the
Acquired Assets and not any other assets of GQM or any subsidiary (each, a "GQM
Subsidiary") and shall not assume or be liable for any debt or other liabilities
of GQM or any GQM Subsidiary (except for the loans to GQM made under the Second
Amended and Restated Term Loan Agreement dated as of November 21, 2016 among GQM
as borrower and, The Landon T. Clay 2009 Irrevocable Trust Dated March 6, 2009
and the Clay Family 2009 Irrevocable Trust Dated April 14, 2009 as lenders, and
amendments thereto (the "GQM Loan") tendered by the Purchasers by Loan as part
of the Purchase Price below).
Special Committee Recommendation
A committee comprised of independent members of Golden Queen's board of
directors, being Paul Blythe, Bryan Coates and Bernard Guarnera (the "Special
Committee"), was constituted to, among other things, review and evaluate the
terms of the proposed acquisition by the Purchasers and other alternatives and
to make a recommendation in respect of the Transaction and other related
matters. The Special Committee engaged Ernst & Young LLP ("EY") to provide a
formal valuation and fairness opinion with respect to the Transaction (the "EY
Formal Valuation and Fairness Opinion") as required by Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special Transactions ("MI
61-101"). Prior to entering into the Agreement, the Special Committee received a
preliminary EY Formal Valuation and Fairness Opinion that concluded that in EY's
opinion, and based upon and subject to the assumptions, limitations and
qualifications set forth therein, the Transaction is fair from a financial point
of view to the GQM shareholders, other than the Purchasers.
Following an extensive review and analysis of the Transaction and the
consideration of other alternatives, the Special Committee, after receiving
advice from its legal and financial advisors, and following receipt of the
preliminary EY Formal Valuation and Fairness Opinion, unanimously approved the
Transaction and recommend that the GQM shareholders vote in favour of the
Transaction. Thomas Clay recused himself from all discussions of the Transaction
and has resigned as a director and officer of the Company prior to it entering
into the Agreement.
Purchasers by Loan, Shares and Cash (as set forth below) agreed to purchase the
Acquired Assets for the following consideration (the "Purchase Price"):
1. Purchasers by Loan (LTC 2009 Irrevocable Trust, Clay Family 2009 Irrevocable
and EHT, LLC) shall tender and exchange all principal and interest due under
GQM Loan, expected to be approximately $26.6 million on the Closing Date, and
all warrants to acquire GQM's Shares;
2. Purchasers by Shares (Thomas M. Clay, Estate of Landon T. Clay, Lavinia D.
Clay, Cassius M.C. Clay, Landon H. Clay, Richard T. Clay, Monadnock Charitable
Annuity Lead Trust dated May 31, 1996, Arctic Coast Petroleums Ltd., EHT, LLC,
Jonathan Clay, 933 Milledge, LLC and James Clay) shall tender and exchange
177,701,229 of GQM's Common Shares.
3. Purchasers by Shares and Loan shall also tender and exchange all outstanding
options and warrants to acquire GQM's Common Shares held by the Purchasers by
Shares and Loan, respectively.
4. Purchasers by Cash shall deliver to GQM $4.25 million cash.
If at any time prior to June 30, 2020, (a) the Purchaser sells, transfers or
assigns the Acquired Assets; (b) GQM US sells, transfers or assigns its 50%
ownership interest in the LLC; or (c) the LLC sells, transfers or assigns its
interest in the Soledad Mountain Project, for net proceeds greater than US$55
million (subject to adjustment in certain circumstances), the Purchaser agrees
to pay the Company an amount equal to 20% of such excess proceeds in accordance
with the Purchase Agreement.
Until April 1, 2019 (the "Go-Shop Period"), GQM may continue to (i) make solicit
initiate or encourage inquiries from or submissions of proposals or offers from
any other person which would result in the acquisition of GQM or any material
portion of the assets of GQM, GQM Canada, GQM US and/or the LLC (an "Acquisition
Proposal"), (ii) participate in any discussions or negotiations with such person
regarding an Acquisition Proposal or otherwise cooperate in any way with or
assist or participate in, facilitate or encourage any effort or attempt by any
other person to do or seek to do any Acquisition Proposal. If GQM notifies the
Purchaser within the Go-Shop Period that it has received an Acquisition Proposal
and the Board of Directors of GQM (the "Board") reasonably determines that the
alternative offer is superior to that proposed by the Purchaser (a "Superior
Offer"), the Purchaser shall have the right to match any Superior Offer in
accordance with the terms and conditions set forth in the Purchase Agreement.
