Document:

STARCORE
INTERNATIONAL
MINES LTD.

 

 

and

 

 

CORTEZ
GOLD CORP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARRANGEMENT
AGREEMENT

 

MAY
29, 2015

 

 

 

 

 

 

 

 

 

 

 

 

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TABLE
OF CONTENTS

 

 

ARTICLE
1 INTERPRETATION

Section
1.1Defined
Terms3

Section
1.2Certain
Rules of
Interpretation12

Section
1.3Schedules13

ARTICLE
2

THE
ARRANGEMENT

Section
2.1Arrangement13

Section
2.2Interim
Order13

Section
2.3The
Cortez
Meeting14

Section
2.4The
Cortez
Circular15

Section
2.5Final
Order16

Section
2.6Court
Proceedings16

Section
2.7No Fractional
Shares17

Section
2.8Cortez
Options17

Section
2.9Arrangement
Filings
and Effective
Date18

Section
2.10Announcement
and Shareholder
Communications18

Section
2.11List
of Shareholders19

ARTICLE
3 REPRESENTATIONS
AND WARRANTIES

Section
3.1Representations
and
Warranties
of Cortez19

Section
3.2Representations
and
Warranties
of Starcore19

ARTICLE
4 COVENANTS

Section
4.1Covenants
of Cortez
Regarding
the Conduct
of Business
until
the Effective
Time20

Section
4.2Covenants
of Cortez
Regarding
the
Arrangement21

Section
4.3Covenants
of Starcore
Relating
to the
Arrangement23

Section
4.4Cortez
Options23

Section
4.5Cortez
Warrants23

Section
4.6Starcore
Meeting
or Written
Resolution24

Section
4.7Starcore
Circular24

Section
4.8Access
to Information;
Confidentiality25

Section
4.9Notice
and Cure Provisions25

Section
4.10Insurance
and
Indemnification26

ARTICLE
5

ADDITIONAL
COVENANTS
REGARDING
NON-SOLICITATION

Section
5.1Non-Solicitation26

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i )

    	 

    	 

    

Section
5.2Notification
of Acquisition
Proposals
27

Section
5.3Responding
to an Acquisition
Proposal
28

Section
5.4Right
to Match
28

Section
5.5Breach
by Subsidiaries
and Representatives
30

ARTICLE
6 CONDITIONS

Section
6.1Mutual
Conditions
Precedent
31

Section
6.2Additional
Conditions
Precedent
to the
Obligations
of Starcore
31

Section
6.3Additional
Conditions
Precedent
to the
Obligations
of Cortez
32

Section
6.4Satisfaction
of Conditions
33

ARTICLE
7

TERM
AND TERMINATION

Section
7.1Term
33

Section
7.2Termination
33

Section
7.3Effect
of Termination/Survival
34

ARTICLE
8 GENERAL
PROVISIONS

Section
8.1Amendments
35

Section
8.2Termination
Fees
35

Section
8.3Expenses
36

Section
8.4Notices.
37

Section
8.5Time
of the Essence.
38

Section
8.6Injunctive
Relief
38

Section
8.7Third
Party
Beneficiaries
38

Section
8.8Waiver
38

Section
8.9Entire
Agreement
38

Section
8.10Successors
and Assigns.
39

Section
8.11Severability
39

Section
8.12Governing
Law 39

Section
8.13Rules
of Construction.
39

Section
8.14No Liability
39

Section
8.15Language.
39

Section
8.16Counterparts
39

 

SCHEDULES

 

SCHEDULE
APLAN
OF ARRANGEMENT
SCHEDULE
BARRANGEMENT
RESOLUTION

SCHEDULE
CREPRESENTATIONS
AND WARRANTIES
OF CORTEZ
SCHEDULE
DREPRESENTATIONS
AND WARRANTIES
OF STARCORE

 

 

 

 

 

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ii )

    	 

    	 

    

ARRANGEMENT
AGREEMENT

 

 

This
Agreement
is dated
effective
May 29, 2015

 

 

BETWEENSTARCORE
INTERNATIONAL
MINES
LTD. (“Starcore”)

 

 

ANDCORTEZ
GOLD
CORP.
(“Cortez”).

 

 

WHEREAS:

 

		A.	Starcore
proposes
to acquire
all
of the
issued
and outstanding
common
shares of
Cortez
on the basis
of three
(3) Starcore
common shares
for each one (1)
Cortez
common share;

 

		B.	Each
outstanding
share purchase
warrant
of Cortez
will
remain
outstanding
and upon
the exercise
of such share
purchase
warrant
will
entitle
the
holder
to acquire
common
shares of
Starcore,
adjusted
for the
exchange ratio,
with
the same
remaining
terms to
expiry;

 

		C.	Each
outstanding
option of
Cortez
will
be cancelled
and each
holder
of such
Cortez
option will
be receive
cash consideration
equal to
the Option
Consideration
(as defined
below);

 

		D.	The
Parties
intend
that the
acquisition
of Cortez
by Starcore
be carried
out under
the arrangement
provisions
of Part
9, Division
5 of the
Business
Corporations
Act (British
Columbia);
and

 

		E.	The
boards
of directors
of each of
Starcore
and Cortez
have unanimously
determined
that the
Arrangement
is in
the best
interest
of their
respective
shareholders,
and have
resolved
to support
the Arrangement
and enter
into this
Arrangement
Agreement;
and

 

		F.	Starcore
has entered
into
voting
support agreements
with
each of
the directors
and officers
and certain
shareholders
of Cortez;

 

THIS
AGREEMENT
WITNESSES that
in consideration
of the
covenants
and agreements
herein contained
and other
good and
valuable
consideration
(the
receipt
and sufficiency
of which
are hereby
mutually
acknowledged),
the Parties
hereto
do hereby
covenant and agree
as follows:

 

 

ARTICLE
1 INTERPRETATION

 

Section
1.1Defined
Terms.

Wherever
used in
this
Agreement,
unless
there
is something
inconsistent
in the
subject
matter
or context,
the
following
capitalized
words and
terms
will
have
the meanings
set out
below
and in
addition
certain
other
words
and terms
are defined
in the Plan
of Arrangement:

 

“Acquisition
Proposal”
means, other
than
the transactions
contemplated
by this
Agreement
and other
than
any transaction
involving
only Cortez
and/or one
or more
of its
wholly-owned
Subsidiaries,
any offer,
proposal
or inquiry
(written
or oral)
from any
Person or
group of Persons
other than
Starcore
(or any affiliate
of Starcore
or any Person acting
in concert
with

 

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Starcore
or any
affiliate
of Starcore)
after
the date
of this
Agreement
relating
to (i)
any sale or disposition
(or any lease,
long-term
supply agreement
or other
arrangement
having
the same
economic
effect
as a sale),
direct
or indirect,
of assets
representing
20% or more
of the consolidated
assets
or contributing
20% or more
of the
consolidated
revenue
of Cortez
and its
Subsidiaries
or of 20% or more
of the
voting or equity
securities
of Cortez
or any of its Subsidiaries
(or rights
or interests
in such voting
or equity
securities),
(ii)
any take-over
bid, exchange
offer or other
transaction
that,
if consummated,
would result
in such Person
or group of Persons
beneficially
owning 20% or more
of any class
of voting
or equity securities
of Cortez
or any of its
Subsidiaries,
(iii)
any plan of
arrangement,
merger, amalgamation,
consolidation,
share
exchange,
business combination,
reorganization,
recapitalization,
liquidation,
dissolution
or winding-up
involving
Cortez or
any of its
Subsidiaries,
or (iv)
any other
similar
transaction
or series
of transactions
involving
Cortez
or any of
its Subsidiaries.

 

“affiliate”
has the
meaning
specified
in National
Instrument
45-106
– Prospectus
and Registration
Exemptions.

 

“Agreement”
means this
arrangement
agreement,
together
with
the
Schedules
attached
hereto,
as the
same may
be amended,
supplemented
or otherwise
modified
from time
to time
in accordance
with
the terms
hereof.

 

“Arrangement”
means an arrangement
under Part
9, Division
5 of
the BCBCA,
on the
terms and
conditions
set forth
in the
Plan
of Arrangement,
subject
to any
amendments
or supplement
thereto
made in
accordance with
this
Agreement
and the
provisions
of the Plan
of Arrangement
or made at
the direction
of the Court
in the Final
Order.

 

“Arrangement
Resolution”
means the
Special
Resolution
of Cortez
Securityholders
approving
the
Arrangement
to be
presented
at the
Cortez
Meeting
substantially
in the
form of Schedule
B.

 

“Arrangement
Filings”
means the
filings,
if any,
that
may
be required
under Section
292 of the
BCBCA to
be made
by Cortez
with
the Registrar
in order
for the
Arrangement
to be effective.

“associate”
has the meaning
specified
in the
Securities
Act (British
Columbia).
“Authorization”
means with
respect
to any
Person,
any order, permit,
approval,
consent,

waiver,
licence
or similar
authorization
of any
Governmental
Entity
having
jurisdiction
over

the
Person.

 

“BCBCA”
means the
Business
Corporations
Act (British
Columbia)
and the
regulations
made thereunder,
as now
in effect
and as
they
may
be promulgated
or amended
from time
to time;

 

“Business
Day” means
a day
which
is not
a Saturday,
Sunday or
a civic
or statutory
holiday in
Vancouver,
British
Columbia.

 

“Change
in Recommendation”
has the
meaning
specified
in Section
7.2(1)(d)(ii).
“Closing
Certificate”
has the meaning
ascribed
thereto
in the
Plan of
Arrangement.

    	 

    	 

    

“Confidentiality
Agreement”
means that
certain
confidentiality
agreement
made  as 
of April
27, 2015 between
Starcore
and Cortez.

 

“Consideration”
means the
Starcore
Shares
to be
received
by the
Cortez
Shareholders
pursuant to
the Plan
of Arrangement
as consideration
for their
Cortez
Shares.

 

“Constating
Documents”
means notice
of articles,
amalgamation,
or continuation
(or the
equivalent),
as applicable,
and articles
and all
amendments
to such
articles.

 

“Contract”
means any
legally
binding
agreement,
commitment,
engagement,
contract,
franchise,
licence,
obligation
or undertaking
(written
or oral)
to which
a Party
or any of
its Subsidiaries
is a
party or
by which
it or
any of
its Subsidiaries
is bound
or affected
or to
which any
of their
respective
properties
or assets
is subject.

 

“Cortez”
means Cortez
Gold
Corp., a
corporation
incorporated
under the
laws of
British
Columbia.

 

“Cortez
Benefit
Plan”
means any
pension or
retirement
income
plans or
other
employee
compensation,
other than
equity
or security-based
compensation
arrangements,
or benefit
plans,
agreements,
policies,
programs,
arrangements
or practices,
whether
written
or oral,
which
are maintained
by or binding
upon Cortez
or any of its
Subsidiaries
or for
which
Cortez
or its
Subsidiaries
could have
any liability.

 

“Cortez
Board” means
the
board of directors
of Cortez
as constituted
from time
to time.
“Cortez Board
Recommendation”
has the
meaning
specified in
Section
2.4(2).

“Cortez
Circular”
means the
notice
of the
Cortez
Meeting
and accompanying
management
information
circular,
including
all schedules,
appendices
and exhibits
to, and
information
incorporated
by reference
in, such
management
information
circular,
to be sent
to the
Cortez
Shareholders
in connection
with the
Cortez
Meeting;
as amended, supplemented
or otherwise
modified
from time
to time
in accordance
with
the terms
of this
Agreement.

 

“Cortez
Disclosure
Letter”
means the
disclosure
letter
dated
the date
of this
Agreement
and delivered
by Cortez
to Starcore
with
this
Agreement.

 

“Cortez
Employees”
means the
employees
of Cortez
and its Subsidiaries.

 

“Cortez
Filings”
means all
documents
publicly
filed
under the
profile
of Cortez
on the
System
for Electronic
Document
Analysis
Retrieval
(SEDAR).

 

“Cortez
Meeting”
means the
special
meeting
of Cortez
Shareholders
and Cortez
Optionholders,
including
any adjournment
or postponement
of such special
meeting
in accordance
with
the terms
of this
Agreement,
to be
called
and held
in accordance
with
the Interim
Order to consider
the Arrangement
Resolution
and for any other
purpose as may
be set out
in the Cortez
Circular.

 

“Cortez
Optionholders”
means the holders
of Cortez
Options.

    	 

    	 

    

“Cortez
Options”
means the
outstanding
options
to purchase
Cortez
Shares
issued
pursuant to
the Cortez
Option
Plan,
as listed
in Section
8(b) of
the Cortez
Disclosure
Letter.

 

“Cortez
Option
Plan”
means the
Cortez
stock
option
plan
as most
recently
approved by Cortez
Shareholders
on September
25, 2014, pursuant
to which Cortez
Options
are granted.

 

“Cortez
Securityholders”
means the
Cortez
Shareholders,
the
Cortez
Warrantholders
and the Cortez
Optionholders.

 

“Cortez
Shareholders”
means the
registered
or beneficial
holders
of the
Cortez
Shares,
as the context
requires,
and “Cortez
Shareholder”
means any one of
them.

“Cortez
Shares” means
the common
shares in
the capital
of Cortez
as presently
constituted.
“Cortez Warrants”
means outstanding
share purchase
warrants
to purchase
Cortez
Shares as

listed
in Section
8(c) of
the
Cortez
Disclosure
Letter.

 

“Cortez
Warrantholders”
means the
holders
of Cortez
Warrants.
“Court” means
the Supreme
Court
of British
Columbia.

“Dissent
Rights”
means the
rights
of dissent
exercisable
by Cortez
Shareholders
in respect
of the Arrangement
Resolution.

 

“Effective
Date”
means the
date
upon which
the Arrangement
becomes
effective
as provided
in the
Plan of
Arrangement.

“Effective
Time”
has the
meaning
ascribed thereto
in the
Plan of
Arrangement.
“Encumbrance”
means any
mortgage,
hypothec,
pledge,
assignment,
charge, lien,
claim,

security
interest,
adverse
interest,
other
third
person interest
or encumbrance
of any
kind,

whether
contingent
or absolute
and any agreement,
option,
right
or privilege
(whether
by law, contract
or otherwise)
capable
of becoming
any of the
foregoing.

 

“Environmental
Laws”
means all
Law and
agreements
with
Governmental
Entities
and all
other
statutory
requirements
relating
to public
health
or the
protection
of the
environment
and all Authorizations
issued pursuant
to such Law,
agreements
or other
statutory
requirements.

 

“Exchange
Agent”
means Computershare
Investor
Services
Inc. or
any other
trust
company, bank or
financial
institution
agreed to
between
Starcore
and Cortez
for the
purpose
of, among
other
things,
exchanging
certificates
representing
Cortez
Shares
for Starcore
Shares
in connection
with
the Arrangement.

 

“Exchange
Ratio” means
three (3)
Starcore
Shares
for each one
(1) Cortez
Share.

 

“Final
Order”
means the
final
order of
the Court,
after
a hearing
on the
fairness
of the
terms
and conditions
of the
Arrangement,
in a
form acceptable
to Cortez
and Starcore,
each acting
reasonably,
approving the
Arrangement,
as such order
may be amended
by the Court (with
the consent
of Cortez
and Starcore,
each acting
reasonably)
at any time
prior
to the
Effective
Date or, if
appealed,
then unless such
appeal is withdrawn
or denied, as affirmed
or as

    	 

    	 

    

amended
(provided
that
any such
amendment
is acceptable
to both
Cortez
and Starcore,
each acting
reasonably)
on appeal.

 

“Governmental
Entity”
means (i)
any international,
multinational,
national,
federal,
provincial,
state,
regional,
municipal,
local
or other
government,
governmental
or public
department,
central
bank,
court, tribunal,
arbitral
body, commission,
board, bureau,
ministry,
agency or instrumentality,
domestic or foreign,
(ii) any
subdivision
or authority
of any of the above, (iii)
any quasi-governmental
or private
body exercising
any regulatory,
expropriation
or taxing
authority
under or
for the
account of
any of the
foregoing,
or (iv)
any stock
exchange.

 

“IFRS”
means generally
accepted accounting
principles
as set out
in the
Canadian
Institute
of Chartered
Accountants
Handbook –
Accounting
for an entity
that
prepares its
financial
statements
in accordance
with
International
Financial
Reporting
Standards,
at the
relevant
time, applied
on a consistent
basis.

 

“Indemnified
Persons”
has the meaning
specified
in Section
8.7(1).

 

“Interim
Order”
means the
interim
order of the
Court pursuant
to Section
291 of the
BCBCA, in
a form acceptable
to Cortez
and Starcore,
each acting
reasonably,
providing
for, among
other things,
the calling
and holding
of the Cortez
Meeting,
as such order may
be amended, supplemented
or varied
by the Court
with
the consent
of Cortez
and Starcore,
each acting
reasonably.

 

“Law”
means, with
respect
to any
Person, any
and all
applicable
law (statutory,
common
or otherwise),
constitution,
treaty,
convention,
ordinance,
code, rule,
regulation,
order, injunction,
judgment,
decree, ruling
or other
similar
requirement,
whether
domestic
or foreign,
enacted,
adopted,
promulgated
or applied
by a Governmental
Entity
that
is binding
upon or applicable
to such
Person or
its
business,
undertaking,
property
or securities,
and to the
extent
that
they
have the
force of
law, policies,
guidelines,
notices
and protocols
of any Governmental
Entity,
as amended.

 

“Locked-up
Shareholders”
means all
of the
directors,
officers
and insiders
of Cortez.
“Matching
Period”
has the
meaning
specified
in Section
5.4(1)(e).

“Material
Adverse Effect”
when used in connection
with an entity
means any change,
event, occurrence,
effect,
state
of facts
or circumstance
that,
either
individually
or in
the
aggregate,
is or
could
reasonably
be expected
to be
material
and adverse
to the
business,
financial
condition,
or results
of operations
of a Party
and its
Subsidiaries
taken
as a whole;
other than
changes, events,
occurrences,
statements
of facts,
effects,
or circumstances
that arise
from or in connection
with:

 

		(a)	general
political,
economic,
financial,
currency
exchange,
securities,
capital
or credit
market
conditions
in Canada,
the United
States
or Mexico;

 

		(b)	any act
of terrorism,
war (whether
or not
declared),
armed
hostilities,
riots,
insurrection,
civil
disorder,
military
conflicts
or other
armed conflict,
in each
case, whether
occurring
within
or outside
of Canada,
the United
States
or Mexico;

    	 

    	 

    

		(c)	the
announcement
of this
Agreement,
including
any actions
of competitors,
or any loss
or threatened
loss
of, or adverse
change
or threatened
adverse
change
in the
relationship
of a
Party
with
any Governmental
Entity
or any of
its
employees,
executives,
financing
sources, distributors
or suppliers
arising
as a consequence
of the same;

 

		(d)	any change
or proposed change
in Law
or GAAP
or accounting
rules or
the interpretation
thereof
applicable
to the
industries
or markets
in which
a Party
or any of its
subsidiaries
operate;

 

		(e)	any action
taken
by a Party
in accordance
with
this
Agreement
or with
the prior
written
consent of
the other
Party;

 

		(f)	any change
affecting
the industries
or markets
in which
a Party
or any of
its Subsidiaries
operate;
and

 

		(g)	the termination
of any option,
earn-in
or joint
venture
agreement
to which
a Party
is a signatory,

 

provided,
however, that
with respect
to clauses
(a), (b),
(d) and (f), such
matters do
not have a materially
disproportionate
effect
on a Party
and its
subsidiaries
as a whole,
relative
to companies
of similar
size
operating
in the
industries
or markets
in which
a Party
or any of
its subsidiaries
operate,
and provided
further,
however,
that
references
in certain
sections
of this Agreement
to dollars
amounts are
not intended to
be, and shall
be deemed not to
be, illustrative
or interpretative
for the
purpose of determining
whether
a “Material
Adverse
Effect”
has occurred.

