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PURCHASE AGREEMENT
$300,000,000
8.750% Senior Secured Notes due 2029
This PURCHASE AGREEMENT (this "Agreement") is dated as of and is entered into by and among:
TORCHLIGHT MINING CORP., a corporation incorporated under the Canada Business Corporations Act (the "CBCA"), with its headquarters at 2200 – 400 Burrard Street, Vancouver, British Columbia V6C 3A6, Canada, and its registered office at 1600 – 925 West Georgia Street, Vancouver, British Columbia V6C 3L2, Canada (the "Issuer" or the "Company");
WOLVERINE LAKE MINING LTD., a corporation incorporated under the Business Corporations Act (Ontario), with its registered office at 44 Lakeshore Boulevard, Wolverine Lake, Ontario P0L 1R0, Canada ("WLML");
TORCHLIGHT MILLING & PROCESSING INC., a corporation incorporated under the Business Corporations Act (Ontario), with its registered office at 44 Lakeshore Boulevard, Wolverine Lake, Ontario P0L 1R0, Canada ("TMPI");
TORCHLIGHT U.S. HOLDINGS, INC., a corporation incorporated under the laws of the State of Delaware, with its registered office at 1209 Orange Street, Wilmington, Delaware 19801, United States (EIN: 84-3921057) ("TUSHI" and, together with WLML and TMPI, the "Guarantors");
KELVANTIS CAPITAL MARKETS LLC, a Delaware limited liability company and a broker-dealer registered with the Financial Industry Regulatory Authority, Inc. ("FINRA"), with its principal office at 599 Lexington Avenue, 38th Floor, New York, New York 10022 (the "Lead Initial Purchaser" or the "Representative");
PRESTIGE BARRINGTON & CO., INC., a Delaware corporation and a broker-dealer registered with FINRA, with its principal office at 1285 Avenue of the Americas, 22nd Floor, New York, New York 10019; and
HALCYON SECURITIES INC., a New York corporation and a broker-dealer registered with FINRA, with its principal office at 200 Park Avenue, Suite 3100, New York, New York 10166 (Kelvantis Capital Markets LLC, Prestige Barrington & Co., Inc., and Halcyon Securities Inc. are referred to herein collectively as the "Initial Purchasers").
RECITALS
WHEREAS, the Company proposes to issue and sell $300,000,000 in aggregate principal amount of its 8.750% Senior Secured Notes due 2029 (the "Notes");
WHEREAS, the Notes will be issued pursuant to an indenture (the "Indenture") to be dated as of the among the Company, the Guarantors, and Northern Dominion Trust Company, a national banking association with its corporate trust office at 101 Barclay Street, 7th Floor, New York, New York 10286, as trustee (in such capacity, the "Trustee") and as collateral agent (in such capacity, the "Collateral Agent");
WHEREAS, the Notes will be guaranteed (the "Guarantees") on a senior secured basis, jointly and severally, by each of the Guarantors;
WHEREAS, the Notes and the Guarantees will be secured by a first-priority lien on substantially all tangible and intangible assets of the Company and the Guarantors, as more fully described in the U.S. Security Agreement (as defined below), the Canadian General Security Agreement (as defined below), and the Collateral Agency Agreement (as defined below);
WHEREAS, the offering of the Notes (the "Offering") is being made solely (i) to "qualified institutional buyers" ("QIBs") as defined in Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A, and (ii) to persons outside the United States who are not U.S. persons within the meaning of Regulation S ("Regulation S") under the Securities Act, in reliance on Regulation S;
WHEREAS, in connection with the Offering, the Company has prepared a preliminary offering memorandum dated (the "Preliminary Offering Memorandum") and a final offering memorandum dated (the "Offering Memorandum" or "OM"), each relating to the Company, the Guarantors, and the offering, issuance, and sale of the Notes;
WHEREAS, the pricing of the Notes was determined on (the "Pricing Date"); and
WHEREAS, the Company, the Guarantors, and the Initial Purchasers desire to set forth the terms upon which the Initial Purchasers will severally purchase the Notes from the Company.
NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1: PURCHASE AND SALE OF THE NOTES
1.1 Agreement to Purchase.
Upon the basis of the representations, warranties, covenants, and agreements herein contained, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to the Initial Purchasers, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Company, the aggregate principal amount of Notes set forth opposite such Initial Purchaser's name in Schedule I hereto. The aggregate principal amount of the Notes to be issued and sold pursuant to this Agreement is $300,000,000. The respective obligations of each Initial Purchaser to purchase the Notes as set forth in Schedule I are several and not joint, and no Initial Purchaser shall be responsible for the obligations of any other Initial Purchaser hereunder. The allocation of the Notes among the Initial Purchasers is as follows:
1.2 Purchase Price.
The purchase price for the Notes shall be 96.25% of the aggregate principal amount thereof (the "Purchase Price"), which Purchase Price reflects the issue price to investors of 98.50% of par the initial purchaser discount of 2.25% of the aggregate principal amount of the Notes. The purchase price economics are as follows:
(a) Issue price to investors: 98.50% of the aggregate principal amount, or $295,500,000.
(b) Initial purchaser discount: 2.25% of the aggregate principal amount, or $6,750,000, allocated among the Initial Purchasers in proportion to their respective commitments as follows:
(i) Kelvantis Capital Markets LLC (60%): $4,050,000;
(ii) Prestige Barrington & Co., Inc. (25%): $1,687,500; and
(iii) Halcyon Securities Inc. (15%): $1,012,500.
