TORONTO, ONTARIO -- (Marketwired) -- 04/22/13 -- Further to its press releases of January 30, February 20 and March 28, 2013, Ethiopian Potash Corp. (the "Company" or "EPC") (TSX VENTURE: FED) is pleased to announce that it has executed definitive agreements (the "Definitive Agreements") in respect of, among other things, the early exercise of EPC's option (the "Option") to acquire G and B Central African Resources Ltd. ("G&B"), which owns the Danakil Property, and the forming of a joint venture between EPC and Danakil Potash Corporation ("Danakil Corp.") regarding the Danakil Property (the "Danakil Joint Venture"). The Definitive Agreements supersede and replace the memorandum of understanding (the "MOU") dated January 30, 2013, among EPC, Danakil Corp., G&B, ZRH Nominees (0105) Ltd. ("ZRH") and Premier African Minerals Ltd. ("PREM").
Pursuant to the Definitive Agreements, G&B and its sole shareholder, ZRH, have agreed to waive the requirement for a feasibility study (the "Waiver") under the option agreement among EPC, G&B and ZRH (the "Option Agreement") in order to enable early exercise of the Option and Danakil Corp. acquiring a 70% interest in the Danakil Property pursuant to the Danakil Joint Venture. Conditions precedent to the delivery of the Waiver and the completion of the transactions contemplated by the Definitive Agreements (the "Transactions") include, among other things, (i) receipt of TSX Venture Exchange ("TSXV") approval of the Transactions and (ii) EPC obtaining the Shareholder Approvals (as defined below).
Danakil Joint Venture
Danakil Corp. will acquire an interest in the Danakil Property through an ownership interest in a BVI joint venture company ("JVCo"), which EPC has established to hold the shares of G&B acquired under the Option. Pursuant to the Definitive Agreements, EPC will assign to JVCo all of its rights and interests in and to the Option Agreement, together with all rights and privileges to be derived therefrom, at the time the Waiver is delivered to EPC, so as to allow JVCo to acquire the G&B shares upon the exercise of the Option. Danakil Corp. will pay US$3 million (and commit to carry up to US$7 million of future project expenditures, as described below) for 70% of the shares of JVCo (US$1.5 million to be paid into JVCo and US$1.5 million to be paid to EPC). The US$1.5 million payable by Danakil Corp. to JVCo in respect of its subscription for JVCo shares will be partially setoff against all sums owing to Danakil Corp. by G&B pursuant to a loan agreement entered into among Danakil Corp., EPC, G&B and ZRH on February 20, 2013. For further information see the Company's press release dated February 20, 2013.
The Danakil Joint Venture will be governed by a shareholder and joint venture agreement to be entered into by EPC, JVCo and Danakil Corp. ("JV Agreement") at closing, which will provide (among other things) for customary drag & tag and pre-emptive provisions. Danakil Corp. will have nominees appointed to the boards of directors of JVCo and G&B (and any other group company of JVCo), in each case, that together represent a majority of the respective board of directors. EPC will be entitled to have its nominees appointed to fill the remaining positions on each respective board of directors as long as it retains not less than 10% of the issued share capital of JVCo. To the extent that Danakil Corp. and EPC otherwise change their ownership interests in JVCo, they will seek to adjust their respective representation on the boards of directors to reflect such new ownership interests.
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