Following the completion of the Transaction, it is anticipated that Mr. Adrian Bray, P.Geo., will join Castillian's board of directors and that the current executive management team of Castillian will be unchanged.
Mr. Brian Penney is a director of both of Castillian and Ridgemont and the President and Chief Executive Officer of Ridgemont and, therefore, Castillian and Ridgemont are non-arm's length parties with respect to each other under the policies of the TSX Venture Exchange.
Pursuant to the terms of the Agreement, the Transaction will be conducted by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia), resulting in Ridgemont becoming a wholly-owned subsidiary of Castillian. Each Ridgemont common share issued and outstanding immediately prior to closing of the Transaction will be exchanged for 0.593 of a Castillian common share.
All options and warrants of Ridgemont outstanding immediately prior to closing of the Transaction will, following closing and subject to regulatory approval, be exercisable for that number of shares of Castillian using the same exchange ratio applicable to the common shares of Ridgemont under the Transaction, with corresponding adjustment to the exercise prices on the basis of such exchange ratio.
On April 24, 2013 Ridgemont and Castillian entered into a loan agreement whereby Ridgemont advanced to Castillian $250,000 (the "Loan"). The Loan will accrue interest at the rate of 10% per annum and mature on the earlier of the completion of the Transaction and the date that is twelve months following the termination of either the Agreement (the "Maturity Date"). In the event of the termination of the Definitive Agreement, Ridgemont will have the option to convert the principal amount of the Loan and all interest accrued thereon at any time prior to the Maturity Date into common shares of Castillian at a deemed price of, in the case of the principal amount of the Loan, $0.10 per share, and in the case of interest accrued thereon, subject to TSXV approval, the current market price of the Castillian shares less the maximum discount permitted under the policies of the TSXV. Castillian has the option to prepay the Loan and all interest accrued thereon in full or in part from time to time at any time prior to the Maturity Date.
Certain officers of Ridgemont are contractually entitled to severance payments that could be triggered by the Transaction. Except for Messrs Mark Morabito and Brian Penney, these officers have agreed to accept, in aggregate, $25,000 in lieu of such severance payments, payable immediately prior to completion of the Transaction in common shares of Ridgemont at a deemed price per share of $0.05 (the "Severance Shares"), subject to the approval of the TSXV. Messrs Morabito and Penney have agreed to waive any entitlement to any severance payments.
The Transaction is subject to customary conditions, including:
-- approval by a minimum of 66 2/3% of the votes cast by Ridgemont shareholders at a duly called special shareholders' meeting;-- approval/acceptance of the TSXV of the Transaction and the issuance of the Severance Shares;-- all of the directors and officers of Ridgemont agreeing to support the Transaction by entering into agreements to vote in favour of the Transaction;-- Ridgemont shareholders holding collectively not more than five per cent of the outstanding common shares of Ridgemont having exercised their dissent rights; and-- Ridgemont having working capital upon the closing of the Transaction of not less than $2,900,000, less the sum of (i) expenses incurred by Ridgemont in connection with the Transaction up to a maximum of $100,000 and (ii) the principal amount of the Loan.