Arras Minerals Corp 20-F, filed Feb 17, 2022
Arras Minerals Corp. (ARRKF)
About this 20-F
Arras Minerals Corp filed this 20-F on February 17, 2022, covering the fiscal year ended October 31, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________________ to ______________________________ |
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report _______________________________________________
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Commission File Number:
(Exact name of registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive office)
Chief Executive Officer
Tel:
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Copies to:
Brian Boonstra
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, CO 80202
Tel: (303) 892-7348
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Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Trading Symbol(s) |
Name of each exchange on which registered | |||
Securities for which there is a reporting obligation pursuant to Section 12(g) of the Act.
Common Shares, without par value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.
Indicate the number of outstanding shares of
each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares
its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended period
for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | International Accounting Standards Board ☒ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
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TABLE OF CONTENTS
Page
| INTRODUCTION AND USE OF CERTAIN TERMS | 4 |
| MARKET INFORMATION | 4 |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | 5 |
| PART I | |
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. | 7 |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE. | 7 |
| ITEM 3. KEY INFORMATION. | 7 |
| ITEM 4. INFORMATION ON THE COMPANY. | 19 |
| ITEM 4A. UNRESOLVED STAFF COMMENTS. | 35 |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS. | 35 |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. | 36 |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. | 48 |
| ITEM 8. FINANCIAL INFORMATION. | 49 |
| ITEM 9. THE OFFER AND LISTING. | 49 |
| ITEM 10. ADDITIONAL INFORMATION. | 50 |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 59 |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. | 59 |
| PART II | |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. | 60 |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. | 60 |
| ITEM 15. CONTROLS AND PROCEDURES. | 60 |
| ITEM 16. [RESERVED]. | 60 |
| ITEM 16A. AUDIT COMMITTEE AND FINANCIAL EXPERT. | 60 |
| ITEM 16B. CODE OF ETHICS. | 61 |
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES. | 61 |
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. | 62 |
| ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. | 62 |
| ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. | 62 |
| ITEM 16G. CORPORATE GOVERNANCE. | 62 |
| ITEM 16H. MINE SAFETY DISCLOSURE. | 62 |
| ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. | 62 |
| PART III | |
| ITEM 17. FINANCIAL STATEMENTS. | 63 |
| ITEM 18. FINANCIAL STATEMENTS. | 63 |
| ITEM 19. EXHIBITS. | 63 |
| SIGNATURES | 67 |
| 3 |
INTRODUCTION AND USE OF CERTAIN TERMS
We have prepared this annual report on Form 20-F (this “Annual Report”) using a number of conventions, which you should consider when reading the information contained herein. In this Annual Report, the “Company,” “we,” “us,” “our” and “Arras” shall refer to Arras Minerals Corp. as the context may require. As used in this Annual Report, the terms “Mineral Resource,” “Measured Mineral Resource,” “Indicated Mineral Resource,” “Measured Mineral Resource,” and “Inferred Mineral Resource” and any grammatical variations thereof are based on the definitions of such terms set forth in Item 1300 of Regulation S-K.
The Company was incorporated under the Business Corporations Act (British Columbia) on February 5, 2021 as a wholly owned subsidiary of Silver Bull Resources, Inc. (“Silver Bull”). Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of an Asset Purchase Agreement (the “APA”) in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull (the “Asset Transfer”). On May 25, 2021, Silver Bull announced plans to spin off substantially all of its shares of Arras to the Silver Bull shareholders. On September 24, 2021, Silver Bull distributed approximately 34.5 million of our common shares to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull held by such shareholders (the “Distribution,” and together with the Asset Transfer, the “Spin-off”).
We publish financial statements expressed in U.S. dollars. Our financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
MARKET INFORMATION
This Annual Report contains industry and market data prepared by our management on the basis of such industry sources and our management’s knowledge of and experience in the industry and markets in which we operate (including management’s estimates and assumptions relating to such industry and markets based on that knowledge). Our management has developed its knowledge of such industry and markets through its experience and participation in these markets.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report uses certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the United States Private Securities Litigation Reform Act of 1995, and “forward-looking information” within the meaning of applicable Canadian securities legislation. We use words such as “anticipate,” “continue,” “likely,” “estimate,” “expect,” “may,” “will,” “projection,” “should,” “believe,” “potential,” “could,” or similar words suggesting future outcomes (including negative and grammatical variations) to identify forward-looking statements. These statements include statements regarding the following, among other things:
| ● | the sufficiency of our existing cash resources to enable us to continue our operations as a going concern; |
| ● | future exploration expenditures on the Beskauga Property, the potential exercise of the Beskauga Option and potential bonus payments under the Beskauga Option Agreement; |
| ● | the prospects of entering the development or production stage with respect to any of our projects; |
| ● | our planned activities at the Beskauga Project in 2021 and beyond; |
| ● | whether any part of the Beskauga Project will ever be confirmed or converted into Regulation S-K 1300-compliant “reserves”; |
| ● | our ability to obtain and hold additional concessions in the Beskauga Project area; |
| ● | the timing, duration and overall impact of the novel coronavirus (“COVID-19”) pandemic on the Company’s business; |
| ● | the sufficiency of our surface rights in respect of the Beskauga Property if a mining operation is determined to be feasible; |
| ● | the potential acquisition of additional mineral properties or property concessions; |
| ● | the impact of recent accounting pronouncements on our financial position, results of operations or cash flows and disclosures; |
| ● | our ability to raise additional capital and/or pursue additional strategic options, and the potential impact on our business, financial condition and results of operations of doing so or not; |
| ● | the requirement for Arras shareholder approval of the issuance of certain options to purchase Arras common shares; and |
| ● | the impact of changing foreign currency exchange rates on our financial condition. |
These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, and our actual results could differ from those expressed or implied in these forward-looking statements as a result of the risk factors discussed in more detail in this Annual Report under “Item 3. Key Information—Risk Factors,” including without limitation, risks associated with the following:
| ● | our ability to continue as a going concern as a single-project company; |
| ● | the lack of an existing public market for our common shares; |
| ● | some or all of the expected benefits of the Spin-off may not be achieved; |
| ● | we are uncertain that we will be able to maintain sufficient cash to accomplish our business objectives; |
| ● | our exploration activities require significant amounts of capital that may not be recovered; |
| ● | our ability to meet our current and future capital requirements on favorable terms or at all; |
| ● | risks relating to the results of future exploration at the Beskauga Property and our ability to raise the capital for exploration expenditures on the Beskauga Property to maintain the effectiveness of the Beskauga Option; |
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| ● | our operations may be disrupted, and our financial results may be adversely affected, by global outbreaks of contagious diseases, including the COVID-19 pandemic; |
| ● | we are an exploration stage mining company with no history of operations; |
| ● | we have no commercially mineable ore body; |
| ● | the reliability of our Mineral Resource estimates; |
| ● | our ability to acquire additional mineral properties or property concessions; |
| ● | inherent risks in the mineral exploration industry; |
| ● | risks relating to fluctuations of metal prices; |
| ● | risks relating to competition in the mining industry; |
| ● | risks relating to the title to our properties; |
| ● | risks relating to our option and joint venture agreements; |
| ● | risks associated with joint ventures; |
| ● | our ability to obtain required permits; |
| ● | timing of receipt and maintenance of government approvals; |
| ● | compliance with laws is costly and may result in unexpected liabilities; |
| ● | our success depends on developing and maintaining relationships with local communities and other stakeholders; |
| ● | risks relating to social and environmental activism; |
| ● | risks relating to evolving corporate governance and public disclosure regulations; |
| ● | risks relating to foreign operations; |
| ● | risks relating to worldwide economic and political events; |
| ● | risk of political and economic instability in Kazakhstan; |
| ● | our financial condition could be adversely affected by changes in currency exchange rates; |
| ● | risks relating our “foreign private issuer” status; |
| ● | risks relating to our possible status as a passive foreign investment company; |
| ● | risks relating to volatility in our share value; |
| ● | further equity financings leading to the dilution of our common shares; |
| ● | our common shares continuing not to pay dividends; |
| ● | risks relating to information systems and cybersecurity; |
| ● | our ability to retain key management, consultants and experts necessary to successfully operate and grow our business; |
| ● | our overlapping officers and directors with Silver Bull may give rise to conflicts of interest; |
| ● | our reliance on international advisors and consultants; |
| ● | risks relating to changes in tax laws; and |
| ● | risks relating to changes in regulatory frameworks or regulations affecting our activities. |
All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. You should not place undue reliance on these forward-looking statements.
Cautionary Note Regarding Exploration Stage Companies
We are an exploration stage company and do
not currently have any known reserves and cannot be expected to have known reserves unless and until a feasibility study is completed
for the Beskauga Property concessions that shows proven and probable reserves. There can be no assurance that our concessions contain
proven and probable reserves or that even if such reserves are found, that we will be successful in economically recovering them. Investors
may lose their entire investment.
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PART I
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. |
Directors and Senior Management
Not applicable.
Advisers
Not applicable.
Auditors
Not applicable.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE. |
Not applicable.
| ITEM 3. | KEY INFORMATION. |
[Reserved]
Capitalization and Indebtedness
Not applicable.
Reasons for the Offer and Use of Proceeds
Not applicable.
Risk Factors
You should carefully consider the risks described below, together with all other information included in this Annual Report, in evaluating us and our shares. The following risk factors could adversely affect our business, financial condition, results of operations and the price of our shares.
Risks Relating to the Company
There is substantial doubt about whether we can continue as a going concern.
As of October 31, 2021, we have earned no revenues and have incurred accumulated net losses of approximately $2.1 million, and we expect to incur additional losses in the future. In addition, we have limited financial resources. As of October 31, 2021, we had cash and cash equivalents of approximately $3.8 million and working capital of approximately $6.5 million. Our ability to continue as a going concern is dependent on raising additional capital to fund our exploration plans and ultimately to attain profitable operations. For the period from inception on February 5, 2021 to October 31, 2021, we raised approximately CDN$8.8 million through the issuance of our common shares. However, there is no assurance that we will be successful in raising additional capital. Accordingly, there is substantial doubt as to whether our existing cash resources and working capital are sufficient to enable us to continue our operations as a going concern. Ultimately, in the event that we cannot obtain additional financial resources, or achieve profitable operations, we may have to liquidate our business interests and investors may lose their investment. The accompanying financial statements have been prepared assuming that our company will continue as a going concern. Continued operations are dependent on our ability to obtain additional financial resources or generate profitable operations. Such additional financial resources may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. Such adjustments could be material.
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Our operations may be disrupted, and our financial results may be adversely affected, by global outbreaks of contagious diseases, including the novel coronavirus (COVID-19) pandemic.
Global outbreaks of contagious diseases, including the December 2019 outbreak of COVID-19 have the potential to significantly and adversely impact our operations and business. On March 11, 2020, the World Health Organization recognized COVID-19 as a global pandemic. Pandemics or disease outbreaks such as the currently ongoing COVID-19 outbreak may have a variety of adverse effects on our business, including by depressing commodity prices and the market value of our securities and limiting the ability of our management to meet with potential financing sources. The spread of COVID-19 in Kazakhstan may impact our ability to travel to the region and complete the work necessary to maintain the Beskauga Option. Moreover, the spread of COVID-19 has had, and continues to have, a negative impact on the financial markets, which may impact our ability to obtain additional financing in the near term. A prolonged downturn in the financial markets could have an adverse effect on our business, results of operations and ability to raise capital.
We may have difficulty meeting our current and future capital requirements.
We are required to incur cumulative exploration expenditures on the Beskauga Project of $15 million over the four year option period in order to maintain the Beskauga Option. As of October 31, 2021, we have incurred approximately $2.1 million of these expenditures, with approximately $12.9 million remaining to be incurred. If we elect to exercise the Beskauga Option, we are required to pay an additional $15 million. In addition, we must have sufficient funds to pay general and administrative expenses and conduct other exploration activities. If we are unable to fund these amounts by way of financings, including public or private offerings of equity or debt securities, we will need to reorganize or significantly reduce our operations, which may result in an adverse impact on our business, financial condition and exploration activities. If we are unable to fund the amounts specified under the Beskauga Option, we may lose our ability to acquire the Beskauga Project. We do not have a credit, off-take or other commercial financing arrangement in place that would finance continued evaluation or development of the Beskauga Project, and we believe that securing credit for these projects may be difficult. Moreover, equity financing may not be available on attractive terms and, if available, will likely result in significant dilution to existing shareholders.
We are an exploration stage mining company with no history of operations.
We are an exploration stage enterprise engaged in mineral exploration in Kazakhstan. We were formed in 2021 and therefore have a very limited operating history and are subject to all the risks inherent in a new business enterprise. As an exploration stage company, we may never enter the development and production stages. To date, we have had no revenues and have relied upon equity financing to fund our operations. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with an exploration stage business, and the competitive and regulatory environment in which we operate and will operate, such as under-capitalization, personnel limitations, and limited financing sources.
We have no commercially mineable ore body.
No commercially mineable ore body has been delineated on the Beskauga Project, nor has the Beskauga Project been shown to contain proven or probable mineral reserves. Investors should not assume that the Mineral Resource estimates described in “Item 4. Information on the Company—Property, Plants and Equipment—Beskauga Project” will ever be extracted. We cannot assure you that any mineral deposits we identify on the Beskauga Project will qualify as an ore body that can be legally and economically exploited or that any particular level of recovery of gold, copper or other minerals from discovered mineralization will in fact be realized. Most exploration projects do not result in the discovery of commercially mineable ore deposits. Even if the presence of reserves is established at a project, the legal and economic viability of the project may not justify exploitation.
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Mineral Resource estimates may not be reliable.
There are numerous uncertainties inherent in estimating quantities of Mineral Resources such as gold, copper, silver and zinc, including many factors beyond our control, and no assurance can be given that the recovery of Mineral Resources will be realized. In general, estimates of Mineral Resources are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:
| ● | geological and engineering estimates that have inherent uncertainties; |
| ● | the assumed effects of regulation by governmental agencies; |
| ● | the judgment of the geologists and engineers preparing the estimate; |
| ● | estimates of future metals prices and operating costs; |
| ● | the quality and quantity of available data; |
| ● | the interpretation of that data; and |
| ● | the accuracy of various mandated economic assumptions, all of which may vary considerably from actual results. |
All estimates are, to some degree, uncertain. For these reasons, estimates of the Mineral Resources prepared by different geologists or by the same geologists at different times may vary substantially. As such, there is significant uncertainty in any Mineral Resource estimate, and actual deposits encountered and the economic viability of a deposit may differ materially from our estimates.
Our business plan is highly speculative, and its success largely depends on the successful exploration of our Beskauga concessions.
Our business plan is focused on exploring the Beskauga Property to identify reserves and, if appropriate, to ultimately develop the property. Although we have reported Mineral Resources on the Beskauga Project, we have not established any reserves and remain in the exploration stage. We may never enter the development or production stage. Exploration of mineralization and determination of whether the mineralization might be extracted profitably is highly speculative, and it may take a number of years until production is possible, during which time the economic viability of the project may change. Substantial expenditures are required to establish reserves, extract metals from ore and construct mining and processing facilities.
The Beskauga Project is subject to all of the risks inherent in mineral exploration and development. The economic feasibility of any mineral exploration and/or development project is based upon, among other things, estimates of the size and grade of mineral reserves, proximity to infrastructures and other resources (such as water and power), anticipated production rates, capital and operating costs, and metals prices. To advance from an exploration project to a development project, we will need to overcome various hurdles, including completing favorable feasibility studies, securing necessary permits, and raising significant additional capital to fund activities. There can be no assurance that we will be successful in overcoming these hurdles. Because of our focus on the Beskauga Project, the success of our operations and our profitability may be disproportionately exposed to the impact of adverse conditions unique to the Pavlodar, Kazakhstan region due to the Beskauga Project’s proximity to these locales.
We are uncertain that we will be able to maintain sufficient cash to accomplish our business objectives.
We are not engaged in any revenue producing activities, and we do not expect to be in the near future. Currently, our potential sources of funding consist of the sale of additional equity securities, entering into joint venture agreements or selling a portion of our interests in our assets. There is no assurance that any additional capital that we will require will be obtainable on terms acceptable to us, if at all. Failure to obtain such additional financing could result in delays or indefinite postponement of further exploration of our projects. Additional financing, if available, will likely result in substantial dilution to existing shareholders.
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Our exploration activities require significant amounts of capital that may not be recovered.
Mineral exploration activities are subject to many risks, including the risk that no commercially productive or extractable resources will be encountered. There can be no assurance that our activities will ultimately lead to an economically feasible project or that we will recover all or any portion of our investment. Mineral exploration often involves unprofitable efforts, including drilling operations that ultimately do not further our exploration efforts. The cost of minerals exploration is often uncertain, and cost overruns are common. Our drilling and exploration operations may be curtailed, delayed or canceled as a result of numerous factors, many of which are beyond our control, including title problems, weather conditions, protests, compliance with governmental requirements, including permitting issues, and shortages or delays in the delivery of equipment and services.
Our financial condition could be adversely affected by changes in currency exchange rates, especially between the U.S. dollar and the Kazakh tenge (“KZT”) and the U.S dollar and the Canadian dollar given our focus on the Beskauga Project in Kazakhstan, and our corporate office in Vancouver, Canada.
Our financial condition is affected in part by currency exchange rates, as portions of our exploration costs in Kazakhstan and general and administration costs in Canada are denominated in the local currency. Although many Kazakh contracts have an adjustment provision to address substantial changes in foreign currency exchange rates, a weakening U.S. dollar relative to the KZT and Canadian dollar may have the effect of increasing exploration costs and general and administration costs, while a strengthening U.S. dollar may have the effect of reducing exploration costs and general and administration costs. The exchange rates between the Canadian dollar and the U.S. dollar and between the KZT and U.S. dollar have fluctuated widely in response to international political conditions, general economic conditions and other factors beyond our control.
Our success depends on developing and maintaining relationships with local communities and other stakeholders.
Our ongoing and future success depends on developing and maintaining productive relationships with the communities surrounding our operations and other stakeholders in our operating locations. We believe that our operations can provide valuable benefits to surrounding communities, in terms of direct employment, training and skills development. In addition, we seek to maintain our partnerships and relationships with local communities and stakeholders in a variety of ways, including in-kind contributions, sponsorships and donations. Notwithstanding our ongoing efforts, local communities and stakeholders can become dissatisfied with our activities or the level of benefits provided, which may result in legal or administrative proceedings, civil unrest, protests, direct action or campaigns against us. Any such occurrences could materially and adversely affect our financial condition, results of operations and cash flows.
Compliance with laws is costly and may result in unexpected liabilities.
The Company is headquartered in Vancouver, Canada and its mineral properties are located in Kazakhstan. The Company’s business is subject to various laws and regulations in Canada and Kazakhstan. These laws include compliance with the Extractive Sector Transparency Measures Act (Canada), which requires companies to report annually on payments made to all levels of governments both in Canada and abroad. The Company is also required to comply with anti-corruption and anti-bribery laws, including the Corruption of Foreign Public Officials Act (Canada).
The legal and regulatory requirements in Kazakhstan are different from those in Canada. The Company relies, to a great extent, on the Company’s local advisors in respect of legal, environmental compliance, banking, financing and tax matters in order to ensure compliance with material legal, regulatory and governmental developments as they pertain to and affect the Company’s operations in Kazakhstan. Despite these resources and the Company’s efforts to comply, the Company may fail to comply with a legal or regulatory requirement in Kazakhstan, which may lead to the revocation of certain rights or to penalties or fees and in enforcement actions thereunder.
We are exposed to information systems and cybersecurity risks.
Arras’s information systems (including those of any of its counterparties) may be vulnerable to the increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to these systems or the Company’s information through fraud or other means of deception. Arras’s operations depend, in part, on how well the Company and its counterparties protect networks, equipment, information technology systems and software against damage from threats. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations. There can be no assurance that Arras or its counterparties will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain an area of attention.
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We need and rely upon key personnel.
Presently, we employ a limited number of full-time employees, utilize outside consultants, and in large part rely on the efforts of our officers and directors. Our success will depend, in part, upon the ability to attract and retain qualified employees. In particular, we have only three executive officers, Timothy Barry, Darren Klinck and Christopher Richards, and the loss of the services of any of these three persons could adversely affect our business.
We face general risks in respect of our option and joint venture agreements.
The Company has and may continue to enter into option agreements and/or joint ventures as a means of acquiring property interests. Any failure of any partner to meet its obligations to the Company or other third parties, or any disputes with respect to third parties’ respective rights and obligations could have a material adverse effect on the Company’s rights under such agreements. Furthermore, the Company may be unable to exert direct influence over strategic decisions made in respect of properties that are subject to the terms of these agreements, and the result may be a materially adverse impact on the strategic value of the underlying mineral claims.
We are subject to specific risks associated with joint venture agreements.
The Company holds its interest in the Stepnoe and Ekidos properties through the Stepnoe and Ekidos JV Agreement (as defined below), and the Akkuduk, Nogurbek, Maisor and Elemes properties through the Maikain JV Agreement (as defined below). The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on the Company’s profitability or the viability of the Company’s interest in the properties, which could have a material adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition:
| ● | disagreement amongst joint venture parties on how to conduct business; |
| ● | inability of joint venture parties to meet their obligations to the joint venture or third parties; |
| ● | litigation arising between joint venture shareholders; |
| ● | inability to exert influence over certain strategic decisions; |
| ● | inability of the Company to make its required contributions under the Stepnoe and Ekidos JV Agreement, which may result in dilution to the Company’s interest in the joint venture; and |
| ● | decisions under the dispute resolution provisions of the Stepnoe and Ekidos JV Agreement may not be resolved in the Company’s favor. |
The Company may expand into other geographic areas, which could increase the Company’s operational, regulatory and other risks.
While currently all of the Company’s exploration activities are in Kazakhstan, the Company may in the future expand into other geographic areas, which could increase the Company’s operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of the Company’s operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require the Company to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. The Company may not be able to successfully identify suitable acquisition and expansion opportunities, or integrate such operations successfully with the Company’s existing operations.
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Risks Relating to the Mineral Exploration Industry
There are inherent risks in the mineral exploration industry.
We are subject to all of the risks inherent in the minerals exploration industry, including, without limitation, the following:
| ● | we are subject to competition from a large number of companies, most of which are significantly larger than we are, in the acquisition, exploration, and development of mining properties; |
| ● | we might not be able raise enough money to pay the fees and taxes and perform the labor necessary to maintain our concessions in good status; |
| ● | exploration for minerals is highly speculative, involves substantial risks and is frequently unproductive, even when conducted on properties known to contain significant quantities of mineralization, and our exploration projects may not result in the discovery of commercially mineable deposits of ore; |
| ● | our operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards, pollution and other environmental protection controls, and we may not be able to comply with these regulations and controls; and |
| ● | a large number of factors beyond our control, including fluctuations in metal prices, inflation, and other economic conditions, will affect the economic feasibility of mining. |
Metals prices are subject to extreme fluctuation.
Our activities are influenced by the prices of commodities, including gold, copper, silver, zinc, lead and other metals. These prices fluctuate widely and are affected by numerous factors beyond our control, including interest rates, expectations for inflation, speculation, currency values (in particular, the strength of the U.S. dollar), global and regional demand, political and economic conditions and production costs in major metal-producing regions of the world.
Our ability to establish reserves through our exploration activities, our future profitability and our long-term viability depend, in large part, on the market prices of gold, copper, silver, zinc, lead and other metals. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:
| ● | global or regional consumption patterns; |
| ● | supply of, and demand for, gold, copper, silver, zinc, lead and other metals; |
| ● | speculative activities and producer hedging activities; |
| ● | expectations for inflation; |
| ● | political and economic conditions; and |
| ● | supply of, and demand for, consumables required for production. |
Future weakness in the global economy could increase volatility in metals prices or depress metals prices, which could in turn reduce the value of our properties, make it more difficult to raise additional capital, and make it uneconomical for us to continue our exploration activities.
Our future operations will require additional permits from various governmental authorities.
Our operations are and will continue to be governed by laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance that we will be able to acquire all required licenses, permits or property rights on reasonable terms or in a timely manner, or at all, that such terms will not be adversely changed, that required extensions will be granted, or that the issuance of such licenses, permits or property rights will not be challenged by third parties.
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Title to our properties may be challenged or defective.
We attempt to confirm the validity of our rights of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot guarantee that title to our properties will not be challenged. The Beskauga Property may be subject to prior unregistered agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to the title of any of the claims comprising the Beskauga Property that, if successful, could impair possible development and/or operations with respect to such properties in the future. Challenges to permits or property rights (whether successful or unsuccessful), changes to the terms of permits or property rights, or a failure to comply with the terms of any permits or property rights that have been obtained could have a material adverse effect on our business by delaying or preventing or making continued operations economically unfeasible.
A title defect could result in Arras losing all or a portion of its right, title, and interest to and in the properties to which the title defect relates. Title insurance generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties. As of February 16, 2022, we are not aware of any challenges from the government or from third parties.
We are subject to complex environmental and other regulatory risks, which could expose us to significant liability and delay and potentially the suspension or termination of our exploration efforts.
Our mineral exploration activities are subject to federal, state and local environmental regulations in Kazakhstan. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. No assurance can be given that environmental standards imposed by the government of Kazakhstan will not be changed, thereby possibly materially adversely affecting our proposed activities. Compliance with these environmental requirements may also necessitate significant capital outlays or may materially affect our earning power.
Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees.
Future changes in environmental regulations in Kazakhstan may adversely affect our exploration activities, make them prohibitively expensive, or prohibit them altogether. Environmental hazards may exist on the properties in which we currently hold interests, or may hold interests in the future, that are unknown to us at present and that have been caused by us or previous owners or operators, or that may have occurred naturally. We may be liable for remediating any damage that we may have caused. The liability could include costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties.
Our industry is highly competitive, attractive mineral properties and property concessions are scarce, and we may not be able to obtain quality properties or concessions.
We compete with other mining and exploration companies in the acquisition of mineral properties and property concessions. There is competition for a limited number of attractive mineral property acquisition opportunities, some of which is with other companies having substantially greater financial resources, staff and facilities than we do. As a result, we may have difficulty acquiring quality mineral properties or property concessions.
Our operations are subject to various hazards.
We are subject to risks and hazards, including environmental hazards, possible encounters with unusual or unexpected geological formations, cave-ins, flooding and earthquakes, and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or the destruction of, mineral properties or future production facilities, personal injury or death, environmental damage, delays in our exploration activities, asset write-downs, monetary losses and possible legal liability. We may not be insured against all losses or liabilities, either because such insurance is unavailable or because we have elected not to purchase such insurance due to high premium costs or other reasons. Although we maintain insurance in an amount that we consider to be adequate, liabilities might exceed policy limits, in which event we could incur significant costs that could adversely affect our activities. The realization of any significant liabilities in connection with our activities as described above could negatively affect our activities.
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Social and environmental activism can negatively impact exploration, development and mining activities
There is an increasing level of public concern relating to the effects of mining on the natural landscape, on communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors, activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.
Risks Relating to Foreign Operations
There are inherent risks with foreign operations.
Our business activities are primarily conducted in Kazakhstan, and as such, our activities are exposed to various levels of foreign political, economic and other risks and uncertainties. These risks and uncertainties include, but are not limited to, terrorism, hostage taking, military repression, extreme fluctuations in currency exchange rates, high rates of inflation, labor unrest, war or civil unrest, expropriation and nationalization, renegotiation or nullification of existing concessions, licenses, permits, approvals and contracts, illegal mining, changes in taxation policies, restrictions on foreign exchange and repatriation, changing political conditions, currency controls and governmental regulations that favor or require the rewarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.
Changes, if any, in mining or investment policies or shifts in political attitude in Kazakhstan may adversely affect our exploration and possible future development activities. We may also be affected to varying degrees by government regulations with respect to, but not limited to, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.
The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on our operations. In addition, legislation in Canada or Kazakhstan regulating foreign trade, investment and taxation could have a material adverse effect on our financial condition.
We face risks as a result of operating in Kazakhstan.
The Beskauga Project is in Kazakhstan. As is typical of an emerging market, Kazakhstan’s business, legal and regulatory infrastructure has been subject to substantial political, economic and social change. Our business in Kazakhstan is subject to Kazakhstan-specific laws and regulations, including with respect to tax, anti-corruption, and foreign exchange controls. Such laws are often rapidly changing and are unpredictable. Our failure to manage the risks associated with doing business in Kazakhstan could have a material adverse effect upon our results of operations.
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The Company’s only project is the Beskauga Project, and any adverse development affecting the Beskauga Project, including the Company’s interests, licenses and permits relating thereto, could be expected have a material adverse effect on the Company, its businesses, prospects, assets, results of operations and condition (financial or otherwise).
The Company has obtained permits from the Government of Kazakhstan that enable it to conduct exploration activities. Notwithstanding these arrangements, the Company’s ability to conduct exploration activities is subject to changes in government regulations or shifts in political attitudes over which the Company has no control.
There can be no assurance that industries deemed of national or strategic importance to Kazakhstan such as mineral production will not be nationalized. Government policy may change to discourage foreign investment, renationalization of mining industries may occur and other government limitations, restrictions or requirements not currently foreseen may be implemented. There can be no assurance that the Company’s assets in Kazakhstan will not be subject to nationalization, requisition or confiscation, whether legitimate or not, by any authority or body. Similarly the Company’s operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation, mine safety and annual payments to maintain mineral properties in good standing. There can be no assurance that the laws of Kazakhstan protecting foreign investments will not be amended or abolished or that these existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks detailed above. There can be no assurance that any agreements with the government of Kazakhstan will prove to be enforceable or provide adequate protection against any or all of the risks described above.
Existing contracts or licenses with respect to the Company’s operations may be subject to selective or arbitrary government action.
The Company’s contracts and licenses in Kazakhstan may be susceptible to arbitrary revision and termination. Legal redress for such actions may be uncertain, delayed or unavailable. In addition, it is often difficult to determine from governmental records whether statutory and corporate actions have been properly completed by the parties or applicable regulatory agencies. In some cases, failure to follow the actions may call into question the validity of the entity or the action taken. Examples include corporate registration or amendments, capital contributions, transfers of assets or issuances or transfers of capital stock. Ensuring the Company’s ongoing rights to mineral properties will require a careful monitoring of performance of its contracts and other licenses and monitoring the evolution of the laws and practices of Kazakhstan. Failure to comply with the terms of the necessary licenses or contracts or show compliance against official records may result in their revocation which may have an adverse effect on the Company’s operations.
Changes in the political environment in Kazakhstan could have a material impact on the Company’s business, prospects, results of operations and financial condition.
Since Kazakhstan declared its independence in 1991 after the dissolution of the Soviet Union, Kazakhstan has had political stability as an independent nation. Yet, there is potential for social, political, economic, legal and fiscal instability. The Company cannot predict the possibility of any future changes in the political environment in Kazakhstan that would have an impact on Kazakh laws and regulations, their interpretation or enforcement, or the effect of such changes on the Company’s business, prospects, results of operations and financial condition. The risks include, among other things:
| ● | local currency devaluation; |
| ● | exchange controls or availability of hard currency; |
| ● | changes in export and transportation regulations relating to metals; |
| ● | changes in national fiscal regulations; |
| ● | changes in anti-monopoly legislation or its exercise; |
| ● | nationalization or expropriation of property; and |
| ● | interruption or blockage of the export of metals. |
There can be no assurance that changes in the political environment will not affect governmental regulation and policy.
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The Company relies on international advisors and consultants.
The legal and regulatory requirements in Kazakhstan with respect to conducting mineral exploration and mining activities, banking system and controls, as well as local business culture and practices are different from those in Canada and the United States. The officers and directors of the Company must rely, to a great extent, on the Company’s local legal counsel and local consultants retained by the Company in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Company’s business operations, and to assist the Company with its governmental relations. The Company must rely, to some extent, on those members of management and the Company’s board of directors (the “Arras Board”) who have previous experience working and conducting business in Kazakhstan in order to enhance its understanding of and appreciation for the local business culture and practices. The Company also relies on the advice of local experts and professionals in connection with current and new regulations that develop in respect of banking, financing, labor, litigation and tax matters in this jurisdiction. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond the control of the Company. The impact of any such changes may adversely affect the business of the Company.
Risks Relating to the Spin-off
We share certain key officers and directors with Silver Bull, which means that those officers do not devote their full time and attention to our affairs, and the overlap may give rise to conflicts of interest.
Our Chief Executive Officer, Timothy Barry, also serves as Chief Executive Officer of Silver Bull, our President, Darren Klinck, also serves as President of Silver Bull, and our Chief Financial Officer, Christopher Richards, also serves as Chief Financial Officer of Silver Bull. As a result, our executive officers do not devote their full time and attention to the Company’s affairs. There may be circumstances in which our executive officers are compelled to spend a significant portion of their time and attention to Silver Bull’s affairs, which may mean that they are unable to devote sufficient time to the Company’s affairs. Furthermore, our Chairman, Brian Edgar, also serves as Chairman of Silver Bull, and three members of our board of directors (including Timothy Barry and Brian Edgar) are also directors of Silver Bull. The overlapping officers and directors may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, conflicts may arise if there are issues or disputes under commercial arrangements that may exist between Silver Bull and us, including with respect to allocation of costs for salaries of overlapping officers and common office-related overhead expenditures. Any failure of the directors or officers of the Company to address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.
We may not achieve some or all of the expected benefits of the Spin-off, and the Spin-off may adversely affect our business.
We may not be able to achieve some or all of the strategic, financial, operational, marketing or other benefits expected to result from the Spin-off, or such benefits may be delayed or not occur at all. The Spin-off is expected to provide the following benefits, among others:
| ● | provide investors with the potential for greater value than a single company by unlocking a premium value for the Beskauga and Sierra Mojada projects separately; |
| ● | provide the market with two separate companies that have clear commodity and regional demarcation, allowing for targeted branding and marketing; |
| ● | allow each company flexibility in allocating resources and deploying capital in a manner consistent with the separate business strategies; |
| ● | broaden the appeal of the potential investor base for both companies, with Kazakhstan potentially appealing to European and Middle Eastern investors and Mexico potentially appealing to North American investors; and |
| ● | facilitate the ability of the companies to separately finance the Beskauga and Sierra Mojada projects based on the unique characteristics of each project and jurisdiction. |
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We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:
| ● | potential disruption to the businesses of Arras and Silver Bull; |
| ● | management distraction due to the significant amount of time and effort required; |
| ● | the significant one-time costs of separating the two companies; |
| ● | challenges for management who will continue to have operational responsibilities for Silver Bull; |
| ● | incremental costs on the resulting companies, including, among others, the costs of being a stand-alone company and potential tax inefficiencies; |
| ● | greater susceptibility to market fluctuations and other adverse events as a stand-alone company, including as a result of reduced business diversification; and |
| ● | risk that the Spin-off does not achieve its intended benefits. |
We cannot predict with certainty when the benefits expected from the Spin-off will occur or the extent to which they will be achieved. If we fail to achieve some or all of the benefits expected to result from the Spin-off, or if such benefits are delayed, our business, financial condition and results of operations could be adversely affected.
Our historical financial information through September 24, 2021 is not necessarily representative of the results we would have achieved as a stand-alone company and may not be a reliable indicator of our future results.
Our historical financial statements through September 24, 2021 have been derived (carved out) from the Silver Bull financial statements and accounting records. This derived information does not necessarily reflect the financial position, results of operations, and cash flows we would have achieved as a stand-alone company during the period presented, or those that we will achieve in the future.
This is primarily because of the following factors:
| ● | For the period through September 24, 2021, our business was operated as a subsidiary of Silver Bull. |
| ● | Our financial statements include an allocation from Silver Bull of certain corporate-related general and administrative expenses that we would incur as a stand-alone company that we have not previously incurred. The allocation of these additional expenses, which are included in the financial statements, may not be indicative of the actual expense that would have been incurred had we operated as a stand-alone company for the period presented therein. |
| ● | In connection with the Spin-off, we incurred one-time costs of approximately $0.3 million during the period from inception on February 5, 2021 to October 31, 2021. |
Therefore, our historical financial information may not necessarily be indicative of our future financial position, results of operations or cash flows, and the occurrence of any of the risks discussed in this “Risk Factors” section, or any other event, could cause our future financial position, results of operations or cash flows to materially differ from our historical financial information. Moreover, because the Company was formed in February 2021, we only have presented historical financial statements from that date through October 31, 2021. This brief period of time may not be indicative of the actual future financial performance of the Company.
Risks Relating to Our Common Shares
There is no existing public market for our common shares.
There is currently no existing public market for our common shares. Our common shares are not currently listed or quoted on any stock exchange or market in Canada or elsewhere. The Company cannot offer assurances that one will develop or be sustained. If an active trading market does not develop, shareholders may have difficulty selling any of their common shares. If an active trading market does develop, the Company cannot predict the prices at which our common shares will trade. In addition, in Canada, our shareholders will be able to trade their shares only pursuant to an exemption from prospectus requirements.
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Further equity financings may lead to the dilution of our common shares.
In order to finance future operations, we may raise funds through the issuance of common shares or the issuance of debt instruments or other securities convertible into common shares. We cannot predict the size of future issuances of common shares or the size and terms of future issuances of debt instruments or other securities convertible into common shares or the effect, if any, that future issuances and sales of our securities will have on the market price of our common shares. Any transaction involving the issuance of previously authorized but unissued shares, or securities convertible into common shares, would result in dilution, possibly substantial, to present and prospective security holders. Demand for equity securities in the mining industry has been weak; therefore, equity financing may not be available on attractive terms and, if available, will likely result in significant dilution to existing shareholders.
We may lose our “foreign private issuer” status in the future, which could result in additional costs and expenses to us.
We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and Exchange Commission (the “SEC”). We may in the future lose foreign private issuer status if a majority of our common shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if (i) a majority of our directors or executive officers are U.S. citizens or residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer will be significantly more than the costs incurred as a Canadian foreign private issuer. If we are not a foreign private issuer, we may be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from corporate governance requirements that are available to foreign private issuers. Further, if we engage in capital raising activities after losing foreign private issuer status, there is a higher likelihood that investors may require us to file resale registration statements with the SEC as a condition to any such financing.
We are subject to risks associated with evolving corporate governance and public disclosure regulations.
The Company is subject to changing rules and regulations promulgated by the United States and Canadian governmental and self-regulated organizations, including the SEC, the CSA, any exchange or marketplace on which Arras’s securities are listed or trade, and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity making compliance more difficult and uncertain. The Company’s efforts to comply with these and other new and existing rules and regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
No dividends are anticipated.
At the present time, we do not anticipate paying dividends, cash or otherwise, on our common shares in the foreseeable future. Future dividends will depend on our earnings, if any, our financial requirements and other factors. There can be no assurance that we will pay dividends.
The Company may be a passive foreign investment company for U.S. federal income tax purposes.
The Company may be, or could become, a passive foreign investment company within the meaning of Section 1297 of the Internal Revenue Code of 1986, as amended, which could result in certain potentially adverse U.S. federal income tax consequences to certain U.S. taxpayers with respect to such taxpayer’s ownership and disposition of our common shares.
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| ITEM 4. | INFORMATION ON THE COMPANY. |
Business Overview
Arras is an exploration stage company, engaged in the business of mineral exploration. The Company’s exploration is focused on discovering and delineating Mineral Resources at the Company’s material property, the Beskauga Project (as defined below), which is comprised of three contiguous licenses located in Kazakhstan. We have not realized any revenues. We have not established any reserves with respect to our exploration projects and may never enter into the development stage with respect to any of our projects.
Organizational Structure
The Company was incorporated under the Business Corporations Act (British Columbia) on February 5, 2021 as a wholly owned subsidiary of Silver Bull. Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of the APA in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull. The transferred assets included an option agreement with respect to the Beskauga Property (as defined below), a joint venture agreement with respect to the Stepnoe and Ekidos properties (the “Stepnoe and Ekidos JV Agreement”) and loans payable by Ekidos Minerals LLP (“Ekidos LLP”) to Silver Bull. On September 24, 2021, Silver Bull distributed approximately 34.5 million of our common shares issued to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull held by such shareholders. Upon completion of the Spin-off, Silver Bull retained an approximately 4% ownership interest in Arras. On October 21, 2021, Arras completed a private placement, as a result of which Silver Bull’s ownership interest in Arras decreased to approximately 3%. We do not own any interest in another entity, whether wholly or partially.
History and Development of the Company
The Spin-off
On February 5, 2021, the Company was incorporated under the Business Corporations Act (British Columbia) as a wholly owned subsidiary of Silver Bull. Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of the APA in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull. The transferred assets included an option agreement with respect to the Beskauga Property, a joint venture agreement with respect to the Stepnoe and Ekidos properties and loans payable by Ekidos LLP to Silver Bull. On May 25, 2021, Silver Bull announced plans to spin off substantially all of its shares of Arras to the Silver Bull shareholders. On September 24, 2021, Silver Bull distributed approximately 34.5 million of our common shares to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull held by such shareholders.
Beskauga Option Agreement
Pursuant to the APA, Silver Bull transferred its interest in an option agreement (the “Beskauga Option Agreement”) among Silver Bull, Copperbelt AG (“Copperbelt”) and Dostyk LLP (“Dostyk,” and together with Copperbelt, “CB”) to Arras.
Silver Bull entered into the Beskauga Option Agreement on August 12, 2020. Upon the execution of the Beskauga Option Agreement, Silver Bull paid Copperbelt $30,000. In addition, Silver Bull paid Copperbelt $40,000 upon completion of its due diligence on the Beskauga Project on January 26, 2021 (the “Option Closing Date”).
Pursuant to the Beskauga Option Agreement, Arras has the exclusive right and option (the “Beskauga Option”) to acquire CB’s right, title and 100% interest in the Beskauga property located in Kazakhstan (the “Beskauga Property”), which consists of the Beskauga Main project (the “Beskauga Main Project”) and the Beskauga South project (the “Beskauga South Project,” and together the Beskauga Main Project, the “Beskauga Project”).
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The Beskauga Option Agreement provides that subject to its terms and conditions, in order to maintain the effectiveness of the Beskauga Option, the Company must incur $2,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2022 (the first anniversary of the Option Closing Date), $5,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2023 (the second anniversary of the Option Closing Date), $10,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2024 (the third anniversary of the Option Closing Date), and $15,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2025 (the fourth anniversary of the Option Closing Date) (collectively, the “Exploration Expenditures”).
As of October 31, 2021, approximately $2,118,000 of the required Exploration Expenditures have been incurred under the Beskauga Option Agreement. These Exploration Expenditures were funded via loans made to Ekidos LLP. As at October 31, 2021, Ekidos LLP was an unrelated third-party Kazakh entity, which was incorporated by management of Copperbelt to hold the Beskauga property interests. An additional $565,000 in Exploration Expenditures was made on the Beskauga Project between November and December 2021. These Exploration Expenditures were funded via an additional loan made to Ekidos LLP. The Company expects to finance additional Exploration Expenditures through proceeds from issuances of equity securities of the Company. See “Risk Factors—Risks Relating to the Company—We may have difficulty meeting our current and future capital requirements.” Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, 100% of the equity interests in Ekidos LLP were transferred to the Company on February 3, 2022.
The Beskauga Option Agreement provides that, subject to its terms and conditions, after the Company or its affiliate has incurred the Exploration Expenditures, the Company or its affiliate may exercise the Beskauga Option and acquire (i) the Beskauga Project by paying CB $15,000,000 in cash, (ii) only the Beskauga Main Project by paying CB $13,500,000 in cash, or (iii) only the Beskauga South Project by paying CB $1,500,000 in cash.
In addition, the Beskauga Option Agreement provides that subject to its terms and conditions, the Company or its affiliate may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (“National Instrument 43-101”) indicating gold equivalent resources in the amounts set forth below, with (i) (A) 20% of the Bonus Payments payable after completion of the bankable feasibility study or after the Mineral Resource statement is finally determined and (B) the remaining 80% of the Bonus Payments due within 15 business days of commencement of on-site construction of a mine for the Beskauga Main Project or the Beskauga South Project, as applicable, and (ii) up to 50% of the Bonus Payments payable in shares of Silver Bull common to be valued at the 20-day volume-weighted average trading price of the shares on the TSX calculated as of the date immediately preceding the date such shares are issued:
| Gold equivalent resources | Cumulative Bonus Payments ($) |
| Beskauga Main Project | |
| 3,000,000 ounces | $2,000,000 |
| 5,000,000 ounces | $6,000,000 |
| 7,000,000 ounces | $12,000,000 |
| 10,000,000 ounces | $20,000,000 |
| Beskauga South Project | |
| 2,000,000 ounces | $2,000,000 |
| 3,000,000 ounces | $5,000,000 |
| 4,000,000 ounces | $8,000,000 |
| 5,000,000 ounces | $12,000,000 |
Pursuant to the Beskauga Option Agreement, the bankable feasibility study (i) must be a detailed report in compliance with National Instrument 43-101, in form and substance sufficient for presentation to arm’s length institutional lenders considering project financing, showing the feasibility of placing any part of the Beskauga Property into commercial production as a mine, and (ii) must include a reasonable assessment of the various categories of mineral reserves and their amenability to metallurgical treatment, a complete description of the work, equipment and supplies required to bring such part of the Beskauga Property into commercial production and the estimated cost thereof, a description of the mining methods to be employed and a financial appraisal of the proposed operations. As noted above, the feasibility study must be prepared in compliance with National Instrument 43-101 and the accompanying definition of “feasibility study” prescribed by the Canadian Institute of Mining, Metallurgy and Petroleum. The definition is substantially similar to the definition of “feasibility study” provided in Item 1300 of Regulation S-K.
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The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and CB; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by CB that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.
Stepnoe and Ekidos JV Agreement
Additionally, in connection with the Spin-off and pursuant to the APA, Silver Bull transferred its interest in the Stepnoe and Ekidos JV Agreement to Arras.
On September 1, 2020, Silver Bull entered into the Stepnoe and Ekidos JV Agreement in connection with, among other things, mineral license applications (the “Stepnoe and Ekidos Licenses”) for, and further exploration and evaluation of certain properties, including the Stepnoe and Ekidos properties located in Kazakhstan. The exploration licenses for the Stepnoe and Ekidos properties were granted on October 22, 2020.
Pursuant to the Stepnoe and Ekidos JV Agreement, Ekidos LLP was incorporated on behalf of Copperbelt for the purpose of applying for the Stepnoe and Ekidos Licenses with the funding previously provided by Silver Bull. Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, 100% of the equity interests in Ekidos LLP were transferred to the Company on February 3, 2022.
The Company (through Ekidos LLP) and Copperbelt have initial participating interests in the joint venture of 80% and 20%, respectively. Pursuant to the Stepnoe and Ekidos JV Agreement, once the Company spends a minimum of $3,000,000 on either the Stepnoe or Ekidos property, the Company has the option to acquire Copperbelt’s participating interest in such property for $1,500,000.
The Stepnoe and Ekidos JV Agreement shall terminate automatically upon there being one participant in the joint venture, or by written agreement between the parties, provided that Copperbelt’s loan obligations under the agreement shall only terminate in accordance with the SVB Loans (as defined below).
Maikain JV Agreement
On May 20, 2021, Ekidos LLP entered into the Maikain Joint Venture Agreement (the “Maikain JV Agreement”) with Orogen LLP, a company incorporated under the laws of Kazakhstan, in connection with, among other things, mineral license applications for, and further exploration and evaluation of, certain properties in an area of interest, including the Akkuduk, Nogurbek, Maisor and Elemes properties located in Kazakhstan. The exploration license for the Akkuduk property was granted on February 2, 2021. The exploration license for the Nogurbek property was granted on August 20, 2021. The exploration license for the Maisor property was granted on October 22, 2021. The exploration license for the Elemes property was granted on January 14, 2022.
The Company (through Ekidos LLP) and Orogen LLP have initial participating interests in the Maikain joint venture of 80% and 20%, respectively. Pursuant to Maikain JV Agreement, once the Company spends a minimum of $3,000,000 on a property in the area of interest, the Company has the option to acquire Orogen LLP’s participating interest in such property for $1,500,000.
The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.
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Loan Agreements
In connection with the Spin-off, Silver Bull transferred its interest in three loan agreements to Arras pursuant to the terms of the APA.
Silver Bull entered into (i) a loan agreement with Ekidos LLP dated August 20, 2020, whereby Silver Bull loaned to Ekidos LLP $360,000, which loan agreement was subsequently amended on October 30, 2020, January 21, 2021, June 30, 2021 and November 30, 2021 (collectively, “SVB Loan 1”), (ii) a loan agreement with Ekidos LLP dated December 21, 2020, whereby Silver Bull loaned to Ekidos LLP $400,000, which loan agreement was subsequently amended on June 30, 2021 and November 30, 2021 (“SVB Loan 2”) and (iii) a loan agreement with Ekidos LLP dated February 23, 2021 in the amount of $450,000, of which Silver Bull has loaned $225,000 to Ekidos LLP, which loan agreement was subsequently amended on June 30, 2021 and November 30, 2021 (“SVB Loan 3,” and together with SVB Loan 1 and SVB Loan 2, the “SVB Loans”).
Additionally, the Company entered into (i) a loan agreement with Ekidos LLP dated April 22, 2021, whereby Arras loaned to Ekidos LLP $450,000, which loan agreement was subsequently amended on June 30, 2021 and December 31, 2021 (“Arras Loan 1”), (ii) a loan agreement with Ekidos LLP dated May 19, 2021, whereby Arras loaned to Ekidos LLP $480,000, which loan agreement was subsequently amended on July 30, 2021 and December 31, 2021 (“Arras Loan 2”), (iii) the loan agreement with Ekidos LLP dated June 30, 2021 in the amount of $480,000, which loan agreement was subsequently amended on July 30, 2021 and December 31, 2021 (“Arras Loan 3”), (iv) the loan agreement with Ekidos LLP dated September 21, 2021 in the amount of $480,000, which loan agreement was subsequently amended on December 31, 2021 (“Arras Loan 4”), (v) the loan agreement with Ekidos LLP dated October 21, 2021 in the amount of $490,000, which loan agreement was subsequently amended on December 31, 2021 (“Arras Loan 5”), (vi) the loan agreement with Ekidos LLP dated October 27, 2021 in the amount of $490,000, which loan agreement was subsequently amended on December 31, 2021 (“Arras Loan 6”), (vii) the loan agreement with Ekidos LLP dated November 30, 2021 in the amount of $490,000 (“Arras Loan 7”), (viii) the loan agreement with Ekidos LLP dated December 8, 2021 in the amount of $490,000 (“Arras Loan 8”), (ix) the loan agreement with Ekidos LLP dated December 22, 2021 in the amount of $490,000, (“Arras Loan 9”), and (x) the loan agreement with Ekidos LLP dated December 8, 2021 in the amount of $490,000 (“Arras Loan 10”).
The SVB Loans and Arras Loans 1-6 are interest free and are repayable on June 30, 2022. Arras Loans 7-10 are interest free and are repayable on March 31, 2022.