(c) Net proceeds to the Company: The Purchase Price payable to the Company by the Initial Purchasers at the Closing shall be $288,750,000 (being $300,000,000 multiplied by 0.9625), representing the aggregate principal amount less the initial purchaser discount. After deduction of all estimated fees and expenses of the Offering (including the fees and expenses described in Section 9 hereof), the total estimated net proceeds to the Company are approximately $285,750,000.
1.3 Closing. The closing of the purchase and sale of the Notes (the "Closing") shall take place at the offices of Calderwood & Harkness LLP, 450 Park Avenue, New York, New York 10022, at 10:00 a.m. (New York City time) on (the "Closing Date"), or at such other time and place as the Company and the Representative shall agree in writing. The parties hereby acknowledge that the originally expected Closing Date was April 5, 2022
At the Closing:
(a) Delivery of Notes. The Company shall cause the Notes to be delivered to the Initial Purchasers or their respective designees in global form through the facilities of The Depository Trust Company ("DTC") in the case of Notes sold in reliance on Rule 144A (the "144A Notes") (CUSIP: 891207 AA 3; ISIN: US891207AA38), and through the facilities of Stonefield Industries ("Thackeray Partners LLC") and Harborview Industries ("Ashgrove Enterprises") in the case of Notes sold in reliance on Regulation S (the "Regulation S Notes") (CUSIP: C89120 AA 5; ISIN: USC89120AA58), against payment of the Purchase Price.
(b) Payment of Purchase Price. Each Initial Purchaser shall pay its pro rata share of the Purchase Price by wire transfer of immediately available funds in United States dollars to such account or accounts as the Company shall designate in writing to the Representative not less than two (2) business days prior to the Closing Date.
1.4 Denominations. The Notes shall be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
SECTION 2: REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS
The Company and each of the Guarantors, jointly and severally, represent and warrant to each of the Initial Purchasers as of the date hereof and as of the Closing Date (except where a representation or warranty speaks as of a specific date, in which case such representation or warranty is made as of such specific date) as follows:
2.1 Organization and Qualification.
(a) The Company is duly incorporated, validly existing, and in good standing under the CBCA . The Company has all requisite corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Offering Memorandum. The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership, leasing, or operation of its properties requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (as defined below).
(b) WLML is duly incorporated, validly existing, and in good standing under the Business Corporations Act (Ontario). WLML has all requisite corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Offering Memorandum. WLML is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership, leasing, or operation of its properties requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(c) TMPI is duly incorporated, validly existing, and in good standing under the Business Corporations Act (Ontario). TMPI has all requisite corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Offering Memorandum. TMPI is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership, leasing, or operation of its properties requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(d) TUSHI is duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. TUSHI has all requisite corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Offering Memorandum. TUSHI is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership, leasing, or operation of its properties requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
As used in this Agreement, "Material Adverse Effect" means any material adverse change in, or material adverse effect on, (i) the condition (financial or otherwise), results of operations, business, properties, assets, liabilities, or prospects of the Company and its subsidiaries, taken as a whole, (ii) the ability of the Company or any Guarantor to perform its obligations under any of the Transaction Documents, or (iii) the validity or enforceability of any Transaction Document or the rights or remedies of the Initial Purchasers, the Trustee, or the Collateral Agent thereunder.
2.2 Subsidiaries. (a) The Company's subsidiaries consist of (i) WLML, (ii) TMPI, and (iii) TUSHI, each of which is wholly owned, directly or indirectly, by the Company. Schedule II hereto sets forth the name, jurisdiction of incorporation, ownership structure, and principal function of each subsidiary. WLML is the operating entity for the Wolverine Lake Nickel-Copper Mine located in northern Ontario, Canada. TMPI operates the concentrator and processing facilities located adjacent to the Wolverine Lake mine site. TUSHI holds all United States offtake agreements and marketing contracts entered into by the Company and its subsidiaries.
(b) All of the equity interests in each subsidiary of the Company are duly authorized, validly issued, fully paid, and non-assessable, and are owned, directly or indirectly, by the Company free and clear of all liens, encumbrances, pledges, security interests, claims, equities, charges, options, rights of first refusal, or restrictions of any kind, except as created under the Transaction Documents (as defined below). There are no outstanding options, warrants, rights, or other agreements to acquire any equity interest in any subsidiary of the Company.
2.3 Authorization. (a) The Company has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement, the Indenture, the Notes, the U.S. Security Agreement, the Canadian General Security Agreement, the Collateral Agency Agreement, and the Registration Rights Agreement (collectively, the "Transaction Documents"). The execution, delivery, and performance by the Company of each Transaction Document to which it is a party, and the issuance and sale of the Notes and the consummation of the other transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Company, including the approval of the board of directors of the Company at a meeting duly convened and held, and no further corporate action on the part of the Company is required in connection therewith.
(b) Each Guarantor has full corporate power and authority to execute, deliver, and perform its obligations under each of the Transaction Documents to which it is a party, including without limitation the Indenture (with respect to the Guarantees), the applicable security agreements, and the Collateral Agency Agreement. The execution, delivery, and performance by each Guarantor of each Transaction Document to which it is a party have been duly authorized by all necessary corporate action on the part of such Guarantor, including the approval of the board of directors of such Guarantor, and no further corporate action on the part of any Guarantor is required in connection therewith.
2.4 Valid Issuance of Notes and Guarantees.
(a) The Notes, when duly executed and authenticated in accordance with the terms of the Indenture and issued, delivered, and paid for in accordance with the terms of this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to (the "Enforceability Exceptions").