 

“Material
Contract”
means any
Contract
that
is material
to the
business,
operations
or prospects of
a Party
and its
Subsidiaries
taken as
a whole.

 

“Material
Information”
has the
meaning
specified
in Policy
3.3 (Timely
Disclosure)
of the
TSX
Venture
Exchange
Corporate
Finance
Manual.

 

“Misrepresentation”
means an
untrue statement
of a material
fact or
an omission
to state
a material
fact required
or necessary
to make
the statements
contained
therein
not misleading
in light
of the
circumstances
in which
they are
made.

 

“officer”
has the
meaning
specified
in the
Securities
Act (British
Columbia).

 

“Option
Consideration”
means, in
respect
of the
Cortez
Options,
a cash
amount equal
to the
amount by
which $0.42
exceeds the
exercise price
of such
Cortez
Option;

 

“Ordinary
Course”
means, with
respect
to an
action,
that
such action
is consistent
with
the past practices
of a Party
and is taken
in the ordinary
course of
the normal
day-to-day
operations
of the
business
of that
Party.

 

“Outside
Date” means
September
30, 2015 or
such later
date as
may
be agreed
to in
writing
by the Parties.

 

“Parties”
means Starcore
and Cortez
and “Party”
means any one of
them.

    	 

    	 

    

“Permitted
Liens”
means, in
respect
of Cortez
or any of
its
Subsidiaries,
any one or
more of the
following:

 

		(a)	statutory
liens
for Taxes
not yet
due or payable
or which
Cortez
or its
Subsidiaries
owing such Taxes
is contesting
in good
faith
but only
for so long
as such contestation
effectively
postpones
enforcement
of any
such liens
for Taxes,
and, in
each case,
if adequate
reserves
with
respect
thereto
are maintained
in the
appropriate
financial
statements;

 

		(b)	statutory
liens
incurred
or deposits
made in
the ordinary
course of
the
business
of Cortez
and its
Subsidiaries
in connection
with
workers’
compensation,
employment
insurance
and similar
legislation,
but only
to the
extent
that each
such statutory
lien or
deposit
relates
to amounts
not yet
due;

 

		(c)	security
given
by Cortez
or any of
its Subsidiaries
to a
public
utility
or any Governmental
Entity
when required
in the
ordinary
course of
business
of Cortez
and its Subsidiaries;

 

		(d)	undetermined
or inchoate
construction,
mechanics
or repair
or storage
liens
arising
in the
ordinary
course of
business
of Cortez
and its
Subsidiaries,
with
respect
to amounts
which
are not
yet due
and a claim
for which
has not
been filed
or registered
pursuant to applicable
Law or
of which
notice
in writing
has not been
given
to Cortez
or its
Subsidiaries;

 

		(e)	easements,
including
rights
of way
for, or
reservations
or rights
of others
relating
to, sewers,
water
lines,
gas lines,
pipelines,
electric
lines,
telegraph
and telephone
lines and other
similar
services
and any registered
restrictions
or covenants
that
run with
the land,
provided
that
there has been
compliance
with
the material
provisions
thereof
and that
they do
not materially
detract
from the
ability
to use
any leased
properties
and would not
reasonably
be expected to
materially
and adversely
affect the
ability
of Cortez
and its
Subsidiaries
to carry
on their
business
as it has
been carried
on in
the past;

 

		(f)	zoning
by-laws,
ordinances
or  other 
restrictions
 as  to
 the 
use  of 
real  property,
provided
that
they do
not materially
 detract
 from 
the  ability
 to 
use  any 
leased properties
and would
not reasonably
be expected
to materially
and adversely
affect the
ability
of Cortez
and its Subsidiaries
to carry on their
business
as it has been
carried
on in the
past;

 

		(g)	such other
defects
or irregularities
of title
as do
not materially
and adversely
detract
from the
value
or interfere
with
the
use of the
properties
or assets
subject
thereto
or affected thereby;

 

		(h)	the
right
reserved
to or
vested
in any
Governmental
Entity
by any statutory
provision
or by the
terms
of any lease,
licence,
franchise,
grant or
permit
of Cortez
or any of its
Subsidiaries,
to terminate
any such lease,
licence,
franchise,
grant or
permit,
or to
require
annual or
other
payments
as a condition
of their
continuance;
and

 

		(i)	encumbrances listed
and described
in Schedule
1.1 of the Cortez
Disclosure
Letter.

    	 

    	 

    

“Person”
includes
any individual,
partnership,
association,
body corporate,
organization,
trust,
estate,
trustee,
executor,
administrator,
legal
representative,
government
(including
Governmental
Entity),
syndicate
or other
entity,
whether
or not having
legal
status.

 

“Plan
of Arrangement”
means the
plan
of arrangement,
substantially
in the
form of
Schedule
A, subject
to any
amendments
or variations
to such
plan
made in
accordance
with
Section
8.1 or made
at the
direction
of the Court
in the
Final
Order
with
the prior
written
consent of
Cortez
and Starcore,
each acting
reasonably.

 

“Registrar”
means the
Registrar
of Companies
appointed
pursuant
to Section
400 of the
BCBCA;

 

“Regulatory
Approval”
means, any
consent, waiver,
permit,
exemption,
review,
order, decision
or approval
of, or
any registration
and filing
with,
any Governmental
Entity,
or the
expiry,
waiver
or termination
of any waiting
period
imposed
by Law or
a Governmental
Entity,
in each case
in connection
with,
or required
to lawfully
complete,
the Arrangement.

 

“Representative”
has the
meaning
specified
in Section
5.1(1).
“Required
Approval”
has the
meaning
specified
in Section
2.2(iii).

“Securities
Authority”
means the
British
Columbia
Securities
Commission
and any
other applicable
securities
commissions
or securities
regulatory
authority
of a province
or territory
of Canada.

 

“Securities
Laws”
means the
Securities
Act
(British
Columbia)
and any
other
applicable
provincial
securities
Laws,
together
with
the rules
and regulations
published
under
such laws.

 

“Starcore”
means Starcore
International
Mines
Ltd.,
a corporation
incorporated
under the
laws of
British
Columbia.

 

“Starcore
Disclosure
Letter”
means the
disclosure
letter
dated
the
date
of this
Agreement
and delivered
by Starcore
to Cortez
with
this Agreement.

 

“Starcore
Filings”
means all
documents
publicly
filed
under the
profile
of Starcore
on the
System
for Electronic
Document
Analysis
Retrieval
(SEDAR)
since August
1, 2013.

 

“Starcore
Meeting”
means
the special
meeting
of Starcore
Shareholders,
including
any adjournment
or postponement
thereof,
that
may be required
for the
purpose
of obtaining
Starcore
Shareholder
Approval.

 

“Starcore
Shareholder
Approval”,
if required
by the
TSX,
means the
approval
by the
Starcore
Shareholders
of the
issuance
of the
Consideration
(a) at
the Starcore
Meeting
by ordinary
resolution
or (b)
if permitted
by the
TSX,
by written
resolution
of holders
of at least
50% of
the Starcore
Shares.

 

“Starcore
Shareholders”
means the
registered
or beneficial
holders
of the
Starcore
Shares, as the
context
requires.

    	 

    	 

    

“Starcore
Shares”
means the
common shares
in the
capital
of Starcore
as presently
constituted.

 

“Subsidiary”
means, with
respect to
a specified
body corporate
is any
body corporate
of which
the
specified
body corporate
is entitled
to elect
a majority
of the
board of
directors
thereof
(whether
or not
shares of
any other
class
shall or might
be entitled
to vote
upon the
happening of any event
or contingency)
are at the
time
owned directly
or indirectly
by such body corporate
and shall
include any body corporate,
partnership,
joint
venture
or other
entity
over which
it exercises
direction
or control
or which
is in
a like
relation
to a subsidiary;

 

“Superior
Proposal”
means any
unsolicited
bona fide
written
Acquisition
Proposal
from a Person
to acquire
not less
than all
of the
outstanding
Cortez
Shares
or all
or substantially
all of the
assets
of Cortez
on a consolidated
basis,
that
complies
with
Securities
Laws and did
not result
from or
involve
a breach
of Article
5 and: (a)
is reasonably
capable
of being
completed
without
undue delay,
taking
into account
all financial,
legal,
regulatory
and other aspects
of such proposal
and the
Person
making
such proposal;
(b) if
any consideration
is cash, is not
subject
to any financing
contingency
and in respect of which
adequate
arrangements
have been made
to ensure that
the required
funds will
be available
to effect
payment
in full
for all of the Cortez
Shares or assets,
as the case
may be; (c) if
any consideration
is in shares
or other
securities,
the
value of
such shares
of securities
shall
be the
20 day volume
weighted
average trading
price of such
shares or securities
on the stock
exchange upon
which the
greatest
volume
of trading in
such shares or securities
occurs; and (d) that
the Cortez
Board determines,
in its
good faith
judgment,
after receiving
the advice
of its outside
legal and
financial
advisors
and after
taking into
account all
the terms
and conditions
of the
Acquisition
Proposal,
including
all legal,
financial,
regulatory
and other
aspects of
such Acquisition
Proposal
and the
party making
such Acquisition
Proposal,
would,
if consummated
in accordance
with
its
terms,
but without
assuming
away the
risk of
non-completion,
result in
a transaction
which
is more
favourable,
from a
financial
point
of view,
to the
Cortez
Shareholders
than the Arrangement
(including
any amendments
to the terms
and conditions
of the Arrangement
proposed by
Cortez
pursuant
to Section
5.4(2)).

 

“Superior
Proposal
Notice”
has the
meaning
specified
in Section
5.4(1)(c).

 

“Tax
Act”
means the
Income
Tax Act
(Canada)
and the
regulations
made thereunder
as now in effect
and as they
may
be promulgated
or amended
from time
to time.

 

“Tax
Returns”
means any
and all
returns,
reports,
declarations,
elections,
notices,
forms, designations,
filings,
and statements
(including
estimated
tax returns
and reports,
withholding
tax returns
and reports,
and information
returns and
reports)
filed
or required
to be
filed
in respect
of Taxes.

 

“Taxes”
means (i)
any and all
taxes,
duties,
fees, excises,
premiums,
assessments,
imposts,
levies
and other
charges
or assessments
of any
kind
whatsoever
imposed
by any Governmental
Entity,
whether
computed
on a separate,
consolidated,
unitary,
combined
or other basis,
including
those levied
on, or measured by, or described
with respect
to, income,
gross receipts,
profits,
gains,
windfalls,
capital,
capital
stock, production,
recapture,
transfer,
land transfer,
license,
gift,
occupation,
wealth,
environment,
net worth,
indebtedness,
surplus,
sales, goods
and services,
harmonized
sales, use, value-added,
excise, special
assessment,
stamp, withholding,
business,
franchising,
real or personal property,
health,
employee
health, payroll,
workers’
compensation,
employment
or unemployment,
severance, social
services,

    	 

    	 

    

social
security,
education,
utility,
surtaxes, customs,
import
or export,
and including
all license
and registration
fees
and all
employment
insurance,
health
insurance
and government
pension plan
premiums
or contributions;
(ii) all
interest,
penalties,
fines,
additions
to tax
or other
additional
amounts
imposed
by any Governmental
Entity
on or in
respect
of amounts
of the type
described
in clause
(i) above
or this
clause (ii);
(iii) any liability
for the payment
of any amounts
of the
type
described
in clauses
(i) or
(ii) as
a result of
being a
member of an affiliated,
consolidated,
combined
or unitary
group for
any period;
and (iv)
any liability
for the payment
of any amounts
of the
type described
in clauses
(i) or
(ii)
as a result of
any express or
implied
obligation
to indemnify
any other Person
or as a
result
of being a transferee
or successor
in interest
to any
party.

 

“Termination
Fee” has
the meaning
specified
in Section
8.2. “Termination
Fee Event”
has the meaning
specified
in Section
8.2. “TSXV”
means the
TSX
Venture Exchange.

“TSX”
means the
Toronto
Stock
Exchange.

 

“Voting
Agreements”
means the
voting
agreements
dated
the date
hereof and
made
between
Starcore
and the Locked-up
Shareholders.

 

Section
1.2Certain
Rules of
Interpretation.

In this
Agreement,
unless otherwise
specified:

 

		(1)	Headings,
etc. The
provision
of a Table
of Contents,
the division
of this
Agreement
into Articles
and Sections
and the
insertion
of headings
are
for convenient
reference
only and
do not affect
the construction
or interpretation
of this
Agreement.

 

		(2)	Currency. All
references
to dollars
or to $
are references
to Canadian
dollars.

 

		(3)	Gender
and Number.
Any
reference
to gender
includes
all genders.
Words importing
the singular
number only
include
the plural
and vice
versa.

 

		(4)	Certain
Phrases
and References,
etc. The
words
“including”,
“includes”
and “include”
mean “including
(or includes
or include)
without
limitation,”
and “the
aggregate of”,
“the
total of”,
“the
sum of”,
or a
phrase of
similar
meaning
means “the
aggregate (or
total or sum),
without
duplication,
of.” Unless
stated otherwise,
“Article”,
“Section”,
and “Schedule”
followed
by a number or letter
mean and refer to
the specified
Article
or Section
of or Schedule
to this
Agreement.
 The term
“Agreement”
and any reference
in this
Agreement
to this
Agreement
or any other agreement
or document includes,
and is a reference
to, this
Agreement
or such other
agreement
or document as
it may
have been,
or may
from time to
time
be amended, restated,
replaced,
supplemented
or novated
and includes
all schedules
to it.

 

		(5)	Capitalized
Terms. 
All capitalized
terms
used in
any Schedule,
in the
Cortez
Disclosure
Letter
 or  in
the  Starcore
Disclosure
 Letter
 have 
the 
meanings
 ascribed
to them
in  this
Agreement.

    	 

    	 

    

		(6)	Knowledge.
Where any
representation
or warranty
is expressly
qualified
by reference
to the
knowledge
of Cortez
or Starcore,
it shall
be deemed
to refer
to the
actual
knowledge,
after making
reasonable
inquiries
regarding
the relevant
matter,
of the
senior
officers
of Cortez
or Starcore,
as the
case may
be.

 

		(7)	Accounting
Terms.
All
accounting
terms
are to
be interpreted
in accordance
with
IFRS
and all determinations
of an
accounting
nature
required
to be
made shall
be made
in a
manner consistent
with
IFRS.

 

		(8)	Statutes.
Any reference
to a
statute
refers
to such
statute
and all
rules
and regulations
made under it,
as it
or they
may have
been or may
from time
to time
be amended
or re-enacted,
unless stated
otherwise.

 

		(9)	Computation
of Time.
A period of
time
is to be computed
as beginning
on the day
following
the event
that began
the period
and ending
at 4:30
p.m. on the
last
day of
the period,
if the
last
day of the
period
is a
Business
Day,
or at
4:30
p.m. on
the next
Business
Day if
the last
day of the
period
is not a Business
Day.

 

		(10)	Time
References.
References
to time
are to local
time,
Vancouver,
British
Columbia.

 

		(11)	Subsidiaries.
To the
extent
any warranties,
covenants
or agreements
relate,
directly
or indirectly,
to a
Subsidiary
of Cortez,
each such provision
shall
be construed
as a covenant
by Cortez
to cause
(to the
fullest
extent
to which
it is
legally
capable) such
Subsidiary
to perform
the required
action.

 

Section
1.3Schedules.

		(1)	The
schedules
attached
to this
Agreement
form an integral
part of
this
Agreement
for all purposes
of it.

 

		(2)	The Cortez
Disclosure
Letter
and the Starcore
Disclosure
Letter
and all
information
contained
in them
is confidential
information
and may
not be disclosed
unless (i)
it is
required
to be disclosed
pursuant
to Law,
unless
such Law
permits
the
Parties
to refrain
from disclosing
the information
for confidentiality
or other
purposes, or
(ii)
a Party
needs to disclose
it in
order
to enforce or
exercise
its
rights
under this
Agreement.

 

 

ARTICLE
2

THE
ARRANGEMENT

 

Section
2.1Arrangement

 

Cortez
and Starcore
agree
that the
Arrangement
will
be implemented
in accordance
with
and subject
to the
terms
and conditions
of this
Agreement
and the
Plan
of Arrangement.
Without
limitation
to the
foregoing,
at the Effective
Time,
the
Plan
of Arrangement
shall become
effective
with
the result
that
among other
things,
Starcore
will
become the
holder
of all
the
outstanding
Cortez Shares.

    	 

    	 

    

Section
2.2Interim
Order

 

As
soon as reasonably
practicable
following
the
execution
of this
Agreement,
but in
any event on
or before
June
4, 2015, Cortez
shall
apply
to the
Court,
pursuant
to Part
9, Division
5 of
the BCBCA
and, in cooperation
with
Starcore,
prepare, file
and diligently
pursue an application
for the Interim
Order, which
shall
provide, among
other things:

 

		(i)	for the
class of
persons
to whom
notice
is to
be provided
in respect
of the Arrangement
and the
Cortez
Meeting and
for the
manner
in which
such notice
is to
be provided;

 

		(ii)	for confirmation
of the
record date
for the
Cortez
Meeting
referred
to  in
Section
2.3(1).