Financings and Issuances of the Company’s Securities
As noted above, on March 19, 2021, Silver Bull transferred its Kazakh assets to Arras in exchange for the issuance of 36,000,000 Arras common shares to Silver Bull pursuant to the terms of the APA.
On April 1, 2021, Arras entered into a series of substantially similar subscription agreements (each, an “April 2021 Subscription Agreement”) pursuant to which Arras issued and sold to certain investors an aggregate of 5,035,000 Arras common shares at a price of CDN$0.50 per share, for gross proceeds of CDN$2,517,500. The private placement included subscriptions from certain members of the board of directors and management team (and their respective affiliates) of Arras and Silver Bull for an aggregate of 415,000 Arras common shares (CDN$207,500). All Arras common shares issued in the private placement were subject to a hold period under applicable Canadian securities laws, which expired on August 2, 2021, and are restricted securities under U.S. securities laws. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act, or Rule 506 of Regulation D, or Regulation S, for purposes of the private placement.
On October 21, 2021, Arras entered into a series of substantially similar subscription agreements (each, an “October 2021 Subscription Agreement”) pursuant to which Arras issued and sold to certain investors an aggregate of 6,368,000 Arras common shares at a price of CDN$1.00 per share, for gross proceeds of CDN$6,368,000. The private placement included subscriptions from certain members of the board of directors and management team (and their respective affiliates) of Arras and Silver Bull for an aggregate of 365,000 Arras common shares (CDN$365,000). All Arras common shares issued in the private placement were subject to a hold period under applicable Canadian securities laws, which expired on February 22, 2022, and are restricted securities under U.S. securities laws. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act, or Rule 506 of Regulation D, or Regulation S, for purposes of the private placement.
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See also “Item 6. Directors, Senior Management and Employees—Compensation” and “Item 6. Directors, Senior Management and Employees—Share Ownership—Compensation Plans—Arras Minerals Corp. Equity Incentive Plan” for other issuances of securities of Arras under its equity incentive plan.
Property, Plants and Equipment
Beskauga Project
Location, Access and Infrastructure
The Beskauga Project is located in the Pavlodar Region of northeastern Kazakhstan, approximately 300 km from the Kazakhstan capital, Nur-Sultan (formerly Astana), approximately 70 kilometers southwest of the city of Pavlodar (population of approximately 330,000), and approximately 65 kilometers east of the town of Ekibastuz (population of approximately 125,000). There is an international airport at Nur-Sultan. Access to the project area is via sealed road from Pavlodar.
The property comprises three licenses, the Beskauga mineral license (67.8 square kilometers) in the center of the property, which has been the subject of all work carried out thus far, and the Stepnoe (425 square kilometers) and Ekidos (425 square kilometers) mineral exploration licenses.
The region has sufficient infrastructure to host large-scale mining operations and is a sophisticated transportation and communication node with a local economy dominated by activity in the mining and industrial sectors. Some 40% of all of Kazakhstan’s power-generating capacity comes from the region, which contains six power stations, three of which are in Pavlodar. Fresh water is supplied to the area from the Irtysh River/Karaganda Canal, and there is a large, well-trained labor force to draw upon for any future mining activities.
The map below shows the location of the Beskauga Project:
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Property History, Title and Ownership Rights
The Beskauga deposit was discovered by a regional shallow drilling program conducted during the Soviet-era in the 1980s. Dostyk maintains minerals rights for the Beskauga deposit based on License No. 785 (series MG) dated January 8, 1996, and a series of subsequent contracts and addendums as per the Republic of Kazakhstan legislation.
The Beskauga mineral exploration license was issued under Kazakhstan’s previous mining code, which was based on a contract arrangement whereby a company agrees to meet certain milestones and expenditures with the government. Despite a new mining code being in place since June 2018, obligations under existing contracts and licenses are still enforced. Dostyk has a mineral exploration license providing for the right to explore for all minerals (except uranium) on the Beskauga property. In order to maintain the exploration license in good standing, Dostyk is required to spend the following:
| ● | 2021: $1,801,000 |
| ● | 2022: $2,726,000 |
| ● | 2023: $4,700,000 |
Before the end of the three-year period ending December 31, 2023, the Beskauga exploration license will need to be converted to a mining license. A mining license has a provision to allow for another three-year exploration period before an economic study needs to be completed on the project. Pursuant to the Beskauga Option Agreement with Copperbelt and the Beskauga mineral exploration license held by Dostyk, Arras has the exclusive right and option to acquire Dostyk’s right to explore for all minerals (except uranium) on the Beskauga property until December 31, 2023.
Geology and Mineralization
The Beskauga Project is located in northeastern Kazakhstan, an area underlain by the rocks of the Altaid tectonic collage or Central Asian Orogenic Belt (CAOB), an extensive Palaeozoic subduction–accretion complex made up of fragments of sedimentary basins, island arcs, accretionary wedges and tectonically bounded terranes that was progressively developed from the late Neoproterozoic Era, through the Palaeozoic Era to the early Mesozoic Era, and which extends eastwards into Russia, Mongolia and China as the Transbaikal–Mongolian orogenic collage. These tectonic collages contain several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician to the Jurassic and associated with the various magmatic arcs.
Beskauga is thought to be located in the lower Boshchekul–Chingiz volcanic arc, part of the Kipchak arc system. Island-arc volcanism was calc-alkaline in nature, evolving from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites, granodiorite and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry deposits in the region.
Beskauga is a copper-gold porphyry deposit with elevated grades of molybdenum and silver. The Beskauga Project area is predominantly underlain by sedimentary and volcanogenic-sedimentary rocks of Ordovician age. These have been intruded by small stock-like intrusive bodies of porphyry ranging in composition from granodiorite to quartz diorite to gabbro-diorite, also interpreted to be Ordovician in age. Dikes of diorite porphyry, diabase and graniteporphyry also cut the host sequence. The host rocks are hornfelsed proximal to intrusive contacts. The deposit area is covered by 10–40 meters of younger sediments of upper Eocene and Quaternary age.
The Beskauga Main porphyry-style copper-gold mineralization is largely hosted within granodiorite porphyry, whereas the Beskauga South gold mineralization is hosted within diorite porphyry and may represent an epithermal overprint. The diorite is interpreted to cut and postdate the granodiorite. Diabase is also interpreted to cut granodiorite. Intrusive relationships and timing relative to mineralization have not been clearly established.
Porphyry-style mineralization is hosted in granodiorite and plagiogranite intrusions that have elongated sheet-like shapes, often with offshoots. Mineralized zones are affected by stockwork veining and hydrothermal alteration and dip steeply. Alteration is represented by albitization, sericitization and pyritization, with the most intensive alteration at a depth of 250–500 meters. Tourmaline has also been described. Potassic alteration is described from mineralogical work. Sericite-pyrophyllite-quartz alteration and silicification in steeply dipping alteration zones is also described, indicating a degree of epithermal overprint.
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Pyrite and chalcopyrite are the dominant sulphide minerals at Beskauga, with smaller amounts of bornite, chalcocite, tennantite, enargite, and molybdenite, with magnetite and hematite also described. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets, consisting of quartz-carbonate, quartz-carbonate-chlorite, and quartz-pyrite.
Mineral Resource Estimate
We retained CSA Global Consultants Canada Ltd. to prepare an independent technical report summary on the Beskauga Project dated June 7, 2021 (the “Technical Report Summary”). The purpose of the Technical Report Summary is to support the disclosure of Mineral Resource estimates for the Beskauga Project. The Technical Report Summary conforms to SEC Modernized Property Disclosure Requirements for Mining Registrants as described in Item 1300 of Regulation S-K, Disclosure by Registrants Engaged in Mining Operations (“S-K 1300”) and Item 601(b)(96) (Technical report summary) of Regulation S-K.
To demonstrate potential of the Beskauga deposit for eventual economic extraction, a preliminary pit optimization study was completed. A net smelter return (“NSR”) formula was developed and applied to the block model that incorporates metal prices, concentrate sales terms and metallurgical recoveries that were developed from metallurgical reports available for the Beskauga Project. The NSR formula applied was
NSR $/t = (38.137 + 11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t.
The Mineral Resource estimate has been reported for all blocks in the resource model that fall within a pit shell that was developed for an alternative case with NSR multiplied by factor of 1.25 and NSR value exceeding $5.70/tonne. The entire Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a realistic inventory of mineralization, which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable.
Mineral Resources were classified in accordance with Item 1302(d)(1)(iii)(A) of Regulation S-K into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralization continuity and quality assurance/quality control (“QAQC”) results, considering the level of geological understanding of the deposit, and specific requirements concerning the minimum number of samples and minimum number of drillholes used for grade interpolation for each block as carried out for each search pass. The classification of the Mineral Resources takes into account all uncertainties related to geological interpretation, mineralization continuity and geostatistical analysis, sampling method and sample and data security, drill sample control and quality, data quality and reliability, density, and topographic reliability.
In the Qualified Person’s opinion, further drilling and evaluation work is expected to improve classification of the Mineral Resource and provide better resolution of technical and economic factors that are likely to influence the prospect of economic extraction.
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Beskauga Deposit—Summary of Mineral Resources as of January 28, 2021
based on a NSR cut-off that uses three-year trailing prices to November 2020 of $2.80/pound for copper, $17.25/ounce for silver and $1,500/ounce for gold and is constrained by a pit shell that considers a 1.25 factor above the NSR
|
Category |
Tonnage (million tonnes or Mt) |
Copper (Cu) (%) |
Gold (Au) (grams/tonne or g/t) |
Silver (Ag) (grams/tonne or g/t) |
| Measured Mineral Resources | — | — | — | — |
| Indicated Mineral Resources | 207 | 0.23 | 0.35 | 1.09 |
| Measured + Indicated Mineral Resources | 207 | 0.23 | 0.35 | 1.09 |
| Inferred Mineral Resources | 147 | 0.15 | 0.33 | 1.02 |
| ● | A NSR $/t cut-off of $5.70/t was used, and the NSR formula is: NSR $/t = (38.137+11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t. |
| ● | The NSR formula incorporates variable recovery formulae. Average copper recovery was 81.7% copper and 51.8% for both gold and silver. |
| ● | Metal prices of $2.80/pound for copper, $17.25/ounce for silver, and $1,500/ounce for gold were selected based on three-year trailing prices to November 2020. |
| ● | The Mineral Resource is stated within a pit shell that considers a 1.25 factor above the NSR. |
| ● | Mineral Resources are estimated and reported in accordance with the definitions for Mineral Resources in Item 1302(d)(1)(iii)(A) of Regulation S-K into Indicated and Inferred Mineral Resources, which is consistent with the CIM Definition Standards for Mineral Resources and Mineral Reserves adopted on May 10, 2014. |
| ● | Serik Urbisinov (MAIG), CSA Global Principal Resource Geologist, is the independent Qualified Person with respect to the Mineral Resource estimate. |
| ● | The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors. |
| ● | These Mineral Resources are not mineral reserves as they do not have demonstrated economic viability. |
| ● | The quantity and grade of reported inferred resources in this Mineral Resource estimate are uncertain in nature and there has been insufficient exploration to define these inferred resources as indicated or measured; however, it is reasonably expected that a majority of the inferred Mineral Resources could be upgraded to indicated Mineral Resources with continued exploration. |
| ● | See also pages 6 and 7 of the Technical Report Summary (filed as Exhibit 15.3 to this Annual Report) for the material assumptions and criteria for the Mineral Resource estimate. |
Sample Preparation, Analyses and Security
Sample preparation was carried out at the Dostyk facility in Ekibastuz. Half-core samples were dried, weighed, and crushed and screened to −2 millimeters, and a ~1 kilogram split was milled to 200 mesh fineness (−90 µm). Milled pulps were split and sent to the Stewart Assay and Environmental Laboratory (“SAEL”) in Kara-Balta, Kyrgyzstan for analysis. All equipment used for sample crushing and milling was cleaned and blown with compressed air after each sample, and after each batch of samples a clean blank material was passed though the equipment. The sample preparation area was subject to compulsory wet cleaning once a day. The split core and crushed duplicate sample are stored in the specifically equipped sample storage facility in Ekibastuz, which can be locked and has on-site security.
SAEL has been utilized by Dostyk as the primary laboratory since 2007. SAEL is internationally accredited and independent of Dostyk. Umpire assays were carried out at Genalysis Laboratory in Perth, Australia (“Genalysis”). At both SAEL and Genalysis, samples were analyzed for gold using fire assay (“FA”) with an atomic absorption spectrometry (“AAS”) finish. A 30 gram bead was used in the FA process. A further 33 elements were determined by an aqua regia digest followed by inductively coupled plasma-optical emission spectrometry (ICP-OES) measurement of elemental concentrations.
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QAQC samples comprised certified reference materials (“CRMs”), blanks, duplicates, and umpire assays. CRMs used were OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. A total of 187 gold CRMs and 124 copper CRMs were analyzed, representing 0.52% and 0.34%, respectively, of the 36,271 samples in the database, below the recommended amount of 5% of CRMs. A total of 318 blank samples (0.9% of all samples) were submitted for analysis. Of all the blank material sampled, the majority had below detection or very low values reported, indicating that there is very little contamination overall. In 2013, 97 pulp duplicates were submitted for re-assay, and the results show relatively good repeatability. However, this only represents one year and 0.27% of all samples, and no core duplicates have been submitted; this represents a significant gap in QAQC.
External control check assays at Genalysis were completed on 966 samples (2.7% of all assays), and results show relatively good repeatability and similar distribution for gold and copper, although there is a slight positive bias towards the original results, especially for the copper grades.
It is the Qualified Person’s opinion that sample preparation and analyses were done in line with industry standards and are satisfactory. Although the number of CRM, duplicate, and blank samples are lower than what is considered standard, the quality of assays is considered to be adequate to be used for the Mineral Resource estimate.
Exploration Program
We commenced an exploration program in the second calendar quarter of 2021 on the Beskauga Property, which commenced after the date of the Technical Report Summary. This involved a geological mapping and sampling program of key select areas, as well as a diamond drilling program targeting extensions to the known mineralization. The exploration program’s design was determined based on historical geological information in the area and an airborne geophysics program that was completed in April 2021.
Final geophysical products for the airborne magnetic survey were received in July 2021 and confirmed a 300m x 300m “bulls-eye” magnetic high that had been previously identified with a ground magnetic survey completed in 2012. A lower magntic response surrounds the bulls-eye magnetic high which is interpreted to be an alteration halo around an intrusion. The Beskauga deposit sits on the eastern margin of the interpreted intrusion and the alteration halo. Only 30% of this margin has been tested with the drill.
The program to December 31, 2022 will look to upgrade the existing resource as well as test the wider area that has not yet been drilled. Specifically, the program includes:
| ● | a 30,000-meter exploration drill program in the immediate area to fully test the entire mineralizing system at Beskauga; |
| ● | collection of multi-element litho-geochemical data and hyperspectral data from a selection of historical pulps and drill core and, on this basis, design of routine analytical protocol for all additional drilling; |
| ● | relogging of select drill core, including detailed alteration and vein-type and density logging, and development of a standard operating procedure for logging to optimize data collection and understanding in a porphyry-epithermal system; |
| ● | review and re-processing of induced polarization (IP) and magnetic data collected by Copperbelt; |
| ● | a comprehensive density testing program to confirm the density value used in the Mineral Resource estimate; |
| ● | completion of additional infill drilling to improve definition of the geology and mineralization and to support improved classification of additional Mineral Resources to the Measured or Indicated classification; |
| ● | integration of geological, structural, alteration, and litho-geochemical and hyperspectral studies to support an improved understanding of deposit architecture, an improved three-dimensional (3D) geological model, and an initial geometallurgical domain model to guide additional metallurgical sampling; |
| ● | additional metallurgical test work on both the copper and gold to confirm recovery and comminution parameters, deleterious element mitigation, with sample selection based on geometallurgical domains; |
| ● | follow up on regional targets with geophysics and prospect drilling; |
| ● | detail power and water sources, requirements, and begin all permitting processes; and |
| ● | addressing any other gaps to be filled to advance the project towards a Mineral Resource update and preliminary feasibility study. |
These items are expected to be carried out concurrently as a single phase of work, subject to obtaining sufficient financing.
Capital Expenditures
As the Company’s activities are at the exploration stage, minimal capital expenditures are required. Minor costs have been incurred in setting up the program infrastructure, such as a vehicle, computers, tools and equipment being used by the Company’s geologists in Kazakhstan. No major capital expenditures are anticipated in the coming year.
On March 19, 2021, pursuant to the APA, Arras acquired from Silver Bull $45,647 in mining equipment and $9,331 in computer equipment and software (the carrying amounts of which on October 31, 2021 were $38,800 and $1,697, respectively). Arras acquired an additional $71,855 in mining equipment during the period from February 5, 2021 to October 31, 2021 (the carrying amounts of which on October 31, 2021 was $64,669). All of the mining equipment and computer equipment and software were purchased within the last 12 months and remain in good physical condition.
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Seasonality
The Company’s mineral exploration activities may be subject to seasonality due to adverse weather conditions including, without limitation, inclement weather, frozen ground and restricted access due to snow, ice or other weather-related factors. In addition, the mining and mineral exploration business is subject to global economic cycles effecting, among other things, the marketability and price of mineral products in the global marketplace.
Competition
The mineral exploration and mining industry is competitive in all phases of exploration, development and production. The Company competes with a number of other entities and individuals in the search for and the acquisition of attractive mineral properties. As a result of this competition, the Company may not be able to acquire attractive properties in the future on terms it considers acceptable. The Company may also encounter competition from other mining companies in efforts to hire experienced mining professionals. Increased competition could adversely affect the Company’s ability to attract necessary funding or acquire suitable properties or prospects for mineral exploration in the future. See “Risk Factors—Risks Relating to the Mineral Exploration Industry.”
Social and Environmental Policies
The Company is committed to conducting its operations in accordance with sound social and environmental practices. At present, the scale of operations has not required the adoption of formal policies. The Company will re-evaluate this position if and when necessary.
The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous materials and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation.
Employees
As of the date hereof, the Company has six employees, three of whom are located in Kazakhstan. The Company also relies on consultants and contractors to carry on its business activities and, in particular, to supervise and carry out mineral exploration on the Beskauga Property.
Corporate Offices
The Company is domiciled in Canada and its registered office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia V7X 1L3, Canada. Our principal executive offices are located at 777 Dunsmuir Street, Suite 1610, Vancouver, British Columbia V7Y 1K4, Canada, and the Company’s telephone number is (604) 687-5800.
Available Information
The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
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Regulatory Overview
Kazakhstan Mining Law
Kazakhstan has recently updated its mining code and since 2018 all new licenses are issued under this code. The new mining code, the Code on Subsoil and Subsoil Use (the “SSU Code”) was adopted on June 29, 2018 and is based on the Western Australian model. Under the SSU Code, Kazakhstan transferred from a contractual regime to a licensing regime for solid minerals (except for uranium, which remains under a contractual regime). The purpose has been to boost investment in exploration and mining in Kazakhstan and remove administrative burdens for subsoil users. The mining industry in Kazakhstan accounts for about 14% of gross domestic product and more than 20% of exports and is seen as a key industry.
Under the Kazakhstan Constitution, the subsoil is owned by the state. In regulating the mining sector, the state is represented by the competent authority, the Ministry of Industry and Infrastructural Development (“MIID”), which is authorized to grant and terminate subsoil use rights (“SURs”) and control compliance obligations related to SURs. Under the SSU Code, SURs are granted under subsoil use licenses, either for exploration or mining. Under the previous regime, SURs were granted under contracts for the right of exploration, mining, or combined exploration and mining.
Exploration licenses are granted for up to six years with the possibility of an extension for five more years and provide an exclusive right to use the subsoil for the purpose of exploration and for assessment of resources and reserves for subsequent mining. If a deposit is discovered, the exploration license holder has an exclusive right to obtain a mining license if the discovery is confirmed by a report on estimation of resources and reserves of solid minerals. The SSU Code entitles subsoil users to estimate resources and reserves under the KAZRC standard, which is aligned with the CRIRSCO, JORC and CIM reporting codes.
Under the older contractual permitting system, a company agreed to meet certain milestones and expenditure. Despite a new mining code being in place, obligations under existing contracts are still enforced. Should a company fail to meet its obligations as stated in the contract, or the company needs to extend or change the terms, the company can approach the government and request amendment to its contract.
The SSU Code is the principal law regulating the mining sector, with detail provided by a number of government decrees and ministerial orders. Mining of precious metals is also affected by the Law on Precious Metals and Precious Stones (the “Precious Metals Law”) under which the Kazakhstan National Bank can exercise a priority right to buy fine gold at international prices.
Ecological Requirements
The new Environmental Code of the Republic of Kazakhstan came into force on July 1, 2021. The Environmental Code provides for the following mechanisms for economic regulation of environmental protection:
| ● | fees for impact on the environment, the rates of which are established by tax legislation; |
| ● | market-based mechanisms for managing emissions into the environment, which include setting limits on emissions into the environment, allocating quotas for emissions into the environment, trading in quotas and commitments to reduce emissions into the environment; |
| ● | environmental insurance, the purpose of which is to ensure the civil liability of a person to compensate for environmental damage caused by an accident; and |
| ● | economic stimulation of activities aimed at environmental protection (establishment of incentives for renewable energy sources, promotion of “green” technologies, etc.). |
The most important features of the Environmental Code that affect exploration and mining of solid minerals are as follows.
The Environmental Code provides that impacts of the planned activity must be evaluated either in a mandatory environmental impact assessment or mandatory screening of the impacts of the planned activity. The screening is a process of identifying potential significant environmental impacts, to determine whether an environmental impact assessment (“EIA”) is necessary or not.
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An EIA is mandatory for open-pit mining of solid minerals on an area of more than 25 hectares and primary processing (concentrating) of extracted solid minerals. A screening is mandatory for (i) exploration for solid minerals, which is associated with the extraction of rock mass and soil movement for the purpose of assessing solid mineral resources, (ii) open pit mining on an area of less than 25 hectares, and (iii) underground mining. In certain cases, the authorized body can decide based on the screening results that the full EIA is necessary for the planned activity.
For those projects that must undergo an EIA, the next step after the EIA is preparation of the potential impact report (“Potential Impact Report”), which based on the results of the EIA. The Potential Impact Report:
| ● | must be considered by the public at a public hearing, with the participation of representatives of state bodies and the public; and |
| ● | is subject to expert examination at the authorized body special commission for expert examination. |
Based on the results of the expert examination, the authorized body issues an opinion on the draft Potential Impact Report (valid for three years).
The conclusions and conditions contained in the Potential Impact Report must be taken into account by state bodies when issuing environmental permits, accepting notifications and during the course of administrative procedures related to the implementation of the planned activities.
The Environmental Code provides for the following types of environmental permits:
| ● | integrated environmental permits; and |
| ● | environmental impact permits. |
An integrated environmental permit is required for facilities of Category I (these include facilities related to the production and processing of solid minerals) with the exception of those facilities of Category I, which were commissioned before July 1, 2021, or facilities a positive conclusion for construction of which was obtained by July 1, 2021. The requirement for the mandatory obtaining an integrated environmental permit comes into force on January 1, 2025. The integrated environmental permit is valid indefinitely.
An environmental impact permit is required for the construction and/or operation of facilities of Category II (these include facilities used in the exploration of solid minerals with the extraction of rock mass and movement of soil for the purpose of assessing the resources of solid minerals), as well as for the operation of facilities of Category I indicated above.
Environmental impact permits are issued for a period not exceeding ten years.
Another important matter is regulation of waste management. There is a hierarchy of measures to be applied in the management of mining waste:
| ● | prevention of waste generation; |
| ● | preparation of waste for re-use; |
| ● | waste processing; |
| ● | waste recycling; and |
| ● | waste disposal. |
Thus, depending on which technological solutions are applied by Arras during exploration and further mining of solid minerals, it will be necessary to comply with the following environmental requirements:
| ● | conducting the screening and/or environmental impact assessment of the planned production activity (including passing environmental impact assessment); and |
| ● | obtaining environmental permit(s). |
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Water Use
The use of surface and underground water resources with or without withdrawal for drinking, household and project needs, as well as the discharge of industrial, domestic, drainage and other wastewater (“special water use”) is carried out on the basis of special water use permits.
One of the types of special water use is its use in injection wells to maintain the reservoir pressure of underground leaching during the production of solid minerals. Special water use also includes the discharge of groundwater (mine, quarry, mine), incidentally taken during the exploration and/or production of solid minerals into surface water bodies, subsoil, water facilities or terrain.
A permit for special water use is not required for:
| ● | the use of the following water intake structures: mine and tubular filter wells and capturing structures operating without forced lowering of the level with the withdrawal of water in all cases no more than 50 cubic meters per day from the first aquifer from the surface not used for centralized water supply; or |
| ● | intake (pumping out) of underground waters (pit, quarry, mine), incidentally taken during the exploration and/or production of solid minerals. |
Payment for special water use is determined by tax legislation.
During exploration and mining operations, Arras may be required to obtain a special water use permit depending on what use of water resources is planned.
Land Use Regulations
During the Exploration Stage
All issues related to obtaining land for exploration and production of solid minerals are governed by the Land Code dated June 20, 2003.
Mineral exploration operations can be carried out on state-owned land that is not provided for land use, on the basis of a public easement. Also, subsoil users have a right to carry out the exploration of mineral operations on land plots in private ownership or land use, on the basis of a private or public easement, without the seizure of land plots from private owners or land users.
A subsoil user conducting exploration operations is entitled to demand that an owner or land user grant it the right to limited use of these areas (i.e., a private servitude).
A public easement is formalized by decisions of local executive bodies on the basis of a relevant subsoil use license or subsoil use contract.
A private easement is established by an agreement on the establishment of a private easement concluded between the subsoil user and the owner or land user. If no agreement is reached on the terms of such an agreement, the terms of the private easement must be determined by the court.
A license for the extraction of solid minerals serves as a basis for the local government body to grant the subsoil user the right to temporary paid land use (i.e., a lease) to a land plot (for the entire period of validity of the license or contract).
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Beskauga Project
Arras’s Beskauga Project consists of three licenses: the Beskauga license, which was issued under the older permitting system; and the Ekidos and Stepnoe licenses, which were issued under the new SSU Code in October 2020. The Beskauga license is held by Dostyk, a Kazakh entity 100% owned by Copperbelt, a private mineral exploration company registered in Switzerland with which Arras has an option agreement. The Ekidos and Stepnoe licenses are held by Ekidos LLP, to which Arras has made loans totaling $3.2 million as at October 31, 2021.
Beskauga License
Dostyk maintains minerals rights for the Beskauga deposit based on License No. 785 (series MG) dated January 8, 1996, a contract dated October 11, 2001 and a series of subsequent addendums as per the Republic of Kazakhstan legislation.
The subsoil right for the Beskauga area was initially acquired by Goldbelt Resources Ltd in 1996 as part of a much larger License No. 785 (Mykubinsk), issued to its 80% subsidiary, Dostyk, under the old permitting system. In 2000, Goldbelt Resources Ltd sold its interest in Dostyk to Celtic Resources, a London-listed company.
Exploration rights under License No. 785 including Beskauga were re-issued to Dostyk in October 2001 as Contract No. 759 for the Maikuben area. No drilling at the Beskauga deposit was conducted by Goldbelt Resources Ltd or Celtic Resources.
Via its option agreement with Copperbelt, Arras has acquired the right to explore for “All Minerals” (except uranium) on the remaining Dostyk license including the Beskauga deposit. The present contract set forth its validity period as until the last day of validity of License MG No. 785, January 8, 2021, with an ability to extend until the full depletion of resources.
On February 8, 2021, the MIID granted an extension of the exploration rights to Dostyk until February 8, 2024. Under this addendum, Arras via its agreement with Copperbelt will be required to spend the following over three years to keep the license in good standing:
| ● | 2021: $1.801 million; |
| ● | 2022: $2.726 million; and |
| ● | 2023: $4.7 million. |
At the end of this three-year period in February 2024, the Beskauga exploration contract will need to be converted to a mining license.
Stepnoe, Ekidos, Akkuduk, Nogurbek, Maisor and Elemes Exploration Licenses
Ekidos LLP holds six exploration licenses: the Ekidos (No. 875-EL) and Stepnoe (No. 876-EL) licenses, which were granted on October 22, 2020 to Ekidos LLP; the Akkuduk (No. 1178-EL) license, which was granted on February 2, 2021; Nogurbek (No. 1413-EL) license, which was granted on August 2, 2021; Maisor (No. 1471-EL) license, which was granted on October 22, 2021 and Elemes (No. 1555-EL) license, which was granted on January 14, 2022. All six licenses were applied for under the SSU Code. Under the new code, the licenses are granted for “All Minerals” (except uranium) for an initial six-year period. The licenses can be extended once for an additional five years.
An annual exploration commitment for each license is calculated based on the number of 2.5 km2 “blocks” contained within the license. The exploration commitment for each block is calculated based on a “minimum wage index” (MRP) by the Kazakh State which is then multiplied by the index established by the SSU Code. The rates will vary slightly from year to year due to changing MRP indices, but the annual expenditure commitment for 2022 for the exploration licenses is calculated via a formula outlined in the SSU Code to be approximately $15,600 for each license. It is not expected that this annual exploration commitment cost will materially vary over the first three years.
In addition to the annual exploration commitment costs, there is an annual “land lease” fee, which is calculated using the formula “15MRP x No. of blocks.” It is estimated this fee will equate to approximately $21,000 each per year for each of the exploration licenses.
The annual expenditure commitment in a given year can be covered by expenditure accrued over the years where the exploration expenditure exceeds the calculated commitment amount. The annual expenditure commitment can be reduced by ceding ground.
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Maikain JV Agreement
On May 20, 2021, Ekidos LLP entered into the Maikain JV Agreement with Orogen LLP in connection with, among other things, mineral license applications for, and further exploration and evaluation of, certain properties in an area of interest, including the Akkuduk, Nogurbek, Maisor, and Elemes properties located in Kazakhstan.
The map below shows the location of the the Akkuduk, Nogurbek, Maisor, and Elemes properties, including in relation to the Beskauga Property and the Stepnoe and Ekidos properties:
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The exploration license for the Akkuduk property was granted on February 2, 2021. The exploration license for the Nogurbek property was granted on August 20, 2021. The exploration license for the Maisor property was granted on October 22, 2021. The exploration license for the Elemes property was granted on January 14, 2022.
The Company (through Ekidos LLP) and Orogen LLP have initial participating interests in the Maikain joint venture of 80% and 20%, respectively. Pursuant to Maikain JV Agreement, once the Company spends a minimum of $3,000,000 on a property in the area of interest, the Company has the option to acquire Orogen LLP’s participating interest in such property for $1,500,000.
The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.
The map to the right shows the location of the properties in relation to the Beskauga Project.
The exploration licenses sit in the same Ordovician aged belt of rocks as the Beskauga deposit and are considered highly prospective for porphyry and volcanogenic massive sulphide (VMS) deposits. Historical Soviet reports from between 1965 and 1970 describe a program of mapping and sampling in the area.
Tax Code
In late-2017, Kazakhstan announced substantial changes to its Tax Code (the “Tax Code”) effective as of January 2018, with a mix of generally applicable changes and measures targeted at mining. The new Tax Code includes specific mineral taxation provisions and lists special taxes imposed on subsoil use in addition to such general taxes as the corporate income tax and value added tax, as well as import- and export-related taxes. Notably, several taxes and payments applicable to the mining sector have been removed from the new Tax Code, including the excess profit tax, historical cost payments, and the requirement to pay a commercial discovery bonus.
These reforms are aligned with the SSU Code which will require geological data to be published after a specified period.
Environmental Code
Kazakhstan’s Environmental Code (the “Environmental Code”) was introduced in 2007 and was followed by various changes to the country’s environmental legislation, including the adoption of the Law on Supporting the Use of Renewable Sources of Energy in 2009 and the Law on Energy Saving and Energy Efficiency in 2012. Water resources and related matters are also discussed in separate water legislation. The new Environmental Code took effect on July 1, 2021.
The SSU Code requires subsoil users’ compliance with all relevant environmental legislation.
The Environmental Code separately obliges companies to perform an environmental impact assessment which is reviewed by “the competent environmental authorities” and, in the case of high-risk operations, by the Ministry of Ecology, Geology and Natural Resources. Extending the assessment to involve an initial environmental screening could be considered, as within the current framework the assessment takes place only once the project plans are well advanced.
An environmental permit is available for subsoil operators in Kazakhstan, setting out limits for emissions of pollutants according to a set of emission limit values (“ELVs”). The new Environmental Code refers to the permit which allows operators to legally emit pollutants into the environment within certain limits. The complex mechanisms of calculating ELVs involve a large number of different pollutants, creating challenges for operators seeking to comply with ELVs even through the application of best available techniques (BATs) for managing emissions. The ELVs also form the basis of environmental taxes for an operator, but these and other taxation issues are not covered by the new SSU Code and instead addressed in the Tax Code.
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The Spin-off
Since the completion of the Spin-off on September 24, 2021, we have operated as a stand-alone company. Prior to completion of the Spin-off, on August 31, 2021, we entered into a Separation and Distribution Agreement with Silver Bull. The Separation and Distribution Agreement sets forth our agreements with Silver Bull regarding in connection with the Distribution and providing a framework for the relationship between the parties after the Distribution.
Pursuant to the Separation and Distribution Agreement, Silver Bull agreed to continue to incur the salaries of its employees and other office-related overhead costs and charge Arras for a portion of these costs on a pro-rata cost-recovery basis until the earlier of (i) the date on which our common shares are listed on a stock exchange or (ii) December 31, 2021. In February, 2022, the Company entered into an employment or consulting agreement, effective January 1, 2022, with each member of the senior management team. See “Item 6. Directors, Senior Management and Employees—Compensation—Directors and Senior Management—Employment Agreements with Senior Management” for a description of those agreements.
Pursuant to the Separation and Distribution Agreement, Silver Bull, may, in its sole discretion, offer holders of outstanding Silver Bull warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull shares, one Silver Bull share and one Arras common share in exchange for the original exercise price, subject to compliance with applicable securities laws. If Silver Bull makes such an offer, then (i) Arras must issue Arras common shares to the holders of Silver Bull warrants who elected to accept such offer and (ii) Silver Bull must remit to Arras a portion of the aggregate cash warrant exercise price received by Silver Bull.
We describe these and other arrangements between Silver Bull and us in greater detail under “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.”
| ITEM 4A. | UNRESOLVED STAFF COMMENTS. |
Not applicable.
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS. |
Operating Results
For the period from inception on February 5, 2021 to October 31, 2021, the Company had a net loss of $2,111,582. The loss for this period is likely not indicative of the Company’s expected operations going forward as the Company’s exploration activities at the Beskauga Project have only recently commenced. Additionally, these costs include an allocation from Silver Bull of certain corporate-related general and administrative expenses that we would incur as a stand-alone company that we have not previously incurred. In the opinion of management only, the method used in allocating these expenses is reasonable. However, the allocation of these additional expenses may not be indicative of the actual expense that would have been incurred had we operated as a stand-alone company for the period presented.
Liquidity and Capital Resources
As of October 31, 2021, the Company had cash and cash equivalents of $3,806,291. The source of this cash was from the completion of the Company’s private placements of 5,035,000 common shares at a price of CDN$0.50 per share for gross proceeds of CDN$2,517,500 on April 1, 2021 and 6,368,000 common shares at a price of CDN$1.00 per share for gross proceeds of CDN$6,368,000 on October 21, 2021. No placement agent or finder’s fees were paid in connection with the April 2021 private placement. The Company paid a 5% finder fee totaling $28,927 to an agent respect to certain purchasers who were introduced by the agent in connection with the October 2021 private placement. The Company incurred other offering costs associated with the private placements of $21,761 and $25,794, respectively.
In April 2021, the Arras Board approved an exploration budget for the Beskauga Property of $8.0 million for the period from April to December 2021, dependent upon the Company’s ability to raise additional funding. This exploration budget most significantly includes the undertaking of a 30,000-meter drilling program at Beskauga.
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As of October 31, 2021, the Company has earned no revenues and has incurred accumulated net losses of approximately $2.1 million. The Company’s ability to continue as a going concern is dependent on raising additional capital to fund the Company’s exploration plans and ultimately to attain profitable operations. Management plans to pursue possible financing options, including but not limited to obtaining additional equity financing. However, there is no assurance that the Company will be successful in pursuing these plans.
As future additional financing in the near term will likely be in the form of proceeds from issuances of equity securities, it is likely that there will be dilution to our existing shareholders. Moreover, we may incur fees and expenses in the pursuit of such financings, which will increase the rate at which our cash and cash equivalents are depleted.
Research and Development, Patents and Licenses, Etc.
Not applicable.
Trend Information
Please see “Item 5. Operating and Financial Review and Prospects—Operating Results” for trend information.
Critical Accounting Estimates
Not applicable.
Safe Harbor
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Cautionary Statement Regarding Forward-Looking Statements.”
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. |
Directors and Senior Management
Board of Directors
The Arras Board is comprised of five seats, three of which are filled by current members of the Silver Bull Board. A majority of the members of the Arras Board are independent based on applicable Canadian securities laws and non-U.S. persons.
The following table sets forth certain summary information in respect of the current directors of the Company.
|
Name and |
Position(s)/title |
Date first |
Principal occupation(s) |
| Brian D. Edgar Vancouver, British Columbia |
Chairman | February 5, 2021 | Corporate Director |
| Timothy T. Barry Squamish, British Columbia |
Director and Chief Executive Officer | February 5, 2021 | President (February 5, 2021–October 1, 2021) and Chief Executive Officer (since February 5, 2021) of Arras; and Chief Executive Officer of Silver Bull (a mining company) (since 2011). |
| Darren E. Klinck, Vancouver, British Columbia | Director and President | October 1, 2021 | President, Arras (since October 1, 2021); President, Silver Bull (a mining company) (since October 1, 2021); President (August 2017–April 2021) and Chief Executive Officer (August 2017–January 2020) of Bluestone Resources Inc.; and Executive Vice President (among other roles) of OceanaGold Corporation (April 2007–June 2017). |
| G. Wesley Carson Vancouver, British Columbia |
Director | April 1, 2021 | Vice President, Mining Operations at Wheaton Precious Metals Corp. (since 2017); and Vice President, Project Development at Sabina Gold & Silver Corp. (from 2012 to 2017). |
| Daniel J. Kunz Boise, Idaho |
Director | April 1, 2021 | President and Chief Executive Officer of Prime Mining Corp. (a mining company) (since June 2020); and Managing Member of Daniel Kunz & Associates, LLC (an advisory and engineering services company) (since 2014). |
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Brian D. Edgar
Mr. Edgar has served as Chairman of Arras since its inception on February 5, 2021 and as Chairman of the Silver Bull Board since April 2010. Mr. Edgar has broad experience working in junior and mid-size natural resource companies. He served as Dome’s President and Chief Executive Officer from February 2005 to April 2010, when Dome was acquired by Silver Bull. Further, Mr. Edgar served as a director of Dome (1998–2010), Lundin Mining Corp. (September 1994 – May 2015), Lucara Diamond Corp. (2007–May 2020), BlackPearl Resources Inc. (2006–December 2018), and ShaMaran Petroleum Corp. (2007–June 2019). He has served as a director of Denison Mines Corp. since 2005 and of numerous public resource companies over the last 30 years. Mr. Edgar practiced corporate/securities law in Vancouver, British Columbia, Canada for 16 years.
Timothy T. Barry
Mr. Barry has served as President (February 5, 2021–October 1, 2021) and Chief Executive Officer (since February 5, 2021) of Arras and as President (2011–October 1, 2021), Chief Executive Officer and a director and (since March 2011) of Silver Bull. From August 2010 to March 2011, he served as Silver Bull’s Vice President – Exploration. Between 2006 and August 2010, Mr. Barry spent five years working as Chief Geologist in West and Central Africa for Dome. During this time, he managed all aspects of Dome’s exploration programs and oversaw corporate compliance for Dome’s various subsidiaries. Mr. Barry also served on Dome’s board of directors. In 2005, he worked as a project geologist in Mongolia for Entree Gold, a company that has a significant stake in the Oyu Tolgoi mine in Mongolia. Between 1998 and 2005, Mr. Barry worked as an exploration geologist for Ross River Minerals Inc. on its El Pulpo copper/gold project in Sinaloa, Mexico, for Canabrava Diamonds Corporation on its exploration programs in the James Bay lowlands in Ontario, Canada, and for Homestake Mining Company on its Plutonic Gold Mine in Western Australia. He has also worked as a mapping geologist for the Geological Survey of Canada in the Coast Mountains, and as a research assistant at the University of British Columbia, where he examined the potential of CO2 sequestration in Canada using ultramafic rocks. Mr. Barry received a bachelor of science degree from the University of Otago in Dundein, New Zealand and is a Chartered Professional Geologist (CPAusIMM).
Darren E. Klinck
Mr. Klinck has served as President of each of Arras and Silver Bull since October 1, 2021. He most recently served as President (August 2017–April 2021) and Chief Executive Officer (August 2017–January 2020) of Bluestone Resources Inc. From April 2007 to June 2017, he served in numerous roles at OceanaGold Corporation, including Executive Vice President and Head of Corporate Development, Head of Business Development, and Vice President of Corporate and Investor Relations. Mr. Klinck has served as a director of ValOre Metals Corp. since June 1, 2021 and as a director of Gold Basin Resources Corp. since September 9, 2021. In addition, he served as a director of Bluestone Resources Inc. from August 2017 to April 2021. Mr. Klinck has a Bachelor of Commerce degree from the Haskayne School of Business at The University of Calgary.
G. Wesley Carson
Mr. Carson, BASc., P.Eng., has over 20 years of experience in the mining industry and has held a variety of leadership roles in operations, project development and engineering with both junior and major mining companies, including multiple M&A integrations. Since June 2017, he has been the Vice President, Mining Operations at Wheaton Precious Metals Corp. From June 2012 to June 2017, Mr. Carson was the Vice President – Project Development with Sabina Gold & Silver Corp. He also worked with Thompson Creek Metals Company Inc. as Vice President and General Manager for the Mt. Milligan project in Central British Columbia from October 2010 to February 2012, and for Terrane Metals Corp. as its Director, Mining from November 2007 to November 2010. Prior to this, he worked for Cominco Ltd., Teck Corporation, Placer Dome Inc. and Barrick Gold Corporation in a variety of operating roles in both North America and Africa. Mr. Carson received his Bachelor of Applied Science, Mining and Mineral Process Engineering at the University of British Columbia, and is a registered Professional Engineer in the Province of British Columbia.
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Daniel J. Kunz
Mr. Kunz has more than 35 years of experience in international mining, energy, engineering and construction, including in executive, business development, management, accounting, finance and operations roles. He has served as a member of the Silver Bull Board since April 2011. In June 2020, he was appointed President and Chief Executive Officer of Prime Mining Corp., a mine development company. Since 2014, he has been the managing member of Daniel Kunz & Associates, LLC, an advisory and engineering services company focused on the natural resources sector. From 2013 to 2018, he was the Chairman and Chief Executive Officer of Gold Torrent, Inc., a mine development company. In addition, Mr. Kunz is the founder, and from 2003 until he retired in April 2013 was the President and Chief Executive Officer and a director, of U.S. Geothermal, Inc., a renewable energy company that owns and operates geothermal power plants in Idaho, Oregon, and Nevada and was sold to Ormat Technologies, Inc. in 2018. Mr. Kunz was Senior Vice President and Chief Operating Officer of Ivanhoe Mines Ltd. from 1997 to October 2000, and served as its President and Chief Executive Officer and as a director from November 2000 to March 2003. He was part of the team that discovered Oyu Tolgoi, one of the world’s largest copper-gold deposits. From March 2003 to March 2004, Mr. Kunz served as President and Chief Executive Officer of China Gold International Resources Corp. Ltd. and served as a director from March 2003 to October 2009. Mr. Kunz was a founder of MK Resources LLC, formerly known as the NASDAQ-listed company MK Gold Corporation, and directed the company’s 1993 initial public offering as the President and Chief Executive Officer and a director. For 17 years, he held executive positions with NYSE-listed Morrison Knudsen Corporation (including Vice President and Controller). Mr. Kunz holds a Masters of Business Administration and a Bachelor of Science in Engineering Science. He is currently a director of Raindrop Ventures Inc., Prime Mining Corp., and Greenbriar Capital Corp.
Public Company Directorships
The following directors currently serve on the board of directors of the public companies set out below:
|
Name |
Public company directorship(s) |
| Brian D. Edgar | Denison Mines Corp. and Silver Bull |
| Timothy T. Barry | Silver Bull |
| G. Wesley Carson | Prosper Gold Corp. |
| Daniel J. Kunz | Greenbriar Capital Corp., Prime Mining Corp., Raindrop Ventures Inc. and Silver Bull |
| Darren E. Klinck | ValOre Metals Corp. and Gold Basin Resources Corp. |
Senior Management
The following table sets forth certain summary information in respect of our senior management as of the date of this Annual Report.
|
Name and |
Position(s)/title |
Principal occupation(s) |
| Timothy T. Barry Squamish, British Columbia |
Chief Executive Officer | President (February 5, 2021–October 1, 2021) and Chief Executive Officer (since February 5, 2021) of Arras; and Chief Executive Officer of Silver Bull (a mining company) (since 2011). |
| Darren E. Klinck Vancouver, British Columbia |
President | President, Arras (since October 1, 2021); President, Silver Bull (a mining company) (since October 1, 2021); President (August 2017–April 2021) and Chief Executive Officer (August 2017–January 2020) of Bluestone Resources Inc.; and Executive Vice President (among other roles) of OceanaGold Corporation (April 2007–June 2017). |
| Christopher Richards Vancouver, British Columbia |
Chief Financial Officer | Chief Financial Officer of Silver Bull (a mining company) (since September 2020); Vice President of Finance for Great Panther Mining Limited (a mining company) (from June 2018 until February 2020); self-employed senior financial consultant (January 2017 until May 2018); and Vice President of Finance and Corporate Secretary of Kyzyl Gold Ltd. (a mining company) (December 2013 until December 2016). |
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Timothy T. Barry, Chief Executive Officer
See “—Directors and Senior Management—Board of Directors” above.
Darren E. Klinck, President
See “—Directors and Senior Management—Board of Directors” above.
Christopher Richards, Chief Financial Officer
Mr. Richards was appointed as Silver Bull’s Chief Financial Officer effective as of September 28, 2020. Previously, Mr. Richards served as the Vice President of Finance for Great Panther Mining Limited, a U.S. and Canadian dual-listed gold and silver producer, from June 2018 to February 2020. From January 2017 to May 2018, he was self-employed as a senior financial consultant, advising public and private companies in the mining and natural resources industries. Prior to that, Mr. Richards served as the Vice President of Finance and Corporate Secretary (December 2013–December 2016) and Group Controller (April 2009–November 2013) of Kyzyl Gold Ltd., a wholly owned subsidiary of London Stock Exchange-listed Polymetal International plc, engaged in the development of the Kyzyl Gold Mine located in Kazakhstan. From July 2015 to October 2016, he served as the Chief Financial Officer of TSX Venture Exchange-listed True North Gems Inc. Earlier in his career, Mr. Richards served as the Corporate Controller of U.S. and Canadian dual-listed NovaGold Resources Inc. and as a Senior Manager of Audit for KPMG LLP. He is a CPA (Chartered Professional Accountant, British Columbia), CA, and received a Bachelor of Business Administration degree from Simon Fraser University in 2000 and a certificate in mining studies from the University of British Columbia in 2014.
Arrangements Concerning Election of Directors; Family Relationships
We are not a party to, and are not aware of, any arrangements pursuant to which any our senior management members or directors was selected as such. In addition, there are no family relationships among our senior management members or directors.
Compensation
Directors and Senior Management
Because we are a newly incorporated entity, we have not previously provided any cash compensation to our directors or senior management. The management team of Arras consists of the same individuals who serve as officers of Silver Bull. The following table presents, in the aggregate, all compensation that Silver Bull paid to those of our directors who served as directors of Silver Bull (in their capacities as directors) and to our senior management team members who served as officers of Silver Bull for the year ended October 31, 2020.
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Compensation Expenses for the Year Ended October 31, 2020
| Salary and related benefits | Pension, retirement and other similar benefits | Share-based compensation | Total | |||||||||||
| Non-executive directors as a group (2 persons) | $ | 52,000 | $ | nil | $ | nil | $ | 52,000 | ||||||
| Senior management as a group (3 persons) | 320,908 | nil | nil | 320,908 | ||||||||||
| Total | $ | 372,908 | $ | nil | $ | nil | $ | 372,908 | ||||||
In addition, the following table presents, in the aggregate, the allocated costs from Silver Bull of compensation expenses for our directors and senior management team members that we would incur as a stand-alone company for the period from inception on February 5, 2021 to October 31, 2021 (based on a 50% to 75% share of such expenses being incurred by Silver Bull and invoiced to us during the period, except for director G. Wesley Carson, who is not a director of Silver Bull, and the Company’s President, Darren Klinck, both of whose compensation has been incurred or invoiced to Arras based on their compensation and consulting arrangements with the Company). In the opinion of management only, the method used in allocating these expenses is reasonable. However, the allocation of these compensation-related expenses may not be indicative of the actual expense that would have been incurred had we operated as a stand-alone company for the period presented.
Compensation Expenses for the Period from Inception on February 5, 2021 to October 31, 2021
| Salary and related benefits | Pension, retirement and other similar benefits | Share-based compensation (1) | Total | |||||||||||||
| Non-executive directors as a group (4 persons) | $ | 82,264 | $nil | $ | 379,183 | $ | 461,447 | |||||||||
| Senior management as a group (3 persons) | 229,547 | 57,992 | 511,297 | 1,033,766 | ||||||||||||
| Total | $ | 311,811 | $ | 57,992 | $ | 890,480 | $ | 1,495,213 | ||||||||
| (1) | In accordance with IFRS, the fair value of each stock option granted during the period was based on the grant date fair value of the vested portion of each award using the Black-Scholes option pricing model. |
We will be required to disclose the compensation paid to our senior management on an individual basis in all annual reports on Form 20-F that we file with the SEC once that information is required to be disclosed under Canadian law or is otherwise publicly disclosed.
Employment Agreements with Senior Management
In February 2022, the Company entered into an employment or consulting agreement, effective January 1, 2022, with each member of the senior management team.