Upon expiry of the Go-Shop Period and until the Closing (the "Exclusivity
Period"), neither GQM nor any of its representatives or shareholders shall,
directly or indirectly, in any manner (nor permit any Subsidiary) to (a)
entertain, solicit or encourage, (b) furnish or cause to be furnished any
information to any persons (other than the Purchasers or its representatives) in
connection with, or (c) negotiate or otherwise pursue, an Acquisition Proposal.
GQM shall immediately notify the Purchaser in writing of (i) the receipt during
the Exclusivity Period and until the Closing of any proposal for an Acquisition
Proposal or any requests for any information relating thereto and (ii) the terms
of any such Acquisition Proposal.
In the event a Superior Offer is accepted by GQM and the Agreement is
terminated, a break fee of $1 million shall be payable to the Purchasers.
The Transactions require approval of the GQM Shareholders of (i) 2/3 of the
votes of the GQM Shareholders and (ii) a majority of the votes of the GQM
Shareholders (excluding the Purchasers) in accordance with MI 61-101, in each
case present in person or represented by proxy at the Shareholder Meeting (the
"Required Shareholder Vote"). Each of GQM and the Board shall use its
commercially reasonable efforts to hold a special meeting of GQM's shareholders
(the "Shareholder Meeting") and to obtain the Required Shareholder Vote in
accordance with applicable law as soon as possible but in any event within 45
days of the expiry of the Go-Shop Period. Each of GQM and the Board shall use
its commercially reasonable efforts to support and endorse the Transaction. GQM
will prepare, in consultation with the Purchaser, all materials required for
such Required Shareholder Vote, including proxy circulars, formal valuations and
fairness opinions, and to provide support for the Transaction, regardless of the
progress of any alternative discussions within the Go-Shop Period.
Until the Closing, the Purchasers by Loan shall extend and waive any payment
obligations under the GQM Loan, including but not limited to payments of
principal, interest and applicable fees, of GQM, GQM US, GQM Canada or the LLC
such that any and all amounts owing to the Purchasers by Loan shall be due and
payable in full on the Closing Date; provided that, on the Closing Date, the
Purchasers by Loan shall tender and exchange all amounts owing under the GQM
Loan to GQM for cancellation. In the event that the Required Shareholder Vote is
not obtained at the Shareholder Meeting or the Purchaser Agreement is terminated
for any reason, all amounts owing under the GQM Loan shall immediately become
due and payable in full.
Resignation of Thomas M. Clay
Prior to the execution of the Purchase Agreement, Mr. Thomas M. Clay resigned as
Chairman of the GQM Board and as GQM's Chief Executive Officer and from the
board of directors and all managerial positions with GQM, GQM Canada and GQM US,
as applicable. Mr. Clay will be reinstated as to such positions should the
Transaction be terminated for any reason prior to Closing.
Consents and Approvals
GQM and the Purchaser shall obtain all necessary approvals and consents for the
sale of the Acquired Assets to the Purchasers required from third parties to
GQM's material contracts and any court, regulatory or governmental authorities
as may be required in connection with the Transaction, on terms and conditions
satisfactory to GQM and Purchaser, acting reasonably, including applicable
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Effective February 7, 2019, Thomas M. Clay resigned as a director and Chairman
of the Board and as Chief Executive Officer of GQM and from all Board and
managerial positions with GQM, GQM Canada and GQM US, as applicable. Under the
terms of the Purchase Agreement, Mr. Clay will be reappointed as a director and
Chairman of the Board and as Chief Executive Officer of GQM should the
Transaction be terminated for any reason prior to Closing.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
10.1 Share Purchase Agreement
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