(b) Each Guarantee, when duly executed and delivered in accordance with the terms of the Indenture, will constitute a valid and binding obligation of the respective Guarantor, enforceable against such Guarantor in accordance with its terms, subject to the Enforceability Exceptions.
2.5 No Conflicts.
The execution, delivery, and performance by the Company and each Guarantor of each Transaction Document to which it is or will be a party, the issuance and sale of the Notes, and the consummation of the other transactions contemplated hereby and thereby will not:
(a) violate, conflict with, or result in a breach of any provision of the articles of incorporation, certificate of incorporation, by-laws, or other organizational documents of the Company or any Guarantor;
(b) violate, conflict with, or result in a breach of, or constitute a default (or an event that, with the giving of notice or the passage of time or both, would constitute a default) under, any applicable law, statute, rule, regulation, judgment, order, writ, injunction, or decree of any governmental authority applicable to the Company or any Guarantor or any of their respective properties or assets;
(c) result in a breach of, or constitute a default (or an event that, with the giving of notice or the passage of time or both, would constitute a default) under, any material agreement, contract, indenture, mortgage, lease, or other instrument to which the Company or any Guarantor is a party or by which any of them or their respective properties or assets may be bound, including without limitation the CAD $225,000,000 committed revolving credit facility with Ridgeline Bank of Canada as administrative agent (the "Ridgeline Revolving Facility"), which will be repaid in full and terminated at the Closing ; or
(d) result in the creation or imposition of any lien, charge, or encumbrance upon any property or asset of the Company or any Guarantor other than the liens created under the Transaction Documents in favor of the Collateral Agent for the benefit of the holders of the Notes.
2.6 No Registration Required.
offer and sale of the Notes in the manner contemplated by this Agreement and the Offering Memorandum are exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof, Rule 144A thereunder, and Regulation S thereunder, and from the registration and qualification requirements of applicable U.S. state securities laws. It is not necessary, in connection with the offer, sale, and delivery of the Notes to the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Notes under the Securities Act or to qualify an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended.
2.7 The Offering Memorandum.
(a) The Offering Memorandum dated March 14, 2022, as of its date and as of the Closing Date (as may be amended or supplemented as of the Closing Date), does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b) The Preliminary Offering Memorandum dated February 4, 2022, as of its date, did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty does not apply to statements in or omissions from the Preliminary Offering Memorandum made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchaser through the Representative specifically for use therein.
(c) The representations and warranties set forth in paragraphs (a) and (b) above do not apply to any statements in or omissions from the Offering Memorandum or the Preliminary Offering Memorandum, as the case may be, made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchaser through the Representative specifically for use therein. The statements identified in Schedule IV hereto constitute the only information so furnished by the Initial Purchasers.
2.8 Financial Statements.
The consolidated financial statements of the Company and its subsidiaries included in the Offering Memorandum have been prepared in accordance with applied on a consistent basis throughout the periods indicated and consistent with each other, except as otherwise noted therein. Such financial statements present fairly, in all material respects, the consolidated financial position, results of operations, changes in equity, and cash flows of the Company and its subsidiaries as of the dates and for the periods indicated therein. The consolidated financial statements of the Company for the fiscal year ended December 31, 2021 have been audited by Aldgate Thornton LLP, Chartered Professional Accountants (engagement partner: Francesca Hui, CPA, CA), whose report thereon is included in the Offering Memorandum. For the fiscal year ended December 31, 2021, the Company reported consolidated revenue of CAD $612,400,000 and Adjusted EBITDA (as defined in the Offering Memorandum) of CAD $189,700,000. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Offering Memorandum under applicable securities laws or regulations.
2.9 No Material Adverse Change.
Since the date of the most recent audited financial statements included in the Offering Memorandum (December 31, 2021), there has been no material adverse change, or any development involving a prospective material adverse change, in the condition (financial or otherwise), results of operations, business, properties, assets, liabilities, or prospects of the Company and its subsidiaries, taken as a whole, whether or not arising in the ordinary course of business.
2.10 No Undisclosed Liabilities.
Neither the Company nor any Guarantor has any liabilities or obligations, whether absolute, accrued, contingent, or otherwise, and whether due or to become due, that are not disclosed or adequately reserved against in the Offering Memorandum, other than liabilities incurred in the ordinary course of business subsequent to the date of the most recent financial statements included in the Offering Memorandum which are not, individually or in the aggregate, material to the Company and its subsidiaries, taken as a whole.
2.11 Litigation.
are no pending, or threatened, actions, suits, proceedings, investigations, or inquiries before or by any court, governmental agency, regulatory body, arbitral tribunal, or other body against or affecting the Company or any Guarantor or any of their respective properties, assets, operations, or businesses that, individually or in the aggregate, or that challenge or seek to prevent, enjoin, alter, or materially delay the consummation of any of the transactions contemplated by the Transaction Documents.
2.12 Mining Rights and Properties.
(a) The Company and its subsidiaries have good and valid title to, or valid and enforceable leasehold interests in, all mining rights, mineral claims, mining leases, surface rights, water rights, and other real and personal property described in the Offering Memorandum as owned or leased by them, including without limitation the Wolverine Lake nickel-copper property located in northern Ontario, Canada, comprising approximately 12,400 hectares and designated under Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47 (collectively, the "Wolverine Lake Property"), free and clear of all liens, claims, encumbrances, and defects in title, except for Permitted Liens (as defined in the Indenture).