 

		(iii)	that
the required
level
of approval
(the “Required
Approval”)
for the
Arrangement
Resolution
shall
be two-thirds
of the
votes
cast on
the Arrangement
Resolution
by Cortez 
Shareholders
and Cortez
Optionholders
present
in person
or represented
by proxy at the
Cortez
Meeting,
voting
together
as a single
class;

 

		(iv)	that
the terms,
restrictions
and conditions
of Cortez’s
Constating
Documents,
including
quorum requirements
and all
other
matters,
shall
apply
in respect
of the
Cortez
Meeting;

 

		(v)	for the
grant of
the
Dissent
Rights
to those
Cortez
Shareholders
who are
registered
Cortez
Shareholders;

 

		(vi)	for the
notice
requirements
with
respect
to the
presentation
of the
application
to the
Court for
the Final
Order;

 

		(vii)	that
the
Cortez
Meeting
may
be adjourned
or postponed
from time
to time
by Cortez
in accordance
with
the terms
of this
Agreement
without
the need
for additional
approval of
the Court;

 

		(viii)	that
the record
date for
Cortez
Shareholders
and Cortez
Optionholders
entitled
to notice
of and
to vote
at the Cortez
Meeting will
not change
in respect
of any adjournment(s)
of the
Cortez
Meeting;

 

		(ix)	that
it is
Starcore’s
intention
to rely
upon the
exemption
from registration
provided
by Section
3(a)(10)
of the
U.S.
Securities
Act
with
respect to
the issuance
of the
Consideration
(including
the Starcore
Shares
issuable
upon exercise
of the
Cortez
Warrants)
to be issued
pursuant
to the Arrangement,
based on the Court’s
approval
of the Arrangement;
and

 

		(x)	for such
other
matters
as Starcore
may reasonably
require,
subject
to obtaining
the prior
consent
of Cortez,
such consent
not to
be unreasonably
withheld
or delayed.

 

Section
2.3The Cortez
Meeting

 

		(1)	Subject
to the terms
of this
Agreement,
Cortez
shall:

    	 

    	 

    

		(a)	convene
and conduct
the Cortez
Meeting
in accordance
with
the Interim
Order, Cortez’
Constating
Documents
and Law
as soon as reasonably
practicable,
and in any event
on or before
July
9, 2015, for the
purpose
of considering
the Arrangement
Resolution
and for any other proper
purpose as may
be set out in
the Cortez
Circular
and agreed
to by
Starcore,
and not adjourn,
postpone
or cancel
(or propose
the adjournment,
postponement
or cancellation
of) the Cortez
Meeting
without
the prior
written
consent of
Starcore,
except in
the case of an
adjournment,
as required
for quorum purposes, if
required by applicable
Law, or
as required or permitted
under Section
5.4(5);

 

		(b)	solicit
proxies
in favour
of the
approval
of the
Arrangement
Resolution
and against
any resolution
submitted
by any
Cortez
Shareholder
or Cortez
Optionholder
that
is inconsistent
with
the Arrangement
Resolution
and the completion
of any of
the transactions
contemplated
by this
Agreement,
including,
if so requested
and paid
for by Starcore,
acting reasonably,
using dealer
and proxy solicitation
services
firms
and cooperating
with
any Persons
engaged
by Starcore
to solicit
proxies
in favour
of the approval
of the Arrangement
Resolution;

 

		(c)	provide
Starcore
with
copies
of or access
to information
regarding
the Cortez
Meeting
generated
by any dealer
or proxy
solicitations
services
firm,
as requested
from time
to time
by Starcore;

 

		(d)	permit
Starcore,
on behalf
of the
management
of Cortez,
directly
or through
a soliciting
dealer
to actively
solicit
proxies
in favour
of the
Arrangement
on behalf
of management
of Cortez
in compliance
with
Law and disclose
in the
Cortez
Circular
that
Starcore
may make
such solicitations;

 

		(e)	consult
with
Starcore
in fixing
the date
of the Cortez
Meeting,
give
notice to
Starcore
of the
Cortez
Meeting
and allow
Starcore’s
representatives
and legal
counsel
to attend
the Cortez
Meeting;

 

		(f)	promptly
advise
Starcore,
at such
times
as Starcore
may
reasonably
request
and at least
on a daily
basis
on each
of the
last
ten (10)
Business
Days
prior
to the
date
of the Cortez
Meeting,
as to
the aggregate
tally
of the proxies
received
by Cortez
in respect
of the Arrangement
Resolution;

 

		(g)	promptly
advise
Starcore
of any communication
from
any Cortez
Shareholder
or Cortez
Optionholder
in opposition
to the
Arrangement
and/or purported
exercise
or withdrawal
of Dissent
Rights,
if Cortez
receives
any written
notice
of dissent,
and of any written
communications
sent by or
on behalf of
Cortez
to any Cortez
Shareholder
exercising
or purporting
to exercise
Dissent
Rights;

 

		(h)	not make
any payment
or settlement
offer,
or agree
to any
payment or
settlement
prior
to the
Effective
Time
with
respect
to Dissent
Rights
without
the prior
written
consent of
Starcore;
and

 

		(i)	not change
the
record date
for the
Cortez
Shareholders
or Cortez
Optionholders
entitled
to vote
at the
Cortez
Meeting
in connection
with
any adjournment
or postponement
of the
Cortez
Meeting
unless
required by
Law.

    	 

    	 

    

Section
2.4The Cortez
Circular

 

		(1)	Cortez
shall
promptly
prepare and
complete,
in consultation
with
Starcore,
the Cortez
Circular
together
with
any other
documents
required
by Law
in connection
with
the Cortez
Meeting
and the
Arrangement,
and Cortez
shall,
promptly
after obtaining
the Interim
Order, (and in
all cases no later
than five
(5) Business
Days thereafter)
cause the
Cortez
Circular
and such other
documents
to be filed
and sent to each
Cortez
Shareholder,
each Cortez
Optionholder
and other
Person
as required
by the
Interim
Order and
Law,
in each
case so as
to permit
the Cortez
Meeting
to be held
by the date
specified
in Section
2.3(1).

 

		(2)	Cortez
shall
ensure that
the Cortez
Circular
complies
in material
respects
with
the Law,
does not contain
any Misrepresentation
relating
to Cortez
and provides
the Cortez
Shareholders
and Cortez
Optionholders
with
sufficient
information
to permit
them to
form a reasoned judgement
concerning
the matters
to be placed before
the Cortez
Meeting.
Without
limiting
the generality
of the foregoing,
the Cortez
Circular
must include:
(i) a statement
that the
Cortez Board
has unanimously
determined
that the
Arrangement
Resolution
is in the
best interests
of Cortez
and recommends that
Cortez
Shareholders
vote
in favour
of the Arrangement
Resolution
(the “Cortez
Board Recommendation”),
and (ii) a statement
that the
Locked-Up
Shareholders
have entered
into a Voting
Agreement
and will
vote their
Cortez
Shares and Cortez
Options
in favour of
the Arrangement
Resolution
and against any resolution
submitted
by any Cortez
Shareholder
that is
inconsistent
with
the Arrangement.

 

		(3)	Cortez
shall
give
Starcore
and its
legal
counsel
a reasonable
opportunity
to review
and comment
on drafts
 of 
the 
Cortez 
Circular
 and  other
 related
 documents,
 and  shall
 give
reasonable
consideration
to any comments
made by Starcore
and its
counsel, and agrees
that all
information
relating
solely to
Starcore
included
in the Cortez
Circular
must be in a form
and content
satisfactory
to Starcore,
acting
reasonably.

 

		(4)	Starcore
shall
provide
all necessary
information
concerning
Starcore
and its
affiliates
that
is required
by Law
to be included
in the
Cortez
Circular
or amendments
or supplements
or other
related
documents to
Cortez
in writing,
use best
efforts
to obtain
any necessary consents
from any of
its auditors
and any other
advisors
to the
use of
any financial,
technical
or other
expert information
required
to be
included
in the
Cortez
Circular
and to
the identification
in the
Cortez Circular
of each such advisor
and shall ensure
that such
information
does not contain
any Misrepresentation
concerning
Starcore,
its Subsidiaries
and the
Starcore
Shares.

 

		(5)	Each
Party
shall promptly
notify
the other
Party
if it
becomes aware
that
the Cortez
Circular
contains
a Misrepresentation,
or otherwise
requires
an amendment 
or  supplement.
 The Parties
shall
cooperate
in the
preparation
of any such
amendment
or supplement
as required
or appropriate,
and Cortez
shall promptly
mail, file
or otherwise
publicly
disseminate
any such amendment
or supplement
to the Cortez
Shareholders
and Cortez
Optionholders
and, if required
by the Court
or by Law,
file the
same with
the Securities
Authorities
or any other Governmental
Entity
as required.

 

Section
2.5Final
Order

 

Cortez
shall
take
all
steps necessary
or desirable
to submit
the Arrangement
to the
Court
and diligently
pursue an
application
for the
Final
Order
pursuant
to Part
9, Division
5 of the
BCBCA, as soon
as reasonably
practicable,
but in
any event
not later
than
three
(3) Business
Days
after
the Arrangement
Resolution
is passed
at the
Cortez
Meeting
as provided
for in
the Interim
Order.

    	 

    	 

    

Section
2.6Court
Proceedings

 

		(1)	In connection
with
all
Court
proceedings
relating
to obtaining
the Interim
Order and
the Final
Order, Cortez
shall:

 

		(a)	diligently
pursue,
and cooperate
with
Starcore
in diligently
pursuing,
the Interim
Order and
the Final
Order;

 

		(b)	provide
 legal
 counsel 
to  Starcore
 with
 a  reasonable
 opportunity
 to 
review
 and comment
upon drafts
of all
material
to be
filed
with
the
Court in
connection
with
the Arrangement,
and give
reasonable
consideration
to all
such comments;

 

		(c)	provide
copies
of any
notice
of appearance,
evidence
or other
documents
served
on Cortez
or its
legal
counsel
in respect
of the
application
for the
Interim
Order or
the Final
Order or
any appeal
from them,
and any notice,
written
or oral,
indicating
the intention
of any Person
to appeal,
or oppose
the
granting
of, the
Interim
Order or
the Final
Order;

 

		(d)	ensure
that
all
material
filed with
the Court
in connection
with
the Arrangement
is consistent
with
this
Agreement
and the
Plan
of Arrangement;

 

		(e)	not file
any material
with
the Court
in connection
with
the Arrangement
or serve
any such material,
or agree
to modify
or amend
any material
so filed
or served,
except as contemplated
by this
Agreement
or with
Starcore’s
prior
written
consent,
such consent
not to
be unreasonably
withheld,
conditioned
or delayed,
provided
Starcore
is not required
to agree
or consent
to any increase
in or variation
in the
form of the
Consideration
or other modification
or amendment to
such filed or
served materials
that expands
or increases
Starcore’s
obligations,
or diminishes
or limits
Starcore’s
rights,
set forth
in any
such filed
or served
materials
or under this
Agreement;

 

		(f)	oppose any
proposal from
any Person
that
the Final
Order contain
any provision
inconsistent
with
this
Agreement,
and if
required
by the
terms
of the
Final
Order
or by Law
to return
to Court
with
respect
to the
Final
Order do
so only
after
notice
to, and in
consultation
and cooperation
with,
Starcore;
and

 

		(g)	not object
to legal
counsel to
Starcore
making
such submissions
on the heading
of the
motion
for the
Interim
Order and
the
application
for the
Final
Order
as such counsel
considers appropriate.

 

Section
2.7No Fractional
Shares

 

Starcore
will
not be
required
to issue
or deliver
fractions
of Starcore
Shares
or to
distribute
share certificates
which
evidence
fractional
Starcore
Shares.
If the
Consideration
would
result
in the
issue
of a
fraction
of a
Starcore
Share,
the
number of
Starcore
Shares
to be
issued
to a
Cortez
Shareholder
shall be rounded
down to the
nearest whole
number, without
payment of
any additional
consideration.

    	 

    	 

    

Section
2.8Cortez Options

 

		(1)	The
Parties
acknowledge
that
on the Effective
Date,
all Cortez
Options
will
be surrendered
by the Cortez
Optionholders
to Cortez
for cancellation
pursuant
to Section
3.1(c)
of the
Plan
of Arrangement
in exchange
for a cash
payment
from Starcore
to the
Cortez
Optionholders
equal to
the Option
Consideration,
less
applicable
withholding
tax.

 

		(2)	The Parties
acknowledge
that:

 

		(a)	no deduction
will
be claimed
by Cortez
or any Person
not dealing
at arm’s
length
with
Cortez
for the
purposes
of the
Tax Act
in computing
their
taxable
income
under the
Tax Act
in respect
of payment
of the Option
Consideration
arising
under the surrender
of Cortez
Options
referred
to in
Section
2.8(1);
and

 

		(b)	Cortez
shall
(and Starcore
shall,
following
the
Effective
Date,
ensure that
Cortez
shall):

 

		(i)	make
an election
pursuant
to subsection
110(1.1) of
the Tax
Act,
within
the time
prescribed
by the
Tax Act,
in respect
of the
Cortez
Options;
and

 

		(ii)	provide
evidence
in writing
of such election
to holders
of Cortez
Options
on a  timely
basis, it
being
understood
that
holders
of Cortez
Options
shall
be entitled
to claim
any deductions available
to such
holders pursuant
to the
Tax Act in
respect of
the calculation
of any benefit
arising
from the payment
of Option
Consideration
arising
under the surrender
of Cortez
Options
referred
to in
Section
2.8(1).

 

Section
2.9Arrangement
Filings
and Effective
Date

 

		(1)	Cortez
shall
amend the
Plan
of Arrangement
from time
to time
at the
reasonable
request
of Starcore,
provided
that
no such
amendment
is inconsistent
with
the Interim
Order or
the
Final
Order or
is prejudicial
to the
Cortez
Shareholders.

 

		(2)	Cortez
shall
file
any Arrangement
Filings
with
the Registrar
as soon as
practicable
after
the satisfaction
or, where
not prohibited,
the waiver
by the
applicable
Party
or Parties
in whose
favour the
condition
is, of
the conditions
set out
in Article
6 (excluding
conditions
that,
by their
terms, cannot
be satisfied
until
the Effective
Date, but subject
to the
satisfaction
or, where not
prohibited,
the waiver
by the applicable
Party or Parties
in whose favour
the condition
is, of those
conditions
as of the Effective
Date),
unless another
time
or date is
agreed to
in writing
by the Parties.
Starcore
will
file a certified
copy of the Closing
Certificate
in its
record book
and complete
the Arrangement
Filings
if required.

 

		(3)	The
closing
of the
Arrangement
will
take
place at
the offices
of legal
counsel for
Starcore
in Vancouver,
British
Columbia,
or at
such other
location
as may be agreed
upon by the Parties.

 

Section
2.10Announcement
and Shareholder
Communications

		(1)	Starcore
and Cortez
shall
each publicly
announce the
transactions
contemplated
hereby promptly
following
the execution
of this
Agreement,
the text
and timing
of each
Party’s
announcement
to be
approved
by the
other
Party
in advance,
each acting
reasonably.
Starcore
and Cortez
agree to
cooperate
in the
preparation
of presentations,
if any,
to the

    	 

    	 

    

Cortez
Securityholders
or the
Starcore
Shareholders
regarding
the transactions
contemplated
by this
Agreement
and no Party
shall:

 

		(a)	issue
any press
release
or otherwise
make
public announcements
with
respect
to this
Agreement
or the
Plan
of Arrangement
without
the
consent
of the
other
Party
(which
consent shall
not be
unreasonably
withheld
or delayed);
or

 

		(b)	make
any filing
with
any Governmental
Entity
with
respect thereto
without
prior consultation
with
the other
Party;

 

provided,
however,
that
the foregoing
shall
be subject
to each
Party’s
overriding
obligation
to make
any disclosure
or filing
under Law
or stock
exchange
rules, and
the Party
making
such disclosure
shall use
all
commercially
reasonable
efforts
to give
prior
written
notice
to the
other
Party
and reasonable
opportunity
to review
or comment
on the
disclosure
or filing,
and if such
prior notice
is not possible,
to give
such notice
immediately
following
the making
of such disclosure
or filing.

 

		(2)	To
the extent
possible,
Cortez
shall
provide
prior
notice to
Starcore
of any public
disclosure
that
it proposes
to make
regarding
Material
Information,
together
with
a draft
copy of
such disclosure.
Starcore
and its
legal
counsel
shall
be given
a reasonable
opportunity
to review
and comment
on such Material
Information
prior
to such
Material
Information
being disseminated
publicly
or filed with
any Governmental
Entity,
and reasonable
consideration
shall be given
to any comments
made by
Starcore
and its
counsel.

 

Section
2.11List
of Shareholders

At
the request
of Starcore
from time
to time,
Cortez
will
provide
Starcore
with
a list
(in
both written
and electronic
form)
of (i)
the
Cortez
Shareholders,
together
with
their addresses
and respective
holdings
of Cortez
Shares,
(ii)
the
names, addresses
and holdings
of all
Persons
having rights
issued by Cortez
to acquire
Cortez
Shares
(including
holders
of Cortez
Options
and Cortez
Warrants),
and (iii) participants
and book-based nominee
registrants
such as CDS & Co.,
CEDE & Co.
and DTC,
and non-objecting
beneficial
owners
of Cortez
Shares,
together
with
their
addresses
and respective
holdings
of Cortez
Shares.
Cortez
shall from
time to
time
require
that its
registrar
and transfer
agent furnish
Starcore
with
such additional
information,
including
updated or
additional
lists of Cortez
Shareholders,
and lists
of securities
positions
and other assistance
as Starcore
may reasonably
request in order
to be able
to communicate
with respect
to the
Arrangement
with the
Cortez
Shareholders
and with
such other
Persons
as are entitled
to vote
on the
Arrangement
Resolution.

 

 

ARTICLE
3 REPRESENTATIONS
AND WARRANTIES

 

Section
3.1Representations
and Warranties
of Cortez

 

		(1)	Except
as set
forth
in the
Cortez
Disclosure
Letter,
or as disclosed
in the
Cortez
Filings,
Cortez
represents
and warrants
to Starcore
as set
forth in
Schedule
C and acknowledges
and agrees
that Starcore
is relying
upon such
representations
and warranties
in connection
with the entering
into of
this Agreement:

    	 

    	 

    

		(2)	The
representations
and warranties
of Cortez
contained
in this
Agreement
shall
not survive
the completion
of the
Arrangement
and shall
expire
and be
terminated
on the
earlier
of the
Effective
Time
and the
date
on which
this
Agreement
is terminated
in accordance
with
its terms.

 

Section
3.2Representations
and Warranties
of Starcore

 

		(1)	Except
as set
forth
in the
Starcore
Disclosure
Letter,
or as disclosed
in the
Starcore
Filings,
Starcore
represents
and warrants
to Cortez
as set forth
in Schedule
D and acknowledges
and agrees that
Cortez
is relying
upon the
representations
and warranties
in connection
with
the entering
into
of this
Agreement.

 

		(2)	The
representations
and warranties
of Starcore
contained
in this
Agreement
shall not
survive
the completion
of the
Arrangement
and shall
expire
and be
terminated
on the
earlier
of the
Effective
Time
and the
date
on which
this
Agreement
is terminated
in accordance
with
its terms.

 

 

ARTICLE
4 COVENANTS

 

Section
4.1Covenants
of Cortez
Regarding
the Conduct
of Business
until
the Effective
Time.

		(1)	Until
the earlier
of the
Effective
Time
and the
time
that this
Agreement
is terminated
in accordance
with
its terms,
Cortez
shall
conduct business
only
in the
Ordinary
Course.

