Eco Oro Settles With Shareholders to End Internal Litigation and Plans to Move Forward with Arbitration Claim Against Colombia
Eco Oro Minerals Corp. has agreed to a settlement with 13 shareholders who control two-thirds of the Vancouver-based gold mining company that will end ongoing litigation between the parties.
The shareholders include Trexs Investments, LLC and a “shareholder group,” as the company has referred to them, consisting of Courtenay Wolfe, Harrington Global Opportunities Fund, and Harrington Global Limited.
“The agreement unites the shareholders of Eco Oro in pursuit of its arbitration claim against the Republic of Colombia,” said Eco Oro in a statement. In 2016, Trexs Investments invested some $14 million USD in the company and the intention was to use the proceeds to fight a dispute with the Colombian government.
“The agreement unites the shareholders of Eco Oro in pursuit of its arbitration claim against the Republic of Colombia” – Eco Oro.
The news is the latest major development at the gold and silver mining company. Last week, Mark Moseley-Williams resigned as president, director, and chief executive officer of Eco Oro.
In April, Eco Oro filed a defamation claim against Harrington Global Opportunities Fund, Courtenay Wolfe and Danny Guy with the Supreme Court of British Columbia. The claim alleged that the named parties “either directly or through their agents, published a dissident proxy circular in connection with the annual general and special meeting of Eco Oro shareholders … which contained statements that were false, misleading and defamatory of Eco Oro and the board,” said Eco Oro at the time.
In a statement released in April, the company said that “conduct may have potentially inappropriately jeopardized the Company’s perception among shareholders and the public and therefore negatively impacted the Company’s ability to maximize value for shareholders.”
Terms of the Eco Oro Settlement
Under the settlement, a new five-member board has been formed, including one independent director and two nominees from each of Trexs Investments and the shareholder group, according to Eco Oro. The independent director, Lawrence Haber, was “selected by the shareholder group and Trexs pursuant to the terms of the agreement,” said the company.
One of the nominees from Trexs, David Kay, and one from the shareholder group, Courtenay Wolfe, will be co-executive chairs of the board. All of the selections will need to be approved at the company’s upcoming 2017 meeting, which Eco Oro says will be held no later than September 30.
“We look forward to working with the new board members … to expeditiously implement the transactions under the settlement and direct all of the company’s focus on the pursuit of the arbitration claim against Colombia,” said Kay.
In a statement, the company outlined the following terms of the settlement, reproduced here from Eco Oro:
- A plan of arrangement under the Business Corporations Act (British Columbia) that will, subject to compliance with applicable securities laws, result in shareholders (other than persons, the “CVR Holders”) currently holding contingent value rights (CVRs) having the opportunity to acquire 19.45% of the outstanding CVRs following implementation of the matters to be approved at the 2017 meeting (or CVRs entitled to 14.1% of the gross proceeds of the arbitration claim) for an aggregate purchase price of $1.11 million USD (the “Proposed Arrangement”).
- Pursuant to the Proposed Arrangement (i) up to 17.17% of the CVRs, in aggregate, that were issued by the Company to CVR Holders, will effectively be made available for purchase by persons (other than CVR Holders) who are shareholders as of the record date for the 2017 meeting and entitled to vote in respect of such meeting (“CVR Acquiring Shareholders”), and (ii) additional CVRs representing 2% of the gross proceeds of the arbitration claim shall be made available by the company to the CVR Acquiring Shareholders.
- An amendment to the “Management Incentive Plan” of the company, effective as of January 13, 2017, to, among other things, reduce the cash retention amount pool from 7% to 5% of the total gross proceeds of the arbitration claim.
- Certain amendments to various agreements that shall permit the implementation of the transactions noted above and the terms of the agreement, including an amendment to the terms of the notes issued on November 9, 2016, to ensure that the CVR Holders will be entitled to acquire sufficient common shares to enforce the provisions of the agreement if a material breach of the agreement occurs.
- Reconfirmation of the amended and restated incentive share option plan of the company.
Additional details regarding the resolutions and the 2017 meeting will be outlined in a circular and related materials that are expected to be mailed to shareholders in August 2017.
- Payment of the fees and expenses of the shareholder group and certain other shareholders in connection with the Litigation, as well as the fees and expenses of certain counsel in connection with the implementation of the transactions provided for under the agreement;
- Confirmation that the options to purchase common shares issued to directors and executives on May 8, 2017 will not be exercisable until following the completion of the 2017 meeting, and, upon approval of all Resolutions, all such options shall terminate and cease to exist.
- Temporary waiver by Trexs of all existing and future defaults and events of default under the relevant investment documents until the earliest of (i) implementation of the Proposed Arrangement, (ii) November 10, 2017 (or in certain circumstances December 31, 2017) or (iii) termination of the agreement, with such temporary waiver automatically becoming a permanent waiver of any such defaults upon the implementation of the Proposed Arrangement.
- Covenants by the new board that future financings should, if possible, be structured to enable all shareholders to participate on a pro rata basis.
The arrangement will require final approval from the Supreme Court of British Columbia before it becomes binding. “Failure to timely approve the resolutions will result in the termination of the agreement and the proposed arrangement,” stated Eco Oro.
One of Eco Oro’s largest holdings is the Angostura gold and silver deposit in northeastern Colombia, which the company’s assessment has found to contain more than three million ounces of gold. Eco Oro is currently in dispute with the government of Colombia related to the free-trade agreement between Canada and Colombia, according to the company.