(b) The mineral resource estimates for the Wolverine Lake Property set forth in the Offering Memorandum have been prepared in compliance with National Instrument 43-101 — Standards of Disclosure for Mineral Projects ("NI 43-101") and the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the Canadian Institute of Mining, Metallurgy and Petroleum. As disclosed in the Offering Memorandum, the current mineral resource estimates for the Wolverine Lake Property are:
(i) Measured & Indicated Resources: 48.2 million tonnes at an average grade of 1.12% Ni (nickel) and 0.38% Cu (copper); and
(ii) Inferred Resources: 11.7 million tonnes at an average grade of 0.94% Ni and 0.31% Cu.
(c) All mining permits, licenses, authorizations, and approvals required for the current operations at the Wolverine Lake Property are in full force and effect, have not been suspended or revoked, and are not subject to any pending or, to the knowledge of the Company, threatened proceedings for suspension, revocation, or modification.
2.13 Environmental Compliance.
The Company and its subsidiaries are in compliance with all applicable environmental laws, rules, and regulations, including without limitation the Canadian Environmental Protection Act, 1999, the Ontario Environmental Protection Act, the Ontario Water Resources Act, and the Fisheries Act (Canada), and all regulations promulgated thereunder. All material environmental permits, licenses, approvals, consents, and authorizations required for the operation of the Wolverine Lake mine are in full force and effect, There are no pending or, to the knowledge of the Company, threatened environmental claims, actions, suits, proceedings, or investigations against the Company or any Guarantor that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Guarantor has received any written notice from any governmental authority alleging any material violation of applicable environmental laws.
2.14 Tax Matters.
The Company and each Guarantor have timely filed (or caused to be filed) all tax returns required to be filed by them under applicable Canadian federal, provincial, U.S. federal, state, and local tax laws. All taxes (including income taxes, mining taxes, goods and services taxes, and withholding taxes) shown to be due on such returns, or otherwise assessed against the Company or any Guarantor, have been paid in full, except for taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with IFRS. Neither the Company nor any Guarantor has received any written notice of any tax deficiency, assessment, or proposed adjustment from any taxing authority that has not been resolved or adequately reserved against. There are no outstanding tax sharing or tax allocation agreements to which the Company or any Guarantor is a party (other than agreements among the Company and its wholly owned subsidiaries).
2.15 intellectual Property.
The Company and its subsidiaries own, or have valid and enforceable licenses to use, all patents, patent applications, trademarks, trademark registrations, service marks, trade names, copyrights, trade secrets, know-how, software, and other intellectual property rights (collectively, "intellectual Property") that are necessary for the conduct of their respective businesses as currently conducted and as described in the Offering Memorandum. No claims are pending or, to the knowledge of the Company, threatened by any person challenging the Company's or any Guarantor's rights in or to any intellectual Property, and neither the Company nor any Guarantor has received any written notice that the conduct of its business infringes upon or otherwise violates the intellectual property rights of any third party.
2.16 Security Interests.
Upon execution and delivery of the U.S. Security Agreement (between TUSHI and the Collateral Agent), the Canadian General Security Agreement (among the Company, WLML, TMPI, and the Collateral Agent), and the Collateral Agency Agreement (among the Company, the Guarantors, the Trustee, and the Collateral Agent), and upon the making of all applicable filings and registrations (including the Collateral Agent will have a valid, perfected, first-priority security interest (subject only to Permitted Liens) in the Collateral (as defined in the applicable security agreements). No intercreditor agreement is required in connection with the Offering, as the and no other secured indebtedness of the Company or any Guarantor will remain outstanding after the Closing.
2.17 Use of Proceeds.
The net proceeds from the sale of the Notes will be applied by the Company as described in the Offering Memorandum, specifically as follows:
2.18 Compliance with Laws.
The Company and each Guarantor are, and have been at all times during the past three (3) years, in compliance with all applicable laws, statutes, rules, regulations, orders, judgments, decrees, and governmental requirements, whether federal, provincial, state, or local, applicable to the Company, any Guarantor, or any of their respective properties or operations, including without limitation all applicable mining laws, securities laws, environmental laws, employment and labor laws, tax laws, anti-money laundering laws, and health and safety laws.
2.19 TSX Listing.
The Company's common shares are listed and posted for trading on the Toronto Stock Exchange (the "TSX") under the ticker symbol "TMC." As of January 14, 2022, the market capitalization of the Company was approximately CAD $1,870,000,000. No notification to or approval from the TSX is required in connection with the Offering, the issuance and sale of the Notes, or the other transactions contemplated by the Transaction Documents that has not been obtained or waived. The Company is not in default of any of its obligations under the rules and regulations of the TSX.
2.20 Investment Company Act.
Neither the Company nor any Guarantor is, or immediately after receipt of the proceeds from the sale of the Notes and the application of such proceeds as described in the Offering Memorandum will be, required to register as an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act").
2.21 No General Solicitation.
Neither the Company, any Guarantor, nor any person acting on behalf of the Company or any Guarantor has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Notes, including without limitation (a) any advertisement, article, notice, or other communication published in any newspaper, magazine, website, or similar medium or broadcast over television, radio, or any electronic medium, or (b) any seminar or meeting whose attendees were invited by any general solicitation or general advertising.
2.22 Independent Engineer's Report.
The independent engineer's report (the "Independent Engineer's Report") prepared by Cascade Technical Advisors Inc., with offices in Calgary, Alberta, Canada (lead author: Dr. Elaine Whitaker, P.Eng.), dated February 28, 2022, included or referenced in the Offering Memorandum, was prepared in accordance with applicable professional standards, including the standards established by the Association of Professional Engineers and Geoscientists of Alberta and applicable NI 43-101 requirements. The Company has no reason to believe that the Independent Engineer's Report The Company has provided to Cascade Technical Advisors Inc. all material information regarding the Wolverine Lake Property that was requested by Cascade Technical Advisors Inc. in connection with the preparation of the Independent Engineer's Report.
