Key provisions of the Agreement include a non-solicitation covenant on the part of Kenai, the right in favour of Serabi to match any superior proposal and the payment of a termination fee of $500,000 to Serabi in certain circumstances including if Kenai accepts a superior proposal.
In aggregate it is currently anticipated that 90,020,724 new Serabi Shares will be issued to Kenai shareholders to acquire the 105,906,734 Kenai Shares currently in issue. In the event that any of the existing warrants or options to acquire Kenai Shares is exercised prior to completion additional Serabi Shares will be required to be issued. In addition and pursuant to a Share Purchase Agreement between Kenai and Gold Anomaly Limited ("GAL") whereby Kenai acquired the Sao Chico project, Serabi will issue to GAL 5,100,000 new Serabi Shares in satisfaction of additional consideration commitments made by Kenai to GAL under this Share Purchase Agreement. The new shares being issued pursuant to the Transaction will, on issue, rank pari passu with the existing ordinary shares of Serabi in issue and application will be made for the new Serabi Share to be admitted to trading on AIM and listed on the TSX.
Concurrently with the execution of the Acquisition Agreement, Serabi and Kenai have entered into a secured loan agreement (the "Loan Agreement") pursuant to which Serabi will make available a facility of up to US$2,750,000 (the "Principal") to Kenai. The loan will be used by Kenai to finance the commencement of an estimated 6,000 metre diamond drilling programme at the Sao Chico project and for general working capital purposes. The Principal shall be payable in full following the termination of the Acquisition Agreement by either party thereto in accordance with the provisions of the Acquisition Agreement (the "Repayment Date"). Up to the Repayment Date, interest shall be calculated on the Principal outstanding at the rate of 12% per annum and upon and after the Repayment Date and until the Principal is repaid in full, interest shall be calculated on the Principal outstanding at the rate of 18% per annum. Unless the Acquisition Agreement is terminated earlier the Repayment Date is 31 August 2013.
Serabi will provide the loan to Kenai from its existing cash resources. Serabi's board will on completion of the Transaction and based on the results of the exploration drilling consider what further funding commitments are required at Sao Chico. If the Board of Serabi determines, in light of the progress and commitments at Palito and the anticipated commitments for Sao Chico, that further funding is required, it will consider the options available to it at that time.
Documents relating to the Arrangement, including the information circular required in connection with Kenai's special shareholder meeting, scheduled to take place in early July 2013, are expected to be mailed to Kenai shareholders during May 2013.
Kenai's Board of Directors has determined that the Arrangement is fair, and has unanimously recommended that Kenai's shareholders vote in favour of the Arrangement.
Executive officers and directors of Kenai as well as shareholders representing approximately 27% of the outstanding Kenai Shares have entered into lock-up and support agreements with Serabi under which they have agreed to vote in favour of the Arrangement.
Heenan Blaikie LLP is acting as Canadian legal counsel and Farrer & Co LLP is acting as UK legal counsel to Serabi and its Board of Directors. Owen Bird Law Corporation is acting as Canadian legal counsel to Kenai. FFA Legal is acting as Brazilian local counsel to Serabi and Pinheiro Neto is acting as Brazilian local counsel to Kenai. Beaumont Cornish Limited, as Nominated Adviser to Serabi in accordance with the AIM Rules, has advised Serabi in respect of its obligations under the AIM Rules.
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