 

		(2)	Without
limiting
the generality
of Section
4.1(1),
and without
derogating
from the
obligations
of Cortez
in Section
6.2, Cortez
shall
use reasonable
commercial
efforts
to preserve
intact
the current
business
organization
of Cortez,
keep available
the services
of the
present
employees
and agents of
Cortez
and maintain
good relations
with, and
the goodwill
of, suppliers,
customers, landlords,
creditors,
distributors
and all other
Persons having
business relationships
with
Cortez
and except
for transactions
involving
Cortez
and one or
more of
its wholly-owned
Subsidiaries
or between
wholly-owned
Subsidiaries
of Cortez
or with
the prior
written
consent of Starcore,
Cortez shall
not, and
shall not permit
any of its Subsidiaries
to, directly
or indirectly:

 

		(a)	amend
its Constating
Documents
or, in
the case
of any
Subsidiary
which
is not
a corporation,
its similar
organizational
documents;

 

		(b)	split,
combine
or reclassify
any shares of
Cortez
or declare,
set aside
or pay any dividend
or other
distribution
(whether
in cash,
stock or
property
or any combination
thereof);

 

		(c)	redeem,
repurchase, or
otherwise
acquire
or offer
to redeem,
repurchase
or otherwise
acquire any
shares of
capital
stock of
Cortez
or any of
its Subsidiaries;

 

		(d)	issue,
deliver
or sell,
or authorize
the issuance,
delivery
or sale
of any shares
of capital
stock,
any options,
warrants
or similar
rights
exercisable
or exchangeable
for or convertible
into
such capital
stock,
of Cortez
or any
of its
Subsidiaries,
except for the
issuance
of Cortez
Shares
issuable
upon the
exercise
of the currently
outstanding
Cortez
Options
and Cortez
Warrants;

    	 

    	 

    

		(e)	acquire
(by merger,
consolidation,
acquisition
of stock
or assets
or otherwise),
directly
or indirectly,
in one
transaction
or in
a series
of related
transactions,
any assets,
securities,
properties,
interests
or businesses;

 

		(f)	prepay any
indebtedness
before its
scheduled
maturity
or increase,
create,
incur,
assume or
otherwise
become
liable
for any indebtedness
for borrowed
money or guarantees
thereof;

 

		(g)	make
any loan
or advance
to, or
any capital
contribution
or investment
in, or
assume,
guarantee
or otherwise
become
liable
with
respect
to the
liabilities
or obligations
of, any Person;

 

		(h)	enter
into
any interest
rate, currency,
equity
or commodity
swaps, hedges,
derivatives,
forward
sales
contracts
or similar
financial
instruments;

 

		(i)	make
any bonus or profit
sharing distribution
or similar
payment
of any kind;

 

		(j)	except
as required
by IFRS
or any other
accepted
accounting
principles
to which
Cortez
is subject
to or by
Law, make
any change in
Cortez’s
methods of
accounting;

 

		(k)	grant
any general
increase
in the
rate
of wages,
salaries,
bonuses or
other remuneration
of any
employees;

 

		(l)	(i)
create,
enter
into
or increase
any severance,
change
of control
or termination
pay to (or
amend any existing
arrangement
with)
any Cortez Employee,
director
or executive
officer
of Cortez
or any of
its Subsidiaries;
(ii)
change the
benefits
payable under
any existing
severance
or termination
pay policies
with
any Cortez
Employee,
director
or executive
officer
of Cortez
or any of its Subsidiaries;
(iii)
change the benefits
payable
under any
employment
agreements
with
any Cortez Employee,
director
or executive
officer of Cortez
or any of its Subsidiaries;
(iv) enter
into any employment,
deferred compensation
or other
similar
agreement (or amend
any such existing
agreement,
except as necessary
to comply
with Law
or with
respect to
existing
provisions
of such
plans) with
any director
or executive
officer
of Cortez;
or

(v)
change compensation,
bonus levels
or other
benefits
payable
to any
director
or executive
officer
of Cortez
or to any
Cortez
Employee;

 

		(m)	cancel, waive,
release,
assign,
settle
or compromise
any material
claims
or rights;

 

		(n)	compromise
or settle
any litigation,
proceeding
or governmental
investigation;

 

		(o)	except
in the
Ordinary
Course, amend
or modify
in any
material
respect
or terminate
or waive
any right
under any
Material
Contract
or enter
into
any contract
or agreement
that would
be a Material
Contract
if in
effect
on the
date hereof;

 

		(p)	except
as contemplated
in Section
4.10 amend,
modify
or terminate
any insurance
policy
of Cortez
or any
Subsidiary
in effect
on the date
of this
Agreement;

 

		(q)	abandon or fail
to diligently
pursue any application
for any material
licenses,
permits,
authorizations
or registrations;

    	 

    	 

    

	 	(r)	issue, sell, dispose of or grant any interest in, encumber or pledge or create any lien or agree to issue, sell, dispose of or grant an interest in, encumber or pledge or create any lien on any shares or rights convertible into shares of any Subsidiary or affiliate; or

 

		(s)	authorize,
agree, resolve
or otherwise
commit,
whether
or not
in writing,
to do
any of the
foregoing.

 

Section
4.2Covenants
of Cortez
Regarding
the Arrangement.

		(1)	Cortez
shall
use commercially
reasonable
efforts
to take
or cause
to be
taken
all actions
and to
do or
cause
to be
done all
things
necessary,
proper
or advisable
under Law
to consummate
the Arrangement
as soon as
practicable,
including:

 

		(a)	using
commercially
reasonable
efforts
to obtain
and maintain
all third
party
or other
consents,
waivers,
permits,
exemptions,
orders,
approvals,
agreements,
amendments
or confirmations
that
are required
(A) in
connection
with
the
Arrangement
or (B) required
in order to
maintain
the Material
Contracts
in full force
and effect following
completion
of the Arrangement,
in each case, on terms
that are satisfactory
to Starcore;
and

 

		(b)	using commercially
reasonable
efforts
to,
on prior
written
approval
of Starcore,
oppose, lift
or rescind
any injunction,
restraining
or other
order, decree
or ruling
seeking
to restrain,
enjoin
or otherwise
prohibit
or adversely
affect the
consummation
of the
Arrangement
and defend,
or cause
to be
defended,
any proceedings
to which
it is a party
or brought
against
it or
its directors
or officers
challenging
the Arrangement
or this
Agreement;

 

		(c)	carrying
out the
terms
of the
Interim
Order and
the Final
Order
applicable
to it
and complying
promptly
with
all requirements
imposed
by Law
on it
or its
Subsidiaries
with
respect
to this
Agreement
or the
Arrangement;

 

		(d)	not taking
any action,
or refraining
from taking
any action,
or permitting
any action
to be
taken
or not taken,
which
is inconsistent
with
this
Agreement
or which
would
reasonably
be expected
to prevent,
delay
or otherwise
impede
the consummation
of the Arrangement;
and

 

		(e)	complete
the Arrangement
Filings
at or
immediately
following
the Effective
Time.

 

		(2)	Cortez
shall
promptly
notify
Starcore
of:

 

		(a)	any Material
Adverse
Effect
or any change,
effect,
event,
development,
occurrence,
circumstance
or state
of facts
which
would
reasonably
be expected
to have
a Material
Adverse Effect;

 

		(b)	any notice
or other
communication
from any
Person alleging
that the
consent
(or waiver,
permit,
exemption,
order, approval,
agreement,
amendment
or confirmation)
of such Person
is required
in connection
with
this Agreement
or the Arrangement;

    	 

    	 

    

knowledge,
threatened
against,
relating
to or
involving
or otherwise
affecting
Cortez,
this Agreement
or the Arrangement.

 

		(3)	The
Parties
shall,
as promptly
as practicable,
prepare and
file
all
necessary
documents, registrations,
statements,
petitions,
filings
and applications
for the
Regulatory
Approvals
and use their
commercially
reasonable efforts
to obtain
and maintain
all Regulatory
Approvals.

 

		(4)	The
Parties
shall
cooperate
with
one another
in connection
with
obtaining
the Regulatory
Approvals
including
providing
one another
with
copies of
all notices
and information
or other
correspondence
supplied
to,
filed
with,
or received
from,
any Governmental
Entity.
Despite
the forgoing,
Starcore
is under
no obligation
to take
any steps
or actions
that
would, in
its sole
discretion,
affect Starcore’s
right to
own, use
or exploit
its
business,
operations
or assets
or those
of Cortez.

 

Section
4.3Covenants
of Starcore
Relating
to the
Arrangement

Starcore
shall,
and shall
cause its
Subsidiaries
to, perform
all obligations
required
to be
performed
by Starcore
or any
of its
Subsidiaries
under this
Agreement,
cooperate
with
Cortez
in connection
therewith,
and do all
such other
acts and things
as may be necessary
or desirable
in order
to consummate
and make effective,
as soon as reasonably
practicable,
the transactions
contemplated
in this
Agreement
and, without
limiting
the generality
of the foregoing,
Starcore
shall
and where
appropriate
shall
cause each
of its
Subsidiaries
to:

 

		(1)	defend
all lawsuits
or other
legal,
regulatory
or other
proceedings
against
Starcore
challenging
or affecting
this
Agreement
or the
consummation
of the
transactions
contemplated
hereby;

 

		(2)	apply
for and
use its
best efforts
to obtain
approval
of the
listing
and posting
for trading
on the TSX
of (i)
the Consideration
shares
and (ii)
the Starcore
Shares
which
are issuable
upon the exercise
of the Cortez
Warrants;
and otherwise
comply
with
TSX
requirements
relevant
to this
Agreement;

 

		(3)	use commercially
reasonable
efforts
to satisfy
all conditions
precedent
in this
Agreement.

 

		(4)	Starcore
shall
promptly
notify
Cortez
of:

 

		(a)	any Material
Adverse
Effect
or any change,
effect,
event,
development,
occurrence,
circumstance
or state
of facts
which
would
reasonably
be expected
to have
a Material
Adverse Effect;

 

		(b)	any notice
or other
communication
from any
Person alleging
that the
consent
(or waiver,
permit,
exemption,
order, approval,
agreement,
amendment
or confirmation)
of such Person
is required
in connection
with
this Agreement
or the Arrangement;

    	 

    	 

    

knowledge,
 threatened
 against,
 relating
 to 
or  involving
 or  otherwise
 affecting
Starcore,
this
Agreement
or the
Arrangement.

 

Section
4.4Cortez Options

Subject
to applicable
Law,
Cortez
and the
Cortez
Board shall
take
all
further
actions
necessary
to ensure
that
any outstanding
Cortez
Option
shall
terminate
and be
cancelled
at the
Effective
Time
in exchange
for a cash
payment from Starcore
to each
Cortez
Optionholder
equal to the
Option
Consideration
in respect
of such
outstanding
Cortez
Option, in
accordance with
the Plan
of Arrangement.

 

Section
4.5Cortez Warrants

Starcore
covenants
and agrees
that the
Cortez
Warrants
outstanding
on the Effective
Date will
continue
in effect
on the
same terms
and conditions
(subject
to adjustments
required
after
giving
effect to
the Arrangement
including,
without
limitation,
that
such Cortez
Warrants
shall
be exercisable
for Starcore
Shares).
Starcore
shall
take
all corporate
action
necessary to
reserve
for issuance a
sufficient
number of
Starcore
Shares
for delivery
upon exercise
of the
Cortez
Warrants
assumed in accordance
with this
Section
4.4.

 

Section
4.6Starcore
Meeting
or Written
Resolution

Subject
to the
terms
of this Agreement,
if required
by the TSX,
Starcore
agrees to
(a) convene
and conduct the
Starcore
Meeting
in accordance
with Starcore’s
articles
as soon as reasonably
practicable
or (b)
if so
permitted
by the
TSX,
obtain
the Starcore
Shareholder
Approval
by written
resolution
of the holders
of at least
50% of
the Starcore
Shares.

 

Section
4.7Starcore Circular

		(1)	If Starcore
is required
by the
TSX
to convene
the Starcore
Shareholder
Meeting
in order
to obtain
the Starcore
Shareholder
Approval,
Starcore
shall:

 

		(a)	as promptly
as reasonably
practicable
following
execution
of this
Agreement,
(i) prepare
the Starcore
Circular
together
with
any other
documents
required
by applicable
Laws,
(ii)
file
the Starcore
Circular
in all
jurisdictions
where
the same
is required
to be filed,
and (iii)
mail the
Starcore
Circular
as required
in accordance
with all
applicable
Laws;

 

		(b)	ensure
that
the
Starcore
Circular
complies
in all
material
respects
with
all
Laws (except
that Starcore
shall
not be responsible
for any
information
relating
to Cortez
and its affiliates
included
therein);

 

		(c)	(i)
solicit
proxies
in favour
of the
Starcore
Shareholder
Approval
resolution,
and against
any resolution
submitted
by any other
Starcore
Shareholder,
and take all
other actions
that
are reasonably
necessary or
desirable
to seek
the Starcore
Shareholder
Approval,
and (ii)
recommend
to holders
of Starcore
Shares that
they
vote
in favour
of the Starcore
Shareholder
Approval
resolution;
and

    	 

    	 

    

Starcore
Shareholders.

 

		(2)	If
Starcore
is required
by the
TSX
to convene
the Starcore
Shareholder
Meeting
in order
to obtain
the Starcore
Shareholder
Approval,
Cortez
shall:

 

		(a)	provide
to Starcore
all information
regarding
Cortez,
its affiliates
and the
Cortez
Shares
as required
by Laws
for inclusion
in the
Starcore
Circular
or in
any amendments
or supplements
to such Starcore
Circular;

 

		(b)	use best
efforts
to obtain
any necessary
consents
from
any of
its
auditors
and any other
advisors
to the
use of any
financial,
technical
or other
expert
information
required
to be included
in the
Starcore
Circular
and to
the identification
in the
Starcore
Circular
of each
such advisor;
and

 

		(c)	ensure
that no
such information
will
include
any Misrepresentation
concerning
Cortez,
its Subsidiaries
and the
Cortez
Shares.

 

		(3)	Cortez
and its
legal
counsel
shall
be given
a reasonable
opportunity
to review
and comment
on the
Starcore
Circular
prior
to the
Starcore
Circular
being
printed
and filed
with
the Governmental
Entities,
and reasonable
consideration
shall be
given
to any comments
made by Cortez
and its counsel,
provided
that all
information
relating
solely
to Cortez,
its affiliates
and the Cortez
Shares included
in the Starcore
Circular
shall be in
form and content
satisfactory
to Cortez,
acting
reasonably.

 

		(4)	Cortez
and Starcore
shall
each promptly
notify
each other
if at
any time
before the
Effective
Date
either
becomes
aware
that
the Starcore
Circular
contains
a Misrepresentation,
or that
otherwise
requires
an amendment
or supplement
to the
Starcore
Circular
and the
Parties
shall
co-operate
in the
preparation
of any amendment
or supplement
to the
Starcore
Circular
as required
or appropriate,
and Starcore
shall promptly
mail or otherwise
publicly
disseminate
any amendment or supplement
to the Starcore
Circular
to Starcore
Shareholders
and, if required
by the Court
or applicable
Laws,
file the
same with
the Governmental
Entities
and as otherwise
required.

 

Section
4.8Access to Information;
Confidentiality

 

		(1)	Each of
Starcore
and Cortez
shall provide
to the
other
and their
respective
Representatives

(a) 
upon reasonable
notice,
reasonable
access
during
normal business
hours to
its
and its
Subsidiaries’
(i) premises,
(ii)
property
and assets
(including
all books
and records,
whether
retained
internally
or otherwise)
and (iii)
senior
personnel,
so long
as the
access
does not unduly
interfere
with
the Ordinary
Course conduct
of business;
and (b) such
financial
and operating
data or
other
information
with
respect
to the
assets
or business
of the
applicable
Party
as from time
to time
is reasonably
requested.

 

		(2)	Investigations
made by
or on behalf
of a Party,
whether
under this
Section
4.8 or otherwise,
will
not waive,
diminish
the scope
of, or
otherwise
affect any
representation
or warranty
made by the
other
Party
in this
Agreement.

 

		(3)	The
Parties
acknowledge
that the
Confidentiality
Agreement
continues
to apply
and that
any information
provided
under Section
4.8(1)
above that
is non-public
and/or
proprietary
in

    	 

    	 

    

nature
shall
be subject
to the
terms
of the
Confidentiality
Agreement.
If this
Agreement
is terminated
in accordance
with
its
terms,
the obligations
under the
Confidentiality
Agreement
shall survive
the termination
of this
Agreement.

 

Section
4.9Notice
and Cure
Provisions

 

		(1)	Each
Party
shall
promptly
notify
the other
Party
of the
occurrence,
or failure
to occur,
of any event
or state
of facts
which
occurrence or
failure
would,
or would
be reasonably
likely
to:

 

		(a)	cause any
of the
representations
or warranties
of such Party
contained
in this
Agreement
to be
untrue or
inaccurate
in any
material
respect at
any time
from the
date of
this Agreement
to the
Effective
Time;
or

 

		(b)	result
in the
failure
to comply
with
or satisfy
any covenant,
condition
or agreement
to be complied
with
or satisfied
by such Party
under this
Agreement.

 

		(2)	Notification
provided
under this
Section
4.9
will
not affect
the representations,
warranties,
covenants,
agreements
or obligations
of the
Parties
(or remedies
with
respect thereto)
or the
conditions
to the obligations
of the Parties
under this
Agreement.

 

Section
4.10Insurance
and Indemnification

 

		(1)	Prior
to the
Effective
Date,
Cortez
may purchase
customary
“tail”
policies
of directors’
and officers’
liability
insurance
providing
protection
no less
favourable
in the
aggregate
to the
protection
provided
by the
policies
maintained
by Cortez
and its
Subsidiaries
which
are in
effect immediately
prior
to the
Effective
Date
and providing
protection
in respect
of claims
arising
from facts
or events
which
occurred
on or prior
to the
Effective
Date
and Starcore
will, or
will
cause Cortez
and its
Subsidiaries
to maintain
such tail policies
in effect without
any reduction
in scope or
coverage for six
(6) years
from the Effective
Date;
provided
that Starcore
will
not be
required
to pay
any amounts
in respect
of such
coverage
prior
to the
Effective
Time
and provided
further
that the
cost of such policies
shall not exceed
150% of the
Cortez’s
current annual
aggregate
premium
for policies
currently
maintained
by Cortez or its
Subsidiaries.

 

		(2)	Starcore
shall
honour all
rights
to indemnification
or exculpation
now existing
in favour
of present and
former
employees,
officers
and directors
of Cortez
and its
Subsidiaries
and acknowledges
that
such rights
shall
survive
the completion
of the
Plan
of Arrangement
and shall continue
in full force
and effect in
accordance with
their
terms
for a period
of not less than
two (2)
years from
the Effective
Date.