2.23 Ratings.
The Notes have been rated B1 with a stable outlook by Northmark Ratings Group, Inc. and B+ with a stable outlook by Creston Analytics, Inc., in each case as of March 7, 2022. As of the date hereof, no rating agency has informed the Company that it is
2.24 Existing Indebtedness.
The existing indebtedness of the Company and its subsidiaries consists solely of (a) the Ridgeline Revolving Facility, a CAD $225,000,000 committed revolving credit facility with Ridgeline Bank of Canada as administrative agent, of which CAD $140,000,000 (approximately $110,250,000 at USD/CAD 0.7875) is drawn and outstanding as of the date hereof, and (b) certain equipment finance leases and other obligations in aggregate amount not exceeding CAD $8,500,000 as described in the Offering Memorandum. The Ridgeline Revolving Facility will be repaid in full and terminated on the Closing Date, and all liens and security interests granted in connection therewith will be released simultaneously.
2.25 ERISA and Employee Benefits.
The Company's employee benefit plans, including its registered pension plan and group benefits plan, comply in all material respects with all applicable including without limitation the Pension Benefits Act (Ontario) and the Income Tax Act (Canada). All required contributions to such plans have been made on a timely basis. TUSHI does not sponsor, maintain, contribute to, or have any liability (contingent or otherwise) with respect to any employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 412 of the Internal Revenue Code of 1986, as amended (the "Code"), or any "multiemployer plan" within the meaning of Section 3(37) of ERISA.
2.26 Anti-Corruption; Sanctions.
(a) Neither the Company, any Guarantor, nor any of their respective directors, officers, agents, employees, or, to the knowledge of the Company, any other person associated with or acting on behalf of any of them, has (i) used any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful expense relating to political activity, (ii) made or authorized any direct or indirect unlawful payment to any foreign or domestic government official or employee, or (iii) taken any action in violation of the Corruption of Foreign Public Officials Act (Canada), the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery or anti-corruption laws.
(b) Neither the Company, any Guarantor, nor any of their respective directors or officers is, or is controlled by or acting on behalf of, a person that is (i) the target of any sanctions administered or enforced by the Government of Canada, the U.S. Department of the Treasury's Office of Foreign Assets Control, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty's Treasury of the United Kingdom, or any other relevant sanctions authority (collectively, "Sanctions"), or (ii) located, organized, or resident in a country or territory that is the subject of comprehensive country-wide or territory-wide Sanctions (currently, Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine).
2.27 No Stabilization or Manipulation.
Neither the Company nor any Guarantor has taken, directly or indirectly, and they will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in the stabilization or manipulation of the price of any security of the Company or any Guarantor in order to facilitate the sale or resale of the Notes in contravention of applicable securities laws.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASERS
Each Initial Purchaser, severally and not jointly, represents and warrants to the Company and each of the Guarantors as of the date hereof and as of the Closing Date as follows:
3.1 Authorization. Such Initial Purchaser has full power and authority (corporate and otherwise) to execute, deliver, and perform its obligations under this Agreement. The execution, delivery, and performance by such Initial Purchaser of this Agreement have been duly authorized by all necessary action on the part of such Initial Purchaser, and this Agreement constitutes a valid and binding obligation of such Initial Purchaser, enforceable against it in accordance with its terms, subject to the Enforceability Exceptions.
3.2 Offering Restrictions.
Such Initial Purchaser represents and agrees that (a) it has offered and sold the Notes, and will offer and sell the Notes, only (i) to persons that it reasonably believes are QIBs in transactions meeting the requirements of Rule 144A, or (ii) to persons other than "U.S. persons" (as defined in Regulation S) in offshore transactions complying with Rule 903 or Rule 904 of Regulation S; (b) it has not offered or sold, and will not offer or sell, any Notes by means of any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act), including without limitation any advertisement, article, notice, or other communication published in any newspaper, magazine, website, or similar medium or broadcast over television, radio, or the internet, or any seminar or meeting whose attendees were invited by any general solicitation or general advertising; and (c) it has not engaged and will not engage in any directed selling efforts (as defined in Regulation S) in the United States with respect to the Regulation S Notes.
3.3 FINRA Compliance.
Such Initial Purchaser is a member in good standing of FINRA, and its participation in the Offering complies, and will comply, with all applicable rules and regulations of FINRA, including without limitation FINRA Rule 5110 (Corporate Financing Rule — Underwriting Terms and Arrangements), FINRA Rule 5121 (Public Offerings of Securities with Conflicts of Interest), and FINRA Rule 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings). Such Initial Purchaser will not sell any Notes to any account over which it exercises discretionary authority without the prior written specific consent of the account holder.
SECTION 4: COVENANTS OF THE COMPANY AND THE GUARANTORS
The Company and the Guarantors covenant and agree with each of the Initial Purchasers as follows:
4.1 Delivery of Offering Memorandum.
The Company will provide, or cause to be provided, copies of the Offering Memorandum (including all amendments and supplements thereto, if any) to the Initial Purchasers in such quantities as the Representative may from time to time reasonably request. The Company will bear all costs associated with the preparation, printing, and distribution of the Offering Memorandum and any amendments or supplements thereto.