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Timothy T. Barry
In February 2022, the Company entered into a consulting agreement (the “Barry Consulting Agreement”) with Mr. Barry, pursuant to which Mr. Barry serves as the Chief Executive Officer of the Company. Pursuant to the terms and conditions of the Barry Consulting Agreement, Mr. Barry will receive an annual fee of CDN$300,000 (the “Barry Consulting Fee”) and will be eligible to participate in the Company’s annual bonus plans during the term of the Barry Consulting Agreement, with a bonus target of up to 50% of the annual fee, or a target determined by the Arras Board. In addition, Mr. Barry is eligible to participate in the Company’s Management Retention Bonus Plan. In the event that the Barry Consulting Agreement is terminated by the Company without cause or by Mr. Barry for “good reason” (as defined in the Barry Consulting Agreement), Mr. Barry is entitled to the following amounts, payable in a lump sum: (i) in the event that the Barry Consulting Agreement is terminated prior to February 9, 2023, six months of the Barry Consulting Fee and (ii) in the event that the Barry Consulting Agreement is terminated on or after February 9, 2023, 12 months of the Barry Consulting Fee plus one month of the Barry Consulting Fee for each additional year of service from February 9, 2022, up to a maximum of 24 months of the Barry Consulting Fee plus a payment equal to a pro-rated portion of the annual cash bonus. If the Company terminates the Barry Consulting Agreement without cause within three months following a “change of control” (as defined in the Barry Consulting Agreement), Mr. Barry is entitled to 24 months of the Barry Consulting Fee plus a lump-sum payment equal to two times the annual cash bonus (such payment, the “Barry Change of Control Payment”). In addition, Mr. Barry has the right to terminate the Barry Consulting Agreement for any reason within six months following a “change of control” and receive the Barry Change of Control Payment from the Company. In addition, upon any termination pursuant to which Mr. Barry receives any of the termination of Barry Change of Control Payments described above, Mr. Barry is further entitled to continued benefits provided under the Company’s insured standard benefit plan for a period of 12 months following such termination.
Darren E. Klinck
In February 2022, the Company entered into an amended consulting agreement (the “Westcott Consulting Agreement”) with Mr. Klinck’s personal service corporation, Westcott Management Ltd. (“Westcott”), pursuant to which Mr. Klinck serves as the President of the Company. Pursuant to the terms and conditions of the Westcott Consulting Agreement, Westcott will receive an annual fee of CDN$300,000 (the “Westcott Consulting Fee”) and will be eligible to participate in the Company’s annual bonus plans during the term of the Westcott Consulting Agreement, with a bonus target of up to 50% of the annual fee, or a target determined by the Arras Board.
In addition, Wescott is entitled to the following retention amounts, subject to the Company reaching the applicable market capitalization targets by April 15, 2027: (i) CDN$500,000 if and when the Company’s market capitalization reaches at least CDN$250,000,000 for five consecutive trading days, (ii) CDN$500,000 if and when the Company’s market capitalization reaches at least CDN$500,000,000 for five consecutive trading days, and (iii) CDN$1,000,000 if and when the Company’s market capitalization reaches at least CDN$1,000,000,000 for five consecutive trading days (collectively, the “Retention Bonus”). In the event that the Company undergoes a “change of control” (as defined in the Westcott Consulting Agreement) and the Company’s market capitalization at any point prior to such a “change in control” equals or exceeds CDN$250,000,000, Wescott will be entitled to a retention bonus equal to 0.2% of the applicable bid price less any Retention Bonus previously paid to Wescott.
In the event that the Westcott Consulting Agreement is terminated by the Company without cause or by Wescott for “good reason” (as defined in the Westcott Consulting Agreement), Wescott is entitled to the following amounts, payable in a lump sum: (i) in the event that the Westcott Consulting Agreement is terminated prior to October 1, 2022, six months of the Westcott Consulting Fee and (ii) in the event that the Westcott Consulting Agreement is terminated on or after October 1, 2022, 12 months of the Westcott Consulting Fee plus one month of the Westcott Consulting Fee for each additional year of service from October 1, 2021, up to a maximum of 24 months of the Westcott Consulting Fee plus a payment equal to a pro-rated portion of the annual cash bonus. If the Company terminates the Westcott Consulting Agreement without cause within three months following a “change of control,” Wescott is entitled to 24 months of the Westcott Consulting Fee plus a lump-sum payment equal to two times the annual cash bonus (such payment, the “Westcott Change of Control Payment”). In addition, Wescott has the right to terminate the Westcott Consulting Agreement for any reason within six months following a “change of control” and receive the Westcott Change of Control Payment from the Company. In addition, upon any termination pursuant to which Wescott receives any of the termination of Westcott Change of Control Payments described above, Wescott is further entitled to continued benefits provided under the Company’s insured standard benefit plan for a period of 12 months following such termination.
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Christopher Richards
In February 2022, the Company and Silver Bull entered into an amended employment agreement (the “Richards Employment Agreement”) with Mr. Richards, pursuant to which he serves at the Company’s and Silver Bull’s Chief Financial Officer. The Richards Employment Agreement provides for a base salary of CDN$240,000. Of this annual salary, the Company is responsible for CDN$180,000 (the “Company Base Salary”), with Silver Bull paying the remaining CDN$60,000. Mr. Richards is eligible to participate in the Company’s annual bonus plan with a target bonus of up to 50% of the Company Base Salary. Mr. Richards is further eligible to participate in the Company’s Management Retention Bonus Plan and Equity Incentive Plan, as well as any employee benefit plans maintained by the Company. If Mr. Richards is terminated without “cause” or resigns for “good reason” (as such terms are defined in the Richards Employment Agreement), he will be entitled to receive a lump-sum payment equal to 12 months of the Company Base Salary plus a pro-rated portion of the annual bonus. If the Company terminates Mr. Richards without cause within three months of a “change of control” (as defined in the Richards Employment Agreement) or if Mr. Richards resigns with good reason within six months of a change of control, Mr. Richards is entitled to a lump sum payment equal to 24 months of the Company Base Salary and two times the average annual bonus previously paid to Mr. Richards.
Director Compensation
Each of our independent directors is compensated CDN$25,000 per year, paid in quarterly installments, and is issued additional stock option grants for his services. In addition, the person serving as the Chair the Arras Board receives an additional annual cash fee of CDN$35,000, the Chair of the Audit Committee of the Arras Board receives an additional annual cash fee of CDN$5,000 (payable in quarterly installments), and the Compensation Committee Chair and Nominations and Corporate Governance Committee Chair receive an additional annual cash fee of CDN$2,500 each (payable in the same manner), in each case in consideration for its respective service as the Chair of the Arras Board or such committee.
Share-based Compensation
On April 15, 2021 and August 5, 2021, the Arras Board approved the issuance to each of the following persons, in his capacity as a director and/or officer or employee of Arras, of non-qualified options to purchase Arras common shares under the Arras Minerals Corp. Equity Incentive Plan (the “Arras Equity Plan”) in the amounts set forth below:
| Name and principal position | Number of Arras common shares underlying option award | |||
| Brian D. Edgar Chairman | 800,000 | |||
| Timothy T. Barry Chief Operating Officer | 1,000,000 | |||
| Darren E. Klinck President | 800,000 | |||
| Christopher Richards Chief Financial Officer | 500,000 | |||
The options have a term of five years and an exercise price of CDN$0.50 per share. One-third of each grant will vest on each of the grant date and the first and second anniversaries of the grant date.
Also on April 15, 2021, each of the following independent directors, who are not officers of the Company, were issued in partial compensation for his services as a director options to purchase Arras common shares under the Arras Equity Plan in the amounts set forth below:
| Name | Number of Arras common shares underlying option award | |||
| G. Wesley Carson | 300,000 | |||
| Daniel J. Kunz | 300,000 | |||
The options have a term of five years and an exercise price of CDN$0.50 per share. One-third of each grant vests on each of the grant date and the first and second anniversaries of the grant date.
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Board Practices
On February 5, 2021, Brian Edgar and Timothy Barry were confirmed as the first directors of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On March 31, 2021, G. Wesley Carson, Daniel Kunz and John McClintock were confirmed as additional directors of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On October 1, 2021, Darren Klinck was confirmed as an additional director of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On November 30, 2021, John McClintock retired from the Arras Board.
Audit Committee
The Company has a separately designated standing Audit Committee. The following persons currently serve on our Audit Committee: Daniel Kunz (Chair) and G. Wesley Carson. The charter of the Audit Committee provides that it is responsible for, among other things, overseeing the Company’s financial statements and financial disclosures; overseeing the work of the Company’s external auditors; reviewing the Company’s system of internal controls; overseeing management’s identification and assessment of the principal risks to the operations of the Company and the establishment and management of appropriate systems to manage such risks; reviewing legal or compliance matters, including the effectiveness of the Company’s compliance policies; establishing procedures for the receipt, retention, and treatment of complaints or concerns received by the Company regarding accounting, internal accounting controls or auditing matters; reviewing the Company’s policies relating to the avoidance of conflicts of interest; and reviewing and approving all payments to be made pursuant to any related party transactions. The Audit Committee’s charter was adopted by the Board on December 7, 2021.
Compensation Committee
The Company’s Compensation Committee currently consists of G. Wesley Carson (Chair) and Daniel Kunz. The charter of the Compensation Committee provides that it is responsible for, among other things, reviewing and making compensation related recommendations to the Arras Board and determinations regarding senior executives and directors; reviewing and making recommendations to the Arras Board regarding equity-based compensation plans of the Company and any grants under such plans; and considering the potential risks associated with the adoption of the Company’s compensation policies and practices. The Compensation Committee’s charter was adopted by the Board on December 7, 2021.
Nominations and Corporate Governance Committee
The Company’s Nominations and Corporate Governance Committee currently consists of G. Wesley Carson (Chair) and Daniel Kunz. The charter of the Nominations and Corporate Governance Committee provides that it is responsible for, among other things, ensuring that an appropriate system is in place to formally and regularly evaluate the effectiveness of the Arras Board, its committees, and individual directors; reviewing the governance policies of the Company to ensure compliance with applicable requirements and where necessary or desirable, on account of governance trends that are appropriate for the Company; monitoring conflicts of interest of members of the Arras Board and management in accordance with the Company’s code of business conduct and ethics; and reviewing any shareholder proposals submitted to the Company. The Nominations and Corporate Governance Committee’s charter was adopted by the Board on December 7, 2021.
Employees
Please see “Item 4. Information on the Company—Employees” for information regarding employees of the Company.
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Share Ownership
Share Ownership of Directors and Management
The following sets forth the beneficial ownership of Arras shares by each director and member of senior management of the Company based on 51,475,150 Arras shares outstanding as of February 16, 2022.
| Holder | Arras shares | Percentage Arras ownership | ||||||
| Brian D. Edgar (1) | 1,784,537 | 3.42 | % | |||||
| Timothy T. Barry (2) | 977,815 | 1.88 | % | |||||
| Daniel J. Kunz (3) | 722,096 | 1.40 | % | |||||
| Darren E. Klinck (4) | 566,666 | 1.10 | % | |||||
| Christopher Richards (5) | 397,333 | * | ||||||
| G. Wesley Carson (6) | 240,000 | * | ||||||
| Directors and senior management as a group (6 persons) | 4,688,447 | 8.70 | % | |||||
| * | The percentage of Arras common shares beneficially owned is less than one percent (1%). |
| (1) | Holdings of Mr. Edgar include (i) 895,102 Arras common shares held directly, (ii) 249,602 Arras common shares owned by Tortuga Investments Corp., a company wholly owned by Mr. Edgar, (iii) 533,333 stock options that are vested or will vest within 60 days and (iv) warrants to purchase 106,500 Arras common shares that are exercisable or will be exercisable within 60 days but exclude (A) 475,000 Arras common shares and warrants to purchase 212,500 Arras common shares, in each case that are owned by 0893306 B.C. Ltd., a company wholly owned by Mr. Edgar’s spouse, and of which Mr. Edgar disclaims beneficial ownership, (B) 50,000 Arras common shares that are owned by Mr. Edgar’s spouse and of which Mr. Edgar disclaims beneficial ownership and (C) 266,667 stock options that will not vest within 60 days. |
| (2) | Holdings of Mr. Barry include (i) 311,119 Arras common shares held directly and (ii) 666,666 stock options that are vested or will vest within 60 days but exclude (A) 319,000 Arras common shares and warrants to purchase 159,500 Arras common shares, in each case that are owned by Mr. Barry’s spouse, and of which Mr. Barry disclaims beneficial ownership, and (B) 333,334 stock options that will not vest within 60 days. |
| (3) | Holdings of Mr. Kunz include (i) 442,096 Arras common shares held directly, (ii) 200,000 stock options that are vested or will vest within 60 days and (iii) warrants to purchase 80,000 Arras common shares that are exercisable or will be exercisable within 60 days but exclude 100,000 stock options that will not vest within 60 days. |
| (4) | Holdings of Mr. Klinck include (i) 300,000 Arras common shares that are owned by Mr. Klinck’s spouse and of which Mr. Klinck claims beneficial ownership and (ii) 266,666 stock options that are vested or will vest within 60 days but exclude 533,334 stock options that will not vest within 60 days. |
| (5) | Holdings of Mr. Richards include (i) 56,000 Arras common shares held directly, (ii) 333,333 stock options that are vested or will vest within 60 days and (iii) warrants to purchase 8,000 Arras common shares that are exercisable or will be exercisable within 60 days but exclude 166,667 stock options that will not vest within 60 days. |
| (6) | Holdings of Mr. Carson include (i) 40,000 Arras common shares held directly and (ii) 200,000 stock options that are vested or will vest within 60 days but exclude 100,000 stock options that will not vest within 60 days. |
Except as otherwise noted, each person or entity identified above has sole voting and investment or dispositive power with respect to the securities they hold.
Upon completion of the Spin-off on September 24, 2021, approximately 4% of our issued share capital was owned by Silver Bull. On October 21, 2021, Arras completed a private placement, as a result of which Silver Bull’s ownership interest in Arras decreased to approximately 3%.
As of October 31, 2021, approximately 41.4% of our outstanding shares were held of record by residents of the United States.
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Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that such person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
We are not aware of any arrangement that may, at a subsequent date, result in a change of our control.
Compensation Plans
Arras Minerals Corp. Equity Incentive Plan
As of October 31, 2021, we had one formal equity compensation plan under which equity securities were authorized for issuance to our officers, directors, employees and consultants: the Arras Equity Plan. The maximum number of shares of Arras issuable pursuant to grants made under the Arras Equity Plan, together with all other security-based compensation arrangements of Arras, was 20.0% of the total outstanding shares of Arras from time to time or such other number as may be approved by any applicable stock exchange and the shareholders of Arras from time to time, subject to adjustments as provided under the Arras Equity Plan. As of October 31, 2021, there were 9,560,620 Arras common shares reserved for issuance under the Arras Equity Plan. As of October 31, 2021, options issued under the Arras Equity Plan were outstanding to acquire 5,060,000 Arras common shares.
The Arras Equity Plan was adopted and approved by the Arras Board on April 15, 2021, and amended by the shareholders of Arras on July 5, 2021.
Under the Arras Equity Plan, Arras may grant incentive or nonqualified stock options, restricted share units (“RSUs”) or performance share units (“PSUs”), and restricted stock to employees (including officers), directors, and consultants of Arras or any subsidiary thereof.
Upon the listing of Arras shares on a stock exchange, the maximum number of shares of Arras that may be reserved for issuance to any one participant under the Arras Equity Plan, together with all other security-based compensation arrangements of Arras, is 5.0% of the total issued and outstanding shares of Arras from time to time. Upon the listing of Arras shares on a stock exchange, the maximum number of shares of Arras that may be issued to a director or officer of Arras or other “insider” within any one-year period, or that may be issuable to such persons at any time, under the Arras Equity Plan, or when combined with all other security-based compensation arrangements of Arras, is 10.0% of the total issued and outstanding shares of Arras from time to time. Except with respect to certain U.S. persons, there are no limitations on the maximum number of shares of Arras that may be reserved for issuance to participants under the Arras Equity Plan prior to the listing of the Arras shares on a stock exchange.
For so long as Arras common shares are listed or trade on a stock exchange or other market, options granted under the Arras Equity Plan must have an exercise price that is not less than 100% of the “fair market value” on the grant date. With respect to any incentive stock options granted to a person owning more than 10.0% of the total voting securities of Arras or certain parent or subsidiary corporations, the exercise price of such options must be at a price of not less than 110% of the fair market value on the grant date, and the exercise period of such options must not exceed five years. Options may be exercised on a cash or cashless basis. Unless otherwise designated by the Arras Board in the applicable grant agreement, one-third of the options granted under the Arras Equity Plan must vest on each of the grant date and the first and second anniversaries of the grant date, subject to acceleration in certain circumstances. The exercise period of any option must not exceed 10 years from the grant date. Subject to the terms of the applicable grant agreement and the board of directors’ discretion, upon the termination of an optionholder’s employment or other relationship with Arras, including as a result of death or disability, outstanding options held by such person are subject to accelerated expiry, as follows: (i) upon the death or disability of an optionholder, vested options shall continue to be exercisable for 12 months while unvested options shall be forfeited; (ii) upon a resignation from Arras by an optionholder or termination of an optionholder without cause, vested options shall continue to be exercisable for 90 days while unvested options shall be forfeited; and (iii) upon the termination of an optionholder for cause, all outstanding options (vested or unvested) shall be forfeited.
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Settlement of RSUs and PSUs must be made by the issuance of one share for each RSU or PSU being settled, a cash payment equal to the market price on the vesting date of the RSUs or PSUs being settled, or a combination of shares and cash, all as determined by the Arras Board or as specified in the applicable grant agreement. Unless the applicable grant agreement specifies that RSUs and PSUs must be settled through the issuance of shares, settlement will occur upon or as soon as reasonably practicable following vesting and, in any event, on or before December 31 of the third year following the year in which the participant performed the services to which the grant of RSUs or PSUs relates. Subject to the terms of the applicable grant agreement and the board of directors’ discretion, upon the termination of the employment or other relationship with Arras, including as a result of death or disability, of a holder of RSUs or PSUs, all unvested entitlements shall be forfeited.
Unless otherwise specified in the grant agreement in respect of a particular award, awards granted pursuant to the Arras Equity Plan are not assignable other than by testamentary disposition or the laws of intestate succession.
The Arras Equity Plan, and any grant made pursuant to the Arras Equity Plan, may be amended without approval of the Arras shareholders, except (i) no amendment to the Arras Equity Plan or any grant made pursuant to the Arras Equity Plan may be made without the consent of a participant in the Arras Equity Plan if it adversely alters or impairs the rights of such participant in respect of any previous grant to such participant; and (ii) for so long as the Arras shares are listed on a stock exchange, Arras shareholder approval will be required to (A) increase the maximum number of shares issuable pursuant to the Arras Equity Plan, (B) reduce the exercise price of an outstanding option, except as permitted by the Arras Equity Plan, (C) extend the maximum term of any grant made under the Arras Equity Plan, except as permitted by the Arras Equity Plan, (D) amend the assignment provisions of the Arras Equity Plan, (E) increase the number of shares issuable to “insiders” of Arras or removing the restriction on “insider” participation in the Arras Equity Plan, (F) include other types of equity compensation involving the issuance of shares of Arras under the Arras Equity Plan or (G) amend the amendment provisions of the Arras Equity Plan or to grant additional powers to the Arras Board to amend the Arras Equity Plan without shareholder approval.
The following table sets forth the outstanding equity awards for each of the following officers of Arras at October 31, 2021.
Outstanding Equity Awards at October 31, 2021
| Number of securities underlying unexercised options (1) | Option exercise | Option expiration | ||||||||||||
| Name | Exercisable | Unexercisable | price (2) | date | ||||||||||
| Timothy T. Barry | 333,333 | 666,667 | $ | 0.40 | 4/15/2026 | |||||||||
| Darren E. Klinck | 266,666 | 533,334 | $ | 0.40 | 8/04/2026 | |||||||||
| Christopher Richards | 166,666 | 333,334 | $ | 0.40 | 4/15/2026 | |||||||||
| (1) | Options vest in three equal installments: one-third on the grant date, one-third on the first anniversary of the grant date and one-third on the second anniversary of the grant date. |
| (2) | Exercise price of CDN$0.50 was converted based on the foreign currency exchange rate as of October 31, 2021 (CDN$1.00 = US$0.8071). |
The following table gives information about our common shares that may be issued upon the exercise of options, warrants and rights under our compensation plans as of October 31, 2021.
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Equity Compensation Plan Information
| Plan category | Number of securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuance | |||||||||
| Equity compensation plans approved by security holders | — | $ | — | — | ||||||||
| Equity compensation plans not approved by security holders | 5,060,000 | (1) | $ | 0.40 | (1) | — | ||||||
| Total | 5,060,000 | $ | 0.40 | — | ||||||||
| (1) | Exercise price of CDN$0.50 was converted based on the foreign currency exchange rate as of October 31, 2021 (CDN$1.00 = US$0.8071). |
Arras Minerals Corp. Management Retention Bonus Plan
The Arras Board adopted and approved on April 15, 2021, and further amended in February, 2022, the Arras Minerals Corp. Management Retention Bonus Plan (the “Arras Retention Plan”) in order to encourage the retention of the management team of Arras amidst the mining industry’s highly competitive market for talent and to align the team’s interests with those of the shareholders of Arras.
Pursuant to the Arras Retention Plan, Arras will pay cash bonuses to each of the following persons in the amounts set forth in the following table upon Arras reaching a market capitalization target for five consecutive trading days as set forth in the table (it being understood that that the common shares of Arras are not currently listed or posted for trading on any stock exchange or market):
Name and principal position | CDN$250 million market capitalization | CDN$500 million market capitalization | CDN$1 billion market capitalization | Total bonus opportunity | ||||
| Brian D. Edgar Chairman | CDN$750,000 | CDN$750,000 | CDN$1,500,000 | CDN$3,000,000 | ||||
| Timothy T. Barry Chief Executive Officer | CDN$1,125,000 | CDN$1,125,000 | CDN$2,250,000 | CDN$4,500,000 | ||||
| Christopher Richards Chief Financial Officer | CDN$375,000 | CDN$375,000 | CDN$750,000 | CDN$1,500,000 |
The Arras Retention Plan further provides that if Arras is the subject of a Change of Control (as defined in the Arras Retention Plan) that exceeds CDN$250 million, Arras must pay to Mr. Edgar, Mr. Barry, and Mr. Richards cash bonuses equal to 0.30%, 0.45%, and 0.15%, respectively, of the Change of Control transaction amount, less any cash bonuses that may have previously been paid to such persons pursuant to the market capitalization targets noted above. The market capitalization targets or Change of Control must be achieved or completed by April 15, 2027 in order for any officer or employee of Arras to earn the applicable bonus payment described above. Any bonus payable in the future to an officer or employee of Arras will be cancelled (subject to the discretion of the Arras Board) if such officer or employee is not employed directly or indirectly by Arras when such bonus is earned and becomes payable. At the sole discretion of the Arras Board, Arras shall not be obligated to pay a bonus in cash under the Arras Retention Plan if it lacks funds at the time. In lieu of cash, the Arras Board may choose to settle any bonus by issuing and delivering shares of Arras for such amount valued at the five-day trading volume-weighted average price for Arras’s shares on the market calculated up to the day before the issuance of the shares.
Please see “—Compensation—Directors and Senior Management—Employment Agreements with Senior Management—Darren E. Klinck” above for the amounts owed to Westcott, Mr. Klinck’s personal service corporation, pursuant to the Westcott Consulting Agreement upon Arras reaching certain market capitalization targets and upon the Company undergoing a Change of Control (as defined in the Westcott Consulting Agreement).
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| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. |
Major Shareholders
There is no person or entity that we know that beneficially owns 5% or more of our shares based on 51,475,150 Arras shares outstanding as of February 16, 2022.
Related Party Transactions
Asset Purchase Agreement
On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of the APA in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull. The transferred assets included an option agreement with respect to the Beskauga Property, a joint venture agreement with respect to the Stepnoe and Ekidos properties and loans payable by Ekidos Minerals LLP (“Ekidos LLP”) to Silver Bull. See “Item 4. Information on the Company—History and Development of the Company” for further details regarding the APA and transferred assets.
Separation and Distribution Agreement
On August 31, 2021, we entered into a Separation and Distribution Agreement with Silver Bull. The Separation and Distribution Agreement sets forth our agreements with Silver Bull regarding in connection with the Distribution and providing a framework for the relationship between the parties after the Distribution.
Salaries and Office-related Overhead Costs
Pursuant to the Separation and Distribution Agreement, Silver Bull agreed to continue to incur the salaries of its employees and other office-related overhead costs and charge Arras for a portion of these costs on a pro-rata cost-recovery basis until the earlier of (i) the date on which our common shares are listed on a stock exchange or (ii) December 31, 2021. For the period from inception on February 5, 2021 to October 31, 2021, Silver Bull invoiced the Company CDN$414,478 for such costs. In February, 2022, the Company entered into an employment or consulting agreement, effective January 1, 2022, with each member of the senior management team.
Silver Bull Warrants
Pursuant to the Separation and Distribution Agreement, Silver Bull, may, in its sole discretion, offer holders of outstanding Silver Bull warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull shares, one Silver Bull share and one Arras common share in exchange for the original exercise price, subject to compliance with applicable securities laws. If Silver Bull makes such an offer, then (i) Arras must issue Arras common shares to the holders of Silver Bull warrants who elected to accept such offer and (ii) Silver Bull must remit to Arras a portion of the aggregate cash warrant exercise price received by Silver Bull.
Beskauga Option Agreement
Pursuant to the Separation and Distribution Agreement, Arras may, in its sole discretion, seek the consent of the other parties to the Beskauga Option Agreement to make certain amendments thereto such that the Bonus Payments that Arras or its affiliate may be obligated to pay Copperbelt pursuant to the Beskauga Option Agreement could be satisfied, at the option of Arras, in Arras common shares. If Arras is not successful in obtaining such consents, Silver Bull will agree to use commercially reasonable efforts to enter into an arrangement with Arras providing for (i) the issuance of Silver Bull common stock to Copperbelt upon (A) Arras becoming obligated to make the Bonus Payments and (B) Arras electing to pay a portion of such Bonus Payments in Silver Bull common stock in accordance with the Beskauga Option Agreement and (ii) a payment by Arras to Silver Bull in consideration for the issuance by Silver Bull of Silver Bull common stock to Copperbelt.
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Termination
The Separation and Distribution Agreement may not be terminated following the completion of the Distribution unless the parties mutually agree in writing to terminate it.
This description of the Separation and Distribution Agreement is only a summary and does not purport to be complete and is qualified by reference to the full text of the agreement, which is incorporated by reference as an exhibit to this Annual Report.
Interests of Experts and Counsel
Not applicable.
| ITEM 8. | FINANCIAL INFORMATION. |
Consolidated Statements and Other Financial Information
Please refer to pages F-1 through F-23 of this Annual Report.
Significant Changes
A discussion of significant changes in our business can be found under “Item 4. Information on the Company—History and Development of the Company” and “Item 5. Operating and Financial Review and Prospects—Operating Results.”
| ITEM 9. | THE OFFER AND LISTING. |
Offer and Listing Details
Our common shares are not listed or posted for trading on any stock exchange or market. Accordingly, our common shares, though freely transferable in the United States, will be illiquid until such time as such shares are listed or a trading market develops, if at all. In Canada, our shareholders are able to trade their shares only pursuant to an exemption from prospectus requirements.
Plan of Distribution
Not applicable.
Markets
No securities of the Company are listed or posted for trading on any stock exchange or market. Until our common shares are listed or posted for trading on a stock exchange or other market, the Arras shares will be illiquid and shareholders may have difficulty selling their Arras shares. If we fail to list our common shares on an exchange or another market, the liquidity for our common shares may be significantly impaired, which may significantly decrease the value of our common shares.
Selling Shareholders
Not applicable.
Dilution
Not applicable.
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Expenses of the Issue
Not applicable.
| ITEM 10. | ADDITIONAL INFORMATION. |
Share Capital
Not applicable.
Memorandum and Articles of Association
Copies of our notice of articles and articles of incorporation are attached as Exhibits 1.1 and 1.2, respectively, to this Annual Report. The information called for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference into this Annual Report.
Material Contracts
For information concerning our material contracts, please refer to the following sections in this Annual Report:
|
Section |
Material Contract(s) |
| “Item 4. Information on the Company—History and Development of the Company” |
● the APA ● the Beskauga Option Agreement ● the Stepnoe and Ekidos JV Agreement ● the SVB Loans ● Arras Loans 1–10 ● the April 2021 Subscription Agreements ● the October 2021 Subscription Agreements |
| “Item 6. Directors, Senior Management and Employees—Compensation—Directors and Senior Management—Employment Agreements with Senior Management” |
● Barry Consulting Agreement ● Westcott Consulting Agreement ● Richards Employment Agreement |
| “Item 6. Directors, Senior Management and Employees—Share Ownership—Compensation Plans” |
● the Arras Equity Plan ● the Arras Retention Plan |
| “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” | ● the Separation and Distribution Agreement |
Exchange Controls
We are not aware of any laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of our common shares.
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Taxation
Material U.S. Federal Income Tax Considerations
The following is a discussion of certain U.S. federal income tax considerations to the U.S. Holders (as defined below) of the ownership and disposition of our common shares. This discussion does not address all tax considerations that might be relevant to particular beneficial owners of our common shares in light of their personal circumstances or to persons that are subject to special tax rules. In particular, this description of the material U.S. federal income tax considerations does not address the tax treatment of special classes of beneficial owners of our common shares, such as:
| ● | financial institutions; |
| ● | regulated investment companies; |
| ● | real estate investment trusts; |
| ● | subchapter S corporations; |
| ● | tax exempt entities; |
| ● | insurance companies; |
| ● | persons that do not hold our common shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”); |
| ● | persons holding our common shares, as part of an integrated or conversion transaction or a constructive sale or a straddle; |
| ● | persons that own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of our outstanding common shares; |
| ● | U.S. expatriates; |
| ● | dealers or traders in securities; or |
| ● | a person whose functional currency is not the U.S. dollar. |
This summary does not address the alternative minimum tax, U.S. federal estate and gift tax consequences or tax consequences under any state, local or non-U.S. laws.
For purposes of this discussion, a person is a “U.S. Holder” if it is a beneficial owner of our common shares that is: (1) an individual citizen or resident alien of the United States for U.S. federal income tax purposes; (2) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof, or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust (A) if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have authority to control all substantial decisions of the trust or (B) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
If a partnership, or other pass through entity or arrangement treated as a partnership for U.S. federal income tax purposes, is a beneficial owner of our common shares, the U.S. federal income tax consequences to the partners (or other owners) will generally depend upon the status of the partners (or other owners) and the activities of the entity. Partners (or other owners) of a partnership or other pass through entity that holds our common shares should consult with their tax advisors regarding the tax consequences of owning and disposing of such common shares.
The following discussion is based upon the Code, U.S. judicial decisions, administrative pronouncements and existing and proposed Treasury Regulations, all as in effect as of the date hereof. All of the preceding authorities are subject to change, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. We have not requested, and will not request, a ruling or other guidance from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal income tax considerations described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions described herein.
The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any beneficial owner of our common shares and no opinion or representation with respect to the U.S. federal income tax consequences to any such beneficial owner is given. Holders of our common shares are urged to consult their tax advisors as to the particular consequences to them under U.S. federal, state and local, and any applicable non-U.S. tax laws of owning and disposing of our common shares.
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Tax Consequences to U.S. Holders of the Ownership and Disposition of Our Common Shares
The following discussion is subject in its entirety to the rules described below under the heading “—Passive Foreign Investment Company Rules.”
Taxation of Distributions on Our Common Shares
A U.S. Holder that receives a distribution, including a constructive distribution, with respect to our common shares generally will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent such distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If a distribution with respect to our common shares exceeds our current and accumulated earnings and profits, the excess will be treated as a tax free return of the capital up to such U.S. Holder’s tax basis in our common shares. Any remaining excess distribution generally will be treated as capital gain. However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution with respect our common shares will constitute ordinary dividend income.
Dividends received with respect to our common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Provided that we are eligible for the benefits of the Canada–United States Tax Convention (1980) (the “Canada–U.S. Tax Convention”) or that our common shares are “readily tradable” on a U.S. securities market, dividends paid by us to non-corporate U.S. Holders generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that we will not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax year.
Foreign Tax Credit
In general, any Canadian withholding tax imposed on dividend payments in respect of our common shares will be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or, at a U.S. Holder’s election, may, in certain circumstances, be deducted in computing taxable income). Dividends paid with respect to our common shares will generally be treated as foreign-source income, and generally will be treated as “passive category income” for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers. U.S. Holders are urged to consult their own tax advisors with respect to the amount of foreign taxes that can be claimed as a credit.
Sale or Other Taxable Disposition of Our Common Shares
A U.S. Holder will generally recognize capital gain or loss upon the sale or other taxable disposition of our common shares in an amount equal to the difference between the U.S. Holder’s tax basis in such common shares disposed of and the amount realized on the disposition. Gain or loss realized by a U.S. Holder on the sale or other taxable disposition of our common shares will be capital gain or loss for U.S. federal income tax purposes, and will be long term capital gain or loss if the U.S. Holder’s holding period for such common shares is more than one year. In the case of a non-corporate U.S. Holder, long term capital gains will be subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Receipt of Foreign Currency
The amount of any distributions on or proceeds on the sale, exchange or other taxable disposition of our common shares paid to a U.S. Holder in foreign currency, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt, regardless of whether such foreign currency is converted into U.S. dollars at that time. A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
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Medicare Tax
An additional 3.8% Medicare tax is imposed on the “net investment income” of certain U.S. Holders who are individuals, estates or trusts. Among other items, “net investment income” generally includes gross income from dividends, and certain net gains from sales or other taxable dispositions of our common shares. Special rules apply to PFICs (as defined below). U.S. Holders are urged to consult their tax advisors with respect to the Medicare tax and its applicability in their particular circumstances to income and gains in respect of the ownership and disposition of our common shares.
Backup Withholding and Information Reporting
In general, information reporting will apply to payments made with respect to our common shares through a U.S. paying agent or U.S. intermediary to a U.S. Holder other than certain exempt recipients, such as corporations. In general, payments to U.S. Holders may be subject to backup withholding, currently at a rate of 24%, if the U.S. Holder fails to provide its taxpayer identification number or otherwise comply with the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided the required information is furnished to the IRS. Each U.S. Holder is urged to consult its own tax advisor regarding the information reporting and backup withholding tax rules.
Owners of “specified foreign financial assets” with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold), may be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. U.S. Holders are urged to consult their own tax advisors regarding this legislation and any other information reporting that may be required in connection with their ownership of our common shares.
Passive Foreign Investment Company Rules
If we were to be classified as a “passive foreign investment company” (“PFIC”) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of our common shares.
PFIC Status of the Company
The Company generally will be a PFIC if, for a given tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the fair market value of such assets. “Gross income” generally includes all income less the cost of goods sold, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in a trade or business.
For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.
Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share of any subsidiary of the Company which is also a PFIC (a “lower-tier PFIC”), and will be subject to U.S. federal income tax on (a) a distribution on the shares of a lower-tier PFIC and (b) a disposition of shares of a lower-tier PFIC, both as if the U.S. Holder directly held the shares of such lower-tier PFIC.
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The Company may (or may not) be a PFIC for the current tax year and may (or may not) be a PFIC in subsequent years. The determination of whether the Company (or a subsidiary of the Company) was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether the Company (or subsidiary) will be a PFIC for any tax year depends on the assets and income of the Company (and each such subsidiary) over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this Annual Report. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or subsidiary) concerning its PFIC status or that the Company (and any subsidiary) was not, or will not be, a PFIC for any tax year. U.S. Holders should consult their own tax advisors regarding the PFIC status of the Company and any subsidiary of the Company.
Default PFIC rules under Section 1291 of the Code
If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership and disposition of our common shares will depend on whether such U.S. Holder makes a “qualified electing fund” or “QEF” election (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to our common shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of our common shares and (b) any excess distribution paid on our common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for our common shares, if shorter).
If the Company is a PFIC, under Section 1291 of the Code any gain recognized on the sale or other taxable disposition of our common shares (including an indirect disposition of shares of a lower-tier PFIC), and any excess distribution paid on our common shares (or a distribution by a lower-tier PFIC to its shareholder that is deemed to be received by a U.S. Holder) must be ratably allocated to each day of a Non-Electing U.S. Holder’s holding period for our common shares, as applicable. The amount of any such gain or excess distribution allocated to the tax year of disposition or excess distribution and to years before the Company became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year without regard to the U.S. Holder’s other tax attributes, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.
If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds our common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent years. If the Company ceases to be a PFIC, a Non-Electing U.S. Holder may terminate this deemed PFIC status with respect to our common shares by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.
QEF Election
If the Company is a PFIC and a U.S. Holder makes a QEF Election for the first tax year in which its holding period of our common shares begins, such U.S. Holder generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to our common shares. However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (i) net long-term capital gain over (ii) net short-term capital gain, and “ordinary earnings” are the excess of (i) “earnings and profits” over (ii) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.
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A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of our common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as timely if it is made for the first year in the U.S. Holder’s holding period for our common shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year.
A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in a subsequent tax year, the QEF Election will be effective, and the U.S. Holder will be subject to the QEF rules described above during a subsequent tax year in which the Company qualifies as a PFIC.
The Company will use commercially reasonable efforts to make available to U.S. Holders, upon their written request, for each year in which the Company may be a PFIC, all information and documentation that a U.S. Holder making a QEF Election with respect to the Company, and any lower-tier PFIC in which the Company owns, directly or indirectly, more than 50% of such lower-tier PFIC’s total aggregate voting power, is required to obtain for U.S. federal income tax purposes in the event it is a PFIC. However, U.S. Holders should be aware that the Company provides no assurances that it will attempt to provide any such information relating to any lower-tier PFIC in which the Company owns, directly or indirectly, 50% or less of such lower-tier PFIC’s aggregate voting power. Because the Company may own shares in one or more lower-tier PFICs, and may acquire shares in one or more lower-tier PFICs in the future, they will continue to be subject to the rules discussed above with respect to the taxation of gains and excess distributions with respect to any lower-tier PFIC for which the U.S. Holders do not obtain the required information. U.S. Holders should consult their tax advisors regarding the availability of, and procedure for making, a QEF Election with respect to the Company and any lower-tier PFIC.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if our common shares are marketable stock. Our common shares generally will be “marketable stock” if they are regularly traded on (a) a national securities exchange that is registered with the SEC; (b) the national market system established pursuant to Section 11A of the Exchange Act; or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced; and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. It is anticipated that our common shares will not initially be marketable stock, but may become marketable stock in the future if the conditions described above are met.
A U.S. Holder that makes a Mark-to-Market Election with respect to our common shares generally will not be subject to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for our common shares or such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, our common shares.
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A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of our common shares, as of the close of such tax year over (b) such U.S. Holder’s tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in our common shares over (ii) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).
U.S. Holders that make a Mark-to-Market Election generally also will adjust their tax basis in our common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of our common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years).
A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless our common shares cease to be “marketable stock” or the IRS consents to revocation of such election. U.S. Holders should consult their own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may become eligible in the future to make a Mark-to-Market Election with respect to our common shares, no such election may be made with respect to the stock of any lower-tier PFIC that a U.S. Holder is treated as owning because such stock would not be marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above with respect to deemed dispositions of lower-tier PFIC stock or distributions from a lower-tier PFIC.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of our common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations) in the event the Company is a PFIC during such U.S. Holder’s holding period for the relevant shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which our common shares are transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses our common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.
If the Company were a PFIC, a U.S. Holder would be required to attach a completed IRS Form 8621 to its tax return every year in which it recognized gain on a disposition of our common shares or received an excess distribution. In addition, subject to certain rules intended to avoid duplicative filings, U.S. Holders may also be required to file an annual information return on IRS Form 8621 with respect to each PFIC in which the U.S. Holder holds a direct or indirect interest. U.S. Holders should consult their own tax advisors regarding their filing obligations with respect to such information returns.
In addition, a U.S. Holder who acquires our common shares from a decedent will not receive a “step up” in tax basis of such common shares to fair market value unless such decedent had a timely and effective QEF Election in place.
Special rules also apply to foreign tax credits that a U.S. Holder may claim on a distribution from a PFIC.
The PFIC rules are complex, and U.S. Holders should consult their own tax advisors regarding the PFIC rules and how they may affect the U.S. federal income tax consequences of the ownership, and disposition of our common shares in the event the Company is a PFIC at any time during the holding period for such common shares.
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THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE WITH RESPECT TO THE OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.
Material Canadian Income Tax Considerations
The following summarizes, as of the date hereof, certain Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) and the regulations thereunder (collectively, the “Canadian Tax Act”) and the Canada–United States Tax Convention (1980) (the “Convention”) to the holding and disposition of the common shares.
Comment is restricted to beneficial owners of the common shares, whom, at all relevant times and for purposes of the Canadian Tax Act and the Convention: (i) have not been and will not be deemed to be resident in Canada; (ii) are resident solely in the United States and are entitled to benefits of the Convention; (iii) do not use or hold, and are not deemed to use or hold, the common shares in, or in the course of, carrying on a business in Canada; (iv) deal at arm’s length with and are not affiliated with the Company; (v) hold the common shares as capital property; and (vi) are not an “authorized foreign bank” (as defined in the Canadian Tax Act) or an insurer that carries on business in Canada and elsewhere (each such holder, a “U.S. Resident Holder”). Generally, a U.S. Resident Holder’s common shares will be considered to be capital property of the holder provided that the holder is not a trader or dealer in securities, does not acquire, hold or dispose of (or is not deemed to have acquired, held or disposed of) the common shares in one or more transactions considered to be an adventure or concern in the nature of trade, and does not hold or use (or is not deemed to hold or use) the common shares, in the course of carrying on a business of trading or dealing in securities.
Certain U.S.-resident entities that are fiscally transparent for U.S. federal income tax purposes (including limited liability companies) may not in all circumstances be entitled to benefits under the Convention. U.S. Resident Holders are urged to consult with their own tax advisors to determine their entitlement to benefits under the Convention based on their particular circumstances.
This summary is based upon the current provisions of the Canadian Tax Act and the Convention in effect as of the date hereof, and the Company’s understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) published in writing prior to the date hereof. This summary does not anticipate or take into account any changes in law or in the administrative policies or assessing practices of the CRA, whether by legislative, governmental or judicial decision or action, except only the specific proposals to amend the Canadian Tax Act publicly and officially announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”). This summary assumes that the Tax Proposals will be enacted in the form proposed. This summary does not take into account any other federal or any provincial, territorial or foreign tax legislation or considerations, which may differ significantly from those set out herein. No assurances can be given that the Tax Proposals will be enacted as proposed or at all, or that legislative, judicial or administrative changes will not modify or change the statements expressed herein.
This summary is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended and should not be construed as legal or tax advice to any particular U.S. Resident Holder. No representations with respect to the income tax consequences to any holder of the common shares are made herein. Accordingly, holders of the common shares are urged to consult their own tax advisors with respect to their own particular circumstances. This summary is qualified accordingly.
Dividends
Under the Canadian Tax Act, dividends paid or credited or deemed to be paid or credited to a U.S. Resident Holder by the Company are subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, unless such rate is reduced by the terms of an applicable tax treaty. Under the Convention, the rate of withholding tax on dividends paid or credited to a U.S. Resident Holder is generally reduced to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Resident Holder that is a company beneficially owning at least 10% of the Company’s voting shares). U.S. Resident Holders should consult their own tax advisors.
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Disposition of Common Shares
A U.S. Resident Holder generally will not be subject to tax under the Canadian Tax Act in respect of a capital gain realized by such U.S. Resident Holder on the disposition or deemed disposition of a common share nor will capital losses arising therefrom be recognized under the Canadian Tax Act unless the common share constitutes “taxable Canadian property” of the U.S. Resident Holder for purposes of the Canadian Tax Act, and is not “treaty protected property” of the U.S. Resident Holder for purposes of the Canadian Tax Act at the time of disposition.
Common shares generally will not be “taxable Canadian property” to a U.S. Resident Holder unless at any time during the 60-month period immediately preceding the disposition, more than 50% of the fair market value of the common shares was derived directly or indirectly, from one or any combination of real or immovable property situated in Canada, “Canadian resource properties”, “timber resource properties” (each as defined in the Canadian Tax Act), and options in respect of or interests in, or for civil law rights in, any such properties (whether or not such property exists). Notwithstanding the foregoing, in certain circumstances set out in the Canadian Tax Act, the common shares may be deemed to be “taxable Canadian property”.
Even if a common share is “taxable Canadian property” to a U.S. Resident Holder, any capital gain realized upon the disposition or deemed disposition of such common share may not be subject to tax under the Canadian Tax Act if the common shares is “treaty-protected property” (as defined in the Canadian Tax Act). The common shares of a U.S. Resident Holder will generally constitute “treaty-protected property” for purposes of the Tax Act unless the value of the common shares is derived principally from real property situated in Canada. For this purpose, “real property” has the meaning that term has under the laws of Canada and includes any option or similar right in respect thereof and in any case, includes usufruct of real property, rights to explore for or to exploit mineral deposits, sources and other natural resources and rights to amounts computed by reference to the amount or value of production from such resources.
A U.S. Resident Holder contemplating a disposition of common shares that may constitute taxable Canadian property should consult a tax advisor prior to such disposition.
Dividends and Paying Agents
Not applicable.
Statement by Experts
Not applicable.
Documents on Display
Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report, the contract or document is deemed to modify the description contained in this Annual Report. You must review the exhibits themselves for a complete description of the contract or document.
After completion of the Spin-off on September 24, 2021, we became subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and periodic reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As an FPI, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, are not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to furnish or make available to our shareholders annual reports containing our financial statements prepared in accordance with IFRS.
| 58 |
Subsidiary Information
As of October 31, 2021, we did not own any interest in another entity, whether wholly or partially. Pursuant to the Stepnoe and Ekidos JV Agreement, Ekidos LLP, a company incorporated under the laws of Kazakhstan, was incorporated on behalf of Copperbelt for the purpose of applying for the Stepnoe and Ekidos Licenses with the funding previously provided by Silver Bull. Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, 100% of the equity interests in Ekidos LLP were transferred to the Company on February 3, 2022.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency exchange rate risk and other price risk. The Company is not currently exposed to any significant interest rate risk or other price risk. The Company is exposed to foreign currency exchange rate risk with respect to cash denominated in Canadian dollars. As at October 31, 2021, a 15% strengthening (weakening) of the Canadian dollar against the U.S. dollar would have increased (decreased) the Company’s comprehensive loss by approximately $563,000 for the period from inception on February 5, 2021 to October 31, 2021.
For additional information about the effects of foreign currency translation and foreign currency exchange rate risk on the Company’s financial statements, see the statement of comprehensive loss and statement of cash flows on pages F-4 and F-6 of our financial statements and “Note 14. Financial Instruments” on page F-22 of our financial statements and related notes included elsewhere in this Annual Report.
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. |
Debt Securities
Not applicable.
Warrants and Rights
Not applicable.
Other Securities
Not applicable.
American Depositary Shares
Not applicable.
| 59 |
PART II
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. |
None.
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. |
Not applicable.
| ITEM 15. | CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
As of October 31, 2021, we have carried out an evaluation under the supervision of, and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on the evaluation as of October 31, 2021, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the SEC for new reporting issuers.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. In addition, our registered public accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting until we are no longer an emerging growth company.
Changes in Interal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal period ended October 31, 2021 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 16. | [RESERVED]. |
| ITEM 16A. | AUDIT COMMITTEE AND FINANCIAL EXPERT. |
The Arras Board has determined that Brian Edgar, Daniel J. Kunz, and G. Wesley Carson each satisfy the “independence” requirements set forth in Rule 10A-3 under the Exchange Act The Arras Board has also determined that Daniel J. Kunz and G. Wesley Carson shall each be considered an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Exchange Act.
| 60 |
| ITEM 16B. | CODE OF ETHICS. |
We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, and those of our officers performing similar functions. If the Arras Board approves an amendment to or waiver from any provision of our Code of Business Conduct and Ethics, we will disclose the required information pertaining to such amendment or waiver on our website. The information contained on our website is not incorporated by reference in this Annual Report.
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Auditors
The Company’s independent registered auditors are Smythe LLP (“Smythe”), Chartered Professional Accountants, with a business address at #1700 – 475 Howe Street, Vancouver, British Columbia, Canada V6C 2B3. Smythe LLP, Chartered Professional Accountants, are members of the Chartered Professional Accountants of British Columbia and are registered with both the Canadian Public Accountability Board and the U.S. Public Company Accounting Oversight Board. Smythe LLP, Chartered Professional Accountants were first appointed as the Company’s auditors on June 1, 2021.
Audit Fees
During the period from inception on February 5, 2021 to October 31, 2021, Smythe billed us audit fees and expenses in the amount of $20,000.
Audit-Related Fees
During the period from inception on February 5, 2021 to October 31, 2021, Smythe billed us audit-related fees and expenses in the amount of $17,234.
Tax Fees
There were no tax fees and expenses billed by Smythe during the period from inception on February 5, 2021 to October 31, 2021.
All Other Fees
There were no other fees and expenses billed by Smythe during the period from inception on February 5, 2021 to October 31, 2021.
Audit Committee’s Pre-Approval Policies and Procedures
Section 10A(i) of the Exchange Act prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the Audit Committee of the Arras Board, or unless the services meet certain de minimis standards.
The Audit Committee’s charter, effective as of December 7, 2021, provides that the Audit Committee (i) must approve in advance any and all audit services and permissible non-audit services to be performed by the auditors for the Company or its subsidiary entities that the Audit Committee deems advisable in accordance with applicable requirements and Arras Board-approved policies and procedures, and adopt and implement policies for such pre-approval; (ii) must consider the impact of such service and fees on the independence of the auditor; and (iii) may delegate pre-approval authority to a member of the Audit Committee, provided that the decisions of any member of the Audit Committee to whom this authority has been delegated must be presented to the full Audit Committee at its next scheduled Audit Committee meeting.
| 61 |
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. |
Not applicable.
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. |
None.
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. |
None.
| ITEM 16G. | CORPORATE GOVERNANCE. |
Not applicable.
| ITEM 16H. | MINE SAFETY DISCLOSURE. |
Not applicable.
| ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. |
Not applicable.
| 62 |
PART III
| ITEM 17. | FINANCIAL STATEMENTS. |
Historical Financial Statements
Please refer to pages F-1 through F-24 of this Annual Report.
| ITEM 18. | FINANCIAL STATEMENTS. |
Not applicable.
| ITEM 19. | EXHIBITS. |
We have filed the following documents as exhibits to this Annual Report:
| 63 |
| 64 |
| 65 |
| X | Filed herewith. |
| XX | Furnished herewith. |
+ Indicates a management contract or compensatory plan, contract or arrangement.
| ‡ | Portions of this exhibit have been omitted in accordance with Form 20-F. The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed. The registrant hereby agrees to furnish supplementally an unredacted copy of this exhibit to the Securities and Exchange Commission upon request. |
| * | The following financial information from the Annual Report on Form 20-F of Arras Minerals Corp. for the fiscal year ended October 31, 2021, formatted in XBRL (Extensible Business Reporting Language): Statement of Financial Position, Statement of Comprehensive Loss, Statement of Changes in Shareholders’ Equity, Statement of Cash Flows. |
| 66 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ARRAS MINERALS CORP.
By: /s/ Timothy T. Barry
Name: Timothy T. Barry
Title: Chief Executive Officer
By: /s/ Christopher Richards
Name: Christopher Richards
Title: Chief Financial Officer
Date: February 17, 2022
| 67 |
Arras Minerals Corp.