 

 

ARTICLE
5

ADDITIONAL
COVENANTS
REGARDING
NON-SOLICITATION

 

Section
5.1Non-Solicitation

 

		(1)	Except
as expressly
provided
in this
Article
5, Cortez
shall not,
directly
or indirectly,
through
any officer,
director,
employee,
representative
(including
any financial
or other
adviser)
or agent
of Cortez
or of
any of its Subsidiaries
(collectively
“Representatives”),
and shall
not permit
any such Person
to:

    	 

    	 

    

		(a)	solicit,
initiate,
encourage
or otherwise
facilitate
(including
by way
of furnishing
or providing
copies of,
access
to, or disclosure
of, any information,
properties
(including
mineral
properties),
facilities,
books or
records of
Cortez
or any Subsidiary
or affiliate,
or entering
into
any form
of agreement,
arrangement
or understanding)
any inquiry,
proposal or offer
that constitutes
or may reasonably be expected
to constitute
or lead
to, an Acquisition
Proposal;

 

		(b)	enter
into
or otherwise
engage
or participate
in any
discussions
or negotiations
with any 
Person  (other
 than 
Starcore)
 regarding
 any  inquiry,
 proposal 
or  offer
 that
constitutes
 or may
reasonably
be expected
to constitute
or lead
to, an
Acquisition
Proposal;

 

		(c)	make
a Change in
Recommendation;

 

		(d)	accept,
approve,
endorse or
recommend, or
publicly
propose to
accept,
approve,
endorse or
recommend
any Acquisition
Proposal,
or take
no position
or remain
neutral with
respect
to, any Acquisition
Proposal;
or

 

		(e)	enter
into
or publicly
propose to
enter
into
any agreement
in respect
of any publically
announced Acquisition
Proposal
(it
being understood
that publicly
taking
no position
or a neutral
position
with
respect
to an
Acquisition
Proposal
for a
period
of no
more than
two
(2) Business
Days following
the
formal
announcement of
such Acquisition
Proposal will
not be considered
to be in violation
of this
Section
5.1 provided
the Board has rejected
such Acquisition
Proposal
and affirmed
the Board
Recommendation
before the
end of such
two
(2) Business
Day period);

 

		(2)	If
not already
ceased and
terminated,
Cortez
shall,
and shall
cause its
Subsidiaries
and its Representatives
to, immediately
cease and
terminate,
and cause
to be
terminated,
any solicitation,
encouragement,
discussion,
negotiations,
or other
activities
commenced
prior
to the
date of
this
Agreement
with
any Person
(other
than Starcore)
with
respect to
any inquiry,
proposal or
offer that
constitutes,
or may
reasonably
be expected
to constitute
or lead to,
an Acquisition
Proposal,
and in connection
with
such termination
shall:

 

		(a)	discontinue
access
to, and
disclosure
of all
information,
including
any data
room and any confidential
information,
properties,
facilities,
books
and records
of Cortez
or any Subsidiary;
and

 

		(b)	request,
and exercise
all rights
it has
to require
(i)
the return
or destruction
of all copies
of any confidential
information
regarding
Cortez
or any Subsidiary
provided to
any Person
(other than
Starcore),
and (ii)
the destruction
of all material
including
or incorporating
or otherwise
reflecting
such confidential
information
regarding
Cortez
or any Subsidiary
using
its
best efforts
to ensure
that
such requests
are fully
complied with
in accordance
with
the terms
of such rights
or entitlements.

 

		(3)	Cortez
represents
and warrants
that
Cortez
has not
waived
any confidentiality,
standstill
or similar
agreement
or restriction
to which
Cortez
or any Subsidiary
is a Party,
except
to permit
submissions
of expressions
of interest
prior
the
date
of this
Agreement,
and further
covenants
and agrees
(i)
that Cortez
shall take
all necessary
action to
enforce
each confidentiality,
standstill
or similar
agreement or
restriction
to which
Cortez
or any Subsidiary
is a
party,
and

(ii)
that neither
Cortez,
nor any Subsidiary
nor any of
their
respective
Representatives
have or

    	 

    	 

    

will,
without
the prior
written
consent
of Starcore
(which
may be
withheld
or delayed
in Starcore’s
sole and
absolute
discretion),
release
any Person
from,
or waive,
amend, suspend
or otherwise
modify such
Person’s
obligations
respecting
Cortez,
or any
of its
Subsidiaries,
under any confidentiality,
standstill
or similar
agreement or
restriction
to which
Cortez or
any Subsidiary
is a party.

 

Section
5.2Notification
of Acquisition
Proposals

 

		(1)	If
Cortez
or any of
its Subsidiaries
or any of
their
respective
Representatives,
receives
or otherwise
becomes aware
of any
inquiry,
proposal or
offer
that
constitutes
or may
reasonably
be expected
to constitute
or lead
to an
Acquisition
Proposal,
or any
request for
copies
of, access to, or
disclosure
of, confidential
information
relating
to Cortez
or any Subsidiary,
including
but not limited
to information,
access, or disclosure
relating
to the properties,
facilities,
books or records
of Cortez or any Subsidiary,
Cortez shall
immediately
notify Starcore,
at first
orally,
and then promptly
and in any
event within
24 hours in
writing,
of:

 

		(a)	such Acquisition
Proposal,
inquiry,
proposal,
offer
or request,
including
a description
of its
material
terms
and conditions,
the identity
of all
Person(s)
making
the Acquisition
Proposal,
inquiry,
proposal, offer
or request,
and copies of
all
documents,
correspondence
or other
material
received
in respect
of, from or
on behalf
of any such Person;
and

 

		(b)	the
status
of developments
and negotiations
with
respect to
such Acquisition
Proposal,
inquiry,
proposal,
offer or
request,
including
any changes,
modifications
or other
amendments
to any
such Acquisition
Proposal,
inquiry,
proposal,
offer
or request.

 

Section
5.3Responding
to an Acquisition
Proposal

 

Notwithstanding
Section
5.1,
if at
any time
following
the date
of this
Agreement
and prior
to the approval
by Cortez
Shareholders
and Cortez
Optionholders
of the
Arrangement
Resolution
the Cortez
Board receives
a bona
fide
written
Acquisition
Proposal
that was
not solicited
after
entering
into
this Agreement
in breach of Section
5.1 (and provided that:
(i)
the Person
making
the Acquisition
Proposal was
not restricted
from making
such Acquisition
Proposal
pursuant to
an existing
standstill
or similar
restriction;
(ii)
Cortez
has been and continues
to be in
compliance
with
its obligations
under this
Article
5; and
(iii)
Cortez
notifies
Starcore
in accordance
with
Section
5.2), then
the Cortez
Board may
(directly
or through
its
advisors
or Representatives):

 

		(a)	contact
the Person
making
such Acquisition
Proposal
and its
Representatives
to clarify
the terms
and conditions
of such
Acquisition
Proposal
so as to
determine
whether
such proposal
is, or
could reasonably
be expected
to lead
to, a
Superior
Proposal;

 

		(b)	if,
in the
opinion
of the
Cortez
Board,
acting
in good
faith
and after
receiving
advice from
its outside
financial
advisor
and outside
legal
counsel,
the Acquisition
Proposal
is, or
could
reasonably
be expected
to lead
to, a Superior
Proposal:

 

		(i)	furnish
information
with
respect
to Cortez
and its
Subsidiaries
to the
Person
making
such Acquisition
Proposal
and its
Representatives;
and/or

    	 

    	 

    

		(ii)	consider
such Acquisition
Proposal
and/or,
participate
and/or
engage
in discussions
with
the Person
making
such Acquisition
Proposal
and its
Representatives;

 

provided
that
(x) Cortez
will
not,
and will
not allow
its
Representatives
to, disclose
any non-public
information
with
respect
to Cortez
or its
Subsidiaries
to such
Person
without
entering
into a confidentiality
and standstill
agreement
with such Person,
having terms
not more favourable
to such Person
than the
equivalent
terms
of the Confidentiality
Agreement,
and a correct
and complete
copy of such
agreement
will
be provided
to Starcore
before
any such
information
is provided;
and (y)
Starcore
is promptly
provided with
a list and copies
of all information
provided to
the Person
making
such Acquisition
Proposal
not previously
provided
to Starcore.

 

Section
5.4Right
to Match

 

		(1)	If
Cortez
receives
an Acquisition
Proposal
that
constitutes
or may
constitute
a Superior
Proposal
prior
to the
approval
of the
Arrangement
Resolution
by the
Cortez
Shareholders
and Cortez
Optionholders,
the
Cortez
Board may,
subject
to compliance
with
Article
7 and
Section
8.2, enter
into a definitive
agreement with
respect to
such Acquisition
Proposal,
that is
a Superior
Proposal,
if and
only if:

 

		(a)	the
Person
making
the Superior
Proposal
was not
restricted
from making
such Superior
Proposal
pursuant
to an existing
standstill
or similar
restriction;

 

		(b)	Cortez
has been,
and continues
to be,
in compliance
with
its
obligations
under this
Article
5;

 

		(c)	Cortez
has delivered
to Starcore
a written
notice
of the
determination
of the
Cortez
Board that
such Acquisition
Proposal
constitutes
a Superior
Proposal
and of the
intention
of the
Cortez
Board to
enter
into
such definitive
agreement,
together
with
a written
notice
from the
Cortez
Board regarding
the value
and financial
terms
that the
Cortez Board,
in consultation
with its
financial
advisors,
has determined
should
be ascribed
to any non-cash consideration
offered under
such Acquisition
Proposal
(the “Superior
Proposal
Notice”);

 

		(d)	Cortez
has provided
Starcore
a copy
of the
proposed
definitive
agreement
for the
Superior
Proposal;

 

		(e)	at least
five
(5) Business
Days
(the “Matching
Period”)
have elapsed
from the
date that
is the
later
of the
date
on which
Starcore
received
the Superior
Proposal
Notice
and a copy
of the
proposed
definitive
agreement
for the
Superior
Proposal
from Cortez;

 

		(f)	during
any Matching
Period,
Starcore
has had
the opportunity
(but not
the obligation),
in accordance
with
Section
5.4(2),
to offer
to amend
this
Agreement
and the Arrangement
in order
for such
Acquisition
Proposal
to cease
to be a
Superior
Proposal;

 

		(g)	if
applicable,
the Cortez
Board has
determined
in good
faith,
after
consultation
with Cortez’s
outside
legal
counsel and
financial
advisers,
that such
Acquisition
Proposal

    	 

    	 

    

continues
 to constitute
 a Superior
 Proposal
 compared
to  the
 terms
 of  the
Arrangement
as proposed
to be amended by
Starcore
under Section
5.4(2);

 

		(h)	the
Cortez
Board has
determined
in good
faith,
after
consultation
with
Cortez’s
outside
legal
counsel
that
it is
necessary
for the
Cortez
Board to enter
into
a definitive
agreement
with
respect
to such
Superior
Proposal
in order
to properly
discharge
its fiduciary
duties;

 

		(i)	such Superior
Proposal
does not
provide
for the payment
of any break,
termination
or other
fees or
expenses
to any
person in
the event
that Cortez
completes
the transactions
with Starcore
contemplated
by this
Agreement
or any other
similar
transaction
with Starcore
agreed to prior
to the
termination
of this
Agreement;
and

 

		(j)	prior
to entering
into
such definitive
agreement
Cortez
terminates
this
Agreement
pursuant to
Section
7.2(1)(c)(ii)
 and 
pays  the
 Termination
 Fee 
pursuant 
to Section
8.2.

 

		(2)	During
the Matching
Period,
or such longer
period
as Cortez
may approve
in writing
for such purpose:
(a) the
Cortez
Board shall
review
any offer
made by Starcore
under Section
5.4(1)(f)
to amend
the terms
of this
Agreement
and the
Arrangement
in good
faith
in order
 to determine
whether
such proposal
would,
upon acceptance,
result
in the
Acquisition
Proposal
previously
constituting
a Superior
Proposal
ceasing
to be
a Superior
Proposal;
and (b)
Cortez
shall negotiate
in good faith
with Starcore
to make
such amendments
to the
terms of this
Agreement
and the Arrangement
as would enable
Starcore
to proceed
with
the transactions
contemplated
by this
Agreement
on such amended terms.
If the Cortez
Board determines
that such Acquisition
Proposal
would cease
to be a Superior
Proposal,
Cortez
shall promptly
so advise Starcore,
and Cortez
and Starcore
shall amend
this
Agreement
to reflect
such offer
made by Starcore,
and shall
take and cause
to be taken
all such actions
as are necessary
to give
effect to
the foregoing.

 

		(3)	Each
successive
amendment
to any
Acquisition
Proposal
shall
constitute
a new Acquisition
Proposal
for the
purposes
of this
Section
5.3, and Starcore
shall
be afforded
a new five
(5) Business
Day Matching
Period
from the later
of the date
on which
Starcore
received
the Superior
Proposal
Notice
and a copy of the definitive
agreement for
the new
 Superior
Proposal
from Cortez.

 

		(4)	The
Cortez
Board
shall
promptly
reaffirm
the Cortez
Board Recommendation
by  press release
after
any Acquisition
Proposal
which
is not
determined
to be
a Superior
Proposal
is publicly
announced or
the Cortez
Board
determines
that a
proposed
amendment
to the
terms
of this
Agreement
as contemplated
under
Section
5.4(2) would
result
in an
Acquisition
Proposal no longer
being
a Superior
Proposal.
Cortez
shall provide
Starcore
and its outside
legal counsel
with
a reasonable
opportunity
to review
the form
and content
of any such press
release and shall
make all
reasonable
amendments
to such press release
as requested
by Starcore
and its
counsel.

 

		(5)	If
Cortez provides
a Superior
Proposal
Notice
to Starcore
after
a date
that
is less
than ten
(10) Business
Days
before the
Cortez
Meeting,
Cortez
shall either
proceed with
or shall
postpone
the Cortez
Meeting,
as directed
by Starcore
to a
date
that is
not more
than
ten
(10) Business
Days after
the scheduled
date of
the Cortez
Meeting.

    	 

    	 

    

		(6)	Nothing
contained
in this
Section
5.3 shall
limit
in any
way the
obligation
of Cortez
to convene
and hold
the Cortez
Meeting in
accordance
with
Section
2.3 of this
Agreement
while this
Agreement
remains
in force.

 

		(7)	Nothing
contained
in this
Article
5 shall
prohibit
the
Cortez Board
from responding
through
a directors’
circular
or otherwise
as required
by Law
to an
Acquisition
Proposal
that
it determines
is not
a Superior
Proposal,
provided
that Cortez
shall provide
Starcore
and its
outside
legal counsel
with a reasonable
opportunity
to review
the form and content
of such circular
or other
disclosure
and shall
make
all reasonable
amendments
as requested
by Starcore
and its
counsel.

 

Section
5.5Breach
by Subsidiaries
and Representatives

 

Without
limiting
the generality
of the
foregoing,
Cortez
shall
advise
its Subsidiaries
and the
Representatives
of the
prohibitions
set out
in this
Article
5 and any
violation
of the
restrictions
set forth
in this
Article
5 by Cortez,
its
Subsidiaries
or Representatives
is deemed
to be
a breach
of this
Article
5 by Cortez.

 

 

ARTICLE
6 CONDITIONS

 

Section
6.1Mutual
Conditions
Precedent

 

The
Parties
are not
required
to complete
the
Arrangement
unless each
of the
following
conditions
is satisfied
on or
prior to
the Effective
Time,
which
conditions
may only
be waived,
in whole
or in
part, by
the mutual
consent
of the
Parties:

 

		(1)	Cortez
Securityholder
Approval.
The
Required
Approval
shall
have been
obtained
at the
Cortez
Meeting.

 

		(2)	Interim
and Final
Order.
The Interim
Order and
the
Final
Order
have
each been
obtained
on terms
consistent
with this
Agreement,
and have
not been set
aside or
modified
in a
manner unacceptable
to either
Cortez
or Starcore,
acting
reasonably,
on appeal
or otherwise.

 

		(3)	Starcore
Shareholder
Approval.
If
so required
by the
TSX,
the Starcore
Shareholder
Approval
shall
have been obtained.

 

		(4)	Illegality.
No Law
is in
effect
that
makes
the consummation
of the
Arrangement
illegal
or otherwise
prohibits
or enjoins
Cortez
or Starcore
from consummating
the Arrangement.

 

		(5)	Stock
Exchange
Approvals.
The conditional
approval
from the
TSX
and TSXV
shall
have been obtained
by Starcore
and Cortez,
respectively.

 

Section
6.2Additional
Conditions
Precedent
to the
Obligations
of Starcore

 

Starcore
is not
required
to complete
the Arrangement
unless
each of
the following
conditions
is satisfied
on or
before
the Effective
Time,
which
conditions
are for
the exclusive
benefit
of Starcore
and may only
be waived,
in whole
or in
part, by
Starcore
in its
sole
discretion:

    	 

    	 

    

		(1)	Representations
and Warranties.
The representations
and warranties
of Cortez
which
are qualified
by references
to materiality
or by the
expression
“Material
Adverse
Effect”
and the
representations
and warranties
set forth
in Section
5.1(3)
and Schedule
C were true
and correct as of the
Effective
Time,
in all
respects,
and all other
representations
and warranties
of Cortez
were true and correct
as of the
Effective
Time,
in all
material
respects,
in each case except
for representations
and warranties
made as of a specified
date, the accuracy
of which shall
be determined
as of such specified
date, and
Cortez has delivered
a certificate
confirming
same to Starcore,
executed by two
(2) senior
officers
of Cortez
(in each case
without
personal
liability)
addressed
to Starcore
and dated
the Effective
Date.

 

		(2)	Performance
of Covenants.
Cortez
has fulfilled
or complied
in all
material
respects
with each
of the
covenants
of Cortez
contained
in this
Agreement
to be
fulfilled
or complied
with
by it
on or prior
to the
Effective
Time, and
has delivered
a certificate
confirming
same to
Starcore,
executed by two
(2) senior
officers
of Cortez
(in each case
without
 personal
liability)
addressed
to Starcore
and dated
the Effective
Date.

 

		(3)	No
Legal Action.
There
is no
action
or proceeding
pending or
threatened
by any Person
(other
than Starcore)
in any
jurisdiction
to:

 

		(a)	cease
trade,
enjoin,
prohibit,
or impose
any limitations,
damages
or conditions
on, Starcore’s
ability
to acquire,
hold,
or exercise
full
rights
of ownership
over, any Cortez
Shares,
including
the right
to vote
the Cortez
Shares;

 

		(b)	prohibit
or restrict
the Arrangement,
or the
ownership
or operation
by Starcore
of the
business or
assets
of Starcore,
Cortez
or any of its
Subsidiaries,
or compel
Starcore
to dispose
of or
hold separate
any material
portion
of the
business
or assets
of Starcore,

Cortez
or any of
its Subsidiaries
as a result
of the Arrangement;
or

 

		(c)	prevent
or materially
delay the
consummation
of the
Arrangement,
or if
the Arrangement
is consummated,
have a Material
Adverse
Effect.

 

		(4)	Dissent
Rights.
Dissent
Rights
have not
been exercised
with
respect
to more
than
5% of
the issued
and outstanding
Cortez
Shares.

 

		(5)	No
Material
Adverse
Effect.
There
shall
not have
occurred a
Material
Adverse
Effect
to Cortez.