4.2 Amendments and Supplements to the Offering Memorandum.
(a) During the period from the date hereof through the Closing Date, and for a period of ninety (90) days following the Closing Date (or such shorter period as the Initial Purchasers are required to deliver an offering memorandum in connection with sales or resales of the Notes), the Company will not amend or supplement the Offering Memorandum without the prior written consent of the Representative, which consent shall not be unreasonably withheld , conditioned, or delayed .
(b) If, during the period referred to in paragraph (a) above, any event occurs or any condition exists as a result of which it is necessary to amend or supplement the Offering Memorandum so that it will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company shall promptly (i) notify the Representative of such event or condition, (ii) prepare and furnish to the Initial Purchasers an amendment or supplement to the Offering Memorandum that will correct such untrue statement or omission, and (iii) supply such amended or supplemented Offering Memorandum to the Initial Purchasers in such quantities as the Representative may reasonably request.
4.3 Blue Sky.
The Company will cooperate with the Initial Purchasers and their counsel to qualify or register the Notes for offer and sale under the securities or "blue sky" laws of such jurisdictions of the United States as the Representative may reasonably request and will continue such qualification or registration in effect for so long as may be necessary for the distribution of the Notes; provided, however, that the Company shall not be obligated to (i) qualify as a foreign corporation or dealer in securities in any jurisdiction in which it is not otherwise required to so qualify, (ii) file a general consent to service of process in any such jurisdiction, or (iii) subject itself to taxation in any jurisdiction in which it is not otherwise so subject.
4.4 Use of Proceeds.
The Company shall apply the net proceeds from the sale of the Notes as set forth in the Offering Memorandum and as described in Section 2.17 hereof, including the application of approximately $167,000,000 to fund the Phase II expansion of the Wolverine Lake mine, approximately $110,250,000 to repay the Ridgeline Revolving Facility, approximately $14,250,000 to pay transaction fees and expenses, and the remainder for general corporate purposes and working capital. The Company shall not use any portion of the proceeds of the Notes in a manner that would violate any applicable anti-money laundering laws, Sanctions, or anti-corruption laws.
4.5 No Resales.
The Company will not, and will cause its affiliates (as defined in Rule 144 under the Securities Act) not to, resell any of the Notes that have been acquired by any of them, except in compliance with the Securities Act and applicable state securities laws.
4.6 Reporting Obligations.
The Company will comply with the reporting obligations set forth in the Indenture, including without limitation (a) furnishing annual reports (including audited consolidated financial statements prepared in accordance with IFRS) within ninety (90) days after the end of each fiscal year, and (b) furnishing quarterly reports (including unaudited consolidated financial statements prepared in accordance with IFRS) within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year. The Company will also provide to the Trustee and the holders of the Notes such other reports and information as may be required by the Indenture.
4.7 DTC Eligibility.
The Company will use to maintain the eligibility of the Notes for clearance and settlement through the facilities of DTC, Thackeray Partners LLC, and Ashgrove Enterprises for so long as any Notes remain outstanding.
4.8 Registration Rights.
On the Closing Date, the Company and the Guarantors will enter into a registration rights agreement with the Initial Purchasers (the "Registration Rights Agreement") substantially in the form attached hereto as Exhibit B. Pursuant to the Registration Rights Agreement, the Company and the Guarantors will agree, among other things, to (a) file a registration statement with the U.S. Securities and Exchange Commission (the "SEC") with respect to an offer to exchange the Notes for a new issue of substantially identical notes registered under the Securities Act (the "Exchange Offer"), or, if the Exchange Offer is not available, to file a shelf registration statement with respect to the resale of the Notes, in either case within 365 days after the Closing Date (i.e., on or before April 19, 2023), and (b) use commercially reasonable efforts to cause such registration statement to become effective and, in the case of the Exchange Offer, to consummate such Exchange Offer promptly after such effectiveness. If the Company fails to satisfy its obligations under the Registration Rights Agreement within the time periods specified therein, additional interest will accrue on the Notes at the rate set forth in the Registration Rights Agreement.
4.9 Security Documents.
On or prior to the Closing Date, the Company and the Guarantors shall execute and deliver (a) the U.S. Security Agreement (between TUSHI and the Collateral Agent), (b) the Canadian General Security Agreement (among the Company, WLML, TMPI, and the Collateral Agent), and (c) the Collateral Agency Agreement (among the Company, the Guarantors, the Trustee, and the Collateral Agent), in each case substantially in the forms contemplated by the Indenture. The Company and the Guarantors shall make, or cause to be made, all necessary filings and registrations (including Uniform Commercial Code financing statements in the State of Delaware and Personal Property Security Act registrations in the Provinces of Ontario and British Columbia) to perfect the first-priority security interests granted under the U.S. Security Agreement and the Canadian General Security Agreement, and shall deliver evidence of such filings and registrations to the Representative and the Collateral Agent on or promptly following the Closing Date.
4.10 Payoff of Ridgeline Revolving Facility.
On the Closing Date, the Company shall cause the CAD $140,000,000 outstanding principal balance under the Ridgeline Revolving Facility to be repaid in full (being approximately $110,250,000 at the exchange rate of USD/CAD 0.7875), together with all accrued and unpaid interest, fees, premiums, and other amounts due and payable thereunder. The Company shall obtain and deliver to the Representative on the Closing Date (a) a payoff letter from Ridgeline Bank of Canada (contact: Gavin Forde, Relationship Manager) confirming the total payoff amount and providing wire transfer instructions, (b) a lien release and discharge from Ridgeline Bank of Canada releasing all liens, security interests, mortgages, and encumbrances granted in connection with the Ridgeline Revolving Facility, and (c) termination statements for all Uniform Commercial Code financing statements and Personal Property Security Act registrations filed in connection with the Ridgeline Revolving Facility.