Financial Statements
Period from Inception on February 5, 2021 to October 31, 2021
(Expressed in United States dollars)
| |
| Index | Page |
| Report of Independent Registered Public Accounting Firm | F-2 |
| Financial Statements | |
| Statement of Financial Position | F-4 |
| Statement of Comprehensive Loss | F-5 |
| Statement of Changes in Shareholders’ Equity | F-6 |
| Statement of Cash Flows | F-7 |
| Notes to the Financial Statements | F-8 – F-24 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND DIRECTORS OF ARRAS MINERALS CORP.
Opinion on the Financial Statements
We have audited the accompanying statement of financial position of Arras Minerals Corp. (the “Company”) as of October 31, 2021, and the related statements of comprehensive loss, changes in shareholders’ equity, and cash flows for the period from inception on February 5, 2021 to October 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2021, and the results of its operations and its cash flows for the period from inception on February 5, 2021 to October 31, 2021, in conformity with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.
Material Uncertainty Related to Going Concern
Without modifying our opinion, we draw attention to Note 1 of the financial statements, which indicates that the Company incurred a net loss during the period from inception on February 5, 2021 to October 31, 2021 and has not yet commenced revenue producing operations. As stated in Note 1 to the financial statements, these conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that casts substantial doubt on the Company’s ability to continue as a going concern.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| F-2 |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern Assessment
As described in Note 1 of the financial statements, the financial statements are prepared on a going concern basis, which assumes that the Company will continue its operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As at October 31, 2021, the Company has not earned any cash inflows from operations and expects to incur additional losses in the future. The ability of the Company to continue as a going concern is dependent on raising capital to fund its exploration plans and ultimately to attain profitable operations.
We identified the assessment of going concern as a critical audit matter. Auditing management’s going concern assessment is challenging as it involves subjective assumptions about the ability to raise future financing and future cash outflows relating to planned exploration activities and other ongoing operating and administrative expenditures that are inherently uncertain.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the appropriateness of the inputs and key assumptions used in the cash flow forecasts, specifically the assumption of cash flows related to exploration activities, taking into consideration the Company’s commitments under option agreements. In addition, we assessed management’s plan and ability to raise future financing by observing past financing ability and through discussion with management. We also assessed the accuracy and completeness of the disclosures around the going concern uncertainty in Note 1 of the financial statements.
/s/ Smythe LLP
Smythe LLP, Chartered Professional Accountants
We have served as the Company's auditor since 2021.
Vancouver, Canada
February 17, 2022
| F-3 |
ARRAS MINERALS CORP.
Statement of Financial Position
(Expressed
in United States Dollars)
October 31, 2021 | ||||
| Assets | ||||
| Current | ||||
| Cash and cash equivalents | $ | |||
| Other receivables | ||||
| Prepaid expenses | ||||
| Due from related party (Note 12) | ||||
| Loans to Ekidos Minerals LLP (Notes 3 and 7) | ||||
| Total Current Assets | ||||
| Office and equipment (Notes 3 and 8) | ||||
| Mineral properties (Notes 3, 6 and 9) | ||||
| Total Assets | $ | |||
Liabilities | ||||
| Current | ||||
| Accounts payable and accrued liabilities (Note 12) | $ | |||
| Total Liabilities | ||||
Shareholders’ Equity | ||||
| Share capital (Note 10) | ||||
| Reserves (Note 10) | ||||
| Deficit | ( | ) | ||
| Total Shareholders’ Equity | ||||
| Total Liabilities and Shareholders’ Equity | $ | |||
Nature of operations and going concern (Note 1)
Subsequent events (Note 17)
On behalf of the Board:
|
||
| /s/ Brian Edgar | /s/ Daniel Kunz | |
| Director | Director | |
The accompanying notes are an integral part of these financial statements.
| F-4 |
ARRAS MINERALS CORP.
Statement of Comprehensive Loss
(Expressed in United
States Dollars)
For the Period from Inception on February 5, 2021 to October 31, 2021 | ||||
Expenses | ||||
| Exploration (Notes 6 and 10) | $ | |||
| Personnel (Notes 10 and 12) | ||||
| Professional services (Note 12) | ||||
| Directors’ fees (Notes 10 and 12) | ||||
| Office and administrative (Note 12) | ||||
| Depreciation (Note 8) | ||||
| Foreign exchange gain | ( | ) | ||
| Interest income | ( | ) | ||
| Net and Comprehensive Loss for the Period | $ | ( | ) | |
| Basic and Diluted Loss per Common Share | $ | ( | ) | |
| Weighted Average Number of Common Shares Outstanding | ||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
ARRAS MINERALS CORP.
Statement of Changes in Shareholders’ Equity
(Expressed in United States Dollars)
| Share Capital | ||||||||||||||||||||
| Common Shares | Amount | Equity Reserves | Deficit | Shareholders’ Equity | ||||||||||||||||
| Shares issued upon inception (February 5, 2021) (Note 1) | $ | $ | ||||||||||||||||||
| Shares issued pursuant to asset purchase agreement (Note 3) | ||||||||||||||||||||
| Private placements, net of share issue costs (Note 10) | ||||||||||||||||||||
| Shares issued to finder (Notes 6, 9 and 10) | ||||||||||||||||||||
| Warrants issued pursuant to the Separation and Distribution Agreement (Notes 3 and 10) | — | ( | ) | |||||||||||||||||
| Share-based payment (Note 10) | — | |||||||||||||||||||
| Net loss for the period | — | ( | ) | ( | ) | |||||||||||||||
| Balance, October 31, 2021 | $ | ( | ) | $ | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
ARRAS MINERALS CORP.
Statement of Cash Flows
(Expressed in United States
Dollars)
For the Period from Inception on February 5, 2021 to October 31, 2021 | ||||
| Operating Activities | ||||
| Net loss for the period | $ | ( | ) | |
| Items not affecting cash | ||||
| Depreciation | ||||
| Unrealized foreign exchange gain | ( | ) | ||
| Share-based payment | ||||
| ( | ) | |||
| Changes in non-cash working capital | ||||
| Other receivables | ( | ) | ||
| Prepaid expenses | ( | ) | ||
| Due from related party | ( | ) | ||
| Accounts payable and accrued liabilities | ||||
| Cash Used in Operating Activities | ( | ) | ||
| Financing Activity | ||||
| Issuance of common shares, net of share issue costs | ||||
| Cash Provided by Financing Activity | ||||
| Investing Activities | ||||
| Purchase of equipment | ( | ) | ||
| Loans to Ekidos Minerals LLP | ( | ) | ||
| Cash Used in Investing Activities | ( | ) | ||
| Effect of Foreign Currency Translation on Cash | ||||
| Net Change in Cash and Cash Equivalents | ||||
| Cash and Cash Equivalents, Beginning of Period | ||||
| Cash and Cash Equivalents, End of Period | $ | |||
| Supplemental Cash Flow Information (Note 13) | ||||
The accompanying notes are an integral part of these financial statements.
| F-7 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| 1. | NATURE OF OPERATIONS AND GOING CONCERN |
Arras Minerals Corp. (the “Company”) was incorporated on February 5, 2021 under the Business Corporations Act (British Columbia) as part of an asset purchase agreement to reorganize Silver Bull Resources, Inc. (“Silver Bull”) as described in Note 3. The Company’s head office is located at 1610-777 Dunsmuir Street, Vancouver, BC, V7Y 1K4, Canada.
The
Company is engaged in the acquisition, exploration, and development of mineral property interests. The Company’s assets consist
primarily of the option to acquire a
The Company has not yet determined whether the properties contain mineral reserves where extraction is both technically feasible and commercially viable. The business of mining and the exploration for minerals involves a high degree of risk and there can be no assurance that such activities will result in profitable mining operations.
These
financial statements are prepared on a going concern basis, which contemplated that the Company will continue in operation for the foreseeable
future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has incurred
operating losses to date and has no current sources of revenue or cash inflows from operations. The Company relies on share issuances
in order to fund its exploration and other business objectives. Since inception to October 31, 2021, the Company has raised Canadian
dollar (“$CDN”) $
The Company’s ability to continue as a going concern and fulfill its commitments under the Beskauga option agreement is dependent upon successful execution of its business plan, raising additional capital or evaluating strategic alternatives. The Company expects to continue to raise the necessary funds primarily through the issuance of common shares. There can be no guarantees that future equity financing will be available in which case the Company may need to reduce its exploration activities. There can be no assurance that management’s plan will be successful. If the going concern assumption was not appropriate for these financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
On March 11, 2020, the novel coronavirus outbreak (“COVID-19”) was declared a pandemic by the World Health Organization. While, other than travel restriction to the Company’s exploration projects, the Company has not been significantly impacted by COVID-19, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Company’s business are not known at this time. These impacts could include an impact on the Company’s ability to obtain equity financing to fund additional exploration activities as well as the Company’s ability to explore and conduct business.
| 2. | BASIS OF PRESENTATION |
| a) | Statement of compliance |
These financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) appliable to the preparation of financial statements.
These financial statements are presented in United States dollars, which is the Company’s functional currency.
| F-8 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| b) | Basis of presentation |
These financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
| c) | Approval of the financial statements |
These financial statements were authorized for issue by the Board of Directors on February 16, 2022.
| 3. | ASSET PURCHASE AND SEPARATION AND DISTRIBUTION AGREEMENTS |
On
March 19, 2021, pursuant to an asset purchase agreement with Silver Bull, a majority shareholder (
The fair value of the assets at the date of transfer was as follows:
| Mineral properties | $ | |||
| Mining equipment | ||||
| Computer equipment and software | ||||
| Loans to Ekidos Minerals LLP (“Ekidos”) | ||||
| Net assets acquired | $ | |||
On September 24, 2021,
At the date of the Distribution, the assets transferred did not meet the definition of a business, as there were no substantive processes in place, and the transaction has been accounted for as an acquisition of assets, rather than a business combination. The transaction is accounted for in accordance with IFRS 2 – Share-based payments and IFRS 3 Business Combinations (“IFRS 3”).
| 4. | USE OF JUDGMENTS AND ESTIMATES |
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.
| F-9 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
Measurement of the Company’s assets and liabilities is subject to risks and uncertainties, including ones related to: reserve and resource estimates; title to mineral properties; future commodity prices; estimated costs of future production; future costs of restoration provisions; changes in government legislation and regulations; estimated future income tax amounts; the availability of financing; and various operational factors.
Judgments that have the most significant effect on the amounts recognized in the Company`s financial statements are as follows:
| a) | Determination of functional currency |
The determination of the Company’s functional currency is a matter of judgment based on an assessment of the specific facts and circumstances relevant to determining the primary economic environment of the Company. The Company reconsiders the functional currencies used when there is a change in events and conditions considered in determining the primary economic environment of the Company.
| b) | Going concern |
The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties exist related to events or conditions that may cast substantial doubt upon the Company’s ability to continue as a going concern.
| c) | Asset acquisitions versus business combinations |
Management had to apply judgment with respect to whether the acquisitions through the asset purchase agreement (as discussed in Note 6) were asset acquisitions or business combinations. The assessments required management to assess the inputs, processes and outputs of the companies acquired at the time of the acquisition. Pursuant to the assessment, the asset purchase agreement was considered to be an asset acquisition.
Estimates that have the most significant effect on the amounts recognized in the Company`s financial statements are as follows:
| d) | Valuation of mineral properties |
The Company carries the acquisition costs of its mineral properties at cost less any provision for impairment. The Company undertakes periodic reviews of the carrying values of mineral properties and whenever events or changes in circumstances indicate that their carrying values may exceed their fair value. In undertaking these reviews, management of the Company is required to make significant estimates. These estimates are subject to various risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of the mineral properties and related expenditures.
| e) | Share-based payment |
The Company uses the Black-Scholes option pricing model for the valuation of share-based payment. Option pricing models require the input of the subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s net loss and share-based payment reserve. Measurement of the Company’s obligation to issue shares upon exercise of Silver Bull Warrants is based on an instinct value pricing model which uses assumptions with respect to share price. Changes in these assumptions and estimates result in changes in the fair value of these instruments and a corresponding change in the amount recognized in profit or loss or in equity.
| F-10 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| f) | Fair value of net assets acquired |
The Company makes estimates in determining the fair value of the assets acquired as part of an acquisition. Management exercises judgment in estimating the probability and timing of when cash flows are expected to be achieved, which is used as the basis for estimating fair value. Future performance results that differ from management’s estimates could result in changes to liabilities recorded, which are recorded as they arise through profit or loss.
| g) | Recoverability of loans to Ekidos Minerals LLP |
Estimates are inherent in the on-going assessment of the recoverability of its loans to Ekidos Minerals LLP. The Company is not able to predict changes in financial conditions of its loan holders and the Company’s judgment related to the recoverability of its loans receivable may be material.
| 5. | SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies set out below have been applied in these financial statements.
| a) | Foreign currency translation |
These financial statements are presented in United States Dollars (“USD”) which is the functional currency of the Company.
Statement of financial position: monetary assets and liabilities are translated into USD using period end exchange rates. Non-monetary assets and liabilities are translated into USD using historical exchange rates.
Statement of comprehensive loss: income, expenses, and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions).
Statement of changes in shareholders’ equity: all resulting exchange differences are recognized as a separate component of equity and in other comprehensive loss.
| b) | Financial instruments |
Recognition and measurement of financial assets
The Company recognizes a financial asset when it becomes a party to the contractual provisions of the instrument.
Classification of financial assets
The Company classifies financial assets at initial recognition as financial assets: measured at amortized cost, measured at fair value through other comprehensive income or measured at fair value through profit or loss.
| i. | Financial assets measured at amortized cost |
A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost:
● The Company’s business model for such financial assets is to hold the assets in order to collect contractual cash flows.
● The contractual terms of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the amount outstanding.
A financial asset measured at amortized cost is initially recognized at fair value plus transaction costs directly attributable to the asset. After initial recognition, the carrying amount of the financial asset measured at amortized cost is determined using the effective interest method, net of impairment loss, if necessary. The Company classifies its loans to Ekidos and due from related party as amortized cost.
| F-11 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| ii. | Financial assets measured at fair value through other comprehensive income (“FVTOCI”) |
A financial asset measured at fair value through other comprehensive income is recognized initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, the asset is measured at fair value with changes in fair value included as “financial asset at fair value through other comprehensive income” in other comprehensive income.
| iii. | Financial assets measured at fair value through profit or loss (“FVTPL”) |
A financial asset measured at fair value through profit or loss is recognized initially at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial asset is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises. The Company classifies its cash as fair value through profit or loss.
Derecognition of financial assets
The Company derecognizes a financial asset if the contractual rights to the cash flows from the asset expire, or the Company transfers substantially all the risks and rewards of ownership of the financial asset. Any interests in transferred financial assets that are created or retained by the Company are recognized as a separate asset or liability. Gains and losses on derecognition are generally recognized in the statement of comprehensive loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).
Recognition and measurement of financial liabilities
The Company recognizes financial liabilities when it becomes a party to the contractual provisions of the instruments.
Classification of Financial Liabilities
The Company classifies financial liabilities at initial recognition as financial liabilities: measured at amortized cost or measured at fair value through profit or loss.
| i. | Financial liabilities measured at amortized cost |
A financial liability at amortized cost is initially measured at fair value less transaction cost directly attributable to the issuance of the financial liability. Subsequently, the financial liability is measured at amortized cost based on the effective interest rate method. The Company classifies its accounts payable and accrued liabilities as amortized cost.
| ii. | Financial liabilities measured at fair value through profit or loss |
A financial liability measured at fair value through profit or loss is initially measured at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial liability is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises.
Derecognition of financial liabilities
The Company derecognizes a financial liability when the financial liability is discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statement of comprehensive loss.
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the statement of financial position only when the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above.
| F-12 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| c) | Fair value hierarchy |
Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significant of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Inputs for assets or liabilities that are not based on observable market data.
The Company’s financial instruments classified as Level 1 in the fair value hierarchy are cash, loans to Ekidos, accounts payable and accrued liabilities and due from related party. The carrying values approximate the fair values due to the short-term maturity of these instruments. There were no transfers between fair value levels during the period ended October 31, 2021.
| d) | Mineral properties |
Costs directly related to the acquisition of mineral properties are capitalized. Option payments are considered acquisition costs if the Company has the intention of exercising the underlying option.
Exploration, evaluation and property maintenance costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral deposit which contains proven and probable reserves are expensed as incurred up to the date of establishing that property costs are economically recoverable and that the project is technically feasible.
Mineral properties are not subject to depletion or amortization, but rather are tested for impairment when circumstances indicate that the carrying value may not be recoverable.
Development expenditures are those incurred subsequent to the establishment of economic recoverability and after receipt of project development approval from the Board of Directors. The approval from the Board of Directors will be dependent upon the Company obtaining sufficient financial resources, permits, and licenses to develop the mineral property. Development costs are capitalized and included in the carrying amount of the related property.
Mineral property and mine development costs capitalized are amortized using the units-of-production method over the estimated life of the proven and probable reserves.
| e) | Office and equipment |
Items of office and equipment are recorded at cost less accumulated depreciation. Cost includes all expenditures incurred to bring assets to the location and condition necessary for them to be operated in the manner intended by management, including estimated decommissioning and restoration costs and, where applicable, borrowing costs. If significant parts of an item of office and equipment have different useful lives, then they are accounted for as separate items (major components) of office and equipment.
| F-13 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
No depreciation is recorded until the asset is substantially complete and ready for use. Office and equipment are depreciated over their estimated useful lives as follows:
| Mining equipment | |
| Computer equipment and software |
| f) | Impairment of non-financial assets |
The Company reviews the carrying amounts of its non-financial assets, including mineral properties and office and equipment every reporting period. If there is any indication that the assets or Cash-Generating Units (the “CGU”) may not be fully recoverable, the recoverable amount of the asset or CGU is estimated in order to determine the extent of the impairment loss, if any. CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflow from other assets or group of assets.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows to be derived from continuing use of the asset or CGU are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less cost to sell is the amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the cost of disposal. When a binding sale agreement is not available, fair value less costs to sell is estimated using a discounted cash flow approach with inputs and assumptions consistent with those at market. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in net income. Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized.
| g) | Restoration provisions |
The Company recognizes liabilities for legal, contractual and constructive obligations for decommissioning and restoration when those obligations result from the acquisition, construction, development or normal operation of the asset. Provisions are measured at the present value of the expected expenditures required to settle the obligation using a discount rate reflecting the time value of money and risks specific to the liability. Upon initial recognition of the liability, the corresponding decommissioning and restoration cost is capitalized to the carrying amount of the related asset and amortized as an expense over the useful life of the related asset. Following the initial recognition of the restoration provision, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discounted rate and the amount or timing of cash flows needed to settle the obligation.
| h) | Other provisions |
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation.
| i) | Income taxes |
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used are those that are enacted or substantively enacted by the reporting date.
| F-14 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
Deferred income tax is provided for based on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition of assets and liabilities in a transaction that is not a business combination and affects neither the taxable profit nor the accounting profit. The change in the net deferred income tax asset or liability is included in net income (loss) except for deferred income tax relating to equity items, which are recognized directly in equity. Deferred income tax assets and liabilities are measured using the substantively enacted statutory income tax rates which are expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
The determination of current and deferred taxes requires interpretation of tax legislation, estimates of expected timing of reversal of deferred tax assets and liabilities, and estimates of future earnings.
| j) | Share-based payment |
The Company’s stock option plan (Note 9) allows the Company’s employees, directors, officers and service providers to acquire shares of the Company. The fair value of options granted is recognized as share-based payment expense with a corresponding increase in reserves. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Where stock options are subject to vesting, each vesting tranche is considered a separate award with its own vesting period and grant date fair value. The fair value of each tranche is measured at the grant date using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. Share-based payment expense is recognized over the tranche’s vesting period by a charge to profit or loss. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of stock options that are expected to vest. In situations where equity instruments are issued to service providers and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.
| k) | Share capital |
Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial asset or financial liability. The Company’s common shares and warrants are classified as equity instruments. Share issuance costs are recorded against share proceeds.
| F-15 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| l) | Loss per share |
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting periods.
| m) | Non-monetary transactions |
Shares issued for consideration other than cash are valued at the fair value of assets received or services rendered. If the fair value of assets received or services rendered cannot be reliably measured, shares issued for consideration will be valued at the quoted market price at the date of issuance.
| n) | New standards not yet adopted |
The following standards and pronouncements have been issued by the IASB and have not yet been adopted by the Company. The Company is currently evaluating the impact the new and amended standards are expected to have on its financial statements. Pronouncements that are not applicable to the Company have been excluded from those described below.
Property, Plant and Equipment—Proceeds before Intended Use (Amendments to IAS 16)
These amendments will prohibit the Company from deducting net proceeds from selling any items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in a manner intended by management. The amendments require retrospective application and are effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted.
| 6. | BESKAUGA OPTION AGREEMENT |
On
August 12, 2020, Silver Bull entered into the Beskauga Option Agreement with Copperbelt AG (“Copperbelt”) pursuant to
which it has the exclusive right and option to acquire Copperbelt’s right, title and
On
March 19, 2021, pursuant to an asset purchase agreement, Silver Bull transferred all its rights, title and interest in and to the Beskauga
Option Agreement to the Company. The consideration payable by the Company to Silver Bull for the purchased assets was $
Under the terms of the Beskauga Option Agreement, the Company must incur the following exploration expenditures:
| Date | Amount | |||
| Within 1 year from Closing Date | $ | |||
| Within 2 years from Closing Date | $ | |||
| Within 3 years from Closing Date | $ | |||
| Within 4 years from Closing Date | $ |
| F-16 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
As of October 31, 2021,
approximately $
The
Beskauga Option Agreement also provides that subject to the terms and conditions set forth in the Beskauga Option Agreement, after the
Company or its affiliate has incurred the exploration expenditures (outlined above), the Company or its affiliate may exercise the Beskauga
Option and acquire
In
addition, the Beskauga Option Agreement provides that subject to the terms and conditions set forth in the Beskauga Option Agreement,
the Company or its affiliate may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to
Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with
Canadian National Instrument 43-101 indicating gold equivalent resources in the amounts set forth below, with (i) (A)
| Gold equivalent resources | Cumulative Bonus Payments | |||
| Beskauga Main Project | ||||
| 3,000,000 ounces | $ | |||
| 5,000,000 ounces | $ | |||
| 7,000,000 ounces | $ | |||
| 10,000,000 ounces | $ | |||
| Beskauga South Project | ||||
| 2,000,000 ounces | $ | |||
| 3,000,000 ounces | $ | |||
| 4,000,000 ounces | $ | |||
| 5,000,000 ounces | $ | |||
The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and Copperbelt; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by Copperbelt that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.
| 7. | LOANS TO EKIDOS MINERALS LLP |
On March 19, 2021,
pursuant to an asset purchase agreement, Silver Bull transferred $
| F-17 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| 8. | OFFICE AND EQUIPMENT |
| Mining Equipment | Computer Equipment and Software | Total | ||||||||||
| Cost | ||||||||||||
| Assets acquired on acquisition | $ | $ | $ | |||||||||
| Additions | ||||||||||||
| Balance, October 31, 2021 | ||||||||||||
| Depreciation | ||||||||||||
| Depreciation for the period | ||||||||||||
| Balance, October 31, 2021 | ||||||||||||
| Carrying amounts | ||||||||||||
| Balance, October 31, 2021 | $ | $ | $ | |||||||||
During the period from
inception on February 5, 2021 to October 31, 2021, the Company acquired mining equipment and computer equipment and software of $
| 9. | MINERAL PROPERTIES |
| Balance: February 5, 2021 | $ | |||
| Pursuant to asset purchase agreement (Note 3) | ||||
| Common shares issued to finder (Note 10) | ||||
| Balance: October 31, 2021 | $ |
| 10. | SHARE CAPITAL |
| a) | Authorized |
Unlimited number of common shares and an unlimited number of preferred shares, without par value.
| b) | Issued and outstanding |
Preferred shares
No preferred shares have been issued.
Common shares
As
of October 31, 2021, there are
During the period from inception on February 5, 2021 to October 31, 2021, the following transactions occurred:
On
February 5, 2021, the Company issued
| F-18 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
On
March 19, 2021, the Company issued
On
April 1, 2021, the Company completed a private placement for
On
October 21, 2021, the Company completed the initial tranche of a private placement for
On
October 25, 2021, pursuant to a finder’s fee agreement, the Company issued
| c) | Stock options |
Pursuant to the Company’s Equity Incentive Plan (the “Plan”) approved by the Board of Directors, the Company grants stock options to employees, directors, officers and advisors. Under the Plan, options can be granted for a maximum term of ten years and the stock options shall vest in three equal installments, with one third of the options vesting on each of the grant date, the first-year anniversary of the grant date and the second anniversary of the grant date, unless otherwise designated by the Board. Further, the exercise price shall not be less than the price of the Company’s common shares on the date of the stock option grant.
During
the period from inception on February 5, 2021 to October 31, 2021, the Company granted options to acquire
No options were exercised during the period from inception on February 5, 2021 to October 31, 2021. Stock option transactions are summarized as follows:
| Number of Options | Weighted Average Exercise Price | |||||||||
| Balance, February 5, 2021 | ||||||||||
| Issued | ||||||||||
| Cancelled | ( | ) | ||||||||
| Balance, October 31, 2021 | $ | |||||||||
| F-19 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
The following options were outstanding and exercisable at October 31, 2021:
| Grant Date | Expiry Date | Exercise Price | Number of Options Outstanding | Number of Options Exercisable | Weighted Average Remaining Life | |||||||||||||
| April 14, 2026 | $CDN | |||||||||||||||||
| August 4, 2026 | CDN | |||||||||||||||||
| September 23, 2026 | CDN | |||||||||||||||||
The weighted
average remaining contractual life for options outstanding at October 31, 2021 is
The total fair value of options granted during the period from inception on February 5, 2021 to October 31, 2021 was $1,125,565, of which $638,551 was recognized share-based payment in the statement of comprehensive loss with a corresponding increase in reserves. The remaining amount of $497,426 will be expensed as the remaining unvested options vest.
The Company applies the fair value method using the Black-Scholes option pricing model in accounting for its stock options granted. Accordingly, share-based payments of $307,742 were recognized as personnel expenses for options granted to employees, $225,676 were recognized in directors’ fees for options granted to directors and $105,133 was recognized as exploration for options granted to employees and consultants.
A summary of the range of assumptions used to value stock options granted for the period from inception on February 5, 2021 to October 31, 2021 is as follows:
| Options | For the Period from Inception on February 5, 2021 to October 31, 2021 | |||
| Expected volatility | ||||
| Risk-free interest rate | ||||
| Dividend yield | ||||
| Expected term (in years) |
The
expected volatility assumption is based on the historical and implied volatility of the comparable companies’ common share price.
The risk-free interest rate assumption is based on yield curves on government zero-coupon bonds with a remaining term equal to the stock
options’ expected life. The Company has not paid and does not anticipate paying dividends on its common stock. Companies are required
to utilize an estimated forfeiture rate when calculating the expense for the reporting period. Based on the best estimate, management
applied the estimated forfeiture rate of
| d) | Shares issuable for Silver Bull Warrants |
Pursuant
to the Distribution (Note 3), warrant holders will receive, upon exercise of any Silver Bull Warrant, one Silver Bull common share and
one common share of the Company. The Company will receive $
| F-20 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
A continuity of the Company’s shares issuable for Silver Bull Warrants is as follows:
| Warrants | Shares | Weighted Average Exercise Price Per Arras share issuable | Weighted Average Exercise Price Per Silver Bull Share issuable | |||||||||
| Balance: February 5, 2021 | $ | $ | ||||||||||
| Issuable pursuant to the Distribution with Silver Bull | ||||||||||||
| Balance: October 31, 2021 | $ | $ | ||||||||||
The following warrants were outstanding at October 31, 2021:
| Expiry Date | Exercise Price | Number of Options Outstanding | Weighted Average Remaining Life | |||||||||
| $ | ||||||||||||
| 11. | INCOME TAXES |
Income tax expense
differs from the amount that would be computed by applying the Canadian statutory income tax rate of
For the Period from Inception on February 5, 2021 to October 31, 2021 | ||||
| Loss before income taxes | $ | ( | ) | |
| Statutory income tax rate | % | |||
| Income tax benefit computed at statutory tax rate | ( | ) | ||
| Items not deductible for income tax purposes | ||||
| Unrecognized benefit of deferred income tax assets | ||||
| Income tax benefit | $ | |||
| F-21 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
Significant unrecognized tax benefits and unused tax losses for which no deferred tax asset is recognized as of October 31, 2021 are as follows:
For the Period from Inception on February 5, 2021 to October 31, 2021 | ||||
| Share issuance costs | $ | |||
| Office and equipment | ||||
| Non-capital losses carried forward | ||||
| Unrecognized deductible temporary differences | $ | |||
The Company has available
approximate net operational losses of $
| 12. | RELATED PARTY TRANSACTIONS |
Included
in accounts payable and accrued liabilities at October 31, 2021 is $
As at October 31, 2021,
due from related party consists of $
During the period from
February 5, 2021 to October 31, 2021, expenses totalling $
| October 31, | ||||
| 2021 | ||||
| Directors’ fees | $ | |||
| Personnel | ||||
| Professional services | ||||
| Office and administrative | ||||
| $ | ||||
During the period from inception on February 5, 2021 to October 31, 2021, the Company paid or accrued the following amounts to officers, directors or companies controlled by officers and/or directors:
For the Period from Inception on February 5, 2021 to October 31, 2021 | ||||
| Share-based payment | $ | |||
| Directors’ fees | ||||
| Personnel | ||||
| $ | ||||
| F-22 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| 13. | SUPPLEMENTAL CASH FLOW INFORAMATION |
For the Period from Inception on February 5, 2021 to October 31, 2021 | ||||
| Supplemental information | ||||
| Interest paid | $ | |||
| Income taxes paid | ||||
| Non-cash investing and financing activities | ||||
| Offering costs included in accounts payable and liabilities | $ | |||
| Acquisition of assets for common shares | ||||
| Shares issued to finder | ||||
| Warrants issued pursuant to the September and Distribution Agreement | $ | |||
| 14. | FINANCIAL INSTRUMENTS |
The Company’s financial instruments consist of cash, loans to Ekidos, accounts payable and accrued liabilities and due from related party. The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below.
| a) | Credit risk |
Credit risk is the risk of financial loss to the Company if a counter party to a financial instrument fails to meet its payment obligations. The Company is exposed to credit risk with respect to its cash and loans to Ekidos. Management believes that the credit risk concentration with respect to cash is remote as it maintains accounts with highly rated financial institutions. The Company’s loans to Ekidos are subject to the expected credit loss model. The carrying amount of the loans to Ekidos represent the maximum credit exposure.
| b) | Liquidity risk |
Liquidity
risk is the risk that the Company will encounter difficulty in satisfying its financial obligations as they become due. The Company manages
its liquidity risk by forecasting cash flows from operations and anticipating investing and financing activities. As at October 31, 2021,
the Company had working capital of $
| c) | Market risk |
Market
risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
| F-23 |
Arras Minerals Corp.
Notes to the Financial Statements
For the Period from Inception (February 5, 2021) to October 31, 2021
(Expressed in United States dollars)
| 15. | CAPITAL MANAGEMENT |
The Company defines its capital as shareholders’ equity. Capital requirements are driven by the Company’s general operations and exploration. To effectively manage the Company’s capital requirements, the Company monitors expenses and overhead to ensure costs and commitments are being paid. The Company is not subject to any externally imposed capital requirements. The Company did not change its approach to capital management during the period from inception on February 5, 2021 to October 31, 2021.
| 16. | SEGMENTED INFORMATION |
The Company’s exploration and evaluation activities are located in Kazakhstan, with its head office function in Canada. As at October 31, 2021, all of the Company’s non-current assets are located in Kazakhstan.
| 17. | SUBSEQUENT EVENTS |
The
Company entered into (
On November 21,
2021, the Company completed the second tranche of a private placement for
On December 20,
2021, the Company completed the third and final tranche of a private placement for
On February 3, 2022, Ekidos became a wholly-owned subsidiary of the Company.
F-24
Exhibit 2.1
| |
Exhibit 2.2
DESCRIPTION OF SECURITIES
The following is a description of each class of securities of Arras Minerals Corp. (“Arras,” the “Company,” “we,” “us,” or “our”) that is registered under Section 12 of the Securities Exchange Act of 1934, as amended, and does not purport to be complete. For a complete description of the terms and provisions of such securities, refer to the Company’s notice of articles and articles of incorporation, which are incorporated herein by reference to Exhibits 1.1 and 2.1 to the Company’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on February 17, 2022. This summary is qualified in its entirety by reference to these documents.
Share Capital
Our authorized share capital consists of an unlimited number of common shares without par value. As of October 31, 2021, we had 47,803,100 common shares issued and outstanding. We currently have only one class of issued and outstanding shares, which have identical rights in all respects and rank equally with one another.
Common Shares
All of our common shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of our common shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each common share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of our common shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of our common shares are entitled to receive dividends as and when declared by the board of directors of the Company (the “Arras Board”) in respect of the common shares on a pro rata basis.
Any alteration of the rights, privileges, restrictions and conditions attaching to our common shares under the Company’s articles of incorporation (the “Articles”) must be approved in accordance with the Articles and the Business Corporations Act (British Columbia).
Incorporation
The Company was incorporated under the Business Corporations Act (British Columbia) (as currently in effect) (the “Act”) on February 5, 2021. Our British Columbia incorporation number is BC1287773.
Objects and Purposes of Our Company
Our Articles do not contain a description of the Company’s objects and purposes. We are entitled under the Act to carry on all lawful businesses which can be carried on by a natural person.
Conflicts of Interest and Director Compensation
The directors of the Company manage and supervise the management of the affairs and business of the Company and have authority to exercise all such powers of the Company as are not, under the Act or by our Articles, required to be exercised by the Company’s shareholders.
Under our Articles, any director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Act. Such director or senior officer that has a disclosable interest in a contract shall be liable to account to the Company for any profits that accrue to the director or senior officer under or as a result of the contract or transaction unless disclosure is made thereof and the contract or transaction is approved in accordance with the provisions of the Act. A director is not allowed to vote on any transaction or contract with the Company in which he or she has a disclosable interest unless all directors have a disclosable interest in that transaction or contract, in which case all of these directors may vote on such resolution.
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The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine, or, if the directors so decide, as determined by the shareholders of the Company. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by a resolution passed at a meeting of shareholders by a simple majority (an “ordinary resolution”), and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive. A director or senior officer does not hold a disclosable interest in a contract or transaction merely because the contract or transaction relates to the remuneration of the director or senior officer in that person’s capacity as director, officer, employee or agent of the Company or of an affiliate of the Company.
Borrowing Powers
Our Articles provide that, if authorized by the Arras Board, the Company may:
| · | borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the Arras Board considers appropriate; |
| · | issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the Arras Board considers appropriate; |
| · | guarantee the repayment of money by any other person or the performance of any obligation of any other person; and |
| · | mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company. |
Qualifications of Directors
Under our Articles, a director is not required to hold common shares as qualification for his or her office but must be qualified as required by the Act to become, act or continue to act as a director. There are no age limit requirements pertaining to the retirement or non-retirement of directors of the Company.
Procedures to Alter Share Rights
Our Articles state that, subject to compliance with the Act, the Company may, by a resolution passed at a meeting of shareholders by at least two-thirds of the votes cast on the resolution (a “special resolution”), (a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares; (b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; (c) subdivide or consolidate all or any of its unissued, or fully paid issued, shares; (d) if the Company is authorized to issue shares of a class of shares with par value: (i) decrease the par value of those shares; or (ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares; (e) change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or all or any of its unissued shares without par value into shares with par value; (f) alter the identifying name of any of its shares; (g) otherwise alter its shares or authorized share structure when required or permitted to do so by the Act; (h) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or (i) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued. Pursuant to our Articles, if the Act does not specify the type of resolutions and the Articles do not specify another type of resolution, the Company may, by special resolution, alter the Articles.
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Meetings
Each director holds office until our next annual general meeting or until his or her office is earlier vacated in accordance with our Articles or with the provisions of the Act. A director appointed or elected to fill a vacancy on the Arras Board also holds office until our next annual general meeting. The Articles provide that our annual meetings of shareholders must be held at least once in each calendar year and not more than 15 months after the last annual general meeting at such time and place as the Arras Board may determine; provided that, in the case of our first annual meeting of shareholders, such meeting must only be held within 18 months after our date of incorporation. The Company’s directors may, at any time upon proper notice, call a meeting of our shareholders. Pursuant to the Act, shareholders who hold in the aggregate at least five percent of our issued shares that carry the right to vote at a general meeting may, in accordance with the Act, requisition a general meeting of shareholders for the purposes stated in the requisition. Our Articles state that in addition to those persons who are entitled to vote at a meeting of the shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any persons invited to be present at the meeting by the directors. An extraordinary meeting of shareholders may be called at any time upon proper notice for the transaction of any business the general nature of which is specified in the notice calling the meeting. Under our Articles, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting. If there is only one shareholder entitled to vote at a meeting of shareholders, the quorum is that shareholder, present in person or by proxy.
Limitations on Ownership of Securities
Except as provided in the Investment Canada Act (Canada), there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia or in the Company’s charter documents.
Change in Control
There are no provisions in our Articles or in the Act that would have the effect of delaying, deferring or preventing a change in the control of the Company, and that would operate only with respect to a merger, acquisition, arrangement or corporate restructuring involving the Company or its subsidiaries.
Ownership Threshold
Our Articles and the Act do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.
Transferability
As of October 31, 2021, our common shares were not listed or posted for trading on any stock exchange or market. Accordingly, our common shares, though freely transferable in the United States, will be illiquid until such time as such shares are listed or a trading market develops, if at all. In Canada, our shareholders are able to trade their shares only pursuant to an exemption from prospectus requirements.
No Preemptive or Similar Rights
Under the Act, a shareholder of a corporation does not have a preemptive right to acquire the corporation’s unissued shares unless there is a provision to the contrary in the articles of incorporation. Our Articles do not provide our shareholders with any preemptive or similar rights.
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Exhibit 4.3.2
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Additional Agreement No. 4 to the LOAN AGREEMENT dated 20 August 2020
30 November 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 4 to the Loan Agreement dated 20 August 2020 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to revised as follows: “The repayment of the amount of the Loan specified in this Agreement shall be made by the Debtor on or before 30 June 2022”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 4, the Parties are guided by the provisions of the Agreement.
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| 3. This Additional Agreement No. 4 enters into force on the date of its signing. |
| SIGNATURES AND REQUISITES OF THE PARTIES: |
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.4.2
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Additional Agreement No. 2 to the LOAN AGREEMENT No. 2 dated 21 December 2020
30 November 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 2 to the Loan Agreement No. 2 dated 21 December 2020 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to revised as follows: “The repayment of the amount of the Loan specified in this Agreement shall be made by the Debtor on or before 30 June 2022”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 2, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No. 2 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.5.2
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Additional Agreement No. 2 to the LOAN AGREEMENT No. 3 dated 23 February 2021
30 November 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 2 to the Loan Agreement No. 3 dated 23 February 2021 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to revised as follows: “The repayment of the amount of the Loan specified in this Agreement shall be made by the Debtor on or before 30 June 2022”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 2, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No. 2 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.6.2
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Additional Agreement No. 2 to the LOAN AGREEMENT No. 1 dated 22 April 2021
30 November 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 2 to the Loan Agreement No. 1 dated 22 April 2021 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to be revised as follows: “The Debtor shall repay the Loan in full on or before 30 June 2022 to the bank account of the Creditor as specified in this Agreement”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No.2, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No.2 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.7.2
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Additional Agreement No. 2 to the LOAN AGREEMENT No. 2 dated 19 May 2021
30 November 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 2 to the Loan Agreement No. 2 dated 19 May 2021 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to revised as follows: “The Debtor shall repay the Loan in full on or before 30 June 2022 to the bank account of the Creditor as specified in this Agreement”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 2, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No. 2 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.9
LOAN AGREEMENT
No.4
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
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THIS LOAN AGREEMENT No. 4 (the “Agreement”) is made on 24 September 2021 between:
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 480,000 (four hundred eighty thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for the purposes agreed by the Creditor in writing prior to Debtor’s transfer of any amount to third parties.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 December 2021 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
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Attention: Christopher Richards
Email: crichards@arrasminerals.com
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with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Irma Nuss
Email: irina.dostyk@gmail.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Irma Nuss
| Name: | Irma Nuss |
| Title: | Director |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.9.1
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Additional Agreement No. 1 to the LOAN AGREEMENT No. 4 dated 24 September 2021
31 December 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 1 to the Loan Agreement No. 4 dated 24 September 2021 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to revised as follows: “The Debtor shall repay the Loan in full on or before 30 June 2022 to the bank account of the Creditor as specified in this Agreement”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 1, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No. 1 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.10
LOAN AGREEMENT
No. 5
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
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THIS LOAN AGREEMENT No. 5 (the “Agreement”) is made on 20 October 2021 between:
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 490,000 (four hundred ninety thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for performing subsoil use operations.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 December 2021 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
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Attention: Christopher Richards
Email: crichards@arrasminerals.com
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with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Irma Nuss
Email: irina.dostyk@gmail.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Irma Nuss
| Name: | Irma Nuss |
| Title: | Director |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.10.1
Additional Agreement No.1 to the LOAN AGREEMENT No.4 dated 24 September 2021
31 December 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”, have concluded this Additional Agreement No. 1 to the Loan Agreement No.4 dated 24 September 2021 (hereinafter – the “Agreement”) as follows:
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 1, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No. 1 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.11
LOAN AGREEMENT
No. 6
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
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THIS LOAN AGREEMENT No.6 (the “Agreement”) is made on 27 October 2021 between:
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 480,000 (four hundred eightly thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for performance by the Debtor its obligation as investor under the Investment Agreement with Dostyk LLP (BIN 981140000414) for investing the works on exploration and mapping drilling on Beskauga deposit.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not provided in this Agreement or agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 December 2021 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
| and |
Attention: Christopher Richards
Email: crichards@arrasminerals.com
| |
with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Irma Nuss
Email: irina.dostyk@gmail.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Irma Nuss
| Name: | Irma Nuss |
| Title: | Director |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.11.1
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Additional Agreement No. 1 to the LOAN AGREEMENT No. 4 dated 24 September 2021
31 December 2021
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Arras Minerals Corp., company established in accordance with the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, represented by CFO Mr. Christopher Richards, acting on basis of the Articles, hereinafter referred to as the “Creditor”, on one part, and
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Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Almaly district, Panfilov Street 158, Office 1, represented by Confidant, Mrs. Vlada Nam, acting on the basis of the Power of Attorney dated 26.11.2021, hereinafter referred to as the “Debtor”, on the other part, hereinafter collectively referred to as the “Parties” and individually as “Party”,have concluded this Additional Agreement No. 1 to the Loan Agreement No. 4 dated 24 September 2021 (hereinafter – the “Agreement”) as follows:
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1. Clause 3.1 of Section 3 of the Agreement to revised as follows: “The Debtor shall repay the Loan in full on or before 30 June 2022 to the bank account of the Creditor as specified in this Agreement”.
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2. In all other matters that are not regulated by the terms of this Additional Agreement No. 1, the Parties are guided by the provisions of the Agreement.
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3. This Additional Agreement No. 1 enters into force on the date of its signing.
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SIGNATURES AND REQUISITES OF THE PARTIES:
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On behalf of the Creditor Arras Minerals Corp.
/s/ Christopher Richards Christopher Richards CFO
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On behalf of the Debtor Ekidos Minerals LLP
/s/ Vlada Nam Vlada Nam Confidant |
Exhibit 4.12
LOAN AGREEMENT
No. 7
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
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THIS LOAN AGREEMENT No. 7 (the “Agreement”) is made on 30 November 2021 between
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Vlada Nam, the Confidant, acting on basis of the Power of Attorney dated 26.11.2021, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 490,000 (four hundred ninety thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for performance by the Debtor its obligation as investor under the Investment Agreement with Dostyk LLP (BIN 981140000414) for investing the works on exploration and mapping drilling on Beskauga deposit.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not provided in this Agreement or agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 March 2022 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
| and |
Attention: Christopher Richards
Email: crichards@arrasminerals.com
| |
with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Vlada Nam
Email: Vlada.Nam@arrasminerals.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Vlada Nam
| Name: | Vlada Nam |
| Title: | Confidant, acting on basis of the POA dated 26.11.2021 |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.13
LOAN AGREEMENT
No. 8
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
| |
THIS LOAN AGREEMENT No.8 (the “Agreement”) is made on 8 December 2021 between
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Vlada Nam, the Confidant, acting on basis of the Power of Attorney dated 26.11.2021, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 490,000 (four hundred ninety thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for performance by the Debtor its obligation as investor under the Investment Agreement with Dostyk LLP (BIN 981140000414) for investing the works on exploration and mapping drilling on Beskauga deposit.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not provided in this Agreement or agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 March 2022 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
| and |
Attention: Christopher Richards
Email: crichards@arrasminerals.com
| |
with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Vlada Nam
Email: Vlada.Nam@arrasminerals.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Vlada Nam
| Name: | Vlada Nam |
| Title: | Confidant, acting on basis of the Power of Attorney dated 26.11.2021 |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.14
LOAN AGREEMENT
No. 9
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
| |
THIS LOAN AGREEMENT No. 9 (the “Agreement”) is made on 22 December 2021 between
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Vlada Nam, the Confidant, acting on basis of the Power of Attorney dated 26.11.2021, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 490,000 (four hundred ninety thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for performance by the Debtor its obligation as investor under the Investment Agreement with Dostyk LLP (BIN 981140000414) for investing the works on exploration and mapping drilling on Beskauga deposit.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not provided in this Agreement or agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 March 2022 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
| and |
Attention: Christopher Richards
Email: crichards@arrasminerals.com
| |
with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Vlada Nam
Email: Vlada.Nam@arrasminerals.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Vlada Nam
| Name: | Vlada Nam |
| Title: | Confidant, acting on basis of the Power of Attorney dated 26.11.2021 |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.15
LOAN AGREEMENT
No. 10
between
Ekidos Minerals LLP
as Debtor
and
Arras Minerals Corp.
as Creditor
| |
THIS LOAN AGREEMENT No. 10 (the “Agreement”) is made on 29 December 2021 between
| (1) | Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and |
| (2) | Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Vlada Nam, the Confidant, acting on basis of the Power of Attorney dated 26.11.2021, |
the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:
Agreement: this loan agreement as may be amended and/or supplemented from time to time;
Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account; and
Loan: has the meaning stipulated in Clause 2.1.
1.2 Any reference in this Agreement to:
a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, and Kazakhstan;
“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;
a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;
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the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;
a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;
“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and
the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.
1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 490,000 (four hundred ninety thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor exclusively for performance by the Debtor its obligation as investor under the Investment Agreement with Dostyk LLP (BIN 981140000414) for investing the works on exploration and mapping drilling on Beskauga deposit.
The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not provided in this Agreement or agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).
3. Repayment
3.1 The Debtor shall repay the Loan in full on or before 31 March 2022 to the bank account of the Creditor as specified in this Agreement.
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4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deduction totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
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8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the arbitration referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
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14. Modifications
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
16. Ekidos Minerals Bank Account
The details for the bank account for Ekidos Minerals LLP are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
17. Arras Minerals Corp. Account
The details for the bank account for Arras Minerals Corp. are as follows:
Bank: XXXXXXXXXXXXXX
Bank Address: XXXXXXXXXXXXXX
Account: XXXXXXXXXXXXXX
SWIFT: XXXXXXXXXXXXXX
18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
If to Creditor, at:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, British Columbia
V7Y 1K4
Attention: Tim Barry
Email: tbarry@arrasminerals.com
| and |
Attention: Christopher Richards
Email: crichards@arrasminerals.com
| |
with a copy (which does not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600, Three Bentall Centre
Vancouver, British Columbia
V7X 1L3
| Attention: | Susan Tomaine |
| Email: | susan.tomaine@blakes.com |
If to Debtor, at:
Ekidos Minerals Limited Liability Partnership
Apt. 1, 158 Panfilov Street
Almalinsky District, Almaty 050000
Republic of Kazakhstan
Attention: Vlada Nam
Email: Vlada.Nam@arrasminerals.com
Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:
| Debtor |
Ekidos Minerals Limited Liability Partnership
/s/ Vlada Nam
| Name: | Vlada Nam |
| Title: | Confidant, acting on basis of the Power of Attorney dated 26.11.2021 |
| Creditor |
Arras Minerals Corp.
/s/ Christopher Richards
| Name: | Christopher Richards |
Title: Chief Financial Officer
Exhibit 4.18
ARRAS MINERALS CORP.
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
INSTRUCTIONS TO PURCHASERS
HAVE YOU COMPLETED THIS SUBSCRIPTION AGREEMENT PROPERLY? The following items
in this Subscription Agreement must be completed. | |
| All Purchasers | |
| o | All Purchasers must complete all the information in the boxes on pages 3 to 4 and sign where indicated . The purpose of the form is to determine whether you meet the standards for participation in a private placement under NI 45-106 (as defined herein). |
Canadian Purchasers
All Purchasers resident in Canada must complete either Schedule “A” or Schedule “B”
Schedule A - “Accredited Investors”
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| o | All Purchasers resident in Canada purchasing as “Accredited Investors” must complete and sign the Accredited Investor Certificate for All Accredited Investors attached hereto as Schedule “A”. |
| o | Purchasers relying on exemption (j) (k) or (l) of the Accredited Investor Certificate for All Accredited Investors, must also complete and sign the Individual Accredited Investor Risk Acknowledgement Form attached hereto as Appendix “1” to Schedule “A”. |
| Schedule B - “Family, Friends and Business Associates” | |
| o | Purchasers resident in Canada purchasing as "Family, Friends and Business Associates" must complete Schedule B - Qualified Investor Certificate on pages B-1 to B-2 including, if resident in Ontario, Appendix 1 to Schedule B or if resident in Saskatchewan, Appendix 2 to Schedule "B". |
| U.S. Purchasers | |
| o | All Purchasers resident of or otherwise subject to the securities laws of the United States (as defined herein) must complete and sign the Accredited Investor Certificate for All Accredited Investors attached hereto as Schedule ”A”. |
| o | All Purchasers resident of or otherwise subject to the securities laws of the United States (as defined herein), must also complete and sign the United States Accredited Investor Certificate attached hereto as Schedule “C”. The purpose of the form is to determine whether you meet the standards for participation in a private placement under the U.S. Securities Act (as defined herein). |
Please return this executed Subscription Agreement and all applicable Schedules together with payment as described herein to the Company as follows:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, B.C. V7Y 1K4
Attention: Christopher Richards, Chief Financial Officer
Email: crichards@arrasminerals.com.
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SUBSCRIPTION AGREEMENT
(Canada, United States and Offshore Purchasers)
TO: ARRAS MINERALS CORP.
The undersigned (referred to herein as the “Purchaser”), hereby irrevocably subscribes to purchase from Arras Minerals Corp. (the “Company”) the number of common shares (the “Purchased Shares”) set out below for a subscription price of $1.00 per Common Share (the “Offering”).
