VANCOUVER, May 11, 2018
/CNW/ - Rye Patch Gold Corp. ("Rye Patch" or the
"Company") (TSX.V: RPM; OTCQX: RPMGF; FWB: 5TN)
wishes to provide certain additional disclosures to supplement its
information circular (the "Circular") dated April 18,
2018 in connection with the special meeting of shareholders of the
Company (the "Meeting") to be held on May 18, 2018
concerning an arrangement (the "Arrangement") involving the
Company and Alio Gold Inc. ("Alio").
Interests of Certain Persons in the Arrangement
Shareholders should be aware that certain executive officers and
directors of the Company have certain interests that are or may be
different from or in addition to the interests of other
shareholders generally. These interests include those described
below.
Options and RSUs
The directors and executive officers of the Company hold an
aggregate of 1,779,380 share purchase options
("Options") and 245,203 restricted share units
("RSUs"). Pursuant to the Arrangement, each outstanding
Option will be exchanged for a replacement share purchase option to
purchase 0.48 common shares of Alio at an exercise price per
replacement share purchase option equal to the current exercise
price divided by 0.48. All RSUs, including those held by directors
and executive officers, will be deemed to be vested immediately
prior to the closing of the Arrangement and will be exchanged at
that time for Rye Patch shares or cash, as may be elected by
holders of RSUs in accordance with the RSU plan.
Employment and Consulting Agreements
The Company entered into a consulting agreement with
William C. (Bill) Howald, President
and Chief Executive Officer through his holding company, and
employment agreements with Tony
Wood, Chief Financial Officer, and Doug Jones, Chief Operating Officer, which
agreements include the payment of certain benefits in the event of
a change of control of the Company. These agreements provide that
if the executive officer's consulting arrangement or employment is
terminated by the Company in the six-month period after a "change
of control" or, in the case of Mr. Howald, he terminates the
agreement in accordance with its terms within three months
following a "change of control", the executive officer is entitled
to receive the following benefits:
- William C. (Bill) Howald:
an amount equal to three times his annual consulting fee and three
times any bonus paid or payable to him in respect of the most
recently completed financial year of the Company;
- Tony Wood: an amount equal to his current month's salary
multiplied by 24 months and benefits for the same period, together
with an amount equal to any bonus paid or payable to him by the
Company in respect of the most recently completed financial year;
and
- Doug Jones: an amount equal to his current month's salary
multiplied by 12 months and benefits for the same period.
Pursuant to these agreements, if the Arrangement is completed
and the entitlements are triggered as described above,
Mr. Howald would be entitled to receive cash compensation of
approximately US$645,000 plus three
times his annual bonus, Mr. Wood would be entitled to receive
cash compensation of approximately C$477,288 together with an amount equal to any
bonus paid or payable to him in respect of the most recently
completed financial year, and Mr. Jones would be entitled to
receive approximately US$220,160.
Members of the special committee of the Company formed in
respect of the Arrangement (the "Special Committee") were
paid a retainer of US$12,000(US$20,000
for the Chair) in connection with their service on the Special
Committee.
Minority Approval under MI 61-101
The Company is subject to Multilateral Instrument 61-101
Protection of Minority Security Holders in Special Transactions
("MI 61‑101"). MI 61-101 provides that, in certain
circumstances, where a "related party" (as defined in MI 61-101) of
an issuer is entitled to receive a "collateral benefit" (as defined
in MI 61-101) in connection with an arrangement transaction
such as the Arrangement, such transaction may be considered a
"business combination" for the purposes of MI 61-101 and subject to
minority shareholder approval requirements.
A "collateral benefit" includes any benefit that a related party
of the subject company (which includes the directors and executive
officers of the subject company) is entitled to receive as a
consequence of the transaction including such benefits as an
increase in salary or a lump sum payment on a change of
control.
Under MI 61-101, a benefit received by a related party is not
considered to be a "collateral benefit" if, among other things, at
the time the transaction was agreed to, the related party
beneficially owned or exercised control or direction over less than
1% of the outstanding equity securities of the subject company at
the relevant time.
If a "related party" receives a "collateral benefit" in
connection with the Arrangement, the resolution approving the
Arrangement (the "Arrangement Resolution") will require
"minority approval" in accordance with MI 61-101. This means the
Arrangement Resolution must be approved by a majority of the votes
cast, excluding those votes beneficially owned, or over which
control or direction is exercised, by the "related parties" of the
Company who receive a "collateral benefit". This approval is in
addition to the requirement that the Arrangement Resolution be
approved by not less than two-thirds of the votes cast by Rye Patch
shareholders at the Meeting.
If the Arrangement is completed, the vesting of the outstanding
RSUs is to be accelerated and the "change of control" compensation
may be payable pursuant to the consulting and the employment
agreements described above. Pursuant to MI 61-101, these benefits
are considered to be "collateral benefits" accruing to "related
parties", unless they are excluded as a result of such party
beneficially owning or exercising control or direction over less
than 1% of the outstanding equity securities of Rye Patch at the
relevant time.
The Company has determined that the only director or executive
officer of the Company who is receiving a "collateral benefit" in
connection with the Arrangement and beneficially owns or exercises
control or direction over more than 1% of Rye Patch shares is Mr.