4.11 No Integration.
The Company will not, and will cause its affiliates not to, sell, offer for sale, solicit offers to buy, or otherwise negotiate in respect of any security (as defined in the Securities Act) that would be integrated with the sale of the Notes in a manner that would require the offer and sale of the Notes to be registered under the Securities Act or that would otherwise cause the exemptions from registration relied upon herein to be unavailable.
4.12 Future Guarantors.
The Company will cause each Restricted Subsidiary (as defined in the Indenture) formed or acquired after the Closing Date that has total assets (as determined in accordance with IFRS) equal to or in excess of $5,000,000 to (a) execute a supplemental indenture and become a Guarantor under the Indenture, (b) execute a joinder to the applicable security agreements and the Collateral Agency Agreement, and (c) deliver such opinions, certificates, and other documents as may be required under the Indenture, in each case within thirty (30) days after the date on which such Restricted Subsidiary is formed or acquired or first exceeds the $5,000,000 total asset threshold.
SECTION 5: CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INITIAL PURCHASERS
The obligations of the Initial Purchasers to purchase the Notes at the Closing shall be subject to the accuracy in all material respects of the representations and warranties of the Company and each Guarantor set forth in Section 2 hereof (as of the date hereof and as of the Closing Date), to the performance by the Company and each Guarantor of their respective obligations under this Agreement, and to the satisfaction (or waiver by the Representative) of the following conditions precedent on or before the Closing Date:
5.1 Execution and Delivery of Transaction Documents.
Each of the following Transaction Documents shall have been duly executed and delivered by all parties thereto, and the Representative shall have received executed counterparts thereof:
(a) the Indenture, dated as of the Closing Date, among the Company, the Guarantors, and Northern Dominion Trust Company, as Trustee and Collateral Agent;
(b) the Notes, in global form, duly executed and authenticated;
(c) the Guarantees, executed by each Guarantor pursuant to the terms of the Indenture;
(d) the U.S. Security Agreement, between TUSHI and the Collateral Agent;
(e) the Canadian General Security Agreement, among the Company, WLML, TMPI, and the Collateral Agent;
(f) the Collateral Agency Agreement, among the Company, the Guarantors, the Trustee, and the Collateral Agent; and
(g) the Registration Rights Agreement, among the Company, the Guarantors, and the Initial Purchasers.
5.2 Legal Opinions.
The Initial Purchasers shall have received on the Closing Date the following legal opinions, each dated as of the Closing Date and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Representative and its counsel:
(a) New York Counsel to the Company and the Guarantors. An opinion of Calderwood & Harkness LLP, 450 Park Avenue, New York, New York 10022, New York counsel to the Company and the Guarantors, as to matters of New York law, including without limitation (i) the valid issuance and binding nature of the Notes and the Indenture, (ii) the due authorization by the Company and each Guarantor of the Transaction Documents, (iii) the enforceability of the Notes, the Guarantees, and the Indenture against the Company and each Guarantor, (iv) the availability of the exemptions from registration under the Securities Act afforded by Rule 144A and Regulation S, and (v) the validity, attachment, and perfection of the security interests granted under the U.S. Security Agreement.
(b) Delaware Counsel to TUSHI. An opinion of Calderwood & Harkness LLP as to matters of Delaware law regarding TUSHI, including without limitation (i) the due organization, valid existence, and good standing of TUSHI under the laws of the State of Delaware, (ii) the corporate power and authority of TUSHI to enter into the Transaction Documents to which it is a party, and (iii) the enforceability of the Guarantee executed by TUSHI and the U.S. Security Agreement against TUSHI.
(c) Canadian Counsel to the Company and the Canadian Guarantors. An opinion of Pendleton Ross LLP (Marie-Claire Bouchard), Canadian counsel to the Company and the Canadian Guarantors (WLML and TMPI), as to matters of CBCA law and Ontario law, including without limitation (i) the due organization, valid existence, and good standing of the Company under the CBCA and of WLML and TMPI under the Business Corporations Act (Ontario), (ii) the authorization by the Company, WLML, and TMPI of the Transaction Documents, (iii) the enforceability of the Guarantees executed by WLML and TMPI and of the Canadian General Security Agreement, and (iv) the validity, attachment, and perfection of the security interests granted under the Canadian General Security Agreement.
(d) U.S. Counsel to the Initial Purchasers. An opinion of Clairmont & Voss LLP (Harrison Voss), 51 West 52nd Street, New York, New York 10019, counsel to the Initial Purchasers, as to such matters of New York and U.S. federal law as the Initial Purchasers may reasonably request.
5.3 Officers' and Secretary's Certificates.
The Initial Purchasers shall have received, on the Closing Date, each of the following certificates, duly executed and dated as of the Closing Date:
(a) Officer's Certificate of Torchlight Mining Corp. An Officer's Certificate of the Company, substantially in the form attached hereto as Exhibit C, executed by Lianne Prokopchuk, Chief Financial Officer, and Deepak Rathore, General Counsel, certifying (i) compliance with Section 4.02 of the Indenture, (ii) that all conditions precedent to the issuance of the Notes set forth herein and in the Indenture have been satisfied, and (iii) such other matters as the Representative may reasonably request.