This subscription plus the attached terms and conditions (the “Terms and Conditions”), completed and executed Subscriber Certificates (as defined in the Terms and Conditions) and the appendices attached hereto and thereto, are collectively referred to as the “Subscription Agreement”. The Purchaser agrees to be bound by the Terms and Conditions and agrees that the Company may rely upon the covenants, representations and warranties of the Purchaser contained in the Subscription Agreement.
| Number of Purchased Shares: | Aggregate Subscription Amount: | ||||||
Name and Address of Purchaser:
|
Registration Instructions (if different): | ||||||
________________________________________________ Name of Purchaser (please print) |
________________________________________________ Name | ||||||
| By: | __________________________________________Authorized Signature | ________________________________________________ Account Reference, if applicable | |||||
________________________________________________ Official Capacity or Title (please print) |
| ||||||
________________________________________________
| |||||||
________________________________________________ (Please print name of signatory if different from the name of the Purchaser printed above.) |
________________________________________________ Address, including postal code | ||||||
Purchaser’s Address, including province: |
Delivery Instructions (if different): | ||||||
________________________________________________
|
________________________________________________ Name
| ||||||
|
________________________________________________ Account Reference, if applicable | ||||||
| Telephone Number: | ____________________________ |
________________________________________________
| |||||
| Fax Number: | __________________________________ | ________________________________________________
| |||||
| E-mail Address: | _______________________________ | ________________________________________________ Address, including postal code | |||||
________________________________________________ Telephone Number | |||||||
| 2 |
Beneficial Purchaser Information (if applicable)
Name and Address of beneficial purchaser (“Beneficial Purchaser”) (if not the same as Purchaser):
____________________________________________ (Name of Beneficial Purchaser)
____________________________________________ (Beneficial Purchaser’s Residential Address)
____________________________________________
____________________________________________ (Beneficial Purchaser’s Telephone Number)
|
Present Ownership of Securities The Purchaser either [check appropriate box]: ☐ owns, directly or indirectly, or exercises control or direction over, no Common Shares or securities convertible into Common Shares; or ☐ owns, directly or indirectly, or exercises control or direction over, Common Shares and convertible securities entitling the Purchaser to acquire an additional Common Shares.
Insider Status The Purchaser either [check appropriate box]: ☐ is an “Insider” of the Company as defined in the applicable Canadian securities law, namely: (a) a director or an officer of the Company; (b) a director or an officer of a person that is itself an insider or subsidiary of the Company; (c) a person that has (i) direct or indirect beneficial ownership of; (ii) control or direction over; or (iii) a combination of direct or indirect beneficial ownership of and of control or direction over securities of the Company carrying more than 10% of the voting rights attached to all the Company’s outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the person as underwriter in the course of a distribution; or (d) the Company itself, if it has purchased, redeemed or otherwise acquired any securities of its own issue, for so long as it continues to hold those securities; or ☐ is not an Insider of the Company.
Registrant Status The Purchaser either [check appropriate box]: ☐ is a “registrant” as defined under applicable Canadian securities law: “registrant” means a person registered or required to be registered under applicable Canadian securities law, or ☐ is not a “registrant”.
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| 3 |
INSTRUCTIONS FOR PURCHASERS
The Purchaser must:
(1) Read this Subscription Agreement;
(2) Complete and execute pages 3-4 of this Subscription Agreement;
(3) Each Purchaser must read, complete and sign the applicable Schedules to this Subscription Agreement;
(4) Make payment for the Purchased Shares as required by Section 2 of the Terms and Conditions; and
(5) Deliver the signed documents as required by Section 3 of the Terms and Conditions.
ACCEPTANCE: The Company hereby accepts the above subscription subject to the Terms and Conditions of this Subscription Agreement.
DATED this _____ day of _________________, 2021
ARRAS MINERALS CORP.
Per: ________________________________________ Name: Christopher
Richards |
| 4 |
SUBSCRIPTION AGREEMENT
TERMS AND CONDITIONS
| 1. | Acceptance |
| 1.1 | The Company may, in its sole discretion, accept or reject this Subscription Agreement in whole or in part at any time prior to the Closing Time (as defined herein) and the Company has the right to allot to any Purchaser less than the amount of Purchased Shares subscribed for. |
| 1.2 | The Company shall forward to the Purchaser confirmation of acceptance or rejection of this Subscription Agreement promptly after the acceptance or rejection of this Subscription Agreement by the Company. If this Subscription Agreement is rejected in whole, the Purchaser understands that any funds, certified cheques and bank drafts delivered by the Purchaser to the Company representing the purchase price for the Purchased Shares will be promptly returned to the Purchaser without interest. If this Subscription Agreement is accepted only in part, the Purchaser understands that a cheque representing the portion of the purchase price for that portion of its subscription for the Purchased Shares that is not accepted will be promptly delivered to the Purchaser without interest. |
| 2. | Payment |
The Purchaser shall deliver the aggregate amount payable in respect of the Purchased Shares subscribed for hereby to the Company, as soon as possible and in any event no later than 4:00 p.m. (Vancouver time) on the Business Day (as defined herein) immediately preceding the Closing Date (as defined herein), by certified cheque or bank draft drawn on a Canadian chartered bank or trust company in Canadian dollars and payable in immediately available funds to “Arras Minerals Corp.” or by wire transfer (which subscription amount shall include any wire transfer fee payable or payable in such other manner as may be specified by the Company) or by any other manner acceptable to the Company.
The wire transfer instructions are as follows:
Beneficiary bank: Beneficiary bank address:
Transit: Institution: SWIFT Code: For credit to:
Beneficiary Account: Canadian Clearing Code: |
XXXXXXXXXXX XXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX XXX XXXXXXXXXXXX XXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX XXXXXXX XXXXXXXXXXX |
| 3. | Additional Deliveries and Conditions for Acceptance |
| 3.1 | The Purchaser acknowledges that the Company’s obligation to sell the Purchased Shares to the Purchaser is subject to, among other things, the conditions that the Purchaser shall complete, sign and return to the Company, Christopher Richards, Chief Financial Officer as soon as possible and in any event no later than 4:00 pm (Vancouver time) on the date that is two Business Days immediately preceding the Closing Date: |
| (a) | one completed and executed copy of this Subscription Agreement; |
| (b) | if the Purchaser is resident in Canada, either: |
| (i) | if the Purchaser is purchasing as an “accredited investor”, one completed and executed copy of the “Accredited Investor Certificate for All Accredited Investors” in the form attached hereto as Schedule “A” (the “Accredited Investor Certificate for All Accredited Investors”) and if applicable, the Individual Accredited Investor Risk Acknowledgement Form for Accredited Investors who are Individuals attached hereto as Appendix “1” to Schedule “A”; or |
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| (ii) | if the Purchaser is purchasing as purchasing as “family, friends and business associates”, one completed and executed copy of the “Qualified Investor Certificate” in the form attached hereto as Schedule “B” (the “Qualified Investor Certificate”) including, if resident in Ontario, Appendix 1 to Schedule “B” or if resident in Saskatchewan, Appendix 2 to Schedule “B”; |
| (c) | if the Purchaser is a U.S. Purchaser, one completed and executed copy of the Accredited Investor Certificate for All Accredited Investors and one completed and executed copy of the “United States Accredited Investor Certificate” attached hereto as Schedule “C” (together with the Accredited Investor Certificate for All Accredited Investors and the Qualified Investor Certificate, the “Subscriber Certificates”); and |
| (d) | any other document required by applicable Securities Laws (as defined herein) which the Company requests. |
The Purchaser acknowledges and agrees that such documents, when executed and delivered by the Purchaser, will form part of and will be incorporated into this Subscription Agreement with the same effect as if each constituted a representation and warranty or covenant of the Purchaser hereunder in favour of the Company. The Purchaser acknowledges and agrees that this offer, the purchase price and any other documents delivered in connection herewith will be held by the Company until such time as the conditions set out in this Subscription Agreement are satisfied.
| 3.2 | Any obligation of the Company to sell the Purchased Shares to the Purchaser is subject to (a) performance by the Purchaser of, or compliance by the Purchaser with, its covenants, agreements and conditions under and in accordance with this Subscription Agreement, prior to the Closing (as defined herein); (b) the truth and correctness, at the time of acceptance and at the Closing Date, of the Purchaser’s representations and warranties in this Subscription Agreement (including the representations and warranties made in any Appendix or Schedule hereto, as applicable); (c) the sale of the Purchased Shares to the Purchaser being exempt from the requirement to file a prospectus or registration statement and the requirement to prepare and deliver an offering memorandum or similar document under applicable Securities Laws; (d) the Company having obtained all required regulatory approvals to permit the completion of such sale, prior to the Closing; and (e) the Purchaser executing and delivering all requisite documentation as required by this Subscription Agreement, the applicable Securities Laws (including but not limited to the Subscriber Certificates, and all appendices attached thereto, with respect to the Purchased Shares). |
| 3.3 | The Purchaser understands that the information provided herein will be relied upon by the Company for purposes of determining the eligibility of the Purchaser to purchase the Purchased Shares. The Purchaser agrees to provide upon request any additional information that the Company determines necessary or appropriate in determining the Purchaser’s eligibility to purchase such Purchased Shares. |
| 3.4 | For the purposes hereof; |
| (a) | “Business Day” means any day except Saturday, Sunday or a statutory holiday in Vancouver, British Columbia, Canada; |
| (b) | “Securities Laws” means any and all securities laws including, statutes, rules, regulations, instruments, by-laws, policies, guidelines, orders, decisions, rulings and awards, applicable in the jurisdictions in which the Purchased Shares will be offered, sold and issued; |
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| (c) | “U.S. Person” has the meaning ascribed to such term in Rule 902(k) of Regulation S promulgated under the U.S. Securities Act (as defined herein), which definition includes, but is not limited to, an individual resident in the United States, an estate or trust of which any executor or administrator or trustee is a U.S. Person, and any partnership or corporation organized or incorporated under the laws of the United States; and |
| (d) | “U.S. Purchaser” means any Purchaser who is a U.S. Person, a person in the United States or a person purchasing the Purchased Shares for the account or for the benefit of a U.S. Person or a person in the United States, or a person who is otherwise subject to the securities laws of the United States. |
| 4. | Closing |
| 4.1 | Closing of this subscription for the Purchased Shares (the “Closing”) will be completed at the offices of Blake, Cassels & Graydon LLP, counsel to the Company, at Suite 2600, 595 Burrard Street, Vancouver, B.C., V7X 1L3, at 11:00 a.m. (Vancouver time) (the “Closing Time”) on Wednesday, October 20, 2021 (the “Closing Date”), or at such other places, times and dates as may be determined by the Company, and may occur in one or more tranches. |
| 4.2 | If the Closing does not occur on or before Monday, November 29, 2021 the Company shall return this Subscription Agreement and any funds, certified cheques and bank drafts delivered by the Purchaser to the Company representing the purchase price for the Purchased Shares, without interest, to the Purchaser. |
| 4.3 | The Purchaser acknowledges that the Offering may close in one or more tranches in one or more Closings. |
| 5.4 | The Purchaser appoints the Company, with full power of substitution, as his, her or its true and lawful attorney and agent with full power and authority in its place and stead to: |
| (a) | act as the Purchaser’s representative at the Closing and to swear, execute, file and record in the Purchaser’s name on the Purchaser’s behalf any document necessary to accept delivery of the Purchased Shares on the Closing Date; |
| (a) | approve any documents addressed to the Purchaser; |
| (b) | waive, in whole or in part, any representations, warranties, covenants or conditions for the benefit of the Purchaser; |
| (c) | complete or correct any errors or omissions in this Subscription Agreement on behalf of the Purchaser; and |
| (d) | receive, on the Purchaser’s behalf, any certificates representing the Purchased Shares subscribed for hereunder. |
| 5. | Representations, Warranties and Covenants of the Purchaser |
By executing this Subscription Agreement, the Purchaser, on its behalf, and if applicable, on behalf of a Beneficial Purchaser, represents, warrants and covenants to the Company and acknowledges that the Company is relying thereon that:
| (a) | the Purchaser understands that the Purchased Shares subscribed for by the Purchaser hereunder form part of a larger Offering by the Company, upon and are subject to the terms and conditions set forth herein; |
| (b) | the Purchaser acknowledges that the Company may complete additional financings at prices, on terms and in amounts as may be determined by the Company, from time to time in the future, and that any such future financings may have a dilutive effect on current securityholders and the Purchaser, but there is no assurance that such financings will be available on reasonable terms or at all; |
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| (c) | the Purchaser understands that the Offering is not subject to any minimum aggregate subscription amount, and the Company may close the Offering for less than the maximum aggregate amount indicated or may increase the size of the Offering; |
| (d) | the Purchaser is aware that the offer made by this subscription is irrevocable and requires acceptance by the Company and will not become an agreement between the Purchaser and the Company until accepted by the Company signing in the space above; |
| (e) | the Purchaser has completed, executed and delivered as principal, the Subscriber Certificates, as applicable, and the appendices attached thereto, as necessary; |
| (f) | the Purchaser acknowledges that the Purchased Shares are being offered for sale only on a “private placement” basis; |
| (g) | the Purchaser is aware of the characteristics of the Purchased Shares and the risks relating to an investment therein and agrees that the Purchaser must bear, and is able to bear, the economic risk of his, her or its investment in the Purchased Shares. The Purchaser has been advised to consult his, her or its own legal advisors with respect to the hold periods imposed by the applicable Securities Laws or other resale restrictions applicable to such securities. The Purchaser understands that he, she or it will not be able to resell any of the Purchased Shares until the expiry of the applicable hold period under applicable Securities Laws, except in accordance with limited exemptions and compliance with other requirements of applicable Securities Laws, and the Purchaser (and not the Company) is responsible for compliance with applicable resale restrictions or hold periods and will comply with all relevant Securities Laws in connection with any resale of the Purchased Shares; |
| (h) | the Purchaser acknowledges and agrees with the Company that the Purchaser’s ability to transfer the Purchased Shares is limited by, among other things, applicable Securities Laws. In particular, the Purchaser acknowledges having been informed that the Purchased Shares are subject to resale restrictions under National Instrument 45-102 – Resale of Securities (“NI 45-102”) and may not be sold or otherwise disposed of for a period of four months and one day from the later of: (i) the date of distribution of the Purchased Shares; and (ii) the date the Company became a reporting issuer in any province or territory, unless a statutory exemption is available or a discretionary order is obtained under applicable Securities Laws allowing the earlier resale thereof, and may be subject to additional resale restrictions if such sale or other disposition would be a “control distribution” as that term is defined in NI 45-102 or otherwise. If the Purchaser is not resident in Canada, additional resale restrictions may apply; |
| (i) | the Purchaser acknowledges that there is no market for the Purchased Shares. The Purchaser has been advised to consult the Purchaser’s own legal advisors with respect to the merits and risks of an investment in the Purchased Shares and with respect to applicable resale restrictions, and the Purchaser further acknowledges that the Company’s legal counsel are acting solely as counsel to the Company and not as counsel to the Purchaser; |
| (j) | the Purchaser has such knowledge or experience in financial and business affairs as to be capable of evaluating the merits and risks of the Purchaser’s proposed investment in the Purchased Shares, and the Purchaser or, if applicable, any Beneficial Purchaser for whom the Purchaser is subscribing for the Purchased Shares, is able to bear the economic risks of the investment in the Purchased Shares; |
| (k) | the Purchaser has had access to such information, if any, concerning the Company, as the Purchaser considers necessary with its investment decision to invest in the Purchased Shares, including receiving satisfactory answers to any questions the Purchaser asked the management of the Company; |
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| (l) | the Purchaser will execute and deliver within the applicable time periods all documentation as may be required by applicable Securities Laws to permit the purchase of the Purchased Shares on the terms set forth herein and, if required by applicable Securities Laws or stock exchange rules, the Purchaser will execute, deliver and file or assist the Company in obtaining and filing such reports, undertakings and other documents relating to the purchase of the Purchased Shares by the Purchaser as may be required by any applicable Securities Laws, securities commission, stock exchange or other regulatory authority; |
| (m) | the Purchaser acknowledges that it has been advised to consult its own legal advisors with respect to applicable resale and transfer restrictions, that it is solely responsible for complying with such restrictions and it agrees to comply with the restrictions referred to in paragraph (s) above and all other applicable resale and transfer restrictions. The Purchaser will comply with all applicable Securities Laws concerning the subscription, purchase, holding and resale of the Purchased Shares and will not resell any of the Purchased Shares except in accordance with the provisions of applicable Securities Laws. In this regard, the Subscriber acknowledges that any certificates representing the Purchased Shares will contain the following legend: |
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE IS ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”
| (n) | the Purchaser acknowledges and agrees with the Company that the Toronto Stock Exchange (“TSX”) or the TSX Venture Exchange (“TSXV”) may require escrow requirements and resale restrictions on the Purchased Shares and agrees to promptly execute and deliver all documentation and agreements as may be required by the TSX or the TSXV; |
| (o) | if the Purchaser is an individual, he or she has attained the age of majority in the jurisdiction in which he or she is resident and is legally competent to execute this Subscription Agreement and to take all actions required pursuant hereto; |
| (p) | if the Purchaser is a corporation, partnership, unincorporated association or other entity, the Purchaser has the legal capacity and competence to execute this Subscription Agreement and to take all actions required pursuant hereto and the individual signing this Subscription Agreement has been duly authorized to execute and deliver this Subscription Agreement; |
| (q) | if the Purchaser is not an individual, the Purchaser has not been created solely or primarily to use exemptions from the registration and prospectus exemptions under applicable Securities Laws and has a pre-existing purpose other than to use such exemptions; |
| (r) | the execution and delivery of this Subscription Agreement and the performance and compliance with the terms hereof will not result in any breach of, or be in conflict with, or constitute a default under, or create a state of facts which after notice or lapse of time or both, would constitute a default under, any term or provision of any constating documents, by-laws or resolutions of the Purchaser or any indenture, contract, agreement (whether written or oral), instrument or other document to which the Purchaser is a party or subject, or any judgment, decree, order, statute, rule or regulation applicable to the Purchaser; |
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| (s) | this Subscription Agreement has been duly and validly authorized, executed and delivered by, and upon acceptance by the Company constitutes a legal, valid, binding and enforceable obligation of, the Purchaser and, if the Purchaser is signing this Subscription Agreement on behalf of a Beneficial Purchaser, also against such Beneficial Purchaser, in each case in accordance with the terms hereof; |
| (t) | if the Purchaser is contracting hereunder as trustee, agent, representative or nominee for one or more Beneficial Purchasers, the Purchaser has due and proper authority to execute and deliver this Subscription Agreement and all other necessary documentation on behalf of each such Beneficial Purchaser and to act on behalf of each such Beneficial Purchaser in connection with the transactions contemplated hereby and acknowledges that the Company may be required by law to disclose to certain regulatory authorities the identity of each Beneficial Purchaser of Purchased Shares for whom the Purchaser may be acting; |
| (u) | the Purchaser has not received, nor has the Purchaser requested, nor does the Purchaser have any need to receive, any prospectus, sales or advertising literature, offering memorandum or any other document describing or purporting to describe the business and affairs of the Company which has been prepared for delivery to, and review by, prospective purchasers in order to assist them in making an investment decision in respect of the Purchased Shares pursuant to the Offering; |
| (v) | the Purchaser has relied only upon publicly available information relating to the Company and not upon any verbal or written representation as to fact, and the Purchaser acknowledges that the Company has not made any written representations, warranties or covenants in respect of such publicly available information except as set forth in this Subscription Agreement. Without limiting the generality of the foregoing, except as may be provided herein, no person has made any written or oral representation to the Purchaser that any person will resell or repurchase the Purchased Shares, or refund any of the purchase price of the Purchased Shares, or that the Purchased Shares will be listed on any exchange or quoted on any quotation and trade reporting system, or that application has been or will be made to list the Purchased Shares on any exchange or quote the Purchased Shares on any quotation and trade reporting system, and no person has given any undertaking to the Purchaser relating to the future value or price of the Purchased Shares; |
| (w) | the Purchaser represents and warrants that the Purchaser is not acquiring the Purchased Shares as a result of being aware of any material information about the affairs of the Company that has not been publicly disclosed, including knowledge of a “material fact” or a “material change” (as those terms are defined in applicable Securities Laws) about the affairs of the Company; |
| (x) | the Purchaser represents and warrants that the Purchaser did not become aware of the offering and sale of the Purchased Shares as a result of, nor has it seen, any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, television or the internet or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; |
| (y) | if the Purchaser has not completed Schedule “C”, the Purchaser, whether acting as principal, trustee or agent, is neither (i) a “U.S. Person” (as defined in Rule 902(k) of Regulation S promulgated under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)), which definition includes, but is not limited to, an individual resident in the United States, an estate or trust of which any executor or administrator or trustee is a U.S. Person and any partnership or corporation organized or incorporated under the laws of the United States, nor (ii) purchasing the Purchased Shares for the account of a U.S. Person or a person in the United States or for resale in the United States, and the Purchased Shares have not been offered to the Purchaser in the United States and the Purchaser was not in the United States when the order was placed or when this Subscription Agreement was executed and delivered; |
| (z) | the Purchaser agrees that it is solely responsible for obtaining such legal, tax, investment and other professional advice as the Purchaser considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated hereunder (including the resale and transfer restrictions referred to herein); |
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| (aa) | unless the Purchaser is a U.S. Purchaser, the Purchaser is neither (i) a U.S. Person nor (ii) purchasing the Purchased Shares for the account or benefit of a U.S. Person or a person in the United States or for resale in the United States, and the Purchased Shares have not been offered to the Purchaser in the United States and the Purchaser was not in the United States when the order was placed or when this Subscription Agreement was executed and delivered; |
| (bb) | the Purchaser will not offer or sell the Purchased Shares in the United States or to a U.S. Person, unless such securities are registered under the U.S. Securities Act and the laws of all applicable states of the United States or an exemption from such registration requirements is available, and further that the Purchaser will not resell the Purchased Shares, except in accordance with the provisions of applicable Securities Laws; |
| (cc) | the Purchaser is entitled under applicable Securities Laws to purchase the Purchased Shares without the benefit of a prospectus qualified under such Securities Laws; |
| (dd) | the Purchaser is resident, or if not an individual has its head office in the jurisdiction set forth on the face page hereof as the “Purchaser’s Address”, and such address was not obtained or used solely for the purpose of acquiring the Purchased Shares; |
| (ee) | the Purchaser is purchasing the Purchased Shares with the benefit of the prospectus exemption provided by by Section 2.3, 2.5, 2.6 or 2.6.1, as applicable, of National Instrument 45-106 – Prospectus Exemptions; |
| (ff) | the Purchaser is purchasing the Purchased Shares: |
| (i) | as principal for its own account and not for the benefit of any other person, or is deemed to be purchasing the Purchased Shares as principal for its own account in accordance with applicable Securities Laws; or |
| (ii) | as agent for a Beneficial Purchaser disclosed on the execution page of this Subscription Agreement, and is an agent or trustee with proper authority to execute all documents required in connection with the purchase of the Purchased Shares on behalf of such Beneficial Purchaser and such Beneficial Purchaser is purchasing the Purchased Shares as principal and not for the benefit of any other person, or is deemed to be purchasing the Purchased Shares as principal; |
| (gg) | the funds representing the purchase price for the Purchased Shares which will be advanced by or on behalf of the Purchaser to the Company hereunder do not represent proceeds of crime for the purposes of the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”), and the Purchaser acknowledges that the Company may in the future be required by law to disclose the Purchaser’s name and other information relating to this Subscription Agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PATRIOT Act, and no portion of the purchase price for the Purchased Shares to be provided by the Purchaser (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of the United States of America, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity that has not been identified to or by the Purchaser; and the Purchaser shall promptly notify the Company if the Purchaser discovers that any of such representations ceases to be true and provide the Company with appropriate information in connection therewith; |
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| (hh) | the funds representing the aggregate purchase price in respect of the Purchased Shares which will be advanced by or on behalf of the Purchaser to the Company hereunder do not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (for the purposes of this Section 6, the “PCMLTFA”) and the Purchaser acknowledges and agrees that the Company may be required by law to disclose the name of the Purchaser and, if applicable, names of Beneficial Purchasers, and other information relating to this Subscription Agreement and the subscription hereunder, on a confidential basis, pursuant to the PCMLTFA. To the best of the Purchaser’s knowledge (a) none of the subscription funds provided by or on behalf of the Purchaser (i) have been or will be derived directly or indirectly from or related to any activity that is deemed criminal under the laws of Canada, the United States, or any other jurisdiction, or (ii) are being tendered on behalf of a person or entity who has not been identified to the Purchaser and, (b) the Purchaser will promptly notify the Company if the Purchaser discovers that any of such representations cease to be true, and shall provide the Company with appropriate information in connection therewith; |
| (ii) | the Company is relying on an exemption from the requirement to provide the Purchaser with a prospectus under the applicable Canadian Securities Laws and, as a consequence of acquiring the Purchased Shares pursuant to such exemption: |
| (i) | certain protections, rights and remedies provided by the applicable Securities Laws, including statutory rights of rescission and certain statutory remedies against an issuer, underwriters, auditors, directors and officers that are available to investors who acquire securities offered by a prospectus, will not be available to the Purchaser; |
| (ii) | the common law may not provide investors with an adequate remedy in the event that they suffer investment losses in connection with securities acquired in a private placement; |
| (iii) | the Purchaser may not receive information that would otherwise be required to be given under the applicable Securities Laws; and |
| (iv) | the Company is relieved from certain obligations that would otherwise apply under the applicable Securities Laws; |
| (jj) | the Purchaser acknowledges that there is no government or other insurance covering the Purchased Shares; |
| (kk) | the Purchaser acknowledges that no agency, governmental authority, regulatory body, stock exchange or other entity (including, without limitation, any securities commission or other regulatory authority) has reviewed, passed on or made any finding or determination as to the merit for investment in the Purchased Shares, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to such securities; |
| (ll) | if the Purchaser is a U.S. Purchaser, the Purchaser confirms, represents and warrants that: |
| (i) | the Purchaser is resident in the United States, in the jurisdiction set out as the “Purchaser’s Address” on the face page hereof, which is the address at which the Purchaser received and accepted the offer to purchase the Purchased Shares; |
| (ii) | the Purchaser is an “accredited investor” (a “U.S. Accredited Investor”), as such term is defined in Rule 501(a) of Regulation D under the U.S. Securities Act, and the Purchaser has concurrently completed and executed Schedule “C” to this Subscription Agreement, indicating which category of U.S. Accredited Investor the Purchaser satisfies; |
| (iii) | the Purchaser understands, recognizes and acknowledges that the Purchased Shares have not and will not be registered under the U.S. Securities Act or the Securities Laws of any state of the United States in which the Purchaser is resident and that the sale contemplated hereby is being made in reliance on a private placement exemption to U.S. Accredited Investors; |
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| (iv) | the Purchaser acknowledges that the offer and sale of the Purchased Shares was made to the Purchaser exclusively by the Company; |
| (v) | the Purchaser acknowledges that it has not purchased the Purchased Shares as a result of any “general solicitation” or “general advertising” (as such terms are used in Regulation D under the U.S. Securities Act), including but not limited to, any advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or on the internet or broadcast over radio or television or the internet, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; |
| (vi) | the Purchaser has no contract, undertaking, agreement or arrangement with any person to sell, transfer or pledge to such person, or anyone else, the Purchased Shares, or any part thereof, or any interest therein, and the Purchaser has no present plans to enter into any such contract, undertaking, agreement or arrangement; |
| (vii) | the Purchaser agrees that if it decides to offer, sell or otherwise transfer any of the Purchased Shares (or any securities issuable upon the exchange thereof), it will not offer, sell, pledge or otherwise transfer any of such securities, directly or indirectly, unless such offer, sale, pledge or transfer is made: |
| (A) | to the Company; or |
| (B) | outside the United States in a transaction in accordance with the requirements of Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations; or |
| (C) | within the United States in accordance with (I) Rule 144A under the U.S. Securities Act, or (II) Rule 144 under the U.S. Securities Act, if available; or |
| (D) | in another transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws, |
and, in the case of transfers pursuant to (C)(II) or (D) (and if required by the transfer agent of the Purchased Shares, (B) above), after it has furnished the Company an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company to such effect;
| (viii) | the Purchaser acknowledges and agrees that the Purchased Shares (and any securities issuable upon the exchange thereof) will be “restricted securities” within the meaning of Rule 144 (a)(3) of the U.S. Securities Act; |
| (ix) | in addition to the Canadian legend as set out in Subsection 5(m), the Purchaser understands and acknowledges that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, certificates representing the Purchased, and all certificates issued in exchange therefor or in substitution thereof, shall bear a restrictive legend substantially in the following form (the “U.S. Legend”): |
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“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING OR OTHERWISE HOLDING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AFTER, IN THE CASE OF (C)(2) OR (D) ABOVE, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”
provided that the U.S. Legend may be removed by providing a declaration to the Company (and any transfer agent of the Purchased Shares), in the form attached hereto as Schedule “D”, or as the Company may prescribe from time to time;
provided further that, notwithstanding the foregoing, any transfer agent for the Purchased Shares may impose additional requirements for the removal of the U.S. Legend from such securities in accordance with Rule 904 of Regulation S under the U.S. Securities Act (which may include, without limitation, an opinion of counsel of recognized standing in form and substance reasonable satisfactory to the Company and such transfer agent) to the effect that the U.S. Legend is no longer required under the applicable requirements of the U.S. Securities Act;
provided further that, if the Purchased Shares are being sold pursuant to Rule 144 under the U.S. Securities Act, the U.S. Legends may be removed by delivery to the Company (and any transfer agent of the Purchased Shares) of an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company (and such transfer agent) to the effect that the U.S. Legend is no longer required under the applicable requirements of the U.S. Securities Act;
| (x) | the Purchaser understands and acknowledges that the Company has no obligation or present intention to file a registration statement under the U.S. Securities Act in respect of the Purchased Shares and, accordingly, the Purchaser acknowledges that there are substantial restrictions on the transferability of the Purchased Shares and that it will not be possible for the Purchaser to readily liquidate his, her or its investment in case of any emergency and the Purchaser has not been supplied with all of the information that would be found in the applicable registration statement if the Purchased Shares were registered under the U.S. Securities Act; |
| (xi) | the Purchaser is aware that (i) purchasing, holding and disposing of the Purchased Shares may have tax consequences under the laws of both Canada and the United States, (ii) the tax consequences for prospective investors who are resident in, or citizens of, the United States under United States, state, local or foreign tax law are not described in this Subscription Agreement, and (iii) it is solely responsible for determining the tax consequences applicable to its particular circumstances and should consult its own tax advisors concerning investment in the Purchased Shares; |
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| (xii) | notwithstanding the foregoing paragraph and anything else contained herein, the Purchaser acknowledges that (A) it has been encouraged, and has had the opportunity, to obtain independent income tax advice with respect to its subscription for the Purchased Shares (including, without limitation, with respect to the applicability of United States federal income tax rules related to “passive foreign investment companies” (a “PFIC”) under the U.S. Internal Revenue Code of 1986, as amended); (B) if the Company were to be deemed to be a PFIC in respect of any year in which the Purchaser owns the Purchased Shares, the Purchaser may be subject to adverse United States federal income tax consequences that it might not be able to mitigate unless the Company takes certain actions to assist the Purchaser with such mitigation, and that the Company is under no obligation to take, and has no present intention of taking, any action to assist the Purchaser in mitigating such adverse tax consequences (in particular, and without limitation, the Company has no obligation to provide the information or to take the actions necessary to permit the Purchaser to make a “qualified electing fund” election within the meaning of such term in the U.S. Internal Revenue Code of 1986, as amended); (C) the Company expects to be a PFIC in each taxable year; and (D) no representation has been made to the Purchaser by the Company or any person acting on its behalf as to the tax consequences to the Purchaser of the Purchaser’s purchase of the Purchased Shares; |
| (xiii) | the Purchaser understands that the Company is incorporated under the laws of British Columbia, Canada, and that most or all of the Company’s assets are located outside the United States and most or all of its directors and officers are residents of countries other than the United States; as a result, it may be difficult for Purchasers to effect service of process within the United States upon the Company or such directors and officers, or to realize in the United States upon judgments of courts of the United States predicated upon civil liability of the Company and its directors and officers under the U.S. federal securities laws; |
| (xiv) | the Purchaser consents to the Company making a notation on its records or giving instruction to the registrar and transfer agent of the Issuer in order to implement the restrictions on transfer and exercise with respect to the Purchased Shares set forth and described herein; |
| (xv) | the Purchaser is acquiring the Purchased Shares for itself for investment purposes only and not with a view to any resale, distribution or other disposition of the Purchased Shares in violation of United States federal or state securities laws, and the Purchaser acknowledges that the exemption from registration under the U.S. Securities Act and applicable state securities laws depends, among other things, upon the bona fide nature of the investment intent expressed herein. |
| (mm) | if the Purchaser is an “accredited investor” in reliance on paragraph (m) of the definition of “accredited investor” in Section 1.1 of NI 45-106, the Purchaser was not created or used solely to purchase or hold securities as an accredited investor under that paragraph (m); |
| (nn) | the Purchaser either (A) is not an “insider” of the Company or a “registrant” (each as defined under applicable Securities Laws) or (B) has identified itself to the Company as either an “insider” or a “registrant” (each as defined under applicable Securities Laws). The Purchaser acknowledges that it is bound by the provisions of applicable Securities Laws which impose obligations on a person who becomes an “insider” of an issuer, or on a person who holds sufficient securities exercisable into voting securities of an issuer to become an “insider”. The Purchaser acknowledges that such obligations may include, but are not limited to: the filing of insider reports on the System for Electronic Disclosure by Insiders (SEDI); the filing of early warning reports; the filing of reports of acquisitions; and the filing of a Personal Information Form or similar document with applicable stock exchanges. The Purchaser further acknowledges that it has been advised to consult its own legal advisors with respect to such obligations, and that it is solely responsible for complying with such obligations, and covenants and agrees with the Company that it will comply with all of such obligations, if applicable to the Purchaser, in a timely manner, whether arising at or after the Closing; |
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| (oo) | if the Purchaser is resident in or otherwise subject to applicable Securities Laws of a jurisdiction other than Canada or the United States, the Purchaser confirms, represents and warrants that: |
| (i) | the Purchaser is knowledgeable of, or has been independently advised as to, the applicable Securities Laws of the jurisdiction in which the Purchaser is resident (the “International Jurisdiction”) and which would apply to this Subscription Agreement; |
| (ii) | the Purchaser is purchasing the Purchased Shares pursuant to exemptions from the prospectus, financial promotion and/or registration requirements or equivalent requirements under applicable Securities Laws or, if such is not applicable, the Purchaser is permitted to purchase the Purchased Shares under the applicable Securities Laws of the International Jurisdiction without the need to rely on any exemptions; |
| (iii) | all acts of solicitation, conduct or negotiations directly or indirectly in furtherance of the purchase of the securities occurred outside of Canada and the United States; |
| (iv) | no offer was made to the Purchaser in Canada or the United States and the buy order in respect of the subscription was not placed from within Canada or the United States; |
| (v) | the applicable Securities Laws of the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the issue and sale or resale of the Purchased Shares (and any securities issued upon the exchange or transfer thereof); |
| (vi) | the delivery of this Subscription Agreement, the acceptance hereof by the Company and the purchase of the Purchased Shares by the Purchaser complies with all applicable laws of the International Jurisdiction and all other applicable laws and does not trigger: (i) any obligation to prepare and file a prospectus or similar document, or any other report or notice with respect to such purchase in the International Jurisdiction or to register the Purchased Shares (and any securities issued upon the exchange or transfer thereof); or (ii) any continuous disclosure reporting obligations of the Company in the International Jurisdiction; and |
| (vii) | the Purchaser will, if requested by the Company, or its counsel, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subsections (ii) to (vi) above to the satisfaction of the Company and its counsel, acting reasonably. |
| 6. | Reliance Upon Representations, Warranties and Covenants by the Company |
The Purchaser acknowledges that the representations, warranties and covenants made by the Purchaser in this Subscription Agreement (including without limitation those made in each Subscriber Certificates, and all appendices attached thereto, to be executed and delivered in accordance with this Subscription Agreement) are made with the intent that they may be relied upon by the Company and its counsel to, among other things, determine the Purchaser’s eligibility to purchase the Purchased Shares, including without limitation the availability of exemptions from the registration and prospectus requirements of applicable Securities Laws in connection with the issuance of the Purchased Shares to the Purchaser. The Purchaser further covenants that by accepting the Purchased Shares, the Purchaser shall be representing and warranting that such representations and warranties are true as at the Closing Date with the same force and effect as if they had been made by the Purchaser at the Closing Date and that the covenants of the Purchaser made by it in this Subscription Agreement to be performed prior to the Closing Date have been performed. The Purchaser further agrees to indemnify the Company and its respective directors, officers, employees, advisers, affiliates, shareholders and agents, and their respective counsel, against all losses, claims, costs, expenses, damages and liabilities which any of them may suffer or incur and which are caused by or arise from any inaccuracy in, or breach or misrepresentation by the Purchaser of, any such representations, warranties and covenants. The Purchaser undertakes to immediately notify the Company of any change in any statement or other information relating to the Purchaser set forth herein or in a Subscriber Certificates, and all appendices attached thereto, that takes place prior to the Closing Date.
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| 7. | Representations, Warranties and Covenants of the Company |
By executing this Subscription Agreement, the Company represents, warrants and covenants to the Purchaser that:
| (a) | the Company is now and at the Closing Time will be a corporation validly subsisting under the laws of the Province of British Columbia; |
| (b) | the Company has all necessary corporate power, authority and capacity to enter into and carry out its obligations under this Subscription Agreement and all other agreements and instruments to be executed by the Company and the Purchaser as contemplated by this Subscription Agreement; |
| (c) | the execution and delivery of this Subscription Agreement and such other agreements and instruments and the consummation of the transactions contemplated by this Subscription Agreement and such other agreements and instruments have been duly and validly authorized by the Company; |
| (d) | the Purchased Shares have been duly authorized for issuance and upon issuance pursuant to the provisions hereof, the Common Shares will be validly issued and fully paid as non-assessable common shares in the capital of the Company; |
| (e) | this Subscription Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms subject, however, to the customary limitations with respect to bankruptcy, insolvency or other laws affecting creditors’ rights generally and to the availability of equitable remedies; |
| (f) | the execution and delivery of this Subscription Agreement and the compliance by the Company with the terms hereof will not result in any breach, or be in conflict with, or constitute a default under, or create a state of facts which after notice or lapse of time or both would constitute a default under, any term or provision of the Company’s constating documents or resolutions of the directors of the Company; |
| (g) | no approval, authorization, consent or order of, and no filing, registration or recording with, any governmental authority is required of the Company in connection with the execution and delivery or with the performance by the Company of this Subscription Agreement other than compliance with the applicable Securities Laws; |
| (h) | the Company has good and marketable title to or beneficial ownership of all real property and good title to all personal property owned by it and material to its business, in each case, free and clear of all liens, encumbrances or restrictions of any kind, except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company, and no other property rights are necessary for the conduct of the business of the Company as currently conducted; and |
| (i) | the Company is not currently prohibited, directly or indirectly, from paying any dividends, from making any other distribution on its common shares, or other securities, or from paying any interest or repaying any loans, advances or other indebtedness of the Company. |
| 17 |
| 8. | Lock-Up |
If requested by the Company, a managing underwriter, agent or relevant stock exchange, as applicable (the “Requesting Party”), in connection with a transaction where the Company becomes a “reporting issuer” within the meaning of the Securities Act (British Columbia), a “registrant” under the U.S. Securities Act or a similar status under similar legislation in any other jurisdiction the Purchaser shall not, for a period not to exceed 180 days commencing and ending on the date specified by the Company and the Requesting Party, (a) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any Common Shares by the Purchaser or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences or ownership of any the of Common Shares held by the Purchaser, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Shares or other securities, in cash or otherwise. The foregoing provisions of this Section 8 shall not apply to the sale of any Common Shares to an underwriter pursuant to an underwriting agreement. The Purchaser shall execute such agreements as may be reasonably requested by the Requesting Party that are consistent with this Section 8 or that are necessary to give further effect thereto
| 9. | Survival |
This Subscription Agreement, including without limitation the representations, warranties, covenants and indemnities contained herein and in each Subscriber Certificate, and all appendices attached thereto, shall survive and continue in full force and effect and be binding upon the Company and the Purchaser, notwithstanding the completion of the purchase of the Purchased Shares by the Purchaser pursuant hereto or the subsequent disposition of the Purchased Shares by the Purchaser.
| 10. | Personal Information Authorization |
By executing this Subscription Agreement, the Purchaser hereby consents to the collection, use and disclosure of the personal information provided herein and other personal information provided by the Purchaser or collected by the Company or its agents as reasonably necessary in connection with the Purchaser’s subscription for the Purchased Shares (collectively, “personal information”) as follows: (a) the Company may use personal information and disclose personal information to intermediaries such as the Company’s legal counsel and withholding and/or transfer agents for the purposes of determining the Purchaser’s eligibility to invest in the Purchased Shares and for managing and administering the Purchaser’s investment in the Purchased Shares; (b) the Company and its agents may use the Purchaser’s social insurance number for income reporting purposes in accordance with applicable law; (c) the Company, its agents and advisors, may each collect, use and disclose personal information for the purposes of meeting legal, regulatory, self-regulatory, security and audit requirements (including any applicable tax, securities, money laundering or anti-terrorism legislation, rules or regulations) and as otherwise permitted or required by law, which disclosures may include disclosures to tax, securities or other regulatory or self-regulatory authorities in Canada and/or in foreign jurisdictions, if applicable, in connection with the regulatory oversight mandate of such authorities; (d) the Company and its agents and advisors may use personal information and disclose personal information to parties connected with the proposed or actual transfer, sale, assignment, merger or amalgamation of the Company or its business or assets or similar transactions, for the purpose of permitting such parties to evaluate and/or proceed with and complete such transaction. Purchasers, assignees and successors of the Company or its business or assets may collect, use and disclose personal information as described in this Subscription Agreement. The Purchaser acknowledges that the Company’s agents or intermediaries may be located outside of Canada, and personal information may be transferred and/or processed outside of Canada for the purposes described above, and that measures the Company may use to protect personal information while handled by agents, intermediaries or other third parties on its behalf, and personal information otherwise disclosed or transferred outside of Canada for the purposes described above, are subject to legal requirements in foreign countries applicable to the Company or such third parties, for example lawful requirements to disclose personal information to government authorities in those countries.
The Purchaser acknowledges and agrees (on its own behalf and, if applicable, on behalf of each beneficial purchaser for whom the Purchaser is contracting hereunder) with the Company (which acknowledgements and agreements shall survive the Closing) that if the Purchaser is resident or otherwise subject to the applicable securities legislation of a jurisdiction in Canada: (i) the Company will deliver to the applicable securities regulatory authority or regulator certain personal information pertaining to the Purchaser, including the Purchaser’s full name, residential address and telephone number, email address, the number of securities purchased by the Purchaser, the total purchase price paid for such securities, the prospectus exemption relied on and the date of distribution of the securities, (ii) such information is being collected indirectly by the applicable securities regulatory authority or regulator under the authority granted to it in securities legislation, (iii) such information is being collected for the purposes of the administration and enforcement of the securities legislation of the local Canadian jurisdiction, and (iv) the Purchaser may contact the public officials listed in Schedule “E” with respect to questions about the security regulatory authority’s or regulator’s indirect collection of such information
| 18 |
| 11. | Governing Law |
This Subscription Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein. The Purchaser hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of the Province of British Columbia with respect to any matters arising out of this Subscription Agreement.
| 12. | Independent Legal Advice |
The Purchaser acknowledges and agrees that Blake, Cassels & Graydon LLP (“Blakes”) has acted as legal counsel only to the Company and that Blakes is not protecting the rights and interests of the Purchaser. The Purchaser acknowledges and agrees that the Company and Blakes have given the Purchaser the opportunity to seek, and have recommended that the Purchaser obtain, independent legal advice with respect to the subject matter of this Subscription Agreement and, further, the Purchaser hereby represents and warrants to the Company and Blakes that the Purchaser has sought independent legal advice or waives such advice.
| 13. | Costs |
All costs and expenses incurred by the Purchaser, including, without limitation, legal fees and disbursements relating to the purchase by the Purchaser of the Purchased Shares, shall be borne by the Purchaser.
| 14. | Assignment |
This Subscription Agreement shall enure to the benefit of and be binding on the Company, the Purchaser and their respective heirs, administrators, executors, successors and permitted assigns. This Subscription Agreement may not be assigned by the Company and may only be transferred or assigned by the Purchaser: (i) subject to compliance with applicable Securities Law, and (ii) with the prior written consent of the Company.
| 15. | Entire Agreement |
This Subscription Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. There are no conditions, representations, warranties, covenants or other agreements between the parties hereto relating to the subject matter hereof, except as specifically set out, referred to or incorporated by reference herein.
| 16. | Amendments and Waivers |
No amendment to this Subscription Agreement will be valid or binding unless set forth in writing and duly executed by the parties hereto. No waiver of any breach of any provision of this Subscription Agreement will be effective or binding unless made in writing and signed by the waiving party.
| 17. | Language |
The parties hereto confirm their express wish that this Subscription Agreement and all documents and agreements directly or indirectly relating hereto be drawn up in the English language. Les parties reconnaissent leur volonté expresse que la présente ainsi que tous les documents et contrats s’y rattachant directmente ou indirectmente soient rédigés en anglais.
| 18. | Time of Essence |
Time shall be of the essence of this Subscription Agreement.
| 19 |
| 19. | Deliveries and Counterparts |
The Company shall be entitled to rely on delivery by facsimile or electronic transmission of a copy, in portable document format or otherwise, of this Subscription Agreement executed by the Purchaser, and acceptance by the Company of such executed Subscription Agreement shall be legally effective to create a valid and binding agreement between the Purchaser and the Company in accordance with the terms hereof. In addition, this Subscription Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same document.
| 20. | Extended Meanings and Headings |
In this Subscription Agreement words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, partnerships, associations, trusts and unincorporated associations. The headings contained herein are for convenience of reference only and shall not affect the construction or interpretation hereof.
| 21. | Currency |
Unless otherwise stated, all references to currency herein are to lawful money of Canada.
| 22. | Further Assurances |
Each of the parties hereto shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may, either before or after the closing of the transactions contemplated hereby, reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Subscription Agreement.
| 20 |
SCHEDULE “A”
ACCREDITED
INVESTOR CERTIFICATE FOR ALL ACCREDITED INVESTORS
TO: Arras Minerals Corp. (the “Company”)
RE: SUBSCRIPTION FOR SHARES OF THE COMPANY
All capitalized terms not defined herein shall have the meaning given to them in the Subscription Agreement to which this Schedule “A” is attached and in Appendix 1 to this Schedule “A” (collectively, the “Subscription Agreement”).
The undersigned Purchaser/duly authorized representative of the Purchaser (or in the case of a trust, the trustee or an officer of the trustee of the trust) hereby certifies, represents and warrants that:
| 1. | he/she has read the Subscription Agreement and understands that the offering of the Purchased Shares is being made on a prospectus-exempt basis; and |
| 2. | the Purchaser and, if applicable, the disclosed principal on whose behalf the Purchaser is purchasing the Purchased Shares, is an “accredited investor” as defined in NI 45-106, by virtue of satisfying one or more of the categories of “accredited investor” set forth below, which the Purchaser has correctly marked: |
[please initial beside each category that applies to the Purchaser.]
| a. | _____ except in Ontario, a Canadian financial institution, or a Schedule III bank,* |
| b. | _____ except in Ontario, the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada),* |
| c. | _____ except in Ontario, a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary,* |
| d. | _____ except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,* |
| e. | _____ an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d), |
e.1. _____ an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
| f. | _____ except in Ontario, the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada,* |
| g. | _____ except in Ontario, a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec,* |
| h. | _____ except in Ontario, any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government,* |
| i. | _____ except in Ontario, a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada,* |
| j. | _____ an individual who, either alone or with a spouse, beneficially owns, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities‚, exceeds CDN$1,000,000, If the Purchaser chooses this category, it must complete, initial and sign the Risk Acknowledgement Form in Appendix 1. |
| A-1 |
[_] By initialing this box, the Purchaser confirms that s/he has discussed this investment with the salesperson identified in Appendix 1 hereof and such salesperson explained the calculation of the financial assets test and asked questions to confirm that the Purchaser met such threshold.
| j.1 | _____ an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities‚, exceeds CDN$5,000,000, |
[_] By initialing this box, the Purchaser confirms that s/he discussed this investment with __________________ (name of salesperson) of __________________ (name of firm of salesperson) and such salesperson explained the calculation of financial assets before taxes and net of any related liabilities and asked questions to confirm that the Purchaser and, if applicable, the Purchaser’s spouse met such threshold.
| k. | _____ an individual whose net income before taxes exceeded CDN$200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded CDN$300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year, If the Purchaser chooses this category, it must complete, initial and sign the Risk Acknowledgement Form on Appendix 1. |
[_] By initialing this box, the Purchaser confirms that s/he discussed this investment with the salesperson identified on Appendix 1 hereof and such salesperson explained the calculation of the net income before taxes and asked questions to confirm that the Purchaser and, if applicable, the Purchaser’s spouse met such threshold.
| l. | _____ an individual who, either alone or with a spouse, has net assets of at least CDN$5,000,000, If the Purchaser chooses this category, it must complete, initial and sign the Risk Acknowledgement Form in Appendix 1. |
[_] By initialing this box, the Purchaser confirms that s/he discussed this investment with the salesperson identified on Appendix 1 hereof and such salesperson explained the calculation of the net assets and asked questions to confirm that the Purchaser and, if applicable, the Purchaser’s spouse met such threshold.
| m. | _____ a person (including a corporate entity), other than an individual or investment fund, that has net assets of at least CDN$5,000,000 as shown on its most recently prepared financial statements, |
| n. | _____ an investment fund that distributes or has distributed its securities only to: |
(i) a person that is or was an accredited investor at the time of the distribution,
| (ii) | a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] or 2.19 [Additional investment in investment funds] of NI 45-106, or |
| (iii) | a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106, |
| o. | _____ an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt, |
| p. | _____ a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed accountƒ managed by the trust company or trust corporation, as the case may be, |
| A-2 |
| q. | _____ a person (including a corporate entity) acting on behalf of a fully managed accountƒ managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction, |
| r. | _____ a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded, |
| s. | _____ an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function, |
| t. | _____ a person (including a corporate entity) in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,„ |
| u. | _____ an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser, |
| v. | _____ a person (including a corporate entity) that is recognized or designated by the securities regulatory authority or, except in Ontario and Quebec, the regulator as an accredited investor, or |
| w. | _____ a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse; |
The Company may follow up with the Purchaser in order to verify their accredited investor status by obtaining further information in order satisfy the Company’s obligations under applicable Securities Laws.
| | For the purposes of NI 45-106 and this Certificate, the term “financial assets” means (a) cash; (b) securities or (c) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. The value of the Purchaser’s personal residence or other real estate is not included in the calculation of financial assets. These financial assets are generally liquid or relatively easy to liquidate. |
| ‚ | For the purposes of NI 45-106 and this Certificate, the term “related liabilities” means (a) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets or (b) liabilities that are secured by financial assets. |
| ƒ | For the purposes of NI 45-106 and this Certificate, the term “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction. |
| „ | In British Columbia, an indirect interest in a person means an economic interest in the person. |
*NOTE: If the Purchaser has selected this category, and the Purchaser is an Ontario resident or otherwise subject to the laws of Ontario for the purposes of his, her or its subscription of securities in this agreement, then the Purchaser must request from the Company an accredited investor certificate applicable to such Purchaser, and complete and sign such requested certificate and provide the same to the Company.