 

Section
6.3Additional
Conditions
Precedent
to the
Obligations
of Cortez

 

Cortez
is not
required to
complete
the
Arrangement
unless each
of the
following
conditions
is satisfied
on or
before
the Effective
Time,
which
conditions
are for
the
exclusive
benefit
of Cortez
and may
only be waived,
in whole
or in
part, by
Cortez
in its
sole
discretion:

 

		(1)	Representations
and Warranties.
The
representations
and warranties
of Starcore
which
are qualified
by references
to materiality
and the
representations
and warranties
set forth
in Schedule
D were
true
and correct
as of
the date
of this
Agreement
and are true
and correct
as of the
Effective
Time,
in all
respects,
and all
other
representations
and warranties
of Starcore
were true and correct
as of the date
of this
Agreement
and are true and
correct as of
the Effective
Time, in
all material
respects,
in each case
except for
representations
and warranties
made as of a specified
date, the
accuracy of which
shall be determined
as of such specified

    	 

    	 

    

date,
and Starcore
has delivered
a certificate
confirming
same
to Cortez,
executed
by two
(2) senior
officers
of Starcore
(in each
case without
personal
liability)
addressed
to Cortez
and dated the
Effective
Date.

 

		(2)	Performance
of Covenants.
Starcore
has fulfilled
or complied
in all
material
respects
with
each of the
covenants
of Starcore
contained
in this
Agreement
to be fulfilled
or complied
with
by it
on or prior
to the
Effective
Time, and
has delivered
a certificate
confirming
same to
Cortez,
executed
by two (2)
senior
officers
of Starcore
(in each case
without
 personal
liability)
addressed
to Cortez
and dated the
Effective
Date.

 

		(3)	No
Legal Action.
There
is no
action
or proceeding
pending or
threatened
by any Person
(other
than Starcore)
in any
jurisdiction
to:

 

		(a)	cease
trade,
enjoin,
prohibit,
or impose
any limitations,
damages
or conditions
on, Starcore’s
ability
to acquire,
hold,
or exercise
full
rights
of ownership
over, any Cortez
Shares,
including
the right
to vote
the Cortez
Shares;

 

		(b)	prohibit
or restrict
the Arrangement,
or the
ownership
or operation
by Starcore
of the
business or
assets
of Starcore,
Cortez
or any of its
Subsidiaries,
or compel
Starcore
to dispose
of or
hold separate
any material
portion
of the
business
or assets
of Starcore,

Cortez
or any of
its Subsidiaries
as a result
of the Arrangement;
or

 

		(c)	prevent
or materially
delay the
consummation
of the
Arrangement,
or if
the Arrangement
is consummated,
have a Material
Adverse
Effect.

 

		(4)	No
Material
Adverse
Effect.
There
shall
not have
occurred a
Material
Adverse
Effect
to Starcore.

 

Section
6.4Satisfaction
of Conditions

 

The
 conditions
 precedent
 set  out
 in 
Section
6.1,  Section
6.2  and
 Section
6.3  will
 be conclusively
deemed to
have been satisfied,
waived
or released
at the
Effective
Time.

 

 

ARTICLE
7

TERM
AND TERMINATION

 

Section
7.1Term

 

This
Agreement
shall be
effective
from the
date hereof
until
the
earlier
of the
Effective
Date and the
termination
of this
Agreement
in accordance
with
its terms.

 

Section
7.2Termination

 

		(1)	This
Agreement
may be terminated
prior
to the
Effective
Time by:

 

		(a)	the mutual
written
agreement
of the
Parties;
or

 

		(b)	either
Cortez
or Starcore
if:

    	 

    	 

    

		(i)	the
Required
Approval
is not
obtained
at the
Cortez
Meeting
in accordance
with
the Interim
Order, provided
that
a Party
may not
terminate
this
Agreement
pursuant
to this
Section
7.2(1)(b)(i)
if the
failure
to obtain
the Required
Approval has
been caused by,
or is a result of, a breach
by such Party
of any of its
representations
or warranties
or the
failure
of such Party
to perform
any of its
covenants
or agreements
under this
Agreement;

 

		(ii)	after
the date
of this
Agreement,
any Law
is enacted,
made, enforced
or amended,
as applicable,
that
makes
the consummation
of the
Arrangement
illegal
or otherwise
permanently
prohibits
or enjoins
Cortez
or Starcore
from consummating
the Arrangement,
and such Law has, if
applicable,
become final
and non-appealable,
provided the
Party
seeking to
terminate
this Agreement
pursuant to this
Section
7.2(1)(b)(ii)
has used its best
efforts
to, as applicable,
appeal or
overturn such
Law or otherwise
have it
lifted
or rendered non-applicable
in respect
of the Arrangement
to the extent
required
by this
Agreement;

 

		(iii)	the
Effective
Time
does not
occur on
or prior
to the
Outside
Date,
provided
that
a  Party
 may
 not  terminate
 this
 Agreement
 pursuant
 to 
this
Section
7.2(1)(b)(iii)
if the
failure
of the
Effective
Time
to so occur has been
caused by, or is
a result of,
a breach by such Party
of any of its
representations
or warranties
or the failure
of such
Party
to perform
any of its covenants
or agreements
under this
Agreement;
or

 

		(c)	Cortez
if:

 

		(i)	a breach
of any representation
or warranty
or failure
to perform
any covenant or agreement
on the
part of
Starcore
under this
Agreement
occurs that
would cause the
condition
in Section
6.3(1)
or Section
6.3(2)
not to
be satisfied,
and such breach
or failure
is incapable
of being
cured; provided
that
any intentional
breach shall
be deemed to be
incurable
and Cortez
is not then
in breach of this
Agreement
so as to cause any
condition in
Section
6.2(1)
or Section
6.2(2)
not to
be satisfied;

 

		(ii)	prior
to the
approval
by the Cortez
Shareholders
and Cortez
Optionholdres
of the
Arrangement
Resolution,
the
Cortez
Board authorizes
Cortez to
enter
into a
written
agreement
with
respect
to a
Superior
Proposal,
provided
Cortez
is then
in compliance
with
Article
5, and
that prior
to or
concurrent
with
such termination
Cortez
pays the
Termination
Fee in
accordance
with
Section
8.2; or

 

		(iii)	there has
occurred
a Material
Adverse
Effect
to Starcore.

 

		(d)	Starcore
if:

 

		(i)	a breach
of any representation
or warranty
or failure
to perform
any covenant or agreement
on the
part of
Cortez
under
this
Agreement
occurs that
would
cause any condition
in Section
6.2(1)
or Section
6.2(2)
not to
be satisfied,
and such breach or failure
is incapable
of being
cured; provided
that any intentional
breach shall
be deemed to
be incurable
and Starcore
is not
then in

    	 

    	 

    

breach
of this
Agreement
so as to
cause any
condition
in Section
6.3(1)
or Section
6.3(2) 
not to
be satisfied;

 

		(ii)	the
Cortez
Board or
any committee
of the
Cortez
Board
fails
to recommend
or withdraws,
amends, modifies
or qualifies,
publicly
proposes or
states
its intention
to do
so, or
fails
to publicly
reaffirm
(without
qualification),
the Cortez
Board Recommendation
(a “Change in
Recommendation”)
(it being
understood
that publicly
taking
no position or a neutral
position
with
respect to
an Acquisition
Proposal
which has
been publically
disclosed
for more than
two (2) Business
Days after
first learning
of an Acquisition
Proposal
shall be deemed
to be a 
Change 
in  Recommendation),
or  Cortez
breaches Section
5.1(1)
in any
respect
or, the
Cortez
Board
or any
committee
of the
Cortez
Board resolves
or proposes
to take
any of the
foregoing
actions;
or

 

		(iii)	there has
occurred
a Material
Adverse
Effect
to Cortez.

 

Section
7.3Effect
of Termination/Survival

 

		(1)	If
this
Agreement
is terminated
pursuant
to Section
7.1 or
Section
7.2, this
Agreement
shall become
void
and of no
further
force or
effect
without
liability
of any Party
(or any shareholder,
director,
officer,
employee,
agent,
consultant
or representative
of such
Party)
to any other
Party
to this
Agreement,
except that:
(a) in the
event of termination
 under
Section
7.1, Section
4.9 (Insurance
and Indemnification)
shall survive
for a
period
of six
(6) years
following
such termination;
and (b)
in the
event of
termination
under Section
7.2, this
Section
7.3,
Section
8.2 (Termination
Fees) Section
8.3 (Expenses)
and Section
8.7 (Third
Party Beneficiaries)
shall survive,
and provided
further
that no Party
shall be relieved
of any liability
for any
wilful
breach by
it of
this Agreement.

 

		(2)	As
used in
this
Section
7.3,
“wilful
breach”
means a
breach that
is a
consequence
of an act
undertaken
by the
breaching
party with
the actual
knowledge
that
the
taking
of such act
would, or
would be
reasonably
expected
to, cause
a breach of
this Agreement.

 

 

ARTICLE
8 GENERAL
PROVISIONS

 

Section
8.1Amendments

 

This
Agreement
and the
Plan
of Arrangement
may,
at any time
and from time
to time
before or
after
the
holding
of the
Cortez
Meeting
but not
later
than
the
Effective
Time,
be amended
by mutual written
agreement of the
Parties,
without
further notice
to or authorization
on the part of the
Cortez
Shareholders,
and any such amendment
may,
without
limitation:

 

		(a)	change the
time
for performance
of any of
the obligations
or acts
of the Parties;

 

		(b)	modify
 any  representation
 or  warranty
 contained
 in 
this 
Agreement
 or  in
 any document
delivered
pursuant
to this
Agreement;

 

		(c)	modify
any of the
covenants
contained
in this
Agreement
and waive
or modify
performance of
any of the
obligations
of the Parties;
and/or

    	 

    	 

    

		(d)	modify any
mutual conditions
contained in
this Agreement.

 

provided
that such amendment
does not:
(i) invalidate
any required
approval of
the Arrangement by the
Cortez Shareholders and
Cortez Optionholders;
or (ii) after
the holding of
the Cortez Meeting, result
in an adverse
change in the
quantum or form
of consideration payable
to Cortez Shareholders and
Cortez Optionholders
pursuant to the
Arrangement.

 

Section 8.2Termination
Fees

 

		(1)	Despite any
other provision in
this Agreement
relating to
the payment
of fees and
expenses, including
the payment
of brokerage
fees, if a
Termination Fee
Event occurs,
Cortez shall pay Starcore
the Termination
Fee in accordance
with Section 8.2(3).

 

		(2)	For the
purposes of this
Agreement,
“Termination Fee”
means $250,000
and “Termination
Fee Event” means the
termination of this
Agreement:

 

		(a)	By Starcore, pursuant
to Section
7.2(1)(d)(ii);

 

		(b)	By Cortez, pursuant
to Section 7.2(1)(c)(ii);
or

 

		(c)	by Cortez or
Starcore pursuant to
Section 7.2(1)(b)(i)
or Section 7.2(1)(b)(iii)
if;

 

		(i)	prior to
such termination, 
an  Acquisition 
Proposal  is 
made  or  publicly
announced by
any Person
other than Starcore
or any of
its affiilates
or any Person 
(other than Starcore
or any of
its affiliates) shall
have publicly
announced an intention
to do so; and

 

		(ii)	within 180
days following
the date of
such termination, (i)
an Acquisition Proposal (whether
or not such
Acquisition Proposal
is the same
Acquisition Proposal referred
to in clause
(i) above) is
consummated, or (ii)
Cortez, directly or indirectly,
in one or
more transactions,
enters into a
contract in respect of
an Acquisition Proposal.

 

		(3)	The Termination
Fee shall be
paid by Cortez
to Starcore by
wire transfer or
immediately
available funds, if
a Termination
Fee Event
occurs due
to:

 

		(a)	a  termination
 of  this 
Agreement  pursuant 
to  Section 8.2(2)(a),
 within  three
 (3) Business Days
of the occurrence
of such Termination
Fee Event;

 

		(b)	a  termination
 of this 
Agreement  pursuant to 
Section 8.2(2)(b), prior
 to  or simultaneously
with the occurrence
of such Termination
Fee Event; and

 

		(c)	a termination
of this Agreement
pursuant to Section
8.2(2)(c), on
or prior to
the consummation of
the Acquisition Proposal
or the entering
into of
the Contract referred
to in Section
8.2(2)(c).

 

	 	(4)	If Cortez terminates this Agreement pursuant to Section 7.2(1)(c)(i), or if this Agreement is terminated by either party because the Arrangement does not complete by the Outside Date as a result of Starcore failing to satisfy the conditions to closing set out in Section 6.1(3) or Section 6.1(5) (with respect to the approval of the TSX only), then Starcore will subscribe for

    	 

    	 

    

Cortez
Shares
having
a value
of $250,000
pursuant
to a
private
placement
offering
at the minimum
subscription
price allowed
by TSXV
policies,
within
three
(3) Business
Days following
Cortez’s
receipt
of TSXV
approval
for such
private
placement.

 

		(5)	Cortez
acknowledges
that
the agreements
contained
in Section
8.2 are
an integral
part of
the transactions
contemplated
by this
Agreement,
and that
without
these
agreements
Starcore
would not
enter
into this
Agreement,
and that the
amounts set
out in this
Section
8.2 represent liquidated
damages
which are
a genuine
pre-estimate
of the
damages,
including
opportunity
costs, which
Starcore
will
suffer
or incur
as a result
of the event
giving
rise
to such
damages and resultant
termination
of this
Agreement,
and is not a penalty.
Cortez
irrevocably
waives
any right it
may have
to raise
as a defence
that any such
liquidated
damages
are excessive
or punitive.

 

Section
8.3Expenses

		(1)	All
out-of-pocket
third
party transaction
expenses
incurred
by a Party
in connection
with
this Agreement
and the
Plan
of Arrangement
shall
be paid
by the
Party
incurring
such expenses,
whether
or not the
Arrangement
is consummated.

 

		(2)	Cortez
confirms
that
no broker,
finder
or investment
banker is
or will
be entitled
to any brokerage,
finder’s
or other
fee or
commission
in connection
with
the transactions
contemplated
by this
Agreement.

 

Section
8.4Notices.

Any
notice,
or other
communication
given
regarding
the matters
contemplated
by this
Agreement
(must be
in writing,
sent by personal
delivery,
courier or
facsimile
(but not
by electronic
mail)
and addressed:

		(a)	to Starcore
International
Mines Ltd.
at: Suite
750 – 580 Hornby
Street

Vancouver,
British
Columbia
V6C 3B6

 

Attention:Chief
Executive
Officer
Facsimile:604.602.4936

with
a copy to:
McMillan
LLP

Suite
1500 – 1055 West
Georgia
Street,
Vancouver,
British
Columbia,
V6E 4N7

 

Attention:Cory
Kent Facsimile:604.685-7084

 

		(b)	to Cortez
Gold Corp.
at:

 

Suite
750 – 580 Hornby
Street
Vancouver,
British
Columbia
V6C 3B6

 

Attention:Lead
Director

    	 

    	 

    

Facsimile:604.602.4936
with a
copy to:

Owen
Bird Law
Corporation

Suite
2900 – 595 Burrard
Street
Vancouver,
British
Columbia,
V6E 4N7

 

Attention:Jeffrey
Lightfoot
Facsimile:604.632-4487

 

 

Any
notice or
other
communication
is deemed to
be given
and received
(i)
if sent
by personal
delivery
or same
day courier,
on the
date of
delivery
if it
is a
Business
Day and
the
delivery
was made
prior
to 4:00
p.m. (local
time
in place
of receipt)
and otherwise
on the
next Business
Day,
(ii) if
sent by overnight
courier,
on the
next Business
Day,
or (iii)
if sent
by facsimile,
on the
Business
Day following
the date
of confirmation
of transmission
by the originating
facsimile.
A Party may
change its
address for
service
from time
to time
by providing
a notice
in accordance
with
the foregoing.
Any subsequent
notice
or other
communication
must be sent
to the
Party
at its
changed
address. Any element
of a Party’s
address that
is not specifically
changed in
a notice
will
be assumed not to be changed.
Sending a copy
of a notice or other
communication
to a Party’s
legal counsel
as contemplated
above is
for information
purposes
only and
does not constitute
delivery
of the
notice
or other
communication
to that
Party.
The failure
to send a copy of a notice
or other communication
to legal
counsel
does not
invalidate
delivery
of that
notice
or other
communication
to a Party.

 

Section
8.5  Time
of the
Essence.

Time
is of
the essence
in this
Agreement.

 

Section
8.6  Injunctive
Relief.

The
Parties
agree that
irreparable
harm would
occur for
which
money damages
would
not be an adequate
remedy at
law
in the
event that
any of the
provisions
of this
Agreement
were not
performed in
accordance with
their
specific
terms or were
otherwise
breached.
It is accordingly
agreed that
the Parties
shall be entitled
to injunctive
and other equitable
relief
to prevent breaches
of this
Agreement,
and to
enforce compliance
with
the
terms
of this
Agreement,
this being
in addition
to any other
remedy to
which
the Parties
may be entitled
at law
or in equity.

 

Section
8.7  Third
Party
Beneficiaries.

		(1)	Except
as provided
in Section
4.10 which,
without
limiting
their
terms, are
intended
as stipulations
for the
benefit
of the
third
Persons
mentioned
in such
provisions
(such third
Persons
referred
to in
this
Section
8.7 as
the “Indemnified
Persons”)
and except
for the
rights
of the Cortez
Securityholders
to receive
the Consideration
following
the Effective
Time
pursuant to the
Arrangement
(for which
purpose Cortez
hereby confirms
that
it is acting
as agent on behalf
of the
Cortez
Shareholders),
Cortez and
Starcore
intend
that this
Agreement
will not benefit
or create
any right
or cause of
action
in favour of
any Person, other
than the Parties
and that no Person,
other
than the
Parties,
shall
be entitled
to rely
on the provisions
of this
Agreement
in any action,
suit, proceeding,
hearing
or other
forum.

 

		(2)	Despite
the
foregoing,
Starcore
acknowledges
to each
of the
Indemnified
Persons
their
direct
rights
against
it under
Section
4.10
of this
Agreement,
which
are intended
for the
benefit
of, and shall
be enforceable
by, each
Indemnified
Person,
his or
her heirs
and his or her
legal

    	 

    	 

    

representatives,
and for
such purpose,
Cortez
confirms
that it
is acting
as trustee
on their
behalf, and agrees to
enforce
such provisions
on their
behalf. The
Parties
reserve
their
right
to vary
or rescind
the rights
at any
time
and in
any way whatsoever,
if any,
granted
by or under
this
Agreement
to any
Person
who is
not a Party,
without
notice
to or
consent of
that
Person, including
any Indemnified
Person.

 

Section
8.8Waiver.

No
waiver
of any
of the
provisions
of this
Agreement
will
constitute
a waiver
of any
other provision
(whether
or not
similar).
No waiver
will
be binding
unless
executed
in writing
by the
Party
to be
bound by the
waiver.
A Party’s
failure
or delay
in exercising
any right under
this
Agreement
will not
operate
as a waiver
of that right.
A single
or partial
exercise
of any right
will not
preclude
a Party
from any
other or
further
exercise
of that
right
or the
exercise
of any
other
right.