(b) Secretary's Certificate of Torchlight Mining Corp. A Secretary's Certificate of the Company, substantially in the form attached hereto as Exhibit D, executed by Deepak Rathore, General Counsel and Corporate Secretary, attaching certified copies of (i) the resolutions of the board of directors of the Company authorizing the execution, delivery, and performance of the Transaction Documents and the issuance and sale of the Notes, (ii) the articles of incorporation of the Company as currently in effect, (iii) the by-laws of the Company as currently in effect, and (iv) an incumbency certificate setting forth the name, title, and specimen signature of each officer authorized to execute and deliver the Transaction Documents on behalf of the Company (Magnus Thornberg, Chief Executive Officer; Lianne Prokopchuk, Chief Financial Officer; Deepak Rathore, General Counsel and Corporate Secretary; Colleen Hébert, Treasurer).
(c) Secretary's Certificate of Wolverine Lake Mining Ltd. A Secretary's Certificate of WLML, dated the Closing Date, in form and substance substantially similar to the Secretary's Certificate referred to in paragraph (b) above, attaching certified copies of board resolutions, articles of incorporation, by-laws, and an incumbency certificate for WLML.
5.4 Bring-Down Certificate.
The Initial Purchasers shall have received a closing certificate (the "Bring-Down Certificate"), substantially in the form attached hereto as Exhibit E, dated the Closing Date and executed by the Chief Executive Officer or the Chief Financial Officer of the Company, certifying on behalf of the Company and each Guarantor that (a) the representations and warranties of the Company and each Guarantor contained in Section 2 hereof are true and correct in all material respects as of the Closing Date (both as originally made as of the date hereof and as of the Closing Date, except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date), (b) no Event of Default or Default (each as defined in the Indenture) has occurred and is continuing as of the Closing Date, and (c) all conditions precedent set forth in this Section 5 have been satisfied.
5.5 Comfort Letter.
The Initial Purchasers shall have received a comfort letter from Aldgate Thornton LLP, Chartered Professional Accountants (engagement partner: Francesca Hui, CPA, CA), dated as of the Closing Date and addressed to the Initial Purchasers, in form and substance satisfactory to the Representative and to Clairmont & Voss LLP, counsel to the Initial Purchasers, confirming, among other things, the independence of Aldgate Thornton LLP with respect to the Company and its subsidiaries within the meaning of applicable professional standards, the compliance of the financial statements included in the Offering Memorandum with IFRS, and the results of agreed-upon procedures with respect to certain financial and statistical data set forth in the Offering Memorandum.
5.6 Ratings. The Notes shall have received and shall maintain ratings of at least and, as of the Closing Date, no such rating shall have been downgraded, withdrawn, suspended, or placed under review for possible downgrade or on negative watch by either rating agency.
5.7 Payoff and Lien Release.
The Ridgeline Revolving Facility shall have been repaid in full on or prior to the Closing Date (including all outstanding principal, accrued interest, fees, and other amounts due thereunder), and the Company shall have delivered to the Initial Purchasers and the Collateral Agent evidence of such repayment and of the release and discharge of all liens and security interests granted in connection with the Ridgeline Revolving Facility, including (a) a payoff letter from Ridgeline Bank of Canada, (b) lien releases and discharges in form satisfactory to the Representative, and (c)
5.8 DTC Letter.
The Company shall have delivered to Northern Dominion Trust Company and DTC the DTC Letter of Representations, in customary form, with respect to the Notes.
5.9 Good Standing Certificates.
The Initial Purchasers shall have received certificates of good standing, compliance, or equivalent status for each of the following entities, each dated within business days of the Closing Date:
(a) the Company, issued by Industry Canada (or the relevant CBCA registrar);
(b) WLML, issued by the Ontario Ministry of Government and Consumer Services;
(c) TMPI, issued by the Ontario Ministry of Government and Consumer Services; and
(d) TUSHI, issued by the Secretary of State of the State of Delaware.
5.10 Security Interest Perfection.
All filings, registrations, recordings, and other actions necessary to perfect the first-priority security interests of the Collateral Agent under the U.S. Security Agreement (including UCC financing statements in Delaware) and the Canadian General Security Agreement (including PPSA registrations in Ontario and British Columbia) shall have been duly made, or The Representative shall have received lien search results from applicable UCC and PPSA registries confirming that no prior liens exist on the Collateral other than Permitted Liens.
5.11 No Material Adverse Change.
Since the date of this Agreement, there shall not have occurred any material adverse change, or any development involving a prospective material adverse change, in the condition (financial or otherwise), results of operations, business, properties, assets, liabilities, or prospects of the Company and its subsidiaries, taken as a whole, that, in the reasonable judgment of the Representative, makes it impracticable or inadvisable to proceed with the Offering, the issuance and sale of the Notes, or the consummation of the other transactions contemplated by this Agreement and the Offering Memorandum.
5.12 No Legal Impediment.
No law, statute, rule, regulation, injunction, restraining order, or decree of any governmental authority shall have been enacted, entered, promulgated, or enforced by any court or governmental authority that prohibits, restricts, or materially impairs the consummation of the transactions contemplated by this Agreement, the Indenture, or the other Transaction Documents, and no proceeding shall have been commenced or threatened in writing seeking any such prohibition, restriction, or impairment.
5.13 Canadian Regulatory Approvals.
All necessary Canadian regulatory clearances, approvals, consents, and filings (including any approvals required under the Investment Canada Act and any applicable provincial securities or mining regulatory requirements) shall have been obtained or made, and all applicable waiting periods shall have expired or been terminated. The parties acknowledge that the Closing Date was extended from April 5, 2022 to April 19, 2022 specifically to accommodate additional time required for Canadian regulatory clearance.
5.14 Independent Engineer's Report.