The statements made in this Schedule are true and will be true on the Closing Date.
The Company may follow up with the Purchaser at the telephone number provided below in order to verify their accredited investor status by obtaining further information in order satisfy the Company’s obligations under applicable Securities Laws.
| A-3 |
DATED ___________________________, 20____.
________________________________________
Signature of Purchaser
________________________________________
Name of Purchaser
________________________________________
Telephone Number of Purchaser
| A-4 |
APPENDIX “1”
INDIVIDUAL ACCREDITED INVESTOR RISK ACKNOWLEDGMENT FORM
Form 45-106F9
Risk Acknowledgement Form for Accredited Investors who are Individuals
WARNING! This investment is risky. Don’t invest unless you can afford to lose all of the money you pay for this investment. |
| Section 1 – TO BE COMPLETED BY THE COMPANY OR SELLING SECURITY HOLDER | |||
| 1. About your investment | |||
| Type of Securities: Purchased Shares | Company: Arras Minerals Corp. (the “Company”) | ||
| Purchased from: The Company | |||
| Sections 2 to 4 – TO BE COMPLETED BY THE PURCHASER | |||
| 2. Risk acknowledgement | |||
| This investment is risky. Initial that you understand that: | Your Initials | ||
| Risk of loss – You could lose your entire investment of CDN$ ___________ [Insert total dollar amount of the Investment] | |||
| Liquidity risk – You may not be able to sell your investments quickly – or at all. | |||
| Lack of information – You may receive little or no information about your investment. | |||
| Lack of advice – You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered. The salesperson is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca. | |||
| 3. Accredited investor status | |||
| You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you (you may initial more than one statement). The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. | Your Initials | ||
| Your net income before taxes was more than CDN$200,000 in each of the 2 most recent calendar years, and you expect it to be more than CDN$200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.) | |||
| Your net income before taxes combined with your spouse’s was more than CDN$300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than CDN$300,000 in the current calendar year. | |||
| Either alone or with your spouse, you own more than CDN$1 million in cash and securities, after subtracting any debt related to the cash and securities. | |||
| Either alone or with your spouse, you have net assets worth more than CDN$5 million. (Your net assets are your total assets (including real estate) minus your total debt). | |||
| 4. Your name and signature | |||
| By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form. | |||
| First and Last Name (please print): | |||
| Signature: | |||
| Date: | |||
| Section 5 – TO BE COMPLETED BY THE SALESPERSON | |||
| 5. Salesperson information | |||
| [Instruction: The salesperson is the person who meets with, or provides information to, the purchaser with respect to making this investment. That could include a representative of the Company or selling security holder, a registrant or a person who is exempt from the registration requirement.] | |||
| First and Last Name of Salesperson (please print): | |||
| Telephone: | Email: | ||
| Name of Firm (if registered): | |||
| Section 6 – TO BE COMPLETED BY THE COMPANY OR SELLING SECURITY HOLDER | |||
| 6. For more information about this investment | |||
For more information about this investment/ the Company: Arras Minerals Corp. 777 Dunsmuir Street, Suite 1610 Vancouver, B.C. V7Y 1K4 Attention: Christopher Richards, Chief Financial Officer Email: crichards@arrasminerals.com.
For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca. | |||
| A-1-1 |
SCHEDULE “B”
QUALIFIED INVESTOR CERTIFICATE
FOR PURCHASERS RESIDENT IN A PROVINCE OR TERRITORY OF CANADA
TO: Arras Minerals Corp. (the “Company”)
RE: SUBSCRIPTION FOR SHARES OF THE COMPANY
All capitalized terms not defined herein shall have the meaning given to them in the Subscription Agreement to which this Schedule “B” is attached (collectively, the “Subscription Agreement”).
In connection with the purchase by the undersigned Purchaser of Purchased Shares of the Company, the Purchaser hereby represents, warrants, covenants and certifies to the Company that the Purchaser as at the date of this Certificate and as of the date of Closing is and will be resident in a province or territory of Canada as set out on page (ii) of the Subscription Agreement and is purchasing the Purchased Shares as principal for its own account, pursuant to the family, friends and business associates exemptions in Section 2.5, 2.6 or 2.6.1 of National Instrument 45-106, as applicable, by virtue of satisfying one of the indicated criteria as set out below and as so marked by the Purchaser, AND:
| (a) | if resident in Ontario, the Purchaser has completed and signed the Ontario Form 45-106F12 - Risk Acknowledgement Form for Family, Friend and Business Associate Investors in Ontario attached hereto as Appendix 1; or |
| (b) | if resident in Saskatchewan, the Purchaser has completed and signed the Saskatchewan Form 45-106F5 - Risk Acknowledgement Saskatchewan Close Personal Friends and Close Business Associates attached hereto as Appendix 2. |
CHECK APPROPRIATE CATEGORY:
| _____ | (a) a director, executive officer or control person of the Company or of an affiliate of the Company; |
| _____ | (b) a spouse, parent, grandparent, brother, sister, child or grandchild of a director, executive officer or control person of the Company, or of an affiliate of the Company, being __________________________________; |
| _____ | (c) a parent, grandparent, brother, sister, child or grandchild of the spouse of a director, executive officer or control person of the Company or of an affiliate of the Company, being ______________________________; |
| _____ | (d) a close personal friend of a director, executive officer or control person of the Company or of an affiliate of the Company, being ______________________________ (complete (1) below); or |
| _____ | (e) a close business associate of a director, executive officer or control person of the Company or of an affiliate of the Company, being ________________________________ (complete (1) below); |
| _____ | (f) a founder of the Company or a spouse, parent, grandparent, brother, sister, child, grandchild, close personal friend or close business associate of a founder of the Issuer, being _______________________________ (if applicable, complete (1) below); |
| _____ | (g) a parent, grandparent, brother, sister, child or grandchild of a spouse of a founder of the Company, being ___________________________________________; |
| _____ | (h) a person of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, persons described in paragraphs (a) to (g), being _____________________________ (if applicable, complete (1) below); or |
| _____ | (i) a trust or estate of which all of the beneficiaries or a majority of the trustees or executors are persons described in paragraphs (a) to (g), being _____________________________ (if applicable, complete (1) below). |
| B-1 |
| (1) | If you are a close personal friend or close business associate of a director, executive officer, founder or control person of the Issuer, please indicate how long you have known the individual and describe the nature of your relationship, including how you are in a position to assess the capabilities and trustworthiness of the individual. |
| Dated:____________ , 2021 | ||
| Print name of Purchaser | ||
| By: | ||
| Signature | ||
| ||
| Print name of Authorized Signatory for a Corporate Purchaser | ||
| ||
| Title of Authorized Signatory |
Ontario Investors
If the Purchaser is resident in Ontario, it has executed and delivered to the Company an Ontario Form 45-106F12 Risk Acknowledgement Form for Family, Friend and Business Associate Investors in Ontario in the form attached hereto as Appendix 1 to Schedule D.
Saskatchewan Investors
If the Purchaser is resident in Saskatchewan, it has executed and delivered to the Company a Saskatchewan Risk Acknowledgement Form in the form attached hereto as Appendix 2 to Schedule D.
For the purposes hereof:
“close business associate” means an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the Company to be in a position to assess their capabilities and trustworthiness. An individual is not a close business associate solely because the individual is: (a) a member of the same club, organization, association or religious group; (b) a co-worker, colleague or associate at the same workplace; (c) a client, customer, former client or former customer; (d) a mere acquaintance; or (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.
The relationship between the individual and the director, executive officer, founder or control person must be direct. For example the exemption is not available for a close business associate of a close business associate of a director of the Company.
A relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.
| B-2 |
“close personal friend” means an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness. The term “close personal friend” can include a family member who is not already specifically identified in the exemptions if the family member satisfies the criteria described above.
An individual is not a close personal friend solely because the individual is: (a) a relative; (b) a member of the same club, organization, association or religious group; (c) a co-worker, colleague or associate at the same workplace; (d) a client, customer, former client or former customer; (e) a mere acquaintance; or (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.
The relationship between the individual and the director, executive officer, founder or control person must be direct. For example the exemption is not available to a close personal friend of a close personal friend of a director of the Company.
A relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.
“control person” means (a) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company; or (b) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company, and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of the Company, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the Company.
“executive officer” means an individual who is: (a) a chair, vice-chair or president; (b) a vice-president in charge of a principal business unit, division or function including sales, finance or production; (c) an officer of the Company or any of its subsidiaries and who performs a policy-making function in respect of the Company; or (d) performing a policy-making function in respect of the Company.
“founder” means a person who: (a) acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the Company; and (b) at the time of the trade is actively involved in the business of the Company.
| B-3 |
APPENDIX 1
Ontario
Form 45-106F12
Risk Acknowledgement Form for Family, Friend and Business Associate Investors in Ontario
WARNING!
This investment is risky. Don’t invest unless you can afford to lose all the money you pay for this investment.
| SECTION 1 TO BE COMPLTED BY THE ISSUER | ||||
| 1. About your investment | ||||
| Type of securities: Purchased Shares | Issuer: Arras Minerals Corp. | |||
Purchased from: Arras Minerals Corp.
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| SECTIONS 2 TO 4 TO BE COMPLETED BY THE PURCHASER | ||||
| 2. Risk acknowledgement | ||||
| This investment is risky. Initial that you understand that: | Your initials | |||
| Risk of loss – You could lose your entire investment of $______________. [Instruction: Insert the total dollar amount of the investment.] | ||||
| Liquidity risk – You may not be able to sell your investment quickly – or at all. | ||||
| Lack of information – You may receive little or no information about your investment. The information you receive may be limited to the information provided to you by the family member, friend or close business associate specified in section 3 of this form. | ||||
| B-1-1 |
| 3. Family, friend or business associate status | ||||
| You must meet one of the following criteria to be able to make this investment. Initial the statement that applies to you: | Your initials | |||
A) You are: 1) [check all applicable boxes] [_] a director of the issuer or an affiliate of the issuer [_] an executive officer of the issuer or an affiliate of the issuer [_] a control person of the issuer or an affiliate of the issuer [_] a founder of the issuer OR 2) [check all applicable boxes] [_] a person of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, (i) individuals listed in (1) above and/or (ii) family members, close personal friends or close business associates of individuals listed in (1) above [_] a trust or estate of which all of the beneficiaries or a majority of the trustees or executors are (i) individuals listed in (1) above and/or (ii) family members, close personal friends or close business associates of individuals listed in (1) above |
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B) You are a family member of __________________________________________ [Instruction: Insert the name of the person who is your relative either directly or through his or her spouse], who holds the following position at the issuer or an affiliate of the issuer: ____________________________________.
You are the _________________________________ of that person or that person’s spouse. [Instruction: To qualify for this investment, you must be (a) the spouse of the person listed above or (b) the parent, grandparent, brother, sister, child or grandchild of that person or that person’s spouse.] |
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C) You are a close personal friend of __________________________________________ [Instruction: Insert the name of your close personal friend], who holds the following position at the issuer or an affiliate of the issuer: ____________________________________.
You have known that person for _________ years. |
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D) You are a close business associate of __________________________________________ [Instruction: Insert the name of your close business associate], who holds the following position at the issuer or an affiliate of the issuer: ____________________________________.
You have known that person for _________ years. |
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| B-1-2 |
| 4. Your name and signature | ||||
| By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form. You also confirm that you are eligible to make this investment because you are a family member, close personal friend or close business associate of the person identified in section 5 of this form. | ||||
| First and last name (please print): | ||||
Signature:
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Date: | |||
| SECTION 5 TO BE COMPLETED BY THE PERSON WHO CLAIMS THE CLOSE PERSONAL RELATIONSHIP, IF APPLICABLE | ||||
| 5. Contact person at the issuer or an affiliate of the issuer | ||||
[Instruction: To be completed by the director, executive officer, control person or founder with whom the purchaser has a close personal relationship indicated under sections 3B, C or D of this form.]
By signing this form, you confirm that you have, or your spouse has, the following relationship with the purchaser: [check the box that applies] [_] family relationship as set out in section 3B of this form [_] close personal friendship as set out in section 3C of this form [_] close business associate relationship as set out in section 3D of this form
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| First and last name of contact person (please print): | ||||
| Position with the issuer or affiliate of the issuer (director, executive officer, control person or founder): | ||||
| Telephone: | Email: | |||
Signature:
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Date: | |||
| SECTION 6 TO BE COMPLETED BY THE ISSUER | ||||
| 6. For more information about this investment | ||||
Arras Minerals Corp. 777 Dunsmuir Street, Suite 1610 Vancouver, B.C. V7Y 1K4 Attention: Christopher Richards, Chief Financial Officer Email: crichards@arrasminerals.com. For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca. | ||||
Signature of executive officer of the issuer (other than the purchaser):
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Date: | |||
| B-1-3 |
Form instructions:
| 1. | This form does not mandate the use of a specific font size or style but the font must be legible. |
| 2. | The information in sections 1, 5 and 6 must be completed before the purchaser completes and signs the form. |
| 3. | The purchaser, an executive officer who is not the purchaser and, if applicable, the person who claims the close personal relationship to the purchaser must sign this form. Each of the purchaser, contact person at the issuer and the issuer must receive a copy of this form signed by the purchaser. The issuer is required to keep a copy of this form for 8 years after the distribution. |
| 4. | The detailed relationships required to purchase securities under this exemption are set out in section 2.5 of National Instrument 45-106 Prospectus and Registration Exemptions. For guidance on the meaning of “close personal friend” and “close business associate”, please refer to sections 2.7 and 2.8, respectively, of Companion Policy 45-106CP Prospectus and Registration Exemptions. |
| B-1-4 |
Appendix 2
Saskatchewan Form 45-106F5
Risk Acknowledgement
Saskatchewan Close Personal Friends and Close Business Associates
I acknowledge that this is a risky investment:
| · | I am investing entirely at my own risk. |
| · | No securities regulatory authority has evaluated or endorsed the merits of these securities. |
| · | The person selling me these securities is not registered with a securities regulatory authority and has no duty to tell me whether this investment is suitable for me. |
| · | I will not be able to sell these securities for 4 months. |
| · | I could lose all the money I invest. |
| · | I do not have a 2-day right to cancel my purchase of these securities or the statutory rights of action for misrepresentation I would have if I were purchasing the securities under a prospectus. I do have a 2-day right to cancel my purchase of these securities if I receive an amended offering document. |
I am investing $____________ [total consideration] in total; this includes any amount I am obliged to pay in future.
I am a close personal friend or close business associate of __________________________ [state name], who is a _________________________ [state title - founder, director, senior officer or control person] of Arras Minerals Corp. or an affiliate of Arras Minerals Corp.
I acknowledge that I am purchasing based on my close relationship with ____________________ [state name of founder, director, senior officer or control person] whom I know well enough and for a sufficient period of time to be able to assess her/his capabilities and trustworthiness.
I acknowledge that this is a risky investment and that I could lose all the money I invest.
| Date | Signature of Subscriber | |
| Print name of Subscriber |
Sign 2 copies of this document. Keep one copy for your records.
| B-2-1 |
SCHEDULE “C”
UNITED STATES ACCREDITED INVESTOR CERTIFICATE
TO: Arras Minerals Corp. (the “Company”)
RE: SUBSCRIPTION FOR SHARES OF THE COMPANY
Reference is made to the subscription agreement between the Company and the undersigned (referred to herein as the “Purchaser”) dated as of the date hereof (the “Subscription Agreement”). Upon execution of this United States Accredited Investor Certificate, this United States Accredited Investor Certificate shall be incorporated into and form a part of the Subscription Agreement. Terms not otherwise defined herein have the meanings attributed to them in the Subscription Agreement.
In connection with the purchase of the Purchased Shares by the Purchaser, the Purchaser represents, warrants and covenants (on its own behalf or, if applicable, on behalf of those for whom the Purchaser is contracting under the Subscription Agreement) and certifies to the Company and acknowledges that the Company is relying thereon that the Purchaser has read the following definition of an “accredited investor” (“U.S. Accredited Investor”) under Rule 501(a) of Regulation D under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and certifies that the Purchaser is a U.S. Accredited Investor that satisfies one or more of the categories indicated below (check one):
“U.S. Accredited Investor” shall mean any of (check one):
| (a) £ | A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; | |
| (b) £ | A broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended; | |
| (c) | An investment adviser registered pursuant to Section 203 of the United States Investment Advisers Act of 1940, as amended (the “U.S. Investment Advisers Act”), or registered pursuant to the laws of a state; | |
| (d) | An investment adviser relying on the exemption from registering with the United States Securities and Exchange Commission under Section 203(l) or (m) of the U.S. Investment Advisers Act; | |
| (e) £ | An insurance company (as defined in Section 2(a)(13) of the U.S. Securities Act); | |
| (f) £ | An investment company registered under the United States Investment Company Act of 1940, as amended (the “U.S. Investment Company Act”); | |
| (g) £ | A business development company (as defined in Section 2(a)(48) of the U.S. Investment Company Act); | |
| (h) £ | A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the United States Small Business Investment Act of 1958, as amended; | |
| (i) | A rural business investment company (as defined in Section 384A of the Consolidated Farm and Rural Development Act); | |
| (j) £ | 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 US$5,000,000; |
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| (k) £ | An employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (1) whose investment decision is made by a plan fiduciary as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company or registered investment advisor, or (2) having total assets in excess of US$5,000,000, or (3) if a self-directed plan, with investment decisions made solely by persons that are “accredited investors”, as defined in Rule 501(a) of Regulation D under the U.S. Securities Act; | |
| (l) £ | A private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act; | |
| (m) £ | An organization described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Purchased Shares, with total assets in excess of US$5,000,000; | |
| (n) £ | A director or executive officer of the Company; | |
| (o) £ | A natural person with individual “net worth”, or joint “net worth” with his or her spouse, at the time of purchase in excess of US$1,000,000; Note: For purposes of calculating “net worth” under this paragraph: (i) The person’s primary residence shall not be included as an asset; (ii) Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of the Purchased Shares exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of the Purchased Shares shall be included as a liability. |
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| (p)£ | A natural person who had an individual income in excess of US$200,000 in each of the last two years or joint income with his or her spouse in excess of US$300,000 in each of those years, and who reasonably expects to reach the same income level in the current year; | |
| (q) | A natural person who holds, in good standing, one of the following professional licenses: the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Investment Adviser Representative license (Series 65); | |
| (r) £ | A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Purchased Shares, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the U.S. Securities Act; or | |
| (s) £ | An entity in which all of the equity owners are U.S. Accredited Investors. |
The Purchaser acknowledges that if it is an individual U.S. Accredited Investor that is relying on the net worth or income eligibility qualifications set forth in (o) or (p) above, such Purchaser shall also complete and deliver to the Company a U.S. Individual Accredited Investor Questionnaire in the form attached as Appendix I to this Schedule “C”.
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The representations, warranties, statements and certifications made in this United States Accredited Investor Certificate are true and accurate as of the date of this United States Accredited Investor Certificate and will be true and accurate as of the Closing Date and the Purchaser acknowledges that this certificate is incorporated into and forms part of the subscription agreement to which it is attached. If any such representation, warranty, statement or certification becomes untrue or inaccurate prior to the Closing Date, the undersigned Purchaser shall give the Company immediate written notice thereof.
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| Signature of Purchaser of Authorized Signatory of Purchaser |
| Name of Purchaser [Please Print] |
| Name and Office of Authorized Signatory of Purchaser [Please Print] |
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APPENDIX I TO SCHEDULE “C”
U.S. INDIVIDUAL ACCREDITED INVESTOR QUESTIONNAIRE
I understand that in order to be accepted as an “accredited investor”, I must satisfy certain of the following standards. The undersigned hereby represents and warrants to Arras Minerals Corp. (the “Company”) as follows:
GENERAL INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR:
1. General Information
| Name(s): | ||||
| Principal Residence: | ||||
| Business Hours Telephone: | ||||
| Home Telephone: | ||||
| Email: | ||||
2. Financial Status. Please answer the following questions concerning your financial status by marking the appropriate box and filling in the blanks.
2.1 Does your individual or joint (together with your spouse) net worth exceed US$1,000,000? For the purpose of calculating your individual or joint (together with your spouse) net worth, (i) your primary residence shall not be included as an asset, (ii) indebtedness that is secured by your primary residence, up to the estimated fair market value of the primary residence as of the date hereof, shall not be included as a liability (except that if the amount of such indebtedness outstanding as of the date hereof exceeds the amount outstanding 60 days before the date hereof, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability) and (iii) indebtedness that is secured by your primary residence in excess of the estimated fair market value of your primary residence as of the date hereof shall be included as a liability:
[_] Yes [_] No
2.1.1 If you answered “No” to Question 2.1, please indicate the actual amount of individual or joint (together with your spouse) net worth (calculated in accordance with the instructions provided in Question 2.1 above).
US$ ______________
2.2 Please indicate, for each of the two most recent years, what your individual income (or joint income together with your
spouse) was, and for the current year what your individual income (or joint income together with your spouse) is expected to be.
2019 Individual ____________________ Joint ______________________
2020 Individual ____________________ Joint ______________________
3. Financial Background. Please respond to the following questions, supplying as much detail as possible in order to make your answers complete.
3.1 Indicate by check mark which of the following categories best describes the extent of your prior experience in the areas of investment listed below:
| No Experience | Some Experience | Substantial Experience | |
| [_] | [_] | [_] | Marketable Securities |
| [_] | [_] | [_] | Securities for which no public market exists |
3.2 For
those investments for which you indicated “Substantial Experience” or “Some Experience” in question 3.1
above, please answer the following additional question:
How often do you make your own investment decisions with respect to such investments?
| C-1 |
3.3 Do
you have adequate means of providing for your current needs and personal contingencies and have no need for liquidity in such
investments?
[_] Yes [_] No
4. Prior Purchases of Securities.
Have you made prior purchases of securities sold in reliance on the private offering exemption from registration under the
U.S. Securities Act?
[_] Yes [_] No
I hereby represent and warrant that:
(a)
I, individually or together with my spouse, have a net worth (i.e., a total assets in excess of total liabilities,
as calculated in accordance with the instructions provided in Question 2.1 above) of at least US$1,000,000; or
(b)
I, individually (without my spouse), have had an income of not less than US$200,000 (or, jointly with my spouse, US$300,000)
during each of the last two years, and reasonably expect that I will have an income of at least US$200,000 (or US$300,000, together
with my spouse) during the present year.
The foregoing representations and
warranties and all other information which I have provided to the Company concerning myself and my financial condition are true
and accurate as of the date hereof. If in any respect, such representations, warranties, or information shall not be true and
accurate, I will give written notice of such fact to the Company specifying which representations, warranties or information are
not true and accurate, and the reasons therefor.
I understand that the information contained herein is being furnished by me in order for the Company to determine my suitability as an “accredited investor”, may be accepted by the Company in light of the requirements of Section 4(a)(2) of the U.S. Securities Act and that the Company will rely on the information contained herein for purposes of such determination.
IN WITNESS WHEREOF, the undersigned has executed this U.S. Individual Accredited Investor Questionnaire as of the day of _______________________, 2021.
___________________________________
Print or Type Name
X___________________________________
Signature
| C-2 |
SCHEDULE “D”
CERTIFICATION OF U.S. PURCHASER
Form of Declaration for Removal of Legend
TO: Arras Minerals Corp. (the “Company”) (and any future transfer agent thereof)
The undersigned (a) acknowledges that the sale of ____________ common shares of the Company to which this declaration relates, represented by certificate number _______________(the “Securities”), is being made in reliance on Rule 904 of Regulation S (“Regulation S”) under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and (b) certifies that (1) it is not (A) an “affiliate” (as defined in Rule 405 under the U.S. Securities Act) (an “Affiliate”) of the Company, (B) a “distributor” (as defined in Regulation S) (a “Distributor”), (C) an Affiliate of a Distributor or (D) acting on behalf of any of the persons set forth in (A), (B) or (C) above, (2) the offer of the Securities was not made to a person in the United States, and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believed that the buyer was outside the United States, or (B) the transaction was executed in, on or through the facilities of the Toronto Stock Exchange or the TSX Venture Exchange (or another designated offshore securities market) and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any Affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any “directed selling efforts” in the United States in connection with the offer and sale of the Securities, (4) the sale of the Securities is bona fide and not for the purpose of “washing off” the resale restrictions imposed because the Securities are “restricted securities” (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to replace the Securities with fungible unrestricted securities, and (6) the contemplated sale of the Securities is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S under the U.S. Securities Act, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.
| Date | Signature of Subscriber | |
| Print name of Signatory (if different from Purchaser) | ||
| Title |
| D-1 |
SCHEDULE “E”
CONTACT INFORMATION – PROVINCIAL SECURITIES REGULATORY AUTHORITIES
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The contact information of the public official in the local jurisdiction who can answer questions about the security regulatory authority’s or regulator’s indirect collection of information is as follows:
Alberta Securities Commission Suite 600, 250 – 5th Street SW Calgary, Alberta T2P 0R4 Telephone: (403) 297-6454 Toll free in Canada: 1-877-355-0585 Facsimile: (403) 297-2082
British Columbia Securities Commission P.O. Box 10142, Pacific Centre 701 West Georgia Street Vancouver, British Columbia V7Y 1L2 Inquiries: (604) 899-6854 Toll free in Canada: 1-800-373-6393 Facsimile: (604) 899-6581 Email: inquiries@bcsc.bc.ca
The Manitoba Securities Commission 500 – 400 St. Mary Avenue Winnipeg, Manitoba R3C 4K5 Telephone: (204) 945-2548 Toll free in Manitoba 1-800-655-5244 Facsimile: (204) 945-0330
Financial and Consumer Services Commission (New Brunswick) 85 Charlotte Street, Suite 300 Saint John, New Brunswick E2L 2J2 Telephone: (506) 658-3060 Toll free in Canada: 1-866-933-2222 Facsimile: (506) 658-3059 Email: info@fcnb.ca
Government of Newfoundland and Labrador Financial Services Regulation Division P.O. Box 8700 Confederation Building 2nd Floor, West Block Prince Philip Drive St. John’s, Newfoundland and Labrador A1B 4J6 Attention: Director of Securities Telephone: (709) 729-4189 Facsimile: (709) 729-6187 |
Nova Scotia Securities Commission Suite 400, 5251 Duke Street Duke Tower P.O. Box 458 Halifax, Nova Scotia B3J 2P8 Telephone: (902) 424-7768 Facsimile: (902) 424-4625
Ontario Securities Commission 20 Queen Street West, 22nd Floor Toronto, Ontario M5H 3S8 Telephone: (416) 593- 8314 Toll free in Canada: 1-877-785-1555 Facsimile: (416) 593-8122 Email: exemptmarketfilings@osc.gov.on.ca Public official contact regarding indirect collection of information: Inquiries Officer
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Prince Edward Island Securities Office 95 Rochford Street, 4th Floor Shaw Building P.O. Box 2000 Charlottetown, Prince Edward Island C1A 7N8 Telephone: (902) 368-4569 Facsimile: (902) 368-5283
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Financial and Consumer Affairs Authority of Saskatchewan Suite 601 – 1919 Saskatchewan Drive Regina, Saskatchewan S4P 4H2 Telephone: (306) 787-5879 Facsimile: (306) 787-5899
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Autorité des marchés financiers 800, Square Victoria, 22e étage C.P. 246, Tour de la Bourse Montréal, Québec H4Z 1G3 Telephone: (514) 395-0337 or 1-877-525-0337 Facsimile: (514) 873-6155 (For filing purposes only) Facsimile: (514) 864-6381 (For privacy requests only) Email: financementdessocietes@lautorite.qc.ca (For corporate finance issuers); Email: fonds_dinvestissement@lautorite.qc.ca (For investment fund issuers)
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E-1
Exhibit 4.19
SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION AGREEMENT (this "Agreement") dated August 31, 2021 is made between Silver Bull Resources, Inc., a Nevada corporation ("Silver Bull"), and Arras Minerals Corp., a corporation organized under the laws of the Province of British Columbia ("Arras").
R E C I T A L S
WHEREAS, the board of directors of Silver Bull (the "Silver Bull Board") has determined that it is in the best interests of Silver Bull and its stockholders to create a new corporation that will own and operate certain of its assets located in Kazakhstan, referred to herein as the Arras Assets;
WHEREAS, in anticipation of the Distribution (as defined herein), on March 19, 2021, Silver Bull transferred the Transferred Assets to its newly-formed wholly-owned subsidiary, Arras, in exchange for, among other things, an assumption by Arras of certain liabilities associated with the Transferred Assets and issuance of an aggregate of 36 million of Arras Shares, all as provided in the Asset Purchase Agreement and the Conveyance Agreement;
WHEREAS, the Silver Bull Board has determined that it is appropriate and desirable to make a distribution by way of a special dividend, on a pro rata basis, of one Arras Share for each Silver Bull Share held by holders thereof on the Record Date of approximately 34.3 million of Arras Shares owned by Silver Bull (the "Distribution");
WHEREAS, Silver Bull and Arras have prepared, and Arras has filed with the SEC, the Form 20-F, which sets forth certain disclosure concerning Arras and the Distribution;
WHEREAS, each of Silver Bull and Arras has determined that it is appropriate and desirable to set forth the matters required to effect the Distribution and certain other agreements that will govern the relationship of Silver Bull and Arras following the Distribution; and
WHEREAS, (a) the Silver Bull Board has (i) determined that the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements have a valid business purpose, are in furtherance of and consistent with its business strategy and are in the best interests of Silver Bull and its stockholders and (ii) approved this Agreement and each of the Ancillary Agreements, and (b) the board of directors of Arras (the "Arras Board") has approved this Agreement and each of the Ancillary Agreements.
THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE
I
DEFINITIONS
For the purpose of this Agreement, the following terms will have the following meanings:
"Action" means any demand, action, claim, counterclaim, dispute, suit, countersuit, arbitration, hearing, inquiry, subpoena, proceeding, examination or investigation of any nature (whether criminal, civil, legislative, administrative, arbitral, regulatory, prosecutorial, appellate or otherwise) by or before any Governmental Authority or any arbitration or mediation tribunal.
"Affiliate" means, with respect to any Person, any other Person who directly or indirectly controls, is controlled by, or is under direct or indirect common control with, such Person, and includes any Person in like relation to an Affiliate. A Person shall be deemed to "control" another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise; and the term "controlled" shall have a similar meaning.
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"Agent" means Olympia Trust Company, in its capacity as the distribution agent, transfer agent and registrar for the Arras Shares in connection with the Distribution.
"Ancillary Agreements" means all agreements (other than this Agreement) entered into by the Parties in connection with the Distribution or the other transactions contemplated by this Agreement.
"Approvals" or "Notifications" means any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any Third Party, including any Governmental Authority.
"Arras Assets" means the assets of Arras, including but not limited to the Transferred Assets, the Maikain JV Agreement, the Arras Loans.
"Arras Loans" means, collectively, (i) the loan agreement between Arras and Ekidos Minerals LLP dated April 22, 2021, whereby Arras loaned to Ekidos Minerals LLP US$450,000, which loan agreement was subsequently amended on June 30, 2021, (ii) the loan agreement between Arras and Ekidos Minerals LLP dated May 19, 2021, whereby Arras loaned to Ekidos Minerals LLP US$480,000, which loan agreement was subsequently amended on July 30, 2021, and (iii) the loan agreement between Arras and Ekidos Minerals LLP dated June 30, 2021 in the amount of US$480,000, of which Arras has loaned to Ekidos Minerals LLP US$373,500.
"Arras Shares" means common shares, without par value, of Arras.
"Asset Purchase Agreement" means the asset purchase agreement between Silver Bull and Arras dated March 19, 2021.
"Conveyance Agreement" means the general conveyance and assumption of liabilities agreement between Silver Bull and Arras dated March 19, 2021.
"Distribution Date" means the date of the consummation of the Distribution, which will be determined by the Silver Bull Board in its sole and absolute discretion.
"Distribution Time" means 5:01 p.m. Eastern Time on the Distribution Date.
"Effective Time" means immediately after the Distribution Time.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
"Form 20-F" means the registration statement on Form 20-F (or other appropriate form) filed by Arras with the SEC to effect the registration of Arras Shares pursuant to Section 12(b) of the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Distribution.
"Governmental Approvals" means any Approvals or Notifications to be made to, or obtained from, any Governmental Authority.
"Governmental Authority" means any nation or government, any state, province, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, provincial, local, domestic, foreign, supranational or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, a government and any executive official thereof.
| 2 |
"Law" means all applicable national, supranational, federal, state, provincial, local or similar laws (including common law), statutes, ordinances, orders, decrees, codes, rules, regulations, policies or guidelines promulgated, or judgments, decisions, orders or arbitration awards, in each case, enacted, promulgated, issued or entered by a Governmental Authority.
"Liabilities" means all debts, guarantees, assurances, commitments, liabilities, responsibilities, losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim, demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.
"Maikain JV Agreement" means the Maikain joint venture agreement between Ekidos Minerals LLP and Orogen LLP dated May 20, 2021 in connection with mineral license applications for exploration and evaluation of certain properties, including the Akkuduk property located in Kazakhstan.
"Option Agreement" mean the option agreement among Silver Bull, Copperbelt AG and its subsidiary Dostyk LLP dated August 12, 2020, pursuant to which Silver Bull was granted the sole and exclusive option to acquire up to a 100% interest in the Beskauga property located in Kazakhstan.
"Party" or "Parties" means a party or the parties to this Agreement.
"Person" means an individual, a general or limited partnership, a company, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.
"Record Date" means the close of business on the date to be determined by the Silver Bull Board as the record date for determining holders of Silver Bull Shares entitled to receive Arras Shares pursuant to the Distribution.
"Record Holders" means the holders of record of Silver Bull Shares as of the Record Date.
"SEC" means the U.S. Securities and Exchange Commission.
"Silver Bull Loans" means, collectively, (i) the loan agreement between Silver Bull and Ekidos Minerals LLP dated August 20, 2020, whereby Silver Bull loaned to Ekidos Minerals LLP US$360,000, which loan agreement was subsequently amended on October 30, 2020, January 21, 2021 and June 30, 2021, (ii) the loan agreement between Silver Bull and Ekidos Minerals LLP dated December 21, 2020, whereby Silver Bull loaned to Ekidos Minerals LLP US$400,000, which loan agreement was subsequently amended on June 30, 2021, and (iii) the loan agreement between Silver Bull and Ekidos Minerals LLP dated February 23, 2021 in the amount of US$450,000, of which Silver Bull has loaned to Ekidos Minerals LLP US$225,000, which loan agreement was subsequently amended on June 30, 2021.
"Silver Bull Shares" means shares of common stock, par value US$0.01 per share, of Silver Bull.
"Silver Bull Warrants" means warrants to purchase Silver Bull Shares.
"Stepnoe and Ekidos JV Agreement" means the joint venture agreement between Silver Bull and Copperbelt AG dated September 1, 2020 in connection with mineral license applications for exploration and evaluation of the Stepnoe and Ekidos properties located in Kazakhstan.
"Third Party" means any Person other than the Parties.
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"Transferred Assets" means Silver Bull's right, title and interest in and to the Option Agreement, the Stepnoe and Ekidos JV Agreement and the Silver Bull Loans.
"TSX" means the Toronto Stock Exchange.
ARTICLE
II
THE DISTRIBUTION
2.1 Sole and Absolute Discretion; Cooperation.
(a) Silver Bull shall, in its sole and absolute discretion, determine the terms of the Distribution, including the form, structure and terms of any transaction(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution. In addition, Silver Bull may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution.
(b) Arras shall cooperate with Silver Bull to accomplish the Distribution. In this regard, Arras shall, to the extent permitted by applicable Law, (i) promptly take any and all actions necessary or desirable to effect the Distribution, including in respect of the registration under the Exchange Act of Arras Shares on the Form 20-F and (ii) upon written request by Silver Bull and subject to the approval by the Arras Board, issue to Silver Bull such number of Arras Shares that the Silver Bull Board determines is required for the sole purpose of maintaining the distribution ratio of one Arras Share for each Silver Bull Share, at a price of $0.50 per Arras Share or such other consideration as determined by the Arras Board. Silver Bull shall provide to the Agent any information required in order to complete the Distribution.
2.2 Actions Prior to the Distribution. Prior to the Distribution Time and subject to the terms and conditions set forth herein, the Parties shall take, or cause to be taken, the following actions in connection with the Distribution:
(a) Notice to TSX. Silver Bull shall, to the extent possible and necessary, give the TSX not less than five trading days' advance notice of the Record Date in compliance with applicable rules of the TSX Company Manual.
(b) Securities Law Matters. Arras shall file any registration statements, amendments or supplements to the Form 20-F as may be necessary or advisable in order to cause the Form 20-F to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. The Parties shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof that are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or advisable in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. The Parties shall prepare, and Arras shall, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters that Silver Bull determines are necessary or desirable to effectuate the Distribution, and Silver Bull and Arras shall each use their respective reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable. The Parties shall take all such action as may be necessary or appropriate under applicable securities Laws in Canada or blue sky Laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.
(c) Mailing of Form 20-F. Silver Bull shall, as soon as is reasonably practical after the Form 20-F is declared effective by the SEC under the Exchange Act and the Silver Bull Board has approved the Distribution, cause copies of the Form 20-F, or a notice of Internet availability thereof, to be mailed to the Record Holders.
(d) The Distribution Agent. Silver Bull shall enter into a distribution agent agreement, or such other agreement as may be necessary, with the Agent or otherwise provide instructions to the Agent regarding the Distribution.
(e) Financing Transactions. In connection with the Distribution and prior to the Effective Time, the Parties shall cooperate with respect to and undertake such financing transactions as Silver Bull determines to be advisable.
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2.3 Conditions to the Distribution.
(a) The consummation of the Distribution shall be subject to the satisfaction, or waiver, in whole or in part, by Silver Bull in its sole and absolute discretion, of the following conditions:
(i) All corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby by each Party shall have been obtained.
(ii) The SEC shall have declared effective the Form 20-F; no order suspending the effectiveness of the Form 20-F shall be in effect; and no proceedings for such purposes shall be pending before or threatened by the SEC.
(iii) Copies of the Form 20-F, or notice of Internet availability thereof, shall have been mailed to the Record Holders.
(iv) The actions and filings necessary or appropriate under applicable U.S. federal, U.S. state, Canadian or other securities Laws or blue sky Laws (and any comparable Laws under any foreign jurisdiction) and the rules and regulations thereunder shall have been taken or made, and, where applicable, shall have become effective or been accepted.
(v) Any Governmental Approvals required for the consummation of the Distribution shall have been obtained.
(vi) No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the transactions related thereto shall be in effect.
(vii) Each of the Ancillary Agreements shall have been duly executed and delivered by the applicable parties thereto.
(viii) No other event or development shall have occurred or shall exist (including any material breach of the representations, warranties, covenants or agreements of this Agreement) that, in the judgment of the Silver Bull Board, in its sole discretion, makes it inadvisable to effect the Distribution or the other transactions contemplated hereby.
(b) The foregoing conditions are for the sole benefit of Silver Bull and shall not give rise to or create any duty on the part of Silver Bull or the Silver Bull Board to waive or not waive any such condition or in any way limit Silver Bull's right to terminate this Agreement as set forth in Article V or alter the consequences of any such termination from those specified in Article V. Any determination made by the Silver Bull Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 2.3(a) shall be conclusive and binding on the Parties.
2.4 The Distribution.
(a) Subject to Section 2.3, at or prior to the Distribution Time, Silver Bull shall deliver to the Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of the Arras Shares as is necessary to effect the Distribution, and shall cause the transfer agent for the Silver Bull Shares to instruct the Agent to distribute at the Distribution Time the appropriate number of Arras Shares to each such Record Holder or designated transferee or transferees of such Record Holder by crediting such number of Arras Shares to book-entry accounts of such Record Holder or designated transferee or transferees of such Record Holder. The Distribution shall be effective at the Distribution Time.
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(b) Subject to Section 2.3, each Record Holder shall be entitled to receive in the Distribution one Arras Shares for every one Silver Bull Share held by such Record Holder on the Record Date.
(c) Until the Arras Shares are duly transferred in accordance with this Section 2.4 and applicable Law, from and after the Distribution Time, Arras shall regard the Persons entitled to receive such Arras Shares as record holders of such Arras Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons. Arras agrees that, subject to any transfers of such Arras Shares, from and after the Distribution Time (i) each such record holder shall be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the Arras Shares then held by such record holder, and (ii) each such record holder shall be entitled, without any action on the part of such record holder, to receive evidence of ownership of the Arras Shares then held by such record holder.
ARTICLE
III
CERTAIN OTHER MATTERS AND COVENANTS
3.1 Post-Effective Time Conduct. The Parties acknowledge that, after the Effective Time, Silver Bull will be independent of Arras, and Arras will be independent of Silver Bull, in each case with responsibility for its own respective actions and inactions and its own respective Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Effective Time, except as may otherwise be provided in this Agreement or any Ancillary Agreement, and each Party shall use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party.
3.2 Salaries and Office-Related Overhead Costs. As Silver Bull has done since the inception of Arras on February 5, 2021, Silver Bull shall continue to incur the salaries of its employees and other office-related overhead costs (including but not limited to expenses for office space, furnishings and equipment) and charge Arras for a portion of these costs on a pro-rata cost-recovery basis until the earlier of (i) the date on which Arras Shares are listed on a stock exchange or (ii) December 31, 2021 (the earlier of clause (i) or (ii), the "Shared Services Date"). The Parties hereby agree to use commercially reasonable efforts, prior to the Shared Services Date, to enter into a formal service agreement for common office-related overhead costs on such terms and conditions to be determined by the Parties, acting reasonably.
3.3 Agreement Relating to Silver Bull Warrants.
(a) Following the Effective Time, Silver Bull may, in its sole discretion, offer holders of outstanding Silver Bull Warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull Shares, one Silver Bull Share and one Arras Share for the original exercise price, subject to compliance with applicable securities Laws.
(b) If Silver Bull makes the offer pursuant to Section 3.3(a), Arras shall, subject to compliance with applicable securities Laws, issue such number of Arras Shares to satisfy the exercise of the Silver Bull Warrants for which the holders thereof elected to accept Silver Bull's offer to receive Arras Shares and enter into any agreements with Silver Bull or holders of Silver Bull Warrants as necessary to effect transactions contemplated in this Section 3.3.
(c) If Arras issues any Arras Shares to satisfy the cash exercise of the Silver Bull Warrants for which the holders thereof elected to accept Silver Bull's offer to receive Arras Shares pursuant to Section 3.3(a), then Silver Bull shall remit to Arras an amount equal to (i) the aggregate cash warrant exercise price received by Silver Bull in respect of such Silver Bull Warrants multiplied by (ii) the quotient of (A) the fair market value of the Arras Shares distributed in the Distribution divided by (B) the market capitalization of Silver Bull on the Record Date. For illustrative purposes only, if (i) the aggregate cash warrant exercise price received by Silver Bull in respect of such Silver Bull Warrants were US$1.0 million, (ii) the total market capitalization of Silver Bull on the Record Date were US$35.0 million, and (iii) the Silver Bull Board decided that the fair market value of the Arras Shares distributed in the Distribution was US$14.0 million, then the portion of the US$1.0 million aggregate cash warrant exercise price received by Silver Bull in respect of such Silver Bull Warrants required to be remitted by Silver Bull to Arras would be US$400,000 (i.e., US$1,000,000 x (US$14,000,000 / US$35,000,000)).
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3.4 Agreement Relating to the Option Agreement.
(a) Following the Effective Time, Arras may, in its sole discretion, seek the consent of the other parties to the Option Agreement to make certain amendments thereto such that the bonus payments that Arras or its Affiliate may be obligated to pay to Copperbelt AG pursuant to Section 2.8 or Section 2.9 of the Option Agreement (collectively, the "Bonus Payments") could be satisfied, at the option of Arras, in Arras Shares.
(b) If Arras is not successful in obtaining the consents referred to in Section 3.4(a), in consideration for the payments and other consideration received under the Asset Purchase Agreement and the Conveyance Agreement, Silver Bull hereby agrees to use commercially reasonable efforts to enter into an arrangement with Arras, on such terms and conditions to be determined by the Parties, acting reasonably, providing for (i) the issuance of Silver Bull Shares to Copperbelt AG upon (A) Arras becoming obligated to make the Bonus Payments and (B) Arras electing to pay a portion of such Bonus Payments in Silver Bull Shares in accordance with Section 2.8 or Section 2.9 of the Option Agreement and (ii) a payment by Arras to Silver Bull in consideration for the issuance by Silver Bull of Silver Bull Shares to Copperbelt AG.
ARTICLE
IV
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
4.1 Further Assurances.
(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use its reasonable best efforts, prior to, at and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.
(b) Without limiting the foregoing, prior to, at and after the Effective Time, each Party shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Approvals or Notifications of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party shall, at the reasonable request, cost and expense of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the assets transferred or allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any security interest, if and to the extent it is practicable to do so.
(c) Each Party shall (and shall cause their respective Affiliates to) use commercially reasonable efforts to (i) assist in the preparation and timely filing of tax returns of the other Party; (ii) assist in any audit or other proceedings with respect to taxes or tax returns; (iii) make available any information, records, or other documents relating to any taxes or tax returns of the other Party; and (iv) provide any information required to allow the other Party to comply with any information reporting or withholding requirements under applicable Law.
(d) Nothing in this Article IV shall limit or affect the provisions of Section 2.1(a) or Article V.
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ARTICLE
V
TERMINATION
5.1 Termination. Notwithstanding any provision to the contrary, this Agreement and all Ancillary Agreements may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by Silver Bull, in its sole and absolute discretion, without the approval or consent of any other Person, including Arras. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by a duly authorized officer of each of the Parties.
5.2 Effect of Termination. In the event of any termination of this Agreement prior to the Effective Time, this Agreement and all Ancillary Agreements shall become void and no Party (nor any of its Affiliates, directors, officers or employees) shall have any Liability or further obligation to the other Party (or any of its Affiliates) by reason of this Agreement.
ARTICLE
VI
MISCELLANEOUS
6.1 Counterparts; Entire Agreement; Corporate Power; Facsimile Signatures.
(a) This Agreement may be executed in one or more counterparts (including by facsimile, PDF or other electronic transmission), all of which shall be considered one and the same agreement.
(b) This Agreement and the Ancillary Agreements contain the entire agreement between the Parties with respect to the subject matter hereof, and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter.
(c) Each Party represents and warrants to the other Party as follows:
(i) it has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and
(ii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.
6.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable in such Province, and this Agreement shall be treated, in all respects, as a British Columbia contract.
6.3 Coordination with Ancillary Agreements. Except as expressly set forth in the applicable Ancillary Agreement, in the case of any conflict between this Agreement, on the one hand, and any Ancillary Agreement, on the other, in relation to matters specifically addressed by such Ancillary Agreement, the applicable Ancillary Agreement shall prevail.
6.4 Successors and Assigns; Assignment. This Agreement shall enure to the benefit of, and be binding on, the Parties and their respective successors and permitted assigns. Neither Party may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its respective rights or obligations under this Agreement without the prior written consent of the other Party.
6.5 No Third-Party Beneficiaries. This Agreement is for the sole benefit of the Parties, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
6.6 Notices. Any notice, direction, certificate, consent, determination or other communication required or permitted to be given or made under this Agreement shall be in writing and shall be effectively given and made if (i) delivered personally, (ii) sent by prepaid courier service or mail, or (iii) sent by e-mail (return receipt requested) or other similar means of electronic communication, in each case to the applicable address set out below:
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If to Silver Bull, to:
Silver Bull Resources, Inc.
777 Dunsmuir Street, Suite 1610
Vancouver, BC V7Y 1K4
Attention: Timothy Barry
Email: Tbarry@silverbullresources.com
with a copy to (which shall not constitute notice):
Blake, Cassels & Graydon LLP
595 Burrard Street, Suite 2600, Three Bentall Centre
Vancouver, BC V7X 1L3
Attention: Susan Tomaine
Email: susan.tomaine@blakes.com
If to Arras to:
Arras Minerals Corp.
777 Dunsmuir Street, Suite 1610
Vancouver, BC V7Y 1K4
Attention: Christopher Richards
Email: CRichards@silverbullresources.com
with a copy (which shall not constitute notice) to:
Blake, Cassels & Graydon LLP
595 Burrard Street, Suite 2600, Three Bentall Centre
Vancouver, BC V7X 1L3
Attention: Susan Tomaine
Email: susan.tomaine@blakes.com
A Party may, by notice to the other Party, change the address to which such notices are to be given. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.
6.7 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
6.8 Expenses. Except as otherwise expressly set forth in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all out-of-pocket fees, costs and expenses incurred prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Form 20-F and the Distribution and the consummation of the transactions contemplated hereby and thereby shall be borne by the Party incurring such fees, costs or expenses.
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6.9 Waivers of Default. A waiver of any default, breach or non-compliance under this Agreement shall not be effective unless in writing and signed by the Party to be bound by the waiver and then only in the specific instance and for the specific purpose for which it has been given. No waiver shall be inferred from or implied by any failure to act or delay in acting by a Party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other Party. The waiver by a Party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that Party's rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).
6.10 Amendments. No provisions of this Agreement may be waived, amended, supplemented or modified, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.
| SILVER BULL RESOURCES, INC. | ||
| By: | /s/ Timothy Barry | |
| Name: Timothy Barry | ||
| Title: CEO | ||
| ARRAS MINERALS CORP. | ||
| By: | /s/ Christopher Richards | |
| Name: Christopher Richards | ||
| Title: CFO | ||
Exhibit 4.20
CONSULTING AGREEMENT
THIS AGREEMENT made as of the 9th of February 2022 the “Effective Date”).
BETWEEN: ARRAS MINERALS CORP.