William C. (Bill) Howald, the
Company's President and Chief Executive Officer. Mr. Howald
beneficially owns or exercises direction or control
over 993,113 Rye Patch shares (including the deemed exercise
of certain vested Options and RSUs held by him and the accelerated
vesting of RSUs pursuant to the arrangement agreement with Alio
(the "Arrangement Agreement"), calculated in accordance with
the provisions of MI 61-101). This represents approximately 1.21%
of the outstanding Rye Patch shares as of the date of the
Arrangement Agreement. Consequently, the Rye Patch shares
beneficially owned, directly or indirectly, by Mr. Howald or
over which he has control or direction will be excluded for the
purposes of determining if minority approval of the Arrangement is
obtained. In order to ensure complete compliance with the
requirements under MI 61-101, the requisite Rye Patch shareholder
approval for the Arrangement Resolution will require the majority
of the Rye Patch shares to be voted at the meeting in favour of the
Arrangement Resolution, excluding the votes which may be cast by
Mr. Howald.
The Company is not required to obtain a formal valuation under
MI 61-101 as (i) no "interested party" (as defined in MI 61-101)
is, as a consequence of the Arrangement, directly or indirectly
acquiring the Company and (ii) an "interested party" is not a party
to any "connected transaction" (as defined in MI 61-101) to the
Arrangement that is a "related party transaction" (as defined in MI
61-101) for which the Company would be required to obtain a formal
valuation. No prior valuations of the Company have been made in the
past 24 months, and other than the offers received from Alio
as described in the Circular, no bona fide prior offers that
relate to the subject matter of, or are relevant to, the
transaction, have been received by the Company in the past
24 months.
Principal Holders of Rye Patch Shares
As at the Record Date for the Meeting, to the knowledge of the
directors or executive officers of Rye Patch, the only person who
beneficially owned, directly or indirectly, or exercised control or
direction over, shares carrying 10% or more of the voting rights
attached to the issued and outstanding Rye Patch Shares, was Donald
Smith Value Fund, L.P. which held a total of 12,075,000 Rye Patch
Shares representing 14.86% of the issued and outstanding Rye Patch
shares
About Rye Patch Gold Corp.
Rye Patch Gold Corp. is a Nevada based, Tier 1, mining company engaged
in the mining and development of quality resource-based gold and
silver mines and projects along the established Oreana trend in
west central Nevada. Leveraging
its strong financial position and cash to acquire the operating
Florida Canyon Gold Mine, Rye Patch Gold Corp. now controls a
trend-scale platform with mining operations, resource projects and
exploration upside. The combination of operations and organic
growth along a major Nevada gold
trend positions Rye Patch as an emerging mid-tier gold producer
with tremendous value-added potential.
Rye Patch Gold recently announced an agreement to merge with
Alio Gold Inc. whereby Alio Gold
will acquire all of the outstanding shares of Rye Patch Gold and
thereby acquire its 100% owned Florida Canyon Mine and all of
its resource and exploration projects along the Oreana and Cortez
gold trends. The acquisition is expected to be completed in late
May 2018. Alio Gold is a
growth-oriented gold mining company, focused on exploration,
development and production in Mexico. Its principal assets
include its 100%-owned and operating San Francisco Mine in
Sonora, Mexico and its 100%-owned
development stage Ana Paula Project in Guerrero, Mexico. For more information, please
visit our website at www.ryepatchgold.com.
On behalf of the Board of Directors
'William Howald'
William C.
(Bill) Howald, CEO & President
Cautionary Note Regarding
Forward‐Looking Statements
This news release includes certain
"forward‐looking information" under
applicable Canadian securities laws. These
forward‐looking statements or information relate to,
among other things: the timing and receipt of required approvals
for the Arrangement; the ability of Alio
Gold and Rye Patch to satisfy the other conditions to, and
to complete, the Arrangement; and the closing of the
Arrangement.
In respect of the forward‐looking statements
and information concerning the anticipated completion of the
proposed Arrangement, the Company has provided them in reliance on
certain assumptions that are believed to be reasonable at this
time, including assumptions as to the ability of the Company and
Alio Gold to receive the necessary
shareholder, court, stock exchange, creditor and regulatory
approvals; and the ability of the parties to satisfy the other
conditions to the closing of the Arrangement. Accordingly, readers
should not place undue reliance on the
forward‐looking statements and information contained
in this news release concerning the completion of the
Arrangement.
These statements reflect the Company's current views with
respect to future events and are necessarily based upon a number of
assumptions and estimates that, while considered reasonable by the
Company, are inherently subject to significant business, economic,
competitive, political and social uncertainties and contingencies.
Many factors, both known and unknown, could cause actual results,
performance or achievements to be materially different from the
results, performance or achievements that are or may be expressed
or implied by such forward‐looking statements or
information and Rye Patch has made assumptions and estimates based
on or related to many of these factors. Such factors include,
without limitation: satisfaction or waiver of all applicable
conditions to closing of the Arrangement including, without
limitation, receipt of all necessary shareholder, court, stock
exchange, creditor and regulatory approvals or consents and lack of
material changes with respect to Alio
Gold and Rye Patch and their respective businesses, all as
more particularly set forth in the Arrangement Agreement.
Readers are cautioned against attributing undue certainty to
forward‐looking statements or information. Although
the Company has attempted to identify important factors that could
cause actual results to differ materially, there may be other
factors that cause results not to be anticipated, estimated or
intended. The Company does not intend, and does not assume any
obligation, to update these forward‐looking
statements or information to reflect changes in assumptions or
changes in circumstances or any other events affecting such
statements or information, other than as required by applicable
law.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Rye Patch Gold