 

Section
8.9Entire
Agreement.

This
Agreement,
together
with
the Confidentiality
Agreement,
constitutes
the entire
agreement
between
the Parties
with
respect
to the
transactions
contemplated
by this
Agreement
and supersedes
all
prior
agreements,
understandings,
negotiations
and discussions,
whether
oral
or written,
of the Parties.
There are
no representations,
warranties,
covenants,
conditions
or other
agreements,
express
or implied,
collateral,
statutory
or otherwise,
between
the Parties
in connection
with the
subject
matter of
this Agreement,
except as specifically
set forth in
this Agreement.
The Parties
have not
relied
and are
not relying
on any other
information,
discussion
or understanding
in entering
into
and completing
the transactions
contemplated
by this
Agreement.

 

Section
8.10Successors
and Assigns.

		(1)	This
Agreement
becomes
effective
only
when executed
by Cortez
and Starcore.
After
that time,
it will
be binding
upon and
enure to
the benefit
of Cortez,
Starcore
and their
respective
successors and
permitted
assigns.

 

		(2)	Neither
 this
 Agreement
 nor 
any  of  the
 rights
 or 
obligations
 under 
this 
Agreement
 are assignable
or transferable
by any
Party
without
the prior
written
consent
of the
other
Party.

 

Section
8.11Severability.

If
any provision
of this
Agreement
is determined
to be
illegal,
invalid
or unenforceable
by an arbitrator
or any
court of
competent
jurisdiction,
that provision
will
be severed
from this
Agreement
and the
remaining
provisions
shall remain
in full
force
and effect.
Upon such
determination
that any
term or
other
provision
is invalid,
illegal
or incapable
of being
enforced,
the Parties
shall
negotiate
in good faith
to modify
this Agreement
so as to effect
the original
intent
of the Parties
as closely
as possible
in an acceptable
manner to
the
end that
the
transactions
contemplated
hereby are
fulfilled
to the
fullest
extent
possible.

 

Section
8.12Governing
Law.

This
Agreement
will
be governed
by and interpreted
and enforced
in accordance
with
the laws
of the
Province
of British
Columbia
and the
federal
laws of
Canada applicable
therein.

 

Section
8.13Rules of
Construction.

The
Parties
to this
Agreement
waive
the application
of any Law
or rule
of construction
providing
that
ambiguities
in any
agreement
or other
document shall
be construed
against
the party
drafting
such agreement
or other
document.

    	 

    	 

    

Section 8.14No
Liability.

No
director or officer
of Starcore shall
have any personal
liability whatsoever
to Cortez under this
Agreement or
any other
document delivered in
connection with
the transactions contemplated
hereby on
behalf of
Starcore. No director
or officer
of Cortez or
any of
its Subsidiaries
shall have any personal
liability whatsoever
to Starcore under
this Agreement or
any other document
delivered in connection with
the transactions contemplated
hereby on behalf
of Cortez or any
of its Subsidiaries.

 

Section 8.15Language.

The
Parties expressly acknowledge
that they
have requested
that this Agreement
and all ancillary and
related documents thereto
be drafted
in the English
language only.
Les parties aux présentes
reconnaissent
avoir exigé que
la présente
entente et tous
les documents
qui y sont accessoires
soient rédigés en
anglais seulement.

 

Section 8.16Counterparts.

This
Agreement may
be executed in
any number
of counterparts (including
counterparts by
facsimile) and
all such counterparts
taken together shall
be deemed to
constitute one and
the same instrument. The
Parties shall be
entitled to
rely upon delivery
of an executed
facsimile or
similar
executed electronic copy
of this Agreement,
and such
facsimile
or similar
executed electronic
copy shall be legally effective to create a valid and binding agreement
between the Parties.

 

 

 

 

IN WITNESS
WHEREOF the Parties
have executed this
Arrangement Agreement.

 

CORTEZ
GOLD CORP.

 

 

 

By:sgd.
“Gary Arca” 

Authorized
Signing Officer

 

 

 

 

STARCORE
INTERNATIONAL
MINES
LTD.

 

 

 

By:sgd.
“Robert Eadie” 

Authorized
Signing Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{00312245;1}(
40 )

    	 

    	 

    

 

SCHEDULES
SCHEDULE
APLAN
OF ARRANGEMENT
SCHEDULE BARRANGEMENT
RESOLUTION

SCHEDULE
CREPRESENTATIONS
AND
WARRANTIES
OF CORTEZ
SCHEDULE
DREPRESENTATIONS
AND
WARRANTIES
OF STARCORE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{00312245;1}

    	 

    	 

    

SCHEDULE
A

 

PLAN
OF ARRANGEMENT

 

IN
THE MATTER
OF AN
ARRANGEMENT
among Cortez
Gold Corp.
(“Cortez”) and
the holders from time
to time
of the issued
and outstanding common
shares and
options in the
capital of
Cortez, pursuant to Part
9, Division
5 of the
Business Corporations
Act (British
Columbia), as
amended.

 

ARTICLE
1 INTERPRETATION

 

		1.1	In this
Plan of Arrangement,
any capitalized
term used herein
and not defined
in this
Section 1.1 will have
the meaning
ascribed thereto in
the Arrangement
Agreement. Unless
the context otherwise requires,
the following words
and phrases used
in this Plan of Arrangement
will have the meanings hereinafter set out:

 

“Arrangement”
means the
arrangement
under Part 9,
Division 5
of the
BCBCA as
described
herein, subject
to any
amendments
or supplements
thereto made in
accordance with the Arrangement
Agreement and the
provisions hereof
or made
at the direction
of the Court
in the Final Order.

 

“Arrangement
Agreement” means
the agreement
made as of
May 29, 2015
between Starcore and Cortez,
including all
schedules annexed thereto,
together with
the Cortez Disclosure
Letter and
the Starcore Disclosure
Letter, as each
may
be amended, supplemented
or otherwise
modified from time
to time
in accordance
with the terms
thereof.

 

“Arrangement
Resolution” means
the special
resolution of
the Cortez Shareholders
and Cortez Optionholders
approving the
Arrangement which is
to be considered
at the Cortez
Meeting and will be
substantially in
the form
of Schedule
B to the
Arrangement Agreement.

 

“BCBCA”
means the
Business Corporations
Act (British Columbia)
and the regulations
made thereunder, as now
in effect and
as they may
be promulgated
or amended
from time to
time.

 

“Business
Day” means
any day,
other than a
Saturday, a
Sunday or
a statutory or
civic holiday in Vancouver, British
Columbia.

 

“Closing
Certificate” means
a certificate in
the form
attached hereto
as Appendix
A which, when
signed by an
authorized representative of
each of the
Parties, will constitute acknowledgement
by the
Parties that this
Plan of Arrangement
has been implemented
to their respective satisfaction.

 

“Cortez”
means Cortez Gold
Corp., a
corporation existing
under the
laws of the
Province of British Columbia,
Canada.

 

“Cortez
Circular” has
the meaning ascribed
thereto in the
Arrangement Agreement.

 

“Cortez
Meeting” means
the special meeting
of Cortez
Shareholders and Cortez
Optionholders, including any adjournment
or postponement
thereof, to be
called and held
in accordance with
the Interim Order
to consider the
Arrangement Resolution
and for
any other
purpose as
may
be set
out in the
Cortez Circular.

 

“Cortez
Option Plan”
means the
Cortez stock option
plan as most
recently approved by
Cortez Shareholders on September
25, 2014,
pursuant to
which Cortez
Options are granted.

    	 

    	 

    

 

“Cortez
Optionholders” means
the holders of
Cortez Options

 

“Cortez
Options”
means outstanding
stock options to
purchase Cortez
Shares as listed
in Section 8(d) of
the Cortez
Disclosure Letter.

 

“Cortez
Shareholders” means
the registered or
beneficial holders of
the Cortez Shares,
as the context
requires, and
“Cortez
Shareholder” means
any one
of them.

 

“Cortez
Shares” means the
common
shares without par
value in
the authorized share
capital of Cortez.

 

“Cortez
Warrants”
means outstanding share
purchase warrants
to purchase Cortez
Shares as listed
in Section 8(c)
of the Cortez
Disclosure Letter.

 

“Court”
means the Supreme
Court of British
Columbia.

 

“Dissent
Procedures”
has the meaning
ascribed thereto in
Section 5.1.

 

“Dissent
Rights” means the rights
of dissent exercisable by the Cortez
Shareholders in respect of the Arrangement described
in Article 5
hereto.

 

“Dissenter”
means a registered
Cortez Shareholder who
has duly exercised
a Dissent Right
and who is ultimately
entitled to be
paid the fair
value of
the Cortez Shares
held by such
registered Cortez Shareholder.

 

“Dissenting
Shares” has the
meaning ascribed thereto
in Section 5.2.

 

“Effective
Date” means the
effective date of
the Arrangement,
being the third
Business Day after the date upon
which all conditions precedent (excluding conditions
that, by their terms,
cannot be satisfied until the
Effective Date) to
the completion
of the Arrangement
as set out
in Article 6
of the Arrangement Agreement
have been satisfied
or waived in
accordance with
the Arrangement
Agreement, or
such other date
as may
be agreed to
by Starcore and
Cortez, and Starcore
and Cortez will execute
the Closing Certificate confirming
the Effective Date.

 

“Effective
Time” means
the time
on the Effective
Date
specified as
the “Effective
Time”
on the Closing Certificate.

“Exchange
Agent” means
Computershare
Investor Services
Inc., Starcore’s
transfer agent. “Exchange
Agent Agreement”
means that agreement
between Cortez
and the Exchange
Agent

whereby 
(i)  the  Exchange 
Agent  will  mail
 out  a 
letter  of  transmittal
 to  registered 
Cortez

Shareholders
immediately
following the Effective
Date, and (ii)
the Exchange Agent
will receive Cortez
Shares and issue
replacement Starcore
Shares in connection
with the Arrangement.

 

“Exchange
Ratio” means three
(3) Starcore Shares
for each
one (1) Cortez
Share.

 

“Final
Order” means
the final order
of the Court,
after a hearing
upon the fairness
of the terms
and conditions
of the Arrangement,
approving the Arrangement,
in a form
acceptable to Cortez and
Starcore, each acting
reasonably, as
such order
may be amended
by the Court
(with the consent of
Cortez and Starcore,
each acting
reasonably)
at any time
prior to the
Effective Date
or,

    	 

    	 

    

 

if
appealed, then, unless
such appeal is
withdrawn or denied,
as affirmed
or as amended
on appeal.

 

“Interim
Order”
means the interim
order of the
Court made
pursuant to Section
291 of the BCBCA,
in a form
acceptable to Cortez
and Starcore,
each acting
reasonably, providing for, among
other things, the
calling and holding
of the
Cortez Meeting,
as the same
may
be amended, supplemented or
varied by the
Court, with the
consent of Starcore
and Cortez, each
acting reasonably.

 

“Option
Consideration” means,
in respect of
the Cortez Options,
a cash amount
equal to the amount
by which
$0.42 exceeds the
exercise price of
such Cortez Option;

 

“Plan
of Arrangement” means
this Plan
of Arrangement
and any amendments
or variations thereto made
in accordance with
this Plan of
Arrangement
or upon the
direction of the
Court in the Final
Order with the
consent of Cortez
and Starcore, each
acting reasonably.

 

“Registrar”
means the Registrar
of Companies
appointed pursuant to
Section 400 of
the BCBCA.

 

“Starcore”
means Starcore
International Mines Ltd.,
a corporation existing
under the laws
of the Province of
British Columbia,
Canada.

 

“Starcore
Shares” means the
common shares without
par value in
the authorized share
capital of Starcore.

 

“Subsidiary”
has the meaning
given such term
in the Arrangement
Agreement. “Tax
Act” means
the Income
Tax Act (Canada).

“Transmittal
Letter” means
the letter of
transmittal
to be sent
by the Exchange
Agent to registered Cortez
Shareholders for use
in connection with
the Arrangement.

 

		1.2	In this Plan
of Arrangement,
unless otherwise expressly
stated or the
context otherwise requires:

 

		(a)	the division
of this Plan
of Arrangement into
Articles and
Sections and the
further division thereof
into subsections
and the
insertion of
headings are for
convenience of reference only
and will not
affect the construction
or interpretation of
this Plan of Arrangement.
Unless otherwise
indicated, any reference
in this Plan of
Arrangement to an Article,
Section or subsection
refers to the
specified Article, Section
or subsection to this Plan of Arrangement;

 

		(b)	the terms
“hereof”, “herein”,
“hereunder” and similar
expressions refer to
this Plan of Arrangement
and not to
any particular
section or
other portion
hereof and include
any agreement or instrument
supplementary
or ancillary hereto
and, unless otherwise indicated,
a reference
herein to
a Section
is to the
appropriate Section of
this Plan of Arrangement;

 

		(c)	words importing
the singular
number only
will include
the plural
and vice versa,
words importing
the use
of any gender
will include
all genders
and words
importing persons will
include firms
and corporations and
vice versa;

    	 

    	 

    

 

		(d)	if any
date on which
any action is
required to
be taken
hereunder by
any of
the parties is not
a Business Day,
such action will
be required
to be taken
on the next
succeeding day which
is a Business
Day;

 

		(e)	the word “including”
means
“including, without limiting
the generality
of the
foregoing”;

 

		(f)	a reference
to a statute is
to that statute as now enacted or
as the statute may
from time to time
be amended,
re-enacted or replaced
and includes any regulation,
rule or policy made
thereunder; and

 

		(g)	all references
to cash or
currency in
this Plan
of Arrangement
are to
Canadian dollars unless otherwise
indicated.

 

ARTICLE
2 ARRANGEMENT
AGREEMENT

 

		2.1	This Plan
of Arrangement is
made pursuant to
and subject to
the provisions of
the Arrangement Agreement.

 

		2.2	This Plan
of Arrangement will
become
effective as at
the Effective
Time
and will be
binding without any further
authorization, act or
formality on the
part of the
Court, the Registrar,
the Cortez Shareholders or
the Cortez Optionholders,
from and
after the Effective
Time.

 

ARTICLE
3 ARRANGEMENT

 

		3.1	On the
Effective Date,
subject to the
provisions of Article
5 hereof,
the following will
occur and will be
deemed to occur
in the following
sequence without
any further authorization,
act or formality:

 

		(a)	each issued
Cortez Share outstanding
immediately
prior to the
Effective Time
held by a Cortez
Shareholder in respect
of which Dissent
Rights have
been validly exercised
will be deemed
to have been
transferred without any further
act or formality,
to Starcore,
free and clear of
any liens, claims
and encumbrances
in consideration for
a debt claim
against Starcore in an
amount and
payable
in accordance
with Article
5, and:

 

		(i)	such Cortez Shareholder will cease
to be the registered holder of such Dissenting Shares
and will cease
to have any
rights as
registered holders
of such Cortez Shares
other than the
right to be
paid fair value
for such
Dissenting Shares as
set out in
Section 5.2(a);

 

		(ii)	such Cortez
Shareholder’s name
will be removed
as the
registered holder of
such Dissenting Shares from
the registers
of Cortez
Shares maintained by
or on behalf
of Cortez; and

 

		(iii)	Starcore will
be deemed
to be the
transferee of
such Dissenting Shares,
free and clear
of any liens,
claims and
encumbrances;

 

		(b)	immediately
thereafter, each issued
and outstanding
Cortez Share (other
than any Cortez
Share in respect of
which a registered
Cortez Shareholder
has validly
exercised his, her
or its Dissent 
Right) will be
transferred to, and
acquired by Starcore,
without any act
or

    	 

    	 

    

 

formality
on the part
of the holder
of such Cortez
Share or Starcore,
free and clear
of all liens,
claims and
encumbrances,
in exchange
for such number
of Starcore Shares
as determined using
the Exchange
Ratio, provided
that the
aggregate number
of Starcore Shares payable
to any Cortez
Shareholder, if calculated
to include a
fraction of a
Starcore Share, will be
rounded down to
the nearest whole
Starcore Share, with no consideration being paid
for the fractional share, and the
name of each such Cortez Shareholder
will be removed from the register of holders
of Cortez Shares and added to the register of holders of Starcore
Shares, and Starcore
will be recorded
as the registered
holder of
such Cortez Shares so exchanged and will
be deemed to be the legal and beneficial owner thereof;

 

		(c)	each Cortez
Option outstanding immediately
prior to the
Effective Time (whether
vested or unvested and,
for greater certainty),
notwithstanding the
terms of
the Cortez Option Plan,
shall be
deemed to
be unconditionally
vested and exercisable,
and such Cortez Option
shall, without any
further action
by or
on behalf
of a Cortez
Optionholder, be deemed
to be assigned and transferred by such
holder to Cortez in exchange for a cash payment
equal to the Option
Consideration, less
applicable withholdings, and 
such Cortez Option shall immediately be cancelled; and

 

	 	(d)	each holder of Cortez Options shall cease to be a holder of such Cortez Options, such holder’s name shall be removed from each applicable register and the Cortez Option Plan, and all agreements relating to the Cortez Options shall be terminated and shall be of no further force and effect, and such Cortez Optionholder shall thereafter have only the right to receive the Option Consideration to which they are entitled pursuant to Section 3.1(c) at the time and in the manner specified in.

 

		3.2	From the
Effective Time,
where Cortez is
required to
issue Cortez Shares
to any
person or entity pursuant
to any
Cortez Warrant, any
convertible securities or
any other agreement
or arrangement (and such issuance of Cortez
Shares is not otherwise addressed
in this Plan of Arrangement)
such obligation will
be satisfied by
the delivery
to the
person or entity
entitled to receive
such Cortez Shares the
number
of Starcore Shares
determined
based on the
Exchange Ratio
that the person
or entity would
have been entitled
to receive if
the convertible
security had been exercised and Cortez
Shares had been issued immediately
before the Effective Time,
subject to any further adjustment
in the securities or other property issuable as
a result
of any corporate
action by Starcore as
a successor
company
to Cortez
pursuant to the anti-dilution provisions
set out in the certificates representing
the Cortez Warrants, and the
person or entity entitled to receive the Cortez Shares
will be bound
by the terms
of this Plan
of Arrangement and
will receive and
accept Starcore Shares or other securities or property
in lieu of Cortez Shares.

 

ARTICLE
4 CERTIFICATES
AND
PAYMENTS

 

		4.1	On the
Effective Date Starcore
will deposit the
Starcore Shares with
the Exchange Agent
to satisfy the consideration
issuable and/or payable
to the Cortez
Shareholders pursuant
to this Plan of
Arrangement (other than
registered Cortez Shareholders
validly exercising Dissent
Rights and who have
not withdrawn their
notice of objection).

 

		4.2	On the
Effective Date Starcore
will deposit cash
in the aggregate
amount equal
to the Option Consideration
per Cortez Option
with Cortez to
satisfy the
consideration payable
to the
Cortez Optionholders
pursuant to this
Plan of Arrangement.