(the "Corporation" or “Arras”)
OF THE FIRST PART
| AND: | TIMOTHY BARRY |
(the "Consultant")
OF THE SECOND PART
WHEREAS:
| A. | The Corporation wishes to engage the Consultant to provide management consulting services to the Corporation in connection with the mineral exploration and management activities of the Corporation on its current and future mineral properties in which the Corporation has an ownership or optioned interest (the “Properties”); and |
| B. | The Corporation and the Consultant wish to specify the terms of the engagement herein. |
NOW THEREFORE, IN CONSIDERATION OF the covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
| 1. | Relationship and Duties |
| 1.1 | Subject always to the general control and direction of the Corporation, the Consultant shall act and be retained to act, during the term of this Agreement, as a consultant to the Corporation or any subsidiary or subsidiaries of the Corporation, pursuant to the terms and conditions contained herein and as further particularized in this Section 1. |
| 1.2 | The Consultant agrees that (a) it shall act as Chief Executive Officer (“CEO”) and perform the Services of such a position for Corporation (as described in Schedule A); (b) he shall devote his best efforts, skills and attention to the performance of his duties and responsibilities in respect of the offices of the Corporation or any of its subsidiaries to which he is appointed; and (c) any business that the Consultant proposes to undertake outside of the consultancy contemplated which could potentially overlap with Arras’ work with particular focus in Kazakhstan shall require pre-approval of the Board of Directors of the Corporation. |
| 1.3 | The Consultant's duties will generally be to provide the Corporation with managerial services and assistance in its mineral exploration activities and to perform duties and responsibilities assigned to it from time to time by the Board of Directors of the Corporation and to cause the Consultant to discharge such duties as are commensurate with the Consultant’s position with the Corporation (collectively, the "Services"). |
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| 1.4 | The Consultant shall perform the Services to the best of its ability and in a responsible, professional manner commensurate with its experience, expertise and within acceptable industry standards and shall devote as much time and resources to its performance of the Services as is required to achieve such standards which are envisioned to be non-exclusive. The Corporation understands that the Consultant may have other clients (including Silver Bull Resources, Inc.) as is consistent with a consultant rather than an employee. The Consultant shall promote the interest and goodwill of the Corporation. |
| 1.5 | The Consultant shall provide the Services as an independent contractor. The Consultant shall not be deemed to be, or represent themselves as, a representative or agent of the Corporation, except as expressly provided in writing by the Corporation and is consistent with the title of the position(s) held. |
| 1.6 | The Consultant shall comply with all applicable statutes and regulations and the lawful requirements and directions of any governmental authority having jurisdiction with respect to the Services it provides including the obtaining of all necessary permits and licences. |
| 1.7 | The Consultant shall refer to the Board of Directors of the Corporation all matters and transactions in which a real or perceived conflict of interest between the Consultant and the Corporation or any of its subsidiaries may arise. The Consultant shall not proceed with any such matter objected to by the Board of Directors of the Corporation. |
| 2. | Term of Agreement |
| 2.1 | The term of this Agreement shall be effective from January 1, 2022 (the “Effective Date”) and shall continue until this Agreement is terminated in accordance with Section 3 of this Agreement. |
| 3. | Termination |
3.1 The Consultant may terminate their engagement with the Corporation by giving not less than ninety (90) days written notice to the Corporation. At the time the Consultant provides the Corporation with notice to terminate the engagement, or at any time thereafter, the Corporation shall have the right to elect to terminate the Consultant’s engagement at any time prior to the effective date of the Consultant’s last day, and upon such election, shall provide to the Consultant a lump sum payment equal to the pro-rata Annual Fee then in effect for the number of days that remain outstanding to the effective date of the Consultant’s last day of service.
| 3.2 | Termination by Corporation Without Cause. The Consultant may at any time terminate its agreement with the Corporation for “Good Reason”, and the Corporation may at any time terminate the Consultant’s agreement without Cause and without any advance notice, and upon such cessations of the engagement (but excluding any Change of Control Terminations as set out in Section 3.7 of the Agreement), the Corporation may terminate this Agreement without Cause at any time by providing the Consultant with written notice of termination and a lump sum payment equal to: |
| (A) | Six (6) months of the Monthly Fee if the Consultant’s engagement agreement is terminated within the first year from the Effective Date; or |
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| (B) | After one (1) year from the Effective Date, twelve (12) months of the Monthly Fee, plus one (1) month’s monthly fee for each additional year of engagement from the Effective Date, up to a maximum of twenty-four (24) month’s Monthly Fee plus a pro-rata cash bonus using the annual performance bonus as outlined in Section 4.2. |
| (C) | If the Corporation terminates this Agreement without Cause within three (3) months of a Change of Control of the Corporation, the Corporation must pay the Consultant twenty-four (24) months of Monthly fee plus a lump sum payment equal to two (2) annual cash bonuses calculated utilizing the annual performance bonus outlined in Section 4.2 at the time of termination. |
| (D) | If Termination falls under Section 3.2(a),(b),(c) or 3.3 then the Corporation will continue the benefits provided under any insured standard benefit plan provided by the Corporation for twelve (12) months from the date of the termination, provided the Corporation is able to do so under the terms of the plan (with any continuation of benefits being subject to the terms and conditions of the plan provider); |
| 3.3 | Termination By Consultant Following a Change of Control. With Good Reason, the Consultant may elect, within six (6) months of a Change of Control of the Corporation to terminate their engagement and this Agreement upon providing written notice of termination to the Corporation. Upon receipt of such notice of termination in accordance with this, the Corporation must pay the Consultant twenty-four (24) months of the Monthly Fee plus a lump sum payment equal to two (2) annual cash performance bonuses outlined in Section 4.2 at the time of termination. |
| 3.4 | Termination by the Corporation for Fundamental Breach. Notwithstanding any other provision of this Agreement, the Corporation may on written notice to the Consultant immediately terminate this Agreement with the Corporation at any time for Fundamental Breach, without notice or pay in lieu of notice or any other form of compensation, severance pay or damages resulting from, without limitation, fraud, dishonesty, illegality, breach of statute or regulation, gross incompetence or misuse of alcohol or drugs. |
3.5 Directorship and Offices. Upon the termination of the Agreement between the Consultant and the Corporation, the Consultant shall immediately resign any directorship or office held in the Corporation or any respective parent, subsidiary or affiliated companies of the Corporation and, except as provided in this Agreement, the Consultant shall not be entitled to receive any written notice of termination or payment in lieu of notice, or to receive any severance pay, damages or compensation for loss of office or otherwise, by reason of the resignation or resignations referred to in this Section 3.
| 3.6 | Annual Bonus Upon Termination. The Consultant’s participation in any and all annual bonus plans shall cease immediately on the date the Consultant receives or gives notice of termination of this Agreement and the Consultant shall only be entitled to receive any Annual Bonus pro-rated to the date the Consultant receives notice of termination without cause. |
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| 3.7 | No Additional Payments. The Consultant acknowledges and agrees that unless otherwise expressly agreed in writing between the Consultant and the Corporation, the Consultant shall not be entitled, by reason of the Consultant’s relationship with the Corporation or by reason of any termination of their agreement by the Corporation, for any reason, to any remuneration, compensation or other benefits other than those expressly provided for in this Agreement. The Consultant further acknowledges and agrees that any amounts paid to the Consultant pursuant to this Section 3 are inclusive of any amounts that may be payable under any statute of Canada in respect of compensation for length of service, notice of termination or severance pay. |
| 4. | Consultant's Fees and Benefits |
| 4.1 | Subject to Section 1.1 and any adjustments on an annual review, the Consultant shall be remunerated for providing the Services during the term of this Agreement by payment of a “Monthly Fee” of C$25,000 equalling C$300,000 per year (the “Annual Fee”). |
| 4.2 | In addition to the Annual Fee, the consultant shall be eligible to participate in the Corporation’s annual performance bonus (the “Bonus”) of up to fifty (50) percent of the Annual Fee, or a target amount as determined by the Board of Directors. The amount of the Bonus shall be determined by the Board of Directors, in its sole discretion, based on certain financial and operating goals and individual performance objectives as defined by the Board of Directors in its sole discretion. The Consultant acknowledges that there is no assurance that any Bonus will be paid in any given year, that the Bonus arrangements will remain unchanged or that the Bonus will be of the same amount in any future year as in any past year. Subject to the requirements of Section 3 of this Agreement, in the event the Consultant gives or receives notice of termination of engagement, all entitlement to receive a Bonus shall cease (except for: Bonuses that have already been paid to the Consultant by the Corporation; any Bonuses that have been awarded to the Consultant by the Corporation in respect of an already completed financial year of the Corporation but which have not yet been paid by the Corporation to the Consultant; and Bonuses that have been earned by the Consultant but not paid to the Consultant by the Corporation however, in this latter instance, the Bonus shall be paid on a pro rata basis, up to but not beyond the termination date, based on the financial and operating goals and individual performance objectives that had been set by the Board of Directors). |
| 4.3 | Retention Bonus. The Consultant will be eligible to participate in the Arras Minerals Corp. Management Retention Plan, as approved by the Board of Directors on April 15, 2021, and as amended on February 9, 2022 (the “Arras Retention Plan”). |
| (a) | Participation in the Arras Retention Plan will be cancelled if and when this Agreement is terminated prior to any retention bonus becoming payable. |
| 4.4 | The Corporation shall pay for (or reimburse) the insurance plan premiums (including major medical, dental, term life, liability, and disability. |
| 4.5 | Taxes. The Consultant shall be responsible for remittance to the proper authorities of any and all income taxes, employment insurance or social security premiums and workers compensation insurance in relation to the Consultant’s remuneration hereunder, inclusive of the Annual Fee. The Consultant is and will be solely responsible for, and will file, on a timely basis, all tax returns and payments required to be filed with, or made to, any federal, state, provincial, or local tax authority with respect to the provision of services and receipt of fees under the Agreement. |
| (a) | The Corporation reserves the right to withhold local taxes (if any) for services rendered in Kazakhstan should it be required to do so by the Kazakhstan authorities. |
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| (b) | Taxation of a foreign individual in Kazakhstan depends on his/her tax residency status in Kazakhstan. Under Kazakh tax law, an individual is regarded as a tax resident of Kazakhstan for a particular tax year if the individual spends more than 183 days in Kazakhstan in any period of twelve consecutive months ending in that year. Otherwise, the individual is regarded as a non-resident for Kazakhstan tax purposes. Tax residents of Kazakhstan are subject to taxation in Kazakhstan on their worldwide income, while tax non-resident individuals are subject to tax only on their Kazakh-source income. Personal income tax rates in Kazakhstan currently amount to 10% but may be subject to change. All income that a foreign person receives for work performed in Kazakhstan is regarded as taxable Kazakh-source income, regardless of where the income is paid. This income includes salaries, wages and all types of fringe benefits that an employer provides to employees and consultants (i.e. airfare, pension contribution, accommodation or meals). The Corporation may be required to compute and withhold personal income tax and social tax on the Consultant’s payments on a monthly basis, remit the tax, and report these taxes on the Corporation’s quarterly payroll tax reports. |
| 4.6 | The Corporation will provide general liability protection and directors and officers liability protection and ensure that the Articles of Incorporation also provide general liability protection and indemnification for directors and officers as approved by the Board of Directors of the Corporation. |
| 5. | Reimbursement of Expenses |
| 5.1 | The Consultant shall be reimbursed for all direct out-of-pocket expenses actually, reasonably and properly incurred by it in connection with its provision of the Services and for the benefit of the business of the Corporation or its subsidiaries, provided such expenses are appropriately documented and reasonable. Approved expenses include the cost of housing for the Consultant’s family and costs of schooling for the Consultant’s children while on assignment in Kazakhstan. |
| 6. | Confidential Information |
| 6.1 | The Consultant acknowledges that, by reason of this Agreement, the Consultant will have access to Confidential Information of the Corporation that the Corporation has spent time, effort and money to develop and acquire. For the purposes of this Agreement any reference to the “Corporation” shall mean the Corporation, and such respective affiliates and subsidiaries as may exist from time to time. |
| 6.2 | The Consultant acknowledges that the Confidential Information is a valuable and unique asset of the Corporation and that the Confidential Information is and will remain the exclusive property of the Corporation. |
| 6.3 | The Consultant agrees to and will ensure that they will maintain securely and hold in strict confidence all Confidential Information received, acquired or developed by the Consultant or disclosed to the Consultant as a result of or in connection with the Management Consulting Agreement with the Corporation. The Consultant agrees that, both during its tenure with the Corporation and after the termination of the agreement, the Consultant will not, directly or indirectly, divulge, communicate, use, copy or disclose or permit others to use, copy or disclose, any Confidential Information to any person, except as such disclosure or use is required to perform his duties hereunder or as may be consented to by prior written authorization of the Corporation. |
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| 6.4 | The obligation of confidentiality imposed by this Agreement shall not apply to information that appears in issued patents or printed publications, that otherwise becomes generally known in the industry through no act of the Consultant in breach of this Agreement, or that is required to be disclosed by court order or applicable law. |
| 6.5 | The Consultant understands that the Corporation has from time to time in its possession information belonging to third parties or which is claimed by third parties to be confidential or proprietary and which the Corporation has agreed to keep confidential. The Consultant agrees that all such information shall be Confidential Information for the purposes of this Agreement. |
| 6.6 | The Consultant agrees that documents, copies, records and other property or materials made or received by the Consultant that pertain to the business and affairs of the Corporation, including all Confidential Information which is in the Consultant’s possession or under the Consultant’s control are the property of the Corporation and that the Consultant will return same and any copies of same to the Corporation immediately upon termination of the Consultant’s employment or at any time upon the request of the Corporation. |
| 7. | Restricted Activities |
| 7.1 | Restriction on Competition. The Consultant covenants and agrees with the Corporation that the Consultant will not, without the prior written consent of the Corporation, at any time during his employment or for a period of three (3) months following the termination of the Consultant’s engagement, for any reason, either individually or in partnership or in conjunction with any person, whether as principal, agent, shareholder, director, officer, employee, investor, or in any other manner whatsoever, directly or indirectly, advise, manage, carry on, be engaged in, own or lend money to, or permit the Consultant’s name or any part thereof to be used or employed by any person managing, carrying on or engaged in a business anywhere in Kazakhstan or other jurisdiction in which the Corporation is carrying on the business of mineral exploration which is in direct competition with the business of the Corporation. The restrictions set forth in this Section 7.1 shall terminate and shall not apply to the Consultant where the Management Consulting Agreement is terminated by the Corporation following a Change of Control. |
| 7.2 | Restriction on Solicitation. The Consultant shall not, at any time during their engagement or for a period of six (6) months after the termination of the Consultant’s engagement, for any reason, without the prior written consent of the Corporation, for his account or jointly with another, either directly or indirectly, for or on behalf of himself or any individual, partnership, corporation or other legal entity, as principal, agent, employee or otherwise, solicit, influence, entice or induce, attempt to solicit, influence, entice or induce: |
| (A) | any person who is employed by the Corporation to leave such employment; or |
| (B) | any person, firm or corporation whatsoever, who is or was, at any time in the last twelve (12) months of the Consultant’s engagement with the Corporation, a customer or supplier of the Corporation or any affiliate or subsidiary of the Corporation, to cease its relationship with the Corporation or any affiliate or subsidiary of the Corporation. |
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| 7.3 | Corporate Opportunities. During the term of this Agreement, the Consultant will offer to the Corporation any investment or other opportunity generally in the geographic area (in the province of Pavoldar, Kazakhstan, and the business in which the Corporation operates, of which he may become aware. If after 10 working days the Board of Directors of the Corporation refuses the opportunity to participate in the investment or venture, the Consultant is free to seek other alternatives only during his private time. |
| 7.4 | Restriction on Investments. The Consultant may make passive investments in public companies involved in industries in which the Corporation operates, provided any such investment does not exceed a 10% equity interest, unless the Consultant obtains consent to acquire an equity interest exceeding 10% by consent of the Board of Directors of the Corporation. |
| 8. | Enforcement |
| 8.1 | The Consultant acknowledges and agrees that the covenants and obligations under Sections 6 and 7 are reasonable, necessary and fundamental to the protection of the Corporation’s business interests, and the Consultant acknowledges and agrees that any breach of these Sections by the Consultant would result in irreparable harm to the Corporation and loss and damage to the Corporation for which the Corporation could not be adequately compensated by an award of monetary damages. Accordingly, the Consultant agrees that, in the event the Consultant violates any of the restrictions referred to in Sections 6 or 7, this shall be considered grounds for termination with no severance and the Corporation shall suffer irreparable harm and shall be entitled to preliminary and permanent injunctive relief and any other remedies in law or in equity which the court deems fit. |
| 9. | Severability |
| 9.1 | The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision or part hereof, and any invalid provision will be severable from this Agreement in whole or in part. |
| 10. | Notice |
| 10.1 | Any notice required or permitted to be given hereunder, shall be given by registered mail or by personal delivery or telecopy to the party for whom it is intended, addressed as indicated on the first page hereof or at such other address as the recipient party shall provide in writing to the delivering party. Any notice delivered personally or by telecopy to the party to whom it is addressed, shall be deemed to have been given and received on the day it is so delivered or, if such day is not a business day, then on the next business day following any such day. Any notice mailed shall be deemed to have been given and received on the fifth business day following the date of mailing. |
| 11. | Confidentiality of Agreement |
| 11.1 | The parties agree that this Agreement is confidential and shall remain so after its termination and that it or its contents shall not be divulged by any party without the consent in writing of the other party, with the exception of disclosure to personal advisors and any disclosure required by the laws of any jurisdiction in which the business of the Corporation or its subsidiaries is conducted or may be conducted in future or by the laws of any jurisdiction to which the Corporation or any of its associated or affiliated corporations are subject. |
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| 12. | Indemnity |
| 12.1 | The Corporation will indemnify the Consultant and save him harmless from and against: |
| (A) | any and all demands, costs, payments, assessments, claims or damages payable to any person for suits or claims or other actions made against the Corporation or the Consultant in connection with the Services rendered by the Consultant to the Corporation, |
| (B) | any and all demands, costs, payments, assessments, claims or damages claims arising from loss or damage to property, or injury to, or death of, any person or persons, and |
| (C) | such other liability of any nature or kind to which the Consultant may be subject, arising from or in any way out of the provision of Services by the Consultant under this Agreement. Such indemnity shall cover any and all liability of the Consultant, including all expenses, costs and legal fees incurred in connection therewith. Notwithstanding the foregoing, the foregoing indemnity shall not apply where a court of competent jurisdiction, in a final judgment that has become non-appealable, has determined that: |
| (ii) | the Consultant, in the course of performing the Services, has been negligent or dishonest, has engaged in willful misconduct, or has acted in bad faith or committed any fraudulent act; and |
| (iii) | the expenses, losses, claims, damages or liabilities, as to which indemnification is claimed, were directly caused by such negligence, dishonesty, willful misconduct, bad faith or fraud. |
| 12.2 | With respect to all demands, costs, payments, assessments, claims or damages payable to any authority for source deductions, goods and services tax, harmonized sales tax, and any other remittance obligations arising with respect to payment to the Consultant hereunder or on account of loss or damage to property, or injury to, or death of, any person or persons arising from or out of the provision of Services by the Consultant under this Agreement, the Consultant shall indemnify and save the Corporation harmless from and against any and all liability for such demands, costs, payments, assessments, loss, damage, injury or death, including any expenses, costs and legal fees incurred in connection therewith, expect for liability on account of loss or damage to property, or injury to, or death of, any person as may arise solely out of the Corporation’s negligence. |
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| 13. | Further Assurances |
| 13.1 | The parties hereto undertake to do, sign, execute and deliver such other things, deeds or documents accessory or useful for the purpose of giving full effect to this Agreement with signatures on the signature page. |
| 14. | Governing Law |
| 14.1 | This Agreement is governed by and is to be construed, interpreted and enforced in accordance with the laws of the Province of British Columbia, and the laws of Canada applicable therein. |
| 15. | Enurement |
| 15.1 | This Agreement enures to the benefit of and is binding upon the parties and their respective successors or assigns. |
| 16. | Entire Agreement |
| 16.1 | As of its date of execution, this Agreement constitutes the entire agreement between the parties and supersedes all prior agreements between the parties. The parties agree that there are no other collateral agreements or understandings between them except as provided in this Agreement. |
| 17. | Assignment |
| 17.1 | The Consultant may not assign this Agreement or provide the services of any individual or Corporation other than that stated above without the written consent of the Corporation. |
| 18. | Amendment |
| 18.1 | This Agreement may be amended only in writing by the parties hereto. |
| 19. | Interpretation |
| 19.1 | In this Agreement, a “business day” means a day other than Saturday, Sunday or a statutory holiday in the relevant jurisdiction. |
| 19.2 | All headings in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement. |
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| 20. | Survival |
| 20.1 | Sections 7.2, 10 and 11 shall survive the termination of this Agreement and shall continue in full force and effect according to their terms. Counterparts and Delivery by Facsimile |
| 20.2 | This Agreement may be executed in any number of counterparts, each of which when executed and delivered is an original but all of which taken together will constitute one and the same instrument. Any party hereto may deliver an executed copy of this Agreement by facsimile |
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.
| ARRAS MINERALS CORP. | ) | |
| ) | c/s | |
| Per: | ) | |
| ) | ||
| /s/ Christopher Richards | ) | |
| Authorized Signatory | ) |
| TIMOTHY BARRY | ) | |
| ) | c/s | |
| Per: | ) | |
| ) | ||
| /s/ Timothy Barry | ) | |
| Authorized Signatory | ) |
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SCHEDULE “A”
SERVICES
The Chief Executive Officer (the "CEO") primary role is to take overall supervisory and managerial responsibility for the day to day operations of the Corporation's business. Working closely with the President, the CEO will manage the Corporation in an effective, efficient and forward-looking way to fulfill the priorities, goals and objectives determined by the Board. The CEO aims to execute the strategic plans, budgets and responsibilities set out below, with a view to increasing shareholder value. The CEO reports to the Board.
Without limiting the foregoing, the CEO is responsible for the following:
(a) Develop and maintain the Corporation's goal to operate to the highest standards of the industry;
| (b) | Maintain and develop with the Board strategic plans for the Corporation and implement such plans to the best abilities of the Corporation; |
| (c) | Provide quality leadership to the Corporation's staff and ensure that the Corporation's human resources are managed properly; |
(d) Provide high-level policy options, orientations and discussions for consideration by the Board;
| (e) | Together with any special committee appointed for such purpose, maintain existing and develop new strategic alliances and consider possible merger or acquisition transactions with other mining companies which will be constructive for the Corporation's business and will help enhance shareholder value; |
| (f) | Provide support, co-ordination and guidance to various responsible officers and managers of the Corporation; |
| (g) | Implement, oversee and guide the investor relations program for the Corporation, which shall, among other things, ensure communications between the Corporation and major stakeholders, including and most importantly the Corporation's shareholders, are managed in an optimum way and are done in accordance with applicable securities laws; |
| (h) | Provide timely strategic, operational and reporting information to the Board and implement its decisions in accordance with good governance, with the Corporation's policies and procedures, and within budget; |
(i) Act as an entrepreneur and innovator within the strategic goals of the Corporation;
(j) Co-ordinate the preparation of an annual business plan or strategic plan;
(k) Ensure appropriate governance skills development and resources are made available to the Board;
| (l) | Implement workplace policies and procedures that ensure compliance with the provisions of this Manual by all the Corporation’s officers, directors, employees, customers and contractors; |
(l) Provide a culture of high ethics throughout the organization;
| (m) | Take primary responsibility for the administration of all of the Corporation's subareas and administrative practices. |
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SCHEDULE “B”
DEFINITIONS
The following terms shall have the following definitions:
| (a) | “Annual Fee” means equal to twelve (12) Monthly Fees |
| (b) | “Total Annual Compensation” means an Annual amount that is the combination of: |
| (i) | the Annual Fee as of the date the cessation of the Consultant’s engagement with the Corporation; and |
| (ii) | an amount equal to the annual average of Bonuses actually paid to the Consultant by the Corporation during the Consultant’s three (3) most recent years of engagement with the Corporation, or, if the Consultant has not been engaged for three (3) years with the Corporation since the Effective Date, an amount equal to the greater of the following amounts: |
| (A) | the annual average of Bonuses, if any, actually paid to the Consultant by the Corporation since the Effective Date; or |
(B) 50% of the Annual Fee in effect at the time of the Consultant’s cessation of engagement with the Corporation.
| (c) | “Board” means the Board of Directors of the Corporation; |
| (d) | “Change of Control” means the occurrence of one or more of the following events after the Effective Date of this Agreement: |
| (i) | a sale, lease or other disposition of all or substantially all of the assets of the Corporation, |
| (ii) | a consolidation or merger of the Corporation with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization; or |
| (iii) | a transaction or series or related transactions pursuant to which any person, entity or group within the meaning of Section 13(d) or 14(d) of the U.S. Securities Exchange Act of 1934 (“1934 Act”), or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Corporation or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Corporation representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; or |
| (iv) | a transaction or series of transactions pursuant to which (A) (i) any person, entity or group within the meaning of Section 13(d) or 14(d) of the 1934 Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Corporation or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Corporation representing at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors or securities of the Corporation that, upon conversion or exchange of such securities, would represent at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors, or (ii) a consolidation or merger of the Corporation with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than eighty percent (80%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization and (B) in connection with or as a result of such transaction or series of transactions, either (i) one-half (or more) of the members of the Board of Directors of the Corporation resign or are replaced with nominees designated by such person, entity or group or (ii) the Chief Executive Officer of the Corporation resigns or is terminated as a result of such transaction or series of transactions. |
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| (e) | “Confidential Information” means all trade secrets, proprietary information and other data or information (and any tangible evidence, record or representation thereof), whether prepared, conceived or developed by an employee of the Corporation (including the Consultant) or received by the Corporation from an outside source which is maintained in confidence by the Corporation or any of its employees, contractors or customers including, without limitation: |
| (i) | any ideas, drawings, maps, improvements, know-how, research, geological records, drill logs, inventions, innovations, products, services, sales, scientific or other formulae, core samples, processes, methods, machines, procedures, tests, treatments, developments, technical data, designs, devices, patterns, concepts, computer programs or software, records, data, training or service manuals, plans for new or revised services or products or other plans, items or strategy methods on compilation of information, or works in process, or any inventions or parts thereof, and any and all revisions and improvements relating to any of the foregoing (in each case whether or not reduced to tangible form) that relate to the business or affairs of the Corporation or that result from its marketing, research and/or development activities; |
| (ii) | any information relating to the relationship of the Corporation with any personnel, suppliers, principals, investors, contacts or prospects of the Corporation and any information relating to the requirements, specifications, proposals, orders, contracts or transactions of or with any such persons; |
| (iii) | any marketing material, plan or survey, business plan, opportunity or strategy, development plan or specification or business proposal; |
| (iv) | financial information, including the Corporation’s costs, financing or debt arrangements, income, profits, salaries or wages; and |
| (v) | any information relating to the present or proposed business of the Corporation. |
| (f) | “Fundamental Breach” means any material breach of a fundamental term or condition of this Agreement and, without limiting the foregoing, includes any of the following acts or omissions: |
| (a) | the Consultant’s gross default or misconduct during the Consultant’s engagement in connection with or effecting the business of the Corporation; |
| (b) | the Consultant’s continued refusal or willful misconduct to carry out the duties of his employment after receiving written notice from the Corporation of the failure to do so and having had an opportunity to correct same within a reasonable period of time from the date of receipt of such notice; |
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| (c) | theft, fraud, dishonesty, misconduct, or misuse of alcohol or drugs of the Consultant involving the property, business or affairs of the Corporation or in the carrying out of the duties of his employment; or |
| (d) | any material breach of this Agreement including any breach Sections 6,7 or 8 of this Agreement; |
| (g) | “Good Reason” means any of the following conduct by the Corporation: |
| (i) | a unilateral reduction to the Annual Fee; |
| (ii) | a unilateral reduction to the aggregate value of the Consultant’s remuneration and benefits other than Annual Fee; |
| (iii) | a unilateral material adverse change to the Consultant’s position, title, authority or responsibilities; or |
| (iv) | any reason which would be considered to amount to constructive dismissal pursuant to the common law. |
| (h) | “Person” means an individual, partnership, association, Corporation, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government; |
14
Exhibit 4.21
CONSULTING AGREEMENT
THIS AGREEMENT made as of the 1st of October 2021 the “Effective Date”) and amended on the 9th day of February 2022 the “Amended Date”.
| BETWEEN: | ARRAS MINERALS CORP. |
(the "Corporation" or “Arras”)
OF THE FIRST PART
| AND: | WESTCOTT MANAGEMENT LTD. |
(the "Consultant")
OF THE SECOND PART
WHEREAS:
| A. | The Corporation wishes to engage the Consultant to provide management consulting services to the Corporation in connection with the mineral exploration and management activities of the Corporation on its current and future mineral properties in which the Corporation has an ownership or optioned interest (the “Properties”); and |
| B. | The Corporation and the Consultant wish to specify the terms of the engagement herein. |
NOW THEREFORE, IN CONSIDERATION OF the covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
| 1. | Relationship and Duties |
| 1.1 | Subject always to the general control and direction of the Corporation, the Consultant shall act and be retained to act, during the term of this Agreement, as a consultant to the Corporation or any subsidiary or subsidiaries of the Corporation, pursuant to the terms and conditions contained herein and as further particularized in this Section 1. |
| 1.2 | The Consultant agrees that (a) it shall act as President and perform the Services of such a position for Corporation (as described in Schedule A); (b) it shall cause the Consultant’s Representative to devote his best efforts, skills and attention to the performance of his duties and responsibilities in respect of the offices of the Corporation or any of its subsidiaries to which he is appointed; and (c) any business that the Consultant or the Consultant’s representative propose to undertake outside of the consultancy contemplated which could potentially overlap with Arras’ work with particular focus in Kazakhstan shall require pre-approval of the Board of Directors of the Corporation. |
| 1.3 | The Consultant acknowledges that the Consultant’s Representative shall be appointed by the Corporation as President of the Corporation and to hold such other offices as the Corporation and Consultant deem appropriate. |
| 1 |
| 1.4 | The Consultant's duties will generally be to provide the Corporation with managerial services and assistance in its mineral exploration activities and to perform duties and responsibilities assigned to it from time to time by the CEO & Board of Directors of the Corporation and to cause the Consultant’s Representative to discharge such duties as are commensurate with the Consultant’s Representative’s position with the Corporation (collectively, the "Services"). |
| 1.5 | The Consultant shall (and shall cause the Consultant’s Representative to) perform the Services to the best of its ability and in a responsible, professional manner commensurate with its experience, expertise and within acceptable industry standards and shall devote as much time and resources to its performance of the Services as is required to achieve such standards which are envisioned to be non-exclusive. The Corporation understands that Westcott Management Ltd. may have other clients (including Silver Bull Resources, Inc.) as is consistent with a consultant rather than an employee. The Consultant shall promote the interest and goodwill of the Corporation. |
| 1.6 | The Consultant shall provide the Services as an independent contractor. The Consultant and the Consultant’s Representative shall not be deemed to be, or represent themselves as, a representative or agent of the Corporation, except as expressly provided in writing by the Corporation and is consistent with the title of the position(s) held. |
| 1.7 | The Consultant shall comply with all applicable statutes and regulations and the lawful requirements and directions of any governmental authority having jurisdiction with respect to the Services it provides including the obtaining of all necessary permits and licences. |
| 1.8 | The Consultant shall refer to the CEO & Board of Directors of the Corporation all matters and transactions in which a real or perceived conflict of interest between the Consultant and the Corporation or any of its subsidiaries may arise. The Consultant shall not proceed with any such matter objected to by the CEO or Board of Directors of the Corporation. |
| 1.9 | For the purposes of this Agreement the “Consultant’s Representative” is Darren Klinck. |
| 2. | Term of Agreement |
| 2.1 | The Consultant may terminate their engagement with the Corporation by giving not less than ninety (90) days written notice to the Corporation. At the time the Consultant provides the Corporation with notice to terminate the engagement, or at any time thereafter, the Corporation shall have the right to elect to terminate the Consultant’s engagement at any time prior to the effective date of the Consultant’s last day, and upon such election, shall provide to the Consultant a lump sum payment equal to the pro-rata Annual Fee then in effect for the number of days that remain outstanding to the effective date of the Consultant’s last day of service |
| 3. | Termination |
| 3.1 | The term of this Agreement shall be effective from October 1, 2021 (the “Effective Date”) and shall continue until this Agreement is terminated in accordance with Section 3 of this Agreement. |
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| 3.2 | Termination by Corporation Without Cause. The Consultant may at any time terminate its agreement with the Corporation for “Good Reason”, and the Corporation may at any time terminate the Consultant’s agreement without Cause and without any advance notice, and upon such cessations of the engagement (but excluding any Change of Control Terminations as set out in Section 3.7 of the Agreement), the Corporation may terminate this Agreement without Cause at any time by providing the Consultant with written notice of termination and a lump sum payment equal to: |
| (A) | Six (6) months of the Monthly Fee if the Consultant’s engagement agreement is terminated within the first year from the Effective Date; or |
| (B) | After one (1) year from the Effective Date, twelve (12) months of the Monthly Fee, plus one (1) month’s monthly fee for each additional year of engagement from the Effective Date, up to a maximum of twenty-four (24) month’s Monthly Fee plus a pro-rata cash bonus using the annual performance bonus as outlined in Section 4.2. |
| (C) | If the Corporation terminates this Agreement without Cause within three (3) months of a Change of Control of the Corporation, the Corporation must pay the Consultant twenty-four (24) months of Monthly fee plus a lump sum payment equal to two (2) annual cash bonuses calculated utilizing the annual performance bonus outlined in Section 4.2 at the time of termination. |
| (D) | If Termination falls under Section 3.2(a),(b),(c) or 3.3 then the Corporation will continue the benefits provided under any insured standard benefit plan provided by the Corporation for twelve (12) months from the date of the termination, provided the Corporation is able to do so under the terms of the plan (with any continuation of benefits being subject to the terms and conditions of the plan provider); |
| 3.3 | Termination By Consultant Following a Change of Control. With Good Reason, the Consultant may elect, within six (6) months of a Change of Control of the Corporation to terminate their engagement and this Agreement upon providing written notice of termination to the Corporation. Upon receipt of such notice of termination in accordance with this, the Corporation must pay the Consultant twenty-four (24) months of the Monthly Fee plus a lump sum payment equal to two (2) annual cash performance bonuses outlined in Section 4.2 at the time of termination.. |
| 3.4 | Termination by the Corporation for Fundamental Breach. Notwithstanding any other provision of this Agreement, the Corporation may on written notice to the Consultant immediately terminate this Agreement with the Corporation at any time for Fundamental Breach, without notice or pay in lieu of notice or any other form of compensation, severance pay or damages resulting from, without limitation, fraud, dishonesty, illegality, breach of statute or regulation, gross incompetence or misuse of alcohol or drugs. |
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| 3.5 | Directorship and Offices. Upon the termination of the Agreement between the Consultant and the Corporation, the Consultant shall immediately resign any directorship or office held in the Corporation or any respective parent, subsidiary or affiliated companies of the Corporation and, except as provided in this Agreement, the Consultant shall not be entitled to receive any written notice of termination or payment in lieu of notice, or to receive any severance pay, damages or compensation for loss of office or otherwise, by reason of the resignation or resignations referred to in this Section 3. |
| 3.6 | Annual Bonus Upon Termination. The Consultant’s participation in any and all annual bonus plans shall cease immediately on the date the Consultant receives or gives notice of termination of this Agreement and the Consultant shall only be entitled to receive any Annual Bonus pro-rated to the date the Consultant receives notice of termination without cause. |
| 3.7 | No Additional Payments. The Consultant acknowledges and agrees that unless otherwise expressly agreed in writing between the Consultant and the Corporation, the Consultant shall not be entitled, by reason of the Consultant’s relationship with the Corporation or by reason of any termination of their agreement by the Corporation, for any reason, to any remuneration, compensation or other benefits other than those expressly provided for in this Agreement. The Consultant further acknowledges and agrees that any amounts paid to the Consultant pursuant to this Section 3 are inclusive of any amounts that may be payable under any statute of Canada in respect of compensation for length of service, notice of termination or severance pay. |
| 4. | Consultant's Fees and Benefits |
| 4.1 | Subject to Section 1.1 and any adjustments on an annual review, the Consultant shall be remunerated for providing the Services during the term of this Agreement by payment of a “Monthly Fee” of C$25,000 plus GST equalling C$300,000 per year (the “Annual Fee”) + GST. |
| 4.2 | In addition to the Annual Fee, the consultant shall be eligible to participate in the Corporation’s annual performance bonus (the “Bonus”) of up to fifty (50) percent of the Annual Fee, or a target amount as determined by the Board of Directors. The amount of the Bonus shall be determined by the Board of Directors, in its sole discretion, based on certain financial and operating goals and individual performance objectives as defined by the Board of Directors in its sole discretion. The Consultant acknowledges that there is no assurance that any Bonus will be paid in any given year, that the Bonus arrangements will remain unchanged or that the Bonus will be of the same amount in any future year as in any past year. Subject to the requirements of Section 3 of this Agreement, in the event the Consultant gives or receives notice of termination of engagement, all entitlement to receive a Bonus shall cease (except for: Bonuses that have already been paid to the Consultant by the Corporation; any Bonuses that have been awarded to the Consultant by the Corporation in respect of an already completed financial year of the Corporation but which have not yet been paid by the Corporation to the Consultant; and Bonuses that have been earned by the Consultant but not paid to the Consultant by the Corporation however, in this latter instance, the Bonus shall be paid on a pro rata basis, up to but not beyond the termination date, based on the financial and operating goals and individual performance objectives that had been set by the Board of Directors). |
| 4.3 | Retention Bonus. The Consultant will be eligible to receive C$500,000 (all funds hereafter are C$) when and if the Corporation’s market capitalization reaches at least $250,000,000 for 5 consecutive trading days being 0.2% of such market capitalization. For the purposes of this section, “market capitalization” shall be calculated using the prevailing share price multiplied by the shares outstanding. |
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| (a) | In addition, the Corporation agrees to pay the Consultant a cash bonus of $500,000 when and if the Corporation’s market capitalization reaches at least $500,000,000 for 5 consecutive trading days being 0.2% of the Corporation’s market capitalization appreciation from $250,000,000. |
| (b) | In addition, the Corporation agrees to pay the Consultant a cash bonus of $1,000,000 when and if the Corporation’s market capitalization reaches at least $1,000,000,000 for 5 consecutive trading days being 0.2% of the Corporation’s market capitalization appreciation from $500,000,000. |
| (c) | In the event that the Corporation is the subject of a “Change of Control”, the 0.2% Retention Bonus shall be paid if the market capitalization of the Corporation is equal to or greater than $250,000,000 at any point prior to the closing of the transaction and be equal to 0.2% of the bid price less any 0.2% Retention Bonus that may have been previously paid. |
| (d) | The market capitalization targets (or successful takeover bid target) are to be achieved by April 15, 2027, in order for the Consultant to earn any of the bonus payments in the Section 4.3. Thereafter, no such bonuses will be payable. |
| (e) | Any Retention Bonus will be cancelled if and when this Agreement is terminated prior to the Retention Bonus becoming payable. |
| (f) | At the sole discretion of the Board of Directors, the Corporation shall not be obligated to pay a Retention Bonus in cash if it lacks funds at the time. In lieu of cash, the Board of Directors may choose to settle any bonus debt by issuing and delivering shares of the Corporation for such debt valued at the 5-day trading VWAP for the Corporation’s shares on the market calculated up to the day before the issue of the shares. |
| 4.4 | The Corporation shall pay for (or reimburse) the insurance plan premiums (including major medical, dental, term life, liability, and disability. |
| 4.5 | The Consultant will be responsible for submitting to the necessary tax offices any Goods and Services Tax (“GST”), Harmonized Sales Tax (“HST”), income or other taxes which may be applicable to the fees or benefits payable or deemed paid pursuant to this Section 4, including the Annual Fee. |
| 4.6 | The Corporation will provide general liability protection and directors and officers liability protection and ensure that the Articles of Incorporation also provide general liability protection and indemnification for directors and officers as approved by the Board of Directors of the Corporation. |
| 5. | Reimbursement of Expenses |
| 5.1 | The Consultant shall be reimbursed for all direct out-of-pocket expenses actually, reasonably and properly incurred by it in connection with its provision of the Services and for the benefit of the business of the Corporation or its subsidiaries, provided such expenses are appropriately documented and reasonable. |
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| 6. | Confidential Information |
| 6.1 | The Consultant acknowledges that, by reason of this Agreement, the Consultant will have access to Confidential Information of the Corporation that the Corporation has spent time, effort and money to develop and acquire. For the purposes of this Agreement any reference to the “Corporation” shall mean the Corporation, and such respective affiliates and subsidiaries as may exist from time to time. |
| 6.2 | The Consultant acknowledges that the Confidential Information is a valuable and unique asset of the Corporation and that the Confidential Information is and will remain the exclusive property of the Corporation. |
| 6.3 | The Consultant agrees to and will ensure that the Client’s Representative will maintain securely and hold in strict confidence all Confidential Information received, acquired or developed by the Consultant or disclosed to the Consultant as a result of or in connection with the Management Consulting Agreement with the Corporation. The Consultant agrees that, both during its tenure with the Corporation and after the termination of the agreement, neither the Consultant nor the Consultant’s Representative will, directly or indirectly, divulge, communicate, use, copy or disclose or permit others to use, copy or disclose, any Confidential Information to any person, except as such disclosure or use is required to perform his duties hereunder or as may be consented to by prior written authorization of the Corporation. |
| 6.4 | The obligation of confidentiality imposed by this Agreement shall not apply to information that appears in issued patents or printed publications, that otherwise becomes generally known in the industry through no act of the Consultant in breach of this Agreement, or that is required to be disclosed by court order or applicable law. |
| 6.5 | The Consultant understands that the Corporation has from time to time in its possession information belonging to third parties or which is claimed by third parties to be confidential or proprietary and which the Corporation has agreed to keep confidential. The Consultant agrees that all such information shall be Confidential Information for the purposes of this Agreement. |
| 6.6 | The Consultant agrees that documents, copies, records and other property or materials made or received by the Consultant that pertain to the business and affairs of the Corporation, including all Confidential Information which is in the Consultant’s possession or under the Consultant’s control are the property of the Corporation and that the Consultant will return same and any copies of same to the Corporation immediately upon termination of the Consultant’s employment or at any time upon the request of the Corporation. |
| 7. | Restricted Activities |
| 7.1 | Restriction on Competition. The Consultant covenants and agrees with the Corporation that neither the Consultant nor the Consultant’s Representative will, without the prior written consent of the Corporation, at any time during his employment or for a period of three (3) months following the termination of the Consultant’s engagement, for any reason, either individually or in partnership or in conjunction with any person, whether as principal, agent, shareholder, director, officer, employee, investor, or in any other manner whatsoever, directly or indirectly, advise, manage, carry on, be engaged in, own or lend money to, or permit the Consultant’s name or any part thereof to be used or employed by any person managing, carrying on or engaged in a business anywhere in Kazakhstan or other jurisdiction in which the Corporation is carrying on the business of mineral exploration which is in direct competition with the business of the Corporation. The restrictions set forth in this Section 7.1 shall terminate and shall not apply to the Consultant where the Management Consulting Agreement is terminated by the Corporation following a Change of Control. |
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| 7.2 | Restriction on Solicitation. The Consultant shall not, at any time during their engagement or for a period of six (6) months after the termination of the Consultant’s engagement, for any reason, without the prior written consent of the Corporation, for his account or jointly with another, either directly or indirectly, for or on behalf of himself or any individual, partnership, corporation or other legal entity, as principal, agent, employee or otherwise, solicit, influence, entice or induce, attempt to solicit, influence, entice or induce: |
| (A) | any person who is employed by the Corporation to leave such employment; or |
| (B) | any person, firm or corporation whatsoever, who is or was, at any time in the last twelve (12) months of the Consultant’s engagement with the Corporation, a customer or supplier of the Corporation or any affiliate or subsidiary of the Corporation, to cease its relationship with the Corporation or any affiliate or subsidiary of the Corporation. |
| 7.3 | Corporate Opportunities. During the term of this Agreement, the Consultant will offer to the Corporation any investment or other opportunity generally in the geographic area (in the province of Pavlodar, Kazakhstan, and the business in which the Corporation operates, of which he may become aware. If after 10 working days the Board of Directors of the Corporation refuses the opportunity to participate in the investment or venture, the Consultant is free to seek other alternatives only during his private time. |
| 7.4 | Restriction on Investments. The Consultant or the Consultant’s Representative may make passive investments in public companies involved in industries in which the Corporation operates, provided any such investment does not exceed a 10% equity interest, unless the Consultant obtains consent to acquire an equity interest exceeding 10% by consent of the Chief Executive Officer of the Corporation. |
| 8. | Enforcement |
| 8.1 | The Consultant acknowledges and agrees that the covenants and obligations under Sections 6 and 7 are reasonable, necessary and fundamental to the protection of the Corporation’s business interests, and the Consultant acknowledges and agrees that any breach of these Sections by the Consultant would result in irreparable harm to the Corporation and loss and damage to the Corporation for which the Corporation could not be adequately compensated by an award of monetary damages. Accordingly, the Consultant agrees that, in the event the Consultant violates any of the restrictions referred to in Sections 6 or 7, this shall be considered grounds for termination with no severance and the Corporation shall suffer irreparable harm and shall be entitled to preliminary and permanent injunctive relief and any other remedies in law or in equity which the court deems fit. |
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| 9. | Severability |
| 9.1 | The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision or part hereof, and any invalid provision will be severable from this Agreement in whole or in part. |
| 10. | Notice |
| 10.1 | Any notice required or permitted to be given hereunder, shall be given by registered mail or by personal delivery or telecopy to the party for whom it is intended, addressed as indicated on the first page hereof or at such other address as the recipient party shall provide in writing to the delivering party. Any notice delivered personally or by telecopy to the party to whom it is addressed, shall be deemed to have been given and received on the day it is so delivered or, if such day is not a business day, then on the next business day following any such day. Any notice mailed shall be deemed to have been given and received on the fifth business day following the date of mailing. |
| 11. | Confidentiality of Agreement |
| 11.1 | The parties agree that this Agreement is confidential and shall remain so after its termination and that it or its contents shall not be divulged by any party without the consent in writing of the other party, with the exception of disclosure to personal advisors and any disclosure required by the laws of any jurisdiction in which the business of the Corporation or its subsidiaries is conducted or may be conducted in future or by the laws of any jurisdiction to which the Corporation or any of its associated or affiliated corporations are subject. |
| 12. | Indemnity |
| 12.1 | The Corporation will indemnify the Consultant and save him harmless from and against: |
| (A) | any and all demands, costs, payments, assessments, claims or damages payable to any person for suits or claims or other actions made against the Corporation or the Consultant in connection with the Services rendered by the Consultant to the Corporation, |
| (B) | any and all demands, costs, payments, assessments, claims or damages claims arising from loss or damage to property, or injury to, or death of, any person or persons, and |
| (C) | such other liability of any nature or kind to which the Consultant may be subject, arising from or in any way out of the provision of Services by the Consultant under this Agreement. Such indemnity shall cover any and all liability of the Consultant, including all expenses, costs and legal fees incurred in connection therewith. Notwithstanding the foregoing, the foregoing indemnity shall not apply where a court of competent jurisdiction, in a final judgment that has become non-appealable, has determined that: |
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| (ii) | the Consultant, in the course of performing the Services, has been negligent or dishonest, has engaged in willful misconduct, or has acted in bad faith or committed any fraudulent act; and |
| (iii) | the expenses, losses, claims, damages or liabilities, as to which indemnification is claimed, were directly caused by such negligence, dishonesty, willful misconduct, bad faith or fraud. |
| 12.2 | With respect to all demands, costs, payments, assessments, claims or damages payable to any authority for source deductions, goods and services tax, harmonized sales tax, and any other remittance obligations arising with respect to payment to the Consultant hereunder or on account of loss or damage to property, or injury to, or death of, any person or persons arising from or out of the provision of Services by the Consultant under this Agreement, the Consultant shall indemnify and save the Corporation harmless from and against any and all liability for such demands, costs, payments, assessments, loss, damage, injury or death, including any expenses, costs and legal fees incurred in connection therewith, expect for liability on account of loss or damage to property, or injury to, or death of, any person as may arise solely out of the Corporation’s negligence. |
| 13. | Further Assurances |
| 13.1 | The parties hereto undertake to do, sign, execute and deliver such other things, deeds or documents accessory or useful for the purpose of giving full effect to this Agreement with signatures on the signature page. |
| 14. | Governing Law |
| 14.1 | This Agreement is governed by and is to be construed, interpreted and enforced in accordance with the laws of the Province of British Columbia, and the laws of Canada applicable therein. |
| 15. | Enurement |
| 15.1 | This Agreement enures to the benefit of and is binding upon the parties and their respective successors or assigns. |
| 16. | Entire Agreement |
| 16.1 | As of its date of execution, this Agreement constitutes the entire agreement between the parties and supersedes all prior agreements between the parties. The parties agree that there are no other collateral agreements or understandings between them except as provided in this Agreement. |
| 17. | Assignment |
| 17.1 | The Consultant may not assign this Agreement or provide the services of any individual or Corporation other than that stated above without the written consent of the Corporation. |
| 18. | Amendment |
| 18.1 | This Agreement may be amended only in writing by the parties hereto. |
| 19. | Interpretation |
| 19.1 | In this Agreement, a “business day” means a day other than Saturday, Sunday or a statutory holiday in the relevant jurisdiction. |
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| 19.2 | All headings in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement. |
| 20. | Survival |
| 20.1 | Sections 7.2, 10 and 11 shall survive the termination of this Agreement and shall continue in full force and effect according to their terms. Counterparts and Delivery by Facsimile |
| 20.2 | This Agreement may be executed in any number of counterparts, each of which when executed and delivered is an original but all of which taken together will constitute one and the same instrument. Any party hereto may deliver an executed copy of this Agreement by facsimile |
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.
| ARRAS MINERALS CORP. | ) | |
| ) | c/s | |
| Per: | ) | |
| ) | ||
| /s/ Timothy Barry | ) | |
| Authorized Signatory | ) |
|
WESTCOTT MANAGEMENT LTD. | ) | |
| ) | c/s | |
| Per: | ) | |
| ) | ||
| /s/ Darren Klinck | ) | |
| Authorized Signatory | ) |
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SCHEDULE “A”
SERVICES
Working closely with the CEO, the President shall have responsibility for providing strategic leadership and vision to the Corporation and for establishing, implementing and over-seeing the long-range goals, strategies, plans and policies of the Corporation. The President supports the CEO in creating value for the Corporation’s shareholders over the long term while ensuring that the Corporation’s critical short term performance goals are met and are met in a way that optimizes the Corporation’s ability to create value over the long term.
Responsibilities
The President will report to and work closely with the CEO on all facets of the Corporation’s business, including:
| · | Assisting and backing up the CEO in the discharge of the responsibilities of the CEO. |
| · | Setting company objectives and creating the strategic plan; establishing both annual and long-term operation and capital plans with the design to create shareholder value. |
| · | Direct the implementation of the Corporation’s strategic plan, with routine review as required through: |
| o | Active promotion of the Corporation’s strategic vision throughout the organization; |
| o | Implementing robust strategic and operational planning and reporting processes; |
| o | Continuously evaluating industry trends and events that may affect strategy; |
| o | Creating a corporate structure designed to best implement strategic action plan; and |
| o | Managing and integrating business units as appropriate. |
| · | Act as a senior spokesperson for the Corporation; creating and maintaining positive relationships between the Corporation and its employees, shareholders, regulatory officials and community stakeholders. |
| · | Build effective relationships with key executives and operational staff; and provide oversight of day-to-day activities of the business as required; ensuring operational and financial milestones are met, with the requisite controls and audits in place to safeguard performance, and with the ability to amend where required, with the objective of maximizing profitability and growth. |
| · | Ensure that resources and processes are implemented and maintained, and are effective in providing accurate and comprehensive evaluative information, including the development of operating protocols, sustainability practices and community engagement, while respecting and adhering to all local customs, laws, rules and regulations. |
| · | Act as a primary lead for all company marketing efforts; playing an active role in marketing for new shareholders, as well as communicating with existing investors, analysts and investment banks, raising the corporate profile and capital, if required. |
| · | Ensure that appropriate key performance metrics and assessments are established for the senior leadership team and employees, and monitor performance against those objectives. |
| · | Together with the Chief Financial Officer and other senior management, as appropriate, establish, maintain and ensure the implementation of the Corporation’s disclosure controls and procedures, internal controls over financial reporting, and processes for the certification of the public disclosure documents required under applicable legislation, regulatory requirements and policies. |
| · | Set the tone for the organization; leading by example and acting beyond reproach, so that all employees, consultants and contractors enact the same. Work to create a positive company culture where all employees are engaged and committed to creating a safe, efficient, thoughtful and profitable business. |
| · | Maintain
a visible presence within the mining and minerals sector to ensure that the Corporation may
capitalize on future prospective opportunities. |
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SCHEDULE “B”
DEFINITIONS
The following terms shall have the following definitions:
| (a) | “Annual Fee” means equal to twelve (12) Monthly Fees |
| (b) | “Total Annual Compensation” means an Annual amount that is the combination of: |
| (i) | the Annual Fee as of the date the cessation of the Consultant’s engagement with the Corporation; and |
| (ii) | an amount equal to the annual average of Bonuses actually paid to the Consultant by the Corporation during the Consultant’s three (3) most recent years of engagement with the Corporation, or, if the Consultant has not been engaged for three (3) years with the Corporation since the Effective Date, an amount equal to the greater of the following amounts: |
| (A) | the annual average of Bonuses, if any, actually paid to the Consultant by the Corporation since the Effective Date; or |
(B) 50% of the Annual Fee in effect at the time of the Consultant’s cessation of engagement with the Corporation.
| (c) | “Board” means the Board of Directors of the Corporation; |
| (d) | “Change of Control” means the occurrence of one or more of the following events after the Effective Date of this Agreement: |
| (i) | a sale, lease or other disposition of all or substantially all of the assets of the Corporation, |
| (ii) | a consolidation or merger of the Corporation with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization; or |
| (iii) | a transaction or series or related transactions pursuant to which any person, entity or group within the meaning of Section 13(d) or 14(d) of the U.S. Securities Exchange Act of 1934 (“1934 Act”), or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Corporation or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Corporation representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; or |
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| (iv) | a transaction or series of transactions pursuant to which (A) (i) any person, entity or group within the meaning of Section 13(d) or 14(d) of the 1934 Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Corporation or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Corporation representing at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors or securities of the Corporation that, upon conversion or exchange of such securities, would represent at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors, or (ii) a consolidation or merger of the Corporation with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than eighty percent (80%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization and (B) in connection with or as a result of such transaction or series of transactions, either (i) one-half (or more) of the members of the Board of Directors of the Corporation resign or are replaced with nominees designated by such person, entity or group or (ii) the Chief Executive Officer of the Corporation resigns or is terminated as a result of such transaction or series of transactions. |
| (e) | “Confidential Information” means all trade secrets, proprietary information and other data or information (and any tangible evidence, record or representation thereof), whether prepared, conceived or developed by an employee of the Corporation (including the Consultant) or received by the Corporation from an outside source which is maintained in confidence by the Corporation or any of its employees, contractors or customers including, without limitation: |
| (i) | any ideas, drawings, maps, improvements, know-how, research, geological records, drill logs, inventions, innovations, products, services, sales, scientific or other formulae, core samples, processes, methods, machines, procedures, tests, treatments, developments, technical data, designs, devices, patterns, concepts, computer programs or software, records, data, training or service manuals, plans for new or revised services or products or other plans, items or strategy methods on compilation of information, or works in process, or any inventions or parts thereof, and any and all revisions and improvements relating to any of the foregoing (in each case whether or not reduced to tangible form) that relate to the business or affairs of the Corporation or that result from its marketing, research and/or development activities; |
| (ii) | any information relating to the relationship of the Corporation with any personnel, suppliers, principals, investors, contacts or prospects of the Corporation and any information relating to the requirements, specifications, proposals, orders, contracts or transactions of or with any such persons; |
| (iii) | any marketing material, plan or survey, business plan, opportunity or strategy, development plan or specification or business proposal; |
| (iv) | financial information, including the Corporation’s costs, financing or debt arrangements, income, profits, salaries or wages; and |
| (v) | any information relating to the present or proposed business of the Corporation. |
| (f) | “Fundamental Breach” means any material breach of a fundamental term or condition of this Agreement and, without limiting the foregoing, includes any of the following acts or omissions: |
| (a) | the Consultant’s gross default or misconduct during the Consultant’s engagement in connection with or effecting the business of the Corporation; |
| (b) | the Consultant’s continued refusal or willful misconduct to carry out the duties of his employment after receiving written notice from the Corporation of the failure to do so and having had an opportunity to correct same within a reasonable period of time from the date of receipt of such notice; |
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| (c) | theft, fraud, dishonesty, misconduct, or misuse of alcohol or drugs of the Consultant involving the property, business or affairs of the Corporation or in the carrying out of the duties of his employment; or |
| (d) | any material breach of this Agreement including any breach Sections 6,7 or 8 of this Agreement; |
| (g) | “Good Reason” means any of the following conduct by the Corporation: |
| (i) | a unilateral reduction to the Annual Fee; |
| (ii) | a unilateral reduction to the aggregate value of the Consultant’s remuneration and benefits other than Annual Fee; |
| (iii) | a unilateral material adverse change to the Consultant’s position, title, authority or responsibilities; |
| (iv) | a unilateral requirement that the Consultant relocate outside of the Metro Vancouver region of British Columbia (excluding occasional business travel); or |
| (v) | any reason which would be considered to amount to constructive dismissal pursuant to the common law. |
| (h) | “Person” means an individual, partnership, association, Corporation, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government; |
14
Exhibit 4.22
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT made as of the 17th day of February, 2022.
BETWEEN:
SILVER BULL RESOURCES, INC.
Suite 1610 – 777 Dunsmuir Street
Vancouver, BC, V7Y 1K4
(the “Company”)
AND:
ARRAS MINERALS CORP.
Suite 1610 – 777 Dunsmuir Street
Vancouver, BC, V7Y 1K4
(“Arras”)
AND:
CHRISTOPHER RICHARDS
918 West 13th Avenue
Vancouver, BC, V5Z 1P3
(the “Executive”)
WHEREAS:
A. The Company and the Executive entered into an Employment Agreement dated September 23, 2020 (the “Employment Agreement”) pursuant to which the parties agreed to the terms and conditions of employment of the Executive.
B. The Company and the Executive wish to amend and restate the Employment Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the forgoing recitals and of the mutual covenants, agreements and representations contained herein and other valuable consideration given by each party hereto to the other, the receipt and sufficiency of which are hereby acknowledged by each of the parties, the parties hereby agree as follows:
1. DEFINITIONS
1.1 Unless otherwise defined in the body of this Agreement, defined terms have the meanings ascribed to them in Schedule “A” of this Agreement.
2. EMPLOYMENT
2.1 Position. The Company and Arras agree to employ the Executive as the Chief Financial Officer, reporting to the Chief Executive Officer. The Executive shall perform, observe and conform to such duties and instructions as from time to time are lawfully assigned or communicated to the Executive on behalf of the Company and Arras and on behalf of such affiliated companies designated by the Company as requiring the services of the Executive and as are consistent with his position.
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2.2 Service. During the term the Executive shall:
(a) well and faithfully serve the Company and Arras and use his best efforts to promote the best interests of the Company;
(b) unless prevented by ill health or injury, devote the whole of his working time and attention to the business of the Company and Arras;
(c) comply in all material respects with any Company and Arras’ policies that may apply to the Executive from time to time; and
(d) not, without the prior written consent of the Company or Arras, which consent may be reasonably withheld in the sole discretion of the Company or Arras, engage in any other business, profession or occupation, or become an officer, director, employee, contractor for service, agent or representative of any other corporation, partnership, firm, person, organization or enterprise.
2.3 Term. The term of this Agreement shall be effective from January 1, 2022 (the “Effective Date”) and shall continue until this Agreement and the Executive’s employment are terminated in accordance with Section 4 of this Agreement.
3. COMPENSATION AND BENEFITS
3.1 Salary. The Company shall pay to the Executive $240,000 CDN (the “Total Base Salary”) per annum for all hours worked discharging the duties of his employment, payable in accordance with the Company’s regular payroll practices or on such other basis as mutually agreed between the Company and the Executive.
(a) The Total Base Salary consists of the Silver Bull Base Salary in the amount of $60,000 CDN per annum, and the Arras Base Salary in the amount of $180,000 CDN per annum. The Silver Bull Base Salary may be increased from time to time in the sole discretion of the Board of Directors of the Company and the Arras Base Salary may be increased from time to time in the sole discretion of the Board of Directors of Arras.
3.2 Annual Bonus. The Executive will be eligible to receive an annual bonus based upon attaining the performance criteria set by the Boards of Directors:
(a) For the Company, the terms and conditions of any bonus plan implemented by the Company are subject to modification from year to year by the Board of Directors of the Company in the Company’s sole discretion (the “Silver Bull Annual Bonus”). Whether the Executive has achieved the performance criteria in any year shall be determined by the Board of Directors of the Company, acting reasonably.
(b) For Arras, the Executive is eligible to participate in the Arras’ annual performance bonus plan with a target of up to fifty (50) percent of the Arras Annual Base Salary (the “Arras Annual Bonus”). The amount of the Arras Annual Bonus shall be determined by the Arras Board of Directors, in its sole discretion, based on certain financial and operating goals and individual performance objectives as defined by the Board of Directors in its sole discretion. The Executive acknowledges that there is no assurance that any Arras Annual Bonus will be paid in any given year, that the Arras Annual Bonus arrangements will remain unchanged or that the Arras Annual Bonus will be of the same amount in any future year as in any past year. Subject to the requirements of Section 4 of this Agreement, in the event the Executive gives or receives notice of termination of engagement, all entitlement to receive an Arras Annual Bonus shall cease (except for: Arras Annual Bonuses that have already been paid to the Executive by the Corporation; any Bonuses that have been awarded to the Executive by the Corporation in respect of an already completed financial year of the Corporation but which have not yet been paid by the Corporation to the Executive; and Arras Annual Bonuses that have been earned by the Executive but not paid to the Executive by the Corporation however, in this latter instance, the Arras Annual Bonus shall be paid on a pro rata basis, up to but not beyond the termination date, based on the financial and operating goals and individual performance objectives that had been set by the Board of Directors).
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3.3 Stock Options. The Executive will be eligible to participate in the Company and Arras’s Stock Option Plan and Equity Incentive Plan, respectively. Any grants under these plans will be at the sole discretion of the Board of Directors of the Company and Arras.
3.4 Retention Bonus. The Consultant is eligible to participate in both the Company’s Management Retention Plan, and the Arras Minerals Corp. Management Retention Plan (the “Arras Retention Plan”), as approved by the respective Boards of Directors on April 15, 2021, and as amended on February 9, 2022.
(a) Participation in the Company’s Management Retention Plan and/or the Arras Retention Plan will be cancelled if and when this Agreement is terminated by either the Company and/or Arras prior to any retention bonus becoming payable.
3.5 Group Benefits. The Executive will be eligible to participate in the Company’s employee benefit plans, provided that such participation will be subject to all terms and conditions of such plans (including, without limitation, all waiting periods, eligibility requirements, contributions, exclusions or other similar conditions and limitations). The introduction and administration of the employee benefit plans is within the Company’s sole discretion, and the Executive agrees that the introduction, deletion or amendment of any of the benefits shall not constitute a breach of this Agreement.
3.6 Vacation. The Executive shall be entitled to take four (4) weeks of paid vacation per year. The timing of vacation will be subject to the Company and Arras’ business needs at the time.
3.7 Expenses. The Executive shall be reimbursed by the Company and Arras for all reasonable expenses incurred in connection with the Executive’s employment within a reasonable time after receipt of the appropriate invoice or other documentation related to such expenses.
3.8 Other Perquisites. The Company and Arras agree to pay all reasonable costs associated with annual professional development fees and membership dues incurred by the Executive related to the Executive’s employment and to provide the Executive with reasonable time off of work to attend certified accountant professional development courses.
3.9 Statutory Deductions. The Company shall have the right to deduct and withhold from the Executive’s compensation any amounts required to be deducted and remitted under the applicable provincial laws or federal laws of Canada.
4. TERMINATION OF AGREEMENT AND EMPLOYMENT
4.1 Termination by Executive. The Executive may terminate his employment with the Company and/or Arras by giving not less than ninety (90) days written notice of resignation to the Company and/or Arras. At the time the Executive provides the Company and/or Arras with notice of resignation, or at any time thereafter, the Company and/or Arras shall have the right to elect to terminate the Executive’s employment at any time prior to the effective date of the Executive’s resignation, and upon such election, shall provide to the Executive a lump sum payment equal to the Silver Bull Base Salary and/or Arras Base Salary then in effect for the number of days that remain outstanding to the effective date of the Executive’s resignation.
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4.2 Termination by Company Without Cause. The Executive may at any time terminate his agreement with the Company for “Good Reason”, and the Company may terminate this Agreement without Cause at any time by providing the Executive with written notice of termination and a lump sum payment equal to:
(a) twelve (12) months of Silver Bull Base Salary and a pro-rata payment of the Silver Bull Annual Bonus.
(b) If the Company terminates this Agreement without Cause within three (3) months of a Change of Control of the Company, the Company must pay the Executive twenty-four (24) months of Silver Bull Base Salary plus a lump sum payment equal to two (2) Silver Bull Annual Bonuses, based upon the average of the past two previous year’s bonuses paid to the Executive.
4.3 Termination by Arras Without Cause. The Executive may at any time terminate his agreement with the Company for “Good Reason”, and Arras may terminate this Agreement without Cause at any time by providing the Executive with written notice of termination and a lump sum payment equal to:
(a) twelve (12) months of Arras Base Salary and a pro-rata payment of the Arras Annual Bonus.
(b) If Arras terminates this Agreement without Cause within three (3) months of a Change of Control of the Company, Arras must pay the Executive twenty-four (24) months of Arras Base Salary plus a lump sum payment equal to two (2) Arras Annual Bonuses, based upon the average of the two previous years’ bonuses paid to the Executive.
4.4 Termination By Executive Following a Change of Control. With Good Reason, the Executive may elect, within six (6) months of a Change of Control of the Company and/or Arras to terminate his employment and this Agreement upon providing written notice of termination to the Company and/or Arras. Upon receipt of such notice of termination in accordance with this, the Company and/or Arras must pay the Executive twenty-four (24) months of Base Salary plus a lump sum payment equal to two (2) Annual Bonuses, based upon the average of the two previous years’ bonuses paid to the Executive.
4.5 Termination by the Company and/or Arras for Just Cause. Notwithstanding any other provision of this Agreement, the Company and/or Arras may, on written notice to the Executive, immediately terminate this Agreement and the Executive’s employment with the Company and/or Arras at any time for Cause, without notice or pay in lieu of notice or any other form of compensation, severance pay or damages.
4.6 Directorship and Offices. Upon the termination of his employment with the Company or Arras, the Executive shall immediately resign any directorship or office held in the Company or Arras, or any respective parent, subsidiary or affiliated companies of the Company or Arras, and, except as provided in this Agreement, the Executive shall not be entitled to receive any written notice of termination or payment in lieu of notice, or to receive any severance pay, damages or compensation for loss of office or otherwise, by reason of the resignation or resignations referred to in this Sections 4.2, 4.3 or 4.4.
4.7 Annual Bonus Upon Termination. The Executive’s participation in any and all annual bonus plans shall cease immediately on the date the Executive receives or gives notice of termination of this Agreement and the Executive shall only be entitled to receive any Annual Bonus prorated to the date the Executive receives or gives notice of termination.
4.8 Stock Options on Termination. The vesting and exercise of any stock options granted to the Executive in the event the Executive’s employment with the Company and Arras, or this Agreement is terminated, for any reason, shall be governed by the terms of the Stock Option Plan and any applicable stock option agreement in effect between the Company, Arras and the Executive at the time of termination.
4.9 No Additional Payments. The Executive acknowledges and agrees that unless otherwise expressly agreed in writing between the Executive, the Company and/or Arras, the Executive shall not be entitled, by reason of the Executive’s relationship with the Company and Arras or by reason of any termination of his employment by the Company and/or Arras, for any reason, to any remuneration, compensation or other benefits other than those expressly provided for in this Agreement. The Executive further acknowledges and agrees that any amounts paid to the Executive pursuant to this Section 4 are inclusive of any amounts that may be payable under any statute of Canada in respect of compensation for length of service, notice of termination or severance pay.
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| 5. | CONFIDENTIAL INFORMATION |
5.1 The Executive acknowledges that, by reason of the Executive’s employment by the Company and Arras, the Executive will have access to Confidential Information of the Company and Arras that the Company and Arras have spent time, effort and money to develop and acquire. For the purposes of this Agreement any reference to the “Company” shall mean the Company, and such respective affiliates and subsidiaries as may exist from time to time. Furthermore, for the purposes of this Agreement any reference to “Arras” shall mean Arras, and such respective affiliates and subsidiaries as may exist from time to time.
5.2 The Executive acknowledges that the Confidential Information is a valuable and unique asset of the Company and Arras and that the Confidential Information is and will remain the exclusive property of the Company and Arras, respectively.
5.3 The Executive agrees to maintain securely and hold in strict confidence all Confidential Information received, acquired or developed by the Executive or disclosed to the Executive as a result of or in connection with the Executive’s employment. The Executive agrees that, both during his employment and after the termination of his employment with the Company and/or Arras, the Executive will not, directly or indirectly, divulge, communicate, use, copy or disclose or permit others to use, copy or disclose, any Confidential Information to any person, except as such disclosure or use is required to perform his duties hereunder or as may be consented to by prior written authorization of the Company and/or Arras, respectively.
5.4 The obligation of confidentiality imposed by this Agreement shall not apply to information that appears in issued patents or printed publications, that otherwise becomes generally known in the industry through no act of the Executive in breach of this Agreement, or that is required to be disclosed by court order or applicable law.
5.5 The Executive understands that the Company and Arras have from time to time in its possession information belonging to third parties or which is claimed by third parties to be confidential or proprietary and which the Company and Arras have agreed to keep confidential. The Executive agrees that all such information shall be Confidential Information for the purposes of this Agreement.
5.6 The Executive agrees that documents, copies, records and other property or materials made or received by the Executive that pertain to the business and affairs of the Company and Arras, including all Confidential Information which is in the Executive’s possession or under the Executive’s control are the property of the Company and Arras, and that the Executive will return same and any copies of same to the Company and/or Arras immediately upon termination of the Executive’s employment or at any time upon the request of the Company and/or Arras.
6. RESTRICTED ACTIVITIES
6.1 Restriction on Competition. The Executive covenants and agrees with the Company that the Executive will not, without the prior written consent of the Company, at any time during his employment or for a period of six (6) months following the termination of the Executive’s employment, for any reason, either individually or in partnership or in conjunction with any person, whether as principal, agent, shareholder, director, officer, employee, investor, or in any other manner whatsoever, directly or indirectly, advise, manage, carry on, be engaged in, own or lend money to, or permit the Executive’s name or any part thereof to be used or employed by any person managing, carrying on or engaged in a business anywhere in Kazakhstan or the province of Coahuila, Mexico or other jurisdiction in which Arras and the Company are carrying on the business of mineral exploration which is in direct competition with the business of the Company. The restrictions set forth in this Section 6.1 shall terminate and shall not apply to the Executive where the Executive’s employment is terminated by the Company and/or Arras following a Change of Control.
6.2 Restriction on Solicitation. The Executive shall not, at any time during his employment or for a period of six (6) months after the termination of the Executive’s employment, for any reason, without the prior written consent of the Company and/or Arras, for his account or jointly with another, either directly or indirectly, for or on behalf of himself or any individual, partnership, corporation or other legal entity, as principal, agent, employee or otherwise, solicit, influence, entice or induce, attempt to solicit, influence, entice or induce:
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(a) any person who is employed by the Company and Arras to leave such employment; or
(b) any person, firm or corporation whatsoever, who is or was at any time in the last twelve (12) months of the Executive’s employment a customer or supplier of the Company and Arras or any affiliate or subsidiary, to cease its relationship with the Company, Arras or any their affiliates or subsidiaries.
6.3 Corporate Opportunities. During the term of this Agreement, the Executive will offer to the Company any investment or other opportunity generally in the geographic area of the province of Coahuila, Mexico, and to Arras any investment or other opportunity generally in the country of Kazakhstan and any other geographic region in which the Company and Arras operate, of which he may become aware. If after 10 working days the Board of Directors of either the Company or Arras, as applicable, refuses the opportunity to participate in the investment or venture, the Executive is free to seek other alternatives only during his private time.
6.4 Restriction on Investments. The Executive may make passive investments in companies involved in industries in which the Company and Arras operate, provided any such investment does not exceed a 10% equity interest, unless Executive obtains consent to acquire an equity interest exceeding 10% by consent of the Chief Executive Officer and the Chairman of the Company and Arras.
7. ENFORCEMENT
7.1 The Executive acknowledges and agrees that the covenants and obligations under Sections 5 and 6 are reasonable, necessary and fundamental to the protection of the Company and Arras’ business interests, and the Executive acknowledges and agrees that any breach of these Sections by the Executive would result in irreparable harm to the Company and Arras, and loss and damage to the Company and Arras, for which the Company and/or Arras could not be adequately compensated by an award of monetary damages. Accordingly, the Executive agrees that, in the event the Executive violates any of the restrictions referred to in Sections 5 or 6, the Company and/or Arras shall suffer irreparable harm and shall be entitled to preliminary and permanent injunctive relief and any other remedies in law or in equity which the court deems fit.
8. GENERAL PROVISIONS
8.1 Cooperation and Assistance. The Executive agrees that he shall, both during the term of this Agreement and thereafter, fully co-operate with and assist the Company and Arras in the resolution of complaints, claims or disputes against the Company and/or Arras, including without limitation civil, criminal or regulatory proceedings.
8.2 Use of Likeness. The Executive hereby grants to the Company, Arras, their parent, subsidiary and affiliated companies, during the term of the Executive’s employment, and for a period of one (1) year after the termination of that employment for any reason, the right to use the Executive’s name, likeness and biography in connection with the advertising, sale and/or marketing of the Company and Arras’, or their parent or affiliated company’s, products or services.
8.3 Severability. If any provision of this Agreement is declared unenforceable or invalid for any reason whatsoever, such unenforceability or invalidity shall not affect the enforceability or validity of any remaining portion of this Agreement, which remaining portion shall remain in full force and effect with such unenforceable or invalid provisions shall be severed from the remainder of this Agreement.
8.4 Survival. The Company, Arras and the Executive expressly acknowledge and agree that the provisions of this Agreement, which by their express or implied terms extend beyond the termination of the Executive’s employment hereunder, or beyond the termination of this Agreement, shall continue in full force and effect notwithstanding the termination of the Executive’s employment or the termination of this Agreement for any reason.
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8.5 Entire Agreement. The provisions of this Agreement constitute the entire agreement between the parties and, except as specifically provided in any incentive plans that may be implemented from time to time after the Effective Date of this Agreement, supersede and cancel all previous communications, representations and agreements, whether oral or written, between the parties with respect to the Executive’s employment.
8.6 Amendment. This Agreement may not be amended or modified except by written instrument signed by the Company, Arras and the Executive.
8.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the province of British Columbia and the federal laws of Canada applicable therein, which shall be deemed to be the proper law hereof. The parties hereby attorn to and submit to the jurisdiction of the courts of British Columbia.
8.8 Enurement. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors, personal representatives and permitted assigns.
8.9 Assignment of Rights. The Company and Arras shall have the right to assign this Agreement to another party as a successor employer, provided that any such successor or assignee expressly assumes in writing the Company’s obligations under this Agreement. The Executive shall not assign his rights under this Agreement or delegate to others any of his functions and duties under this Agreement without the express written consent of the Company and Arras which may be withheld in its sole discretion.
8.10 Affiliated Corporations. The Executive acknowledges and agrees that all of the Executive’s covenants and obligations to the Company and Arras, as well as the rights of the Company and Arras under this Agreement, shall run in favour of and shall be enforceable by the parent, subsidiary and affiliated companies of the Company and Arras. The Executive acknowledges that notwithstanding references in this Agreement to affiliated companies of the Company, this Agreement is between the Executive, the Company and Arras. The Executive shall have no right to enforce this Agreement against any party other than the Company and Arras unless this Agreement is assigned to any entity in accordance with Section 8.9 of this Agreement.
8.11 Legal Advice. The Executive acknowledges this Agreement has been prepared by the Company and that the Executive has had sufficient time to review these documents thoroughly, including enough time to obtain independent legal advice concerning the interpretation and effect of these documents prior to their execution. By signing these documents, the Executive represents and warrants that he has read and understood these documents and that he executes them of his own free will and act.
IN WITNESS WHEREOF the parties hereto have duly executed this agreement as of the day and year first above written.
| SILVER BULL RESOURCES, INC. | |
| Per: | /s/ Timothy Barry |
| Authorized Signatory |
| ARRAS MINERALS CORP. | |
| Per: | /s/ Timothy Barry |
| Authorized Signatory |
| Per: | /s/ Christopher Richards |
| CHRSITOPHER RICHARDS |
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SCHEDULE “A”
DEFINITIONS
The following terms shall have the following definitions:
| (a) | “Board” means the Board of Directors of the Company; |
| (b) | “Cause” has the meaning commonly ascribed to the phrase “cause” or “just cause for termination” at common law and, without limiting the foregoing, includes any of the following acts or omissions: |
(a) the Executive’s gross default or misconduct during the Executive’s employment in connection with or effecting the business of the Company and/or Arras;
(b) the Executive’s continued refusal or willful misconduct to carry out the duties of his employment after receiving written notice from the Company and/or Arras of the failure to do so and having had an opportunity to correct same within a reasonable period of time from the date of receipt of such notice;
(c) theft, fraud, dishonesty or misconduct of the Executive involving the property, business or affairs of the Company and/or Arras, or in the carrying out of the duties of his employment; or
(d) any material breach of this Agreement including any breach Sections 5, 6 or 7 of this Agreement;
| (c) | “Change of Control” means the occurrence of one or more of the following events after the Effective Date of this Agreement: |
| (i) | a sale, lease or other disposition of all or substantially all of the assets of the Company or Arras, |
| (ii) | a consolidation or merger of the Company or Arras with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Company or Arras immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization; or |
| (iii) | a transaction or series or related transactions pursuant to which any person, entity or group within the meaning of Section 13(d) or 14(d) of the U.S. Securities Exchange Act of 1934 (“1934 Act”), or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company, Arras, or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Company or Arras representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; or |
| (iv) | a transaction or series of transactions pursuant to which (A) (i) any person, entity or group within the meaning of Section 13(d) or 14(d) of the 1934 Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company, Arras or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Company or Arras representing at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors or securities of the Company that, upon conversion or exchange of such securities, would represent at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors, or (ii) a consolidation or merger of the Company with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than eighty percent (80%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization and (B) in connection with or as a result of such transaction or series of transactions, either (i) one-half (or more) of the members of the Board of Directors of the Company resign or are replaced with nominees designated by such person, entity or group or (ii) the chief executive officer of the Company resigns or is terminated as a result of such transaction or series of transactions. |
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| (d) | “Confidential Information” means all trade secrets, proprietary information and other data or information (and any tangible evidence, record or representation thereof), whether prepared, conceived or developed by an employee of the Company or Arras (including the Executive) or received by the Company or Arras from an outside source which is maintained in confidence by the Company, Arras or any of its employees, contractors or customers including, without limitation: |
| (i) | any ideas, drawings, maps, improvements, know-how, research, geological records, drill logs, inventions, innovations, products, services, sales, scientific or other formulae, core samples, processes, methods, machines, procedures, tests, treatments, developments, technical data, designs, devices, patterns, concepts, computer programs or software, records, data, training or service manuals, plans for new or revised services or products or other plans, items or strategy methods on compilation of information, or works in process, or any inventions or parts thereof, and any and all revisions and improvements relating to any of the foregoing (in each case whether or not reduced to tangible form) that relate to the business or affairs of the Company or Arras, or that result from its marketing, research and/or development activities; |
| (ii) | any information relating to the relationship of the Company and/or Arras with any personnel, suppliers, principals, investors, contacts or prospects of the Company and/or Arras and any information relating to the requirements, specifications, proposals, orders, contracts or transactions of or with any such persons; |
| (iii) | any marketing material, plan or survey, business plan, opportunity or strategy, development plan or specification or business proposal; |
| (iv) | financial information, including the Company and/or Arras’ costs, financing or debt arrangements, income, profits, salaries or wages; and |
| (v) | any information relating to the present or proposed business of the Company and Arras. |
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| (e) | “Good Reason” means any of the following conduct by the Company and/or Arras: |
| (i) | a unilateral reduction to the Silver Bull Annual Salary or Arras Annual Salary; |
| (ii) | a unilateral reduction to the aggregate value of the Executive’s remuneration and benefits, other than Annual Salary; |
| (iii) | a unilateral material adverse change to the Executive’s position, title, authority or responsibilities; |
| (iv) | a unilateral requirement that the Executive relocate outside of the Metro Vancouver region of British Columbia (excluding occasional business travel); or |
| (v) | any reason which would be considered to amount to constructive dismissal pursuant to the common law. |
| (f) | “Person” means an individual, partnership, association, company, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government; and |
| (g) | “Stock Option Plan” means the 2019 Stock Option and Stock Bonus Plan for Silver Bull Resources, Inc. as amended from time to time. |
| (h) | “Equity Incentive Plan” means the 2021 Equity Incentive Plan for Arras Minerals Corp. as amended from time to time. |
Exhibit 4.25.1
ARRAS MINERALS CORP.
AMENDMENT TO MANAGEMENT RETENTION BONUS PLAN
This Amendment to the Arras Minerals Corp. Management Retention Bonus Plan dated the 9th day of February, 2022 (this “Amendment”), is entered into by and among Arras Minerals Corp. (“Arras” or the “Company”) and Timothy Barry, Brian Edgar, Christopher Richards and David Xuan (collectively the “Management”) and, together with the Company, the “Parties” and individually, a “Party”).
RECITALS
| A. | The Company and the Management entered into the Management Retention Bonus Plan agreement, dated April 15, 2021 (the “Retention Plan”) pursuant to which the Parties agreed to the terms and conditions of retention of Management. |
| B. | The Parties now wish to enter into this Amendment in order to modify certain terms of the Retention Plan. |
AGREEMENT
In consideration of the forgoing recitals and of the mutual covenants, agreements and representations contained herein and other valuable consideration given by each Party hereto to the other, the receipt and sufficiency of which are hereby acknowledged by each of the Parties, the Parties hereby agree to the following amendments:
| 1. | Definitions |
The following terms shall have the following definitions:
| a. | For the purposes of the Retention Plan, “market capitalization” shall be calculated using the prevailing share price on a Canadian stock exchange multiplied by the number of the Company’s shares outstanding. |
| b. | “Change of Control” means the occurrence of one or more of the following events after the Effective Date of this Retention Plan: |
| i. | a sale, lease or other disposition of all or substantially all of the assets of the Company, |
| ii. | a consolidation or merger of the Company with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization; or |
| iii. | a transaction or series or related transactions pursuant to which any person, entity or group within the meaning of Section 13(d) or 14(d) of the U.S. Securities Exchange Act of 1934 (“1934 Act”), or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Corporation or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Corporation representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; or |
| iv. | a transaction or series of transactions pursuant to which (A) (i) any person, entity or group within the meaning of Section 13(d) or 14(d) of the 1934 Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Corporation or an affiliate) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act, or comparable successor rule) of securities of the Corporation representing at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors or securities of the Corporation that, upon conversion or exchange of such securities, would represent at least twenty percent (20%) of the combined voting power entitled to vote in the election of directors, or (ii) a consolidation or merger of the Corporation with or into any other corporation or other entity or person (or any other corporate reorganization) in which the shareholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than eighty percent (80%) of the outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization and (B) in connection with or as a result of such transaction or series of transactions, either (i) one-half (or more) of the members of the Board of Directors of the Corporation resign or are replaced with nominees designated by such person, entity or group or (ii) the Chief Executive Officer of the Corporation resigns or is terminated as a result of such transaction or series of transactions. |
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| 2. | Amendments |
| a. | Clause 5 of the Retention Plan to be replaced by the following wording: |
5. In the event that Arras is the subject of a Change of Control, the 1% bonus shall be paid if the market capitalization of the Company is equal to or greater than $250,000,000 at any point prior to the closing of the transaction and be equal to 1% of the bid price less any 1% bonus that may have been previously paid.
| b. | Clause 10 of the Retention Plan to be replaced by the following wording: |
10. At the sole discretion of the Company’s Board of Directors, Arras shall not be obligated to pay a bonus in cash under this agreement if it lacks funds at the time. In lieu of cash, the Company’s Board of Directors may choose to settle any bonus debt by issuing and delivering shares of Arras for such debt valued at the 5-day trading VWAP for Arras’ shares on the market calculated up to the day before the issuance of the shares.
3. No Other Waiver or Amendment. Except as expressly modified herein, all terms and provisions of the Retention Plan shall remain unchanged and in full force and effect. This Amendment shall not be deemed to prejudice any rights or remedies which any Party may now have or may have in the future under or in connection with the Retention Plan or any of the instruments or agreements referred to therein, as the same may be amended, restated or otherwise modified.
4. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the province of British Columbia and the federal laws of Canada applicable therein, which shall be deemed to be the proper law hereof. The Parties hereby attorn to and submit to the jurisdiction of the courts of British Columbia.
5. Counterparts. This Amendment may be executed in one or more counterparts, each of which when executed shall be deemed to be an original, and such counterparts shall together constitute one and the same instrument.
6. Legal Advice. Management acknowledge this Amendment has been prepared by the Company and that Management have had sufficient time to review this Amendment thoroughly, including enough time to obtain independent legal advice concerning the interpretation and effect of this Amendment prior to their execution. By signing this Amendment, Management represent and warrant that they have read and understood this Amendment and that they execute them of their own free will and act.
[Signature Page Follows]
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IN WITNESS WHEREOF the Parties have executed this Amendment as of the date and year first above written.
ARRAS MINERALS CORP.
Per: /s/ G. Wesley Carson
G. Wesley Carson
SIGNED, SEALED AND DELIVERED:
/s/ Timothy Barry
Timothy Barry
/s/ Brain Edgar
Brian Edgar
/s/ Christopher Richards
Christopher Richards
/s/ David Xuan
David Xuan
3
Exhibit 11.1
ARRAS MINERALS CORP.
CODE OF BUSINESS CONDUCT AND ETHICS
Effective Date: December 7, 2021
| 1. | Introduction |
This Code of Business Conduct and Ethics (this “Code”) has been adopted by our Board of Directors (“Board”) to summarize the standards and principles of business conduct that must guide our actions. This Code applies to all directors, officers, and employees (“Company Personnel”) of Arras Minerals Corp. and its subsidiaries (the “Company”). Some specific objectives of this Code are to promote:
| · | honest and ethical conduct; |
| · | handling of actual or apparent conflicts with the interests of the Company, including the avoidance of such conflicts and disclosure to an appropriate person of any material transaction or relationship that reasonably could be expected to give rise to such a conflict; |
| · | confidentiality of corporate information; |
| · | protection and proper use of corporate assets and opportunities; |
| · | compliance with applicable governmental laws, rules and regulations; |
| · | the prompt internal reporting of any violations of this Code to an appropriate person; and |
| · | accountability for adherence to the Code. |
This Code provides guidance to you on your ethical and legal responsibilities. We expect all Company Personnel to comply with the Code, and the Company is committed to taking prompt and consistent action against violations of the Code. In addition to potential civil and criminal liability, violation of the standards outlined in the Code may be grounds for disciplinary action up to and including termination of employment or other business relationships.
While covering a wide range of business practices and procedures, the Code cannot and does not cover every issue that may arise or every situation in which ethical decisions must be made, but rather sets forth key guiding principles of business conduct that the Company expects of all Company Personnel. Any questions regarding the Code and its application or interpretation should be directed to a supervisor or the Audit Committee Chair.
| 2. | Basic Obligations |
Under the Company’s ethical standards, Company Personnel share certain responsibilities. It is your responsibility to: (a) become familiar with, and conduct Company business in compliance with, applicable laws, rules and regulations and this Code; (b) treat all Company Personnel, suppliers, customers and business partners in an honest and fair manner; (c) avoid situations where your personal interests are, or appear to be, in conflict with the Company interests; and (d) safeguard and properly use the Company’s proprietary and confidential information, assets and resources, as well as those of the Company’s suppliers, customers and business partners.
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Certain of the Company’s policies are complemented by specific responsibilities set forth in documents such as the Company’s Insider Trading Policy, Disclosure Policy, Diversity Policy and Whistleblowing Policy. Those polices should be separately consulted by Company Personnel. Please consult with Human Resources for copies of any policies that you have not yet reviewed.
| 3. | Reporting Concerns |
If you should learn of conduct that constitutes a potential or suspected violation of the standards outlined in the Code, you have an obligation to promptly report that conduct. You may do so orally or in writing and, if preferred, anonymously, through any of the following channels:
| (a) | your manager; |
| (b) | your local Human Resources representative; |
| (c) | the Company’s Chief Executive Officer or Audit Committee Chair; or |
| (d) | the Corporate Governance and Nominating Committee of the Board. |
All reports will be treated confidentially. Should you choose to report a matter anonymously, please be advised that the Company may not be able to adequately investigate and resolve the matters specified in your report if you fail to provide sufficient information.
If the issue or concern is related to the internal accounting controls of the Company or any accounting or auditing matter, you should report it using the procedures outlined in the Company’s Whistleblowing Policy.
| 4. | Policy Against Retaliation |
The Company prohibits Company Personnel from retaliating or taking adverse action against anyone for reporting, in good faith, conduct constituting a suspected or potential violation of the Code or for cooperating with or participating in any investigation or proceeding relating to such a concern conducted by the Company or any government authority. Such prohibited retaliation includes actual or threatening the ending of employment of a person, or demoting, disciplining, suspending or imposing a penalty related to the employment of a person. Any individual who has been found to have engaged in retaliation against Company Personnel for reporting, in good faith, a conduct concern, seeking advice with respect to such reporting, or indicating a good faith intent to make such a report, or for co-operating with or participating in the investigation of such a concern, may be subject to discipline, up to and including termination of employment or other business relationship. If any individual believes that they have been subjected to such retaliation, that person is encouraged to report the situation as soon as possible to one of the people detailed in the “Reporting Concerns” section above.
| 5. | Conflicts of Interest |
Company Personnel should not engage in any activity, practice or act that conflicts, or may reasonably be expected to conflict or result in the appearance of a conflict, with the interests of the Company. A conflict of interest occurs when Company Personnel places or finds themself in a position where their private interests conflict with the interests of the Company or have an adverse effect on such person’s ability to exercise judgment in the Company’s best interests or the proper performance of their job. Examples of such conflicts could include, but are not limited to:
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| · | accepting outside employment with, or accepting personal payments from, any organization which does business with, or wishes to do business with, the Company or is a competitor of the Company; |
| · | accepting or giving gifts of more than modest value to or from current or prospective suppliers or customers of the Company; |
| · | competing with the Company for the purchase or sale of property, services or other interests or diverting an opportunity from the Company or taking personal advantage of an opportunity in which the Company has an interest; |
| · | personally having, or having an immediate family member who has, a financial interest in a firm which does or seeks to do business with the Company; or |
| · | having an interest in a transaction involving the Company or a customer, business partner or supplier (not including non-material investments in publicly traded companies). |
Company Personnel must not place themselves in, or remain in, a position in which their private interests conflict, or can reasonably be expected to conflict or result in the appearance of conflict, with the interests of the Company.
If the Company determines that Company Personnel’s outside employment or activity interferes with performance or the ability to meet the requirements of their role with the Company, as they are modified from time to time, Company Personnel may be asked to terminate the outside employment or activity. To protect the interests of both Company Personnel and the Company, any such outside work or other activity that involves potential or apparent conflict of interest may be undertaken only after disclosure to the Company and, in the case of an officer or employee, review and approval by management. Similarly, to the extent that Company Personnel is interested in accepting an appointment as a director, officer or other representative of another company or entity, or other company or entity whose business is competitive with or likely to be competitive with that of the Company’s, or is otherwise considering a material investment in any such company, such appointment or investment, as the case may be, may proceed only after disclosure to the Company by Company Personnel and, in the case of an officer or employee, review and approval by management.
| 6. | Competition and Fair Dealing |
We seek to outperform our competition fairly and honestly and Company Personnel are prohibited from making false or deceptive statements about our competitors. We seek competitive advantages through superior performance, not through unethical or illegal business practices. We will not collude in any way with any competitor to unlawfully fix prices, discounts or terms of sale or divide markets, market shares, customers or territories. Information about other companies and organizations, including competitors, must be gathered using appropriate methods. Illegal acts such as trespassing, burglary, misrepresentation, wiretapping, bribery, payment of kickbacks or facilitation payments and stealing are prohibited. Possessing trade secrets that were obtained without the owner's consent, or inducing such disclosures by customers or past or present employees of other companies is prohibited. Each employee should endeavor to respect the rights of, and deal fairly with, our customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair business practice.
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| 7. | Workplace Harassment and Discrimination |
The Company is committed to maintaining a collegial and respectful workplace and its policies prohibit workplace harassment and discrimination. The Company will comply with applicable human rights legislation in those jurisdictions where it does business.
| · | You will not discriminate against or harass Company Personnel, or any other person with whom you come in contact in the course of your role with the Company, on the basis of gender, race, ethnic background, religion, disability, age, marital and family status, sexual orientation and gender identity or any other personal characteristic protected by law. |
| · | You will not engage in abusive or harassing conduct toward Company Personnel, or any other person with whom you come in contact in the course of your role with the Company, such as unwelcome sexual advances or other non-business, personal comments or conduct that makes others uncomfortable in their role with the Company. |
All acts or threats of workplace violence are prohibited. We encourage and expect you to report workplace harassment, discrimination or other inappropriate conduct as soon as it occurs.
| 8. | Privacy |
The Company, and companies and individuals authorized by the Company, collect and maintain personal information that relates to your employment, including compensation, medical and benefit information. The Company follows procedures to protect information wherever it is stored or processed, and access to your personal information is restricted. Your personal information will only be released to outside parties in accordance with the Company’s policies and applicable legal requirements. Company Personnel who have access to personal information must ensure that personal information is not disclosed in violation of the Company’s policies or practices.
| 9. | Insider Trading |
The Company encourages all Company Personnel to become shareholders on a long-term investment basis. You should refer to the Company’s Insider Trading Policy.
| 10. | Information Technology Systems and Security |
You are expected to use the information technology systems of the Company available to you for appropriate business purposes and in a manner consistent with this Code, other policies and applicable laws and regulations. Use of these systems imposes certain responsibilities and obligations on all Company Personnel. Usage must be ethical and honest with a view to preservation of and due respect for Company’s intellectual property, security systems, personal privacy, and freedom of others from intimidation, harassment, or unwanted attention. To the extent permitted or required by law, the Company may for business and/or legal and compliance purposes store, review, monitor, audit, intercept, access, copy, record and, where appropriate, disclose to regulators and other outside parties the information contained in, or your usage of, its information technology systems. In addition, it is your responsibility to be familiar with Company policies relating to information security and to take necessary and appropriate steps to prevent unauthorized access, including, for example, selecting appropriate passwords, safeguarding your passwords and other means of entry (and not sharing them with other persons) and password protecting data on electronic devices.
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| 11. | Social Media |
Unless you are specifically authorized to represent the Company to the media, you may not respond to media inquiries or requests for information. This includes newspapers, magazines, trade publications, radio and television as well as any other external sources requesting information about the Company. Any media contact on any topic should be immediately referred to the designated spokesperson identified in the Company’s Disclosure Policy. You must be careful not to disclose confidential, personal or business information through public or casual discussions with the media or others.
| 12. | Confidentiality and Disclosure Concerning Company Affairs |
The business affairs of the Company are confidential and should not be discussed with anyone outside the organization except for information that has, already been made available to the public. The Company is committed to providing timely, consistent and credible dissemination of information, consistent with disclosure requirements under applicable securities laws. You should refer to the Company’s Disclosure Policy.
| 13. | Accuracy of Company Records |
As a public company, we are required to record and publicly report all internal and external financial records in compliance with International Financial Reporting Standards (IFRS). Therefore, you are responsible for ensuring the accuracy of all books and records within your control and complying with all Company policies and internal controls. All Company information must be reported accurately, whether in internal personnel, safety, or other records or in information we release to the public or file with government agencies.
| 14. | Financial Reporting and Disclosure Controls |
As a public company, we are required to file periodic and other reports with the Canadian securities regulatory authorities and to make certain public communications. We are required by the Canadian securities regulatory authorities to maintain effective “disclosure controls and procedures” so that financial and non-financial information is reported timely and accurately both to our senior management and in the filings we make. You are expected, within the scope of your duties, to support the establishing and maintaining of the effectiveness of our disclosure controls and procedures.
| 15. | Compliance with All Laws, Rules and Regulations |
The Company is committed to compliance with all laws, rules, and regulations, including laws and regulations applicable to the Company’s securities and trading in such securities, as well as any rules promulgated by any exchange on which the Company’s shares are listed.
| 16. | Customers and Business Partners |
We strive to achieve satisfied customers who will be repeat buyers of our products and services and to building mutually advantageous alliances with our business partners.
Our policy is to build lasting relationships with our customers and business partners through superior delivery and execution and honest sales and marketing. We will comply with applicable advertising laws and standards, including a commitment that our advertising and marketing will be truthful, non-deceptive and fair and will be backed up with evidence before advertising claims are made.
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| 17. | Health and Safety |
The Company is committed to making the work environment safe, secure and healthy for its employees and others. The Company complies with all applicable laws and regulations relating to safety and health in the workplace. We expect Company Personnel to promote a positive working environment for all. You are expected to consult and comply with all Company rules regarding workplace conduct and safety. You should immediately report any unsafe or hazardous conditions or materials, injuries, and accidents connected with our business and any activity that compromises Company security to your supervisor. You must not work under the influence of any substances that would impair the safety of others. All threats or acts of physical violence or intimidation are prohibited.
| 18. | Waivers and Amendments |
Only the Board may waive application of or amend any provision of this Code. A request for such a waiver should be submitted in writing to the Board, Attention: Chair of the Corporate Governance and Nominating Committee for its consideration. The Company will promptly disclose to investors all substantive amendments to the Code, as well as all waivers of the Code granted to directors or officers in accordance with applicable laws and regulations.
| 19. | No Rights Created |
This Code is intended as a component of the flexible governance framework within which the Board, assisted by its committees, supervises the management of the business and affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Articles and By-Laws, it is not intended to establish any legally binding obligations.
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Receipt of Code of Business Conduct and Ethics
I have received a copy of the Arras Minerals Corp. (the “Company”) Code of Business Conduct and Ethics (the “Code”) and acknowledge that I have read and understand its contents. I understand my obligation to comply with this Code, and my obligation to report to appropriate personnel within the Company any and all conduct constituting potential or suspected violations of this Code. I understand that the Company expressly prohibits any director, officer or employee from retaliating against any other such person for reporting such conduct. I am familiar with all resources that are available if I have questions about specific conduct, Company policies, or the Code.
| Printed Name: | |
Signature: |
|
| Position: | |
| Date: |
Please sign and date this receipt and return it to the Human Resources Department .
7
Exhibit 12.1
Certification
of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Timothy Barry, certify that:
| 1. | I have reviewed this Annual Report on Form 20-F of Arras Minerals Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Dated: February 17, 2022 | By: | /s/ Timothy Barry |
|
Timothy Barry, Chief Executive Officer (Principal Executive Officer) | ||
Exhibit 12.2
Certification
of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Christopher Richards, certify that:
| 1. | I have reviewed this Annual Report on Form 20-F of Arras Minerals Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Dated: February 17, 2022 | By: | /s/ Christopher Richards |
|
Christopher Richards, Chief Financial Officer (Principal Accounting and Financial Officer) | ||
Exhibit 13.1
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Arras Minerals Corp. (the “Company”) does hereby certify with respect to the Annual Report of the Company on Form 20-F for the period ended October 31, 2021 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: February 17, 2022 | By: | /s/ Timothy Barry | ||
|
Timothy Barry, Chief Executive Officer (Principal Executive Officer) | ||||
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.
Exhibit 13.2
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Arras Minerals Corp. (the “Company”) does hereby certify with respect to the Annual Report of the Company on Form 20-F for the period ended October 31, 2021 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: February 17, 2022 | By: | /s/ Christopher Richards | ||
|
Chief Financial Officer (Principal Accounting and Financial Officer) | ||||
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Annual Report on Form 20-F of Arras Minerals Corp. (the “Company”) of our report dated February 16, 2022 with respect to the financial statements of the Company as of October 31, 2021 and for the period from the Company’s inception on February 5, 2021 to October 31, 2021. We also consent to the reference to us under the heading “Principal Accountant Fees and Services” in this Annual Report.
/s/ Smythe LLP
Smythe LLP, Chartered Professional Accountants
Vancouver, Canada
February 17, 2022
Exhibit 15.2
CONSENT OF CSA GLOBAL CONSULTANTS CANADA LTD.
We, CSA Global Consultants Canada Ltd., in connection with Arras Minerals Corp.’s Annual Report on Form 20-F for the fiscal year ended October 31, 2021 (the “Form 20-F”), consent to:
- the filing and use of the technical report summary titled “Beskauga Copper-Gold Project, Republic of Kazakhstan, Mineral Resource Estimate — S-K 1300 Technical Report Summary” (the “Technical Report Summary”), dated June 7, 2021, as an exhibit to and referenced in the Form 20-F or any amendment thereto;
- the use of and references to our name in connection with the Form 20-F or any amendment thereto and any such Technical Report Summary; and
- the information derived, summarized, quoted or referenced from the Technical Report Summary, or portions thereof, that was prepared by us, that we supervised the preparation of and/or that was reviewed and approved by us, that is included or incorporated by reference in the Form 20-F or any amendment thereto.
CSA GLOBAL CONSULTANTS CANADA LTD.
| ||
| Date: February 17, 2022 | By: | /s/ Neal Reynolds |
| Name: | Neal Reynolds, PhD BSc. FAusIMM, MAIG, FSEG | |
| Title: | Partner – Americas | |