    	 

    	 

    

 

		4.3	After
the Effective
Date, certificates
formerly
representing Cortez Shares
which are
held by a Cortez
Shareholder will, except
for Cortez Shares
held by Dissenters,
represent only the
right to receive the
consideration issuable and/or
payable
therefor pursuant
to Section 3.1
in accordance with the
terms of this
Plan of Arrangement.

 

		4.4	No dividends
or other distributions
declared or
made
after the Effective
Date
with respect to
the Starcore Shares with
a record date
after the Effective
Date will be
payable
or paid
to the holder
of any unsurrendered certificate
or certificates for
Cortez Shares
which, immediately
prior to the Effective
Date,
represented outstanding Cortez
Shares and will
not be
payable
or paid until
the surrender of certificates
for Cortez
Shares for exchange
for the consideration issuable
and/or payable
therefor pursuant to Section 3.1 in accordance with
the terms
of this Plan of Arrangement.

 

		4.5	As soon
as reasonably practicable
after the Effective
Date (subject to
Section 6.2), the
Exchange Agent  will
send a Transmittal
Letter to
each registered
Cortez Shareholder. Each
registered Cortez 
Shareholder that submits
a duly completed
Transmittal Letter to the Exchange
Agent, together with the certificate
(if any) representing the Cortez Shares
held by such Cortez Shareholder, will receive from
the Exchange Agent the certificates representing
the Starcore Shares to which such Cortez
Shareholder is entitled pursuant to Section
3.1(b), which shares will be registered
in such name or names and either (i) delivered
to the address or addresses as such Cortez Shareholder directed
in their Transmittal
Letter or (ii) made
available for pick up at the offices of
the Exchange Agent in accordance with the
instructions of the Cortez Shareholder in the Transmittal
Letter.

 

		4.6	As soon
as practicable following
the Effective
Date,
Cortez will deliver
to each holder
of Cortez Options, as
reflected on the register
maintained
by or on
behalf of Cortez
in respect of
the Cortez Option
Plan, a cheque
representing the cash
payment
which such holder
is entitled to
receive pursuant to Section
3.1(c), less any
amounts
required to be
withheld pursuant to
Section 6.2.

 

	 	4.7	Any certificate which immediately prior to the Effective Date represented outstanding Cortez Shares and which has not been surrendered, with all other instruments required by this Article 4, on or prior to the sixth anniversary of the Effective Date, will cease to represent any claim against or interest of any kind or nature in Cortez, Starcore or the Exchange Agent.

 

		4.8	In the
event any certificate,
which immediately
before the Effective
Time
represented
one or more
outstanding Cortez Shares
that was exchanged
pursuant to Section
3.1, is lost,
stolen or destroyed,
upon the
making
of an affidavit
of that
fact by the
Person claiming
such certificate
to be lost, stolen or destroyed,
the Exchange Agent will issue in exchange
for such lost, stolen or destroyed certificate,
the consideration to which such Person is entitled in respect of the Cortez
Shares represented by
such lost,
stolen, or destroyed
certificate pursuant to
Section 3.1 deliverable in accordance with such Person’s
Transmittal Letter. When authorizing such issuances or payment
in exchange for any lost, stolen or destroyed
certificate, the Person to whom consideration
is to be
issued and/or paid
will, as
a condition precedent
to the issuance and/or
payment thereof, give a bond satisfactory
to Starcore and its transfer agent in such sum as Starcore may
direct or otherwise indemnify Starcore in a manner
satisfactory to it, against any Claim that may
be made
against one or both
of them with
respect to
the certificate alleged
to have been lost, stolen or destroyed.

    	 

    	 

    

 

ARTICLE
5 RIGHTS OF
DISSENT

 

		5.1	Notwithstanding Section
3.1, holders of
Cortez Shares
may exercise rights
of dissent (the “Dissent
Rights”) in connection
with the
Arrangement pursuant
to the
Interim Order and
in the manner set
forth in
sections 242 to
247 of the
BCBCA (collectively,
the “Dissent
Procedures”).

 

		5.2	Cortez Shareholders
who duly and
validly exercise Dissent
Rights with
respect to
their Cortez Shares (“Dissenting
Shares”) and who:

 

		(a)	are ultimately
entitled to be
paid fair value
for their Dissenting
Shares will be
deemed to have
transferred their Dissenting
Shares to Starcore
and shall be
paid an
amount equal
to such fair value;
or

 

		(b)	for any
reason are ultimately
not entitled to
be paid fair value
for their
Dissenting Shares, will
be  deemed to
have participated in
the Arrangement on
the same basis
as a non-
dissenting  Cortez Shareholder
and will receive
Starcore Shares
on the same
basis as every other non-dissenting
Cortez Shareholder;

 

but in
no case will
Cortez be required
to recognize such
persons as holding
Cortez Shares
on or after the
Effective Date.

 

		5.3	If a
Cortez Shareholder exercises
the Dissent Right, Starcore
will, on the
Effective Date, set
aside a number
of Starcore Shares
which is attributable
under the Arrangement
to the Cortez
Shares for which Dissent
Rights have been
exercised. If the
dissenting Cortez Shareholder
is ultimately not entitled to
be paid fair value for their
Dissenting Shares, they
will be deemed to
have participated in the Arrangement
on the same
basis as the
non-dissenting Cortez
Shareholders and Starcore
will distribute to such
Cortez Shareholder the
Starcore Shares
that the Cortez
Shareholder is entitled
to receive pursuant to
the terms of
the Arrangement.
If a Cortez
Shareholder duly complies
with the Dissent
Procedures and is
ultimately entitled
to be paid
fair value for
their Dissenting Shares, Starcore
will pay the
amount
to be paid
in respect of
the Dissenting Shares.

 

ARTICLE
6

EFFECT
OF THE ARRANGEMENT

 

		6.1	As at and
from the Effective
Time:

 

		(a)	Cortez will be
a wholly-owned
Subsidiary of
Starcore;

 

		(b)	the rights
of creditors against
the property
and interests of
Cortez will be
unimpaired by the
Arrangement;

 

		(c)	Cortez Shareholders,
other than Dissenters,
will hold Starcore
Shares in replacement
for their Cortez Shares,
as provided by
the Plan of
Arrangement; and

 

		(d)	holders of
Cortez Warrants, upon
exercise thereof, will
have the right
to receive Starcore Shares
in accordance with
Section 3.2.

 

		6.2	Starcore, Cortez
and the Exchange
Agent will
be entitled to
deduct and withhold
from any consideration payable
to any Cortez Shareholder,
Cortez Optionholder and
to any Dissenter, such amounts
as Starcore, Cortez
or the Exchange
Agent is
required or permitted
to deduct and

    	 

    	 

    

 

withhold
with respect
to such payment
under the Tax
Act, the United
States Internal Revenue
Code of 1986
or any provision
of provincial, state,
local or foreign
tax laws, in
each case, as amended.
To the extent
that amounts
are so withheld,
such withheld
amounts will
be treated for all
purposes hereof as
having been
paid to the
holder of the
shares or options
in respect of
which such deduction
and withholding
was made, provided
that such withheld amounts are
actually remitted to the appropriate taxing authority.
Each of Cortez, Starcore and the Exchange
Agent is hereby authorized to sell or otherwise dispose of such portion of Starcore Shares payable
as consideration as is necessary to provide
sufficient funds to Starcore, Cortez or
the Exchange Agent, as the case
may be, to enable it
to implement
such deduction or withholding, and
Starcore, Cortez or the Exchange Agent will notify the holder thereof
and remit to the holder any unapplied balance of the net proceeds of such sale.

 

ARTICLE
7 AMENDMENTS

 

		7.1	Starcore and
Cortez reserve
the right to
amend, modify
and/or supplement
this Plan of Arrangement
from time
to time
at any time
prior to the
Effective Date, provided
that any such amendment,
modification or
supplement must
be contained in
a written document
that is approved by
each of Starcore
and Cortez and
is filed
with the Court.
Subject to Section
7.3, if such amendment,
modification or
supplement
is made following
the Cortez Meeting,
it will be approved
by the
Court and, if
required by
the Court, communicated
to the Cortez
Shareholders and Cortez Optionholders, and will become part of the Arrangement upon completion of all the conditions required
in the Court approval.

 

		7.2	Save and
except as may
be otherwise
provided in
the Interim
Order, any amendment,
modification or
supplement to this
Plan of Arrangement
may
be proposed by
Starcore or
Cortez (provided that
the other will have consented
thereto) at any time
prior to the Cortez Meeting
with or without any
other prior
notice or communication
to Cortez Shareholders
and Cortez Optionholders,
and if so
proposed and
accepted by Cortez
Shareholders and Cortez
Optionholders voting at the
Cortez Meeting,
will become part of
this Plan of
Arrangement for all purposes.

 

		7.3	Any amendment,
modification or
supplement to
this Plan of
Arrangement may be
made
by Starcore and
Cortez without approval
of the Cortez
Shareholders and Cortez
Optionholders provided that
it concerns a
matter which, in
the reasonable
opinion of Starcore
and Cortez is
of an administrative
nature required to
better give
effect to
the implementation
of this Plan
of Arrangement and is not
materially adverse to the
financial or
economic interests of any of
the Cortez Shareholders or Cortez Optionholders.

 

ARTICLE
8 FURTHER
ASSURANCES

 

		8.1	Notwithstanding that
the transactions and
events set out
herein will occur
and be deemed
to occur in the
order set
out in this
Plan of Arrangement
without any further
act or formality,
each of the
parties to the
Arrangement Agreement will
make,
do and execute,
or cause to
be made, done
and executed, all such
further acts,
deeds, agreements,
transfers, assurances, instruments
or documents as
may reasonably
be required by
any of them in
order further to document
or evidence any of the transactions or events set out therein.

    	 

    	 

    

Appendix
“A“ to the Plan of Arrangement – Closing Certificate

 

		Re:	Arrangement Agreement
dated May 29,
2015 between Starcore
International
Mines Ltd. and Cortez
Gold Corp. (the
“Arrangement
Agreement”)

 

 

 

Defined
terms
used but not
defined in this
certificate shall
have the meaning
ascribed thereto in the
Arrangement Agreement.

 

Each
of the undersigned
hereby confirms
that the undersigned
is satisfied that
the conditions precedent to
its respective obligations
to complete
the Arrangement
Agreement have
been satisfied and that
the Arrangement is
completed as
of(am/pm
Vancouver local time)
(the “Effective Time”)
on, 2015
(the “Effective
Date”).

 

 

 

 

STARCORE
INTERNATIONAL
MINES
LTD.

 

 

 

 

Name:
Title:

 

 

CORTEZ
GOLD CORP.

 

 

 

 

Name:
Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{00312972;1}A
- 1

    	 

    	 

    

SCHEDULE
B

 

THE ARRANGEMENT RESOLUTION

 

BE
IT RESOLVED THAT:

 

		1.	The arrangement
(the “Arrangement”)
under section
288 of
the Business
Corporations
Act (British
Columbia)
(the “BCBCA”)
involving
Cortez Gold
Corp. (“CUT”)
and Starcore
International
Mines
Ltd. (“Starcore”),
all as
more particularly
described
and set
forth
in the
Management
Information
Circular
(the “Circular”)
of CUT
dated June
4, 2015
accompanying the
notice of this
meeting (as
the Arrangement
may
be modified,
supplemented
or amended),
is hereby authorized,
approved
and adopted.

 

		2.	The plan
of arrangement,
as it
may
be or has
been amended
(the “Plan
of Arrangement”),
involving
CUT and
Starcore,
and implementing
the Arrangement,
the full
text of
which
is set
out in
Schedule
B to
the Circular
(as the
Plan of Arrangement
may
be, or may
have been,
modified,
supplemented
or amended),
is hereby
approved and
adopted.

 

		3.	The
arrangement
agreement
(the “Arrangement
Agreement”)
between
CUT and
Starcore,
dated May
29, 2015,
the actions
of the
directors
of CUT
in approving
the Arrangement,
and the
actions of the
officers of CUT
in executing
and delivering
the Arrangement
Agreement
and any amendments
thereto,
are hereby
ratified
and approved.

 

		4.	CUT
is authorized
to apply
for a
final order
from the
Supreme
Court of
British Columbia
to approve
the Arrangement
on the terms
set forth
in the
Arrangement
Agreement
and the
Plan of
Arrangement
(as they
may
be, or may
have been, amended,
modified
or supplemented
and as
described in
the Circular).

 

		5.	Notwithstanding
that this
resolution
has been
passed (and
the Arrangement
adopted)
by the
shareholders
and optionholders
of CUT
or that
the Arrangement
has been
approved
by the
Supreme
Court
of British
Columbia,
the directors
of CUT
are hereby
authorized
and
empowered,
without
further
notice
to, or
approval
of, the
shareholders
and optionholders
of CUT:

 

		(a)	to
amend
the Arrangement
Agreement
or the
Plan of
Arrangement
to the
extent permitted
by the
Arrangement
Agreement
or the Plan
of Arrangement;
or

 

		(b)	subject to
the terms
of the Arrangement
Agreement,
not to proceed
with the
Arrangement.

 

		6.	Any director
or officer
of CUT
is hereby
authorized
and directed
for and
on behalf
of CUT
to execute,
whether
under corporate
seal of CUT
or otherwise,
and to
deliver
such
documents
as are
necessary
or desirable
to give
effect
to the
Arrangement.

 

		7.	Any director
or officer
of CUT
is hereby
authorized,
for and
on behalf
and
in the
name of
CUT, to
execute
and deliver,
whether under
corporate
seal of CUT
or otherwise,
all such
agreements,
forms,
waivers, notices,
certificates, confirmations
and other
documents
and instruments
and to
do or
cause to
be done
all such
other
acts and
things
as in
the opinion
of such
director
or officer
may
be necessary,
desirable
or useful
for the
purpose
of giving
effect
to the
foregoing
resolutions, the
Arrangement Agreement
and the completion
of the Plan
of Arrangement
in accordance
with the terms
of the Arrangement
Agreement, including:

 

		(a)	all
actions required
to be
taken by
or on behalf
of CUT,
and all
necessary filings
and obtaining
the necessary
approvals, consents and acceptances
of appropriate
regulatory
authorities; and

 

		(b)	the
signing
of the
certificates,
consents
and other
documents
or declarations
required
under
the Arrangement
Agreement
or otherwise
to be
entered into
by CUT,

 

such
 determination
 to 
be  conclusively
 evidenced
 by  the
 execution
 and 
delivery  of 
such  document,
 agreement
 or instrument
or the doing
of any
such act
or thing.

    	 

    	 

    

 

SCHEDULE
C

 

REPRESENTATIONS
AND WARRANTIES
OF CORTEZ
GOLD

 

Except
as set forth
in the correspondingly
numbered
paragraph of the Cortez
Disclosure Letter, or as
disclosed in the
Cortez Filings filed
before the
date of this
Agreement, Cortez hereby represents
and warrants to
Starcore as follows,
and acknowledges and
agrees that Starcore
is relying upon
such representations and
warranties in
connection with
the entering
into of this
Agreement:

 

(1)                
Organization and
Qualification. Cortez and
each of
its Subsidiaries are
corporations duly incorporated
and validly existing
under all
applicable Laws of
their respective jurisdiction of
incorporation, continuance
or creation and
each has
full corporate power and
authority to
own its
assets and
conduct its business
as now owned
and conducted. Cortez and
each of its
Subsidiaries are
duly qualified to
carry on business
and are
in good standing in each jurisdiction
in which the character of their
properties or the nature of their activities
makes such qualification necessary,
except where the failure to be so
qualified will not,
individually or
in the aggregate,
have a
Material Adverse Effect. True and
complete copies of the constating documents of Cortez and each of its Subsidiaries
have been delivered or made available to
Starcore, and neither Cortez nor its Subsidiaries have taken
any action to amend or supersede such documents.

 

(2)                
Authority Relative
to this Agreement.
Cortez has the
requisite corporate power
and authority to enter
into this Agreement
and to perform
its obligations hereunder.
The execution and
delivery of this
Agreement by
Cortez and the
consummation by Cortez
of the transactions
contemplated by this
Agreement have
been duly authorized
by the Cortez Board
and no other
corporate proceedings on
the part of
Cortez or its Subsidiaries
are necessary to
authorize this Agreement
except for the
authorization of Cortez Securityholders of the Arrangement
Resolution. This Agreement
has been duly executed and delivered
by Cortez and
constitutes a valid
and binding obligation
of Cortez, enforceable by Starcore against Cortez in
accordance with its terms, except as the
enforcement thereof may be
limited by bankruptcy,
insolvency and other
applicable Laws affecting the enforcement
of creditors’
rights generally and subject
to the qualification that equitable remedies may be granted
only in the discretion of a court of competent jurisdiction.

 

(3)                
No Conflict;
Required Filings
and Consent.
The execution and
delivery by Cortez
of this Agreement and the performance by
it of its obligations hereunder
and the completion of
the Arrangement will
not violate, conflict
with or result
in a breach
of any provision
of the constating
documents of Cortez or those of
its Subsidiaries, and except
as would not, individually
or in the
aggregate, have
or reasonably
be expected
to have a
Material Adverse Effect, will
not: (a) violate, 
conflict  with  or 
result  in  a 
breach  of:  (i) 
any agreement,contract, indenture, deed of trust, mortgage, bond, instrument,
Authorization, license or permit to which Cortez or its Subsidiaries
is a party or by which Cortez or
its Subsidiaries is
bound; or (ii)
to the knowledge
of Cortez,
any Law
to which Cortez or its Subsidiaries is subject or by which Cortez or its Subsidiaries
is bound; (b) give
rise to any right of termination,
or the acceleration of any indebtedness,

    	 

    	 

    

 

 

under
any such agreement,
contract, indenture, Authorization,
deed of trust,
mortgage, bond, instrument, license
or permit; or
(c) give rise
to any rights
of first refusal
or rights of
first offer, trigger
any change in
control or
influence provisions or
any restriction
or limitation under any
such agreement, contract,
indenture, Authorization, deed
of trust, mortgage, bond,
instrument, license or
permit, or
result in the
imposition of any Encumbrance,
charge or lien
upon any of
Cortez‘s assets
(including mineral
properties) or the
assets (including
mineral properties) of any
of its Subsidiaries.
Other than the approval of
Cortez’s shareholders, the TSXV, the Interim Order, the Final Order, and the filing
of any Arrangement
Filings, no authorization, consent
or approval
of, or filing
with, any Governmental Entity or any
court or other authority is necessary on the part
of Cortez for the consummation by Cortez of its
obligations in connection with the Arrangement under this Agreement or for the completion
of the Arrangement not to cause
or result in
any loss
of any rights or assets
or any interest
therein
held by
Cortez or its Subsidiaries
in any material assets or properties, except for such Authorizations, consents,
approvals and filings as
to which
the failure to
obtain or
make would
not, individually or in the aggregate, prevent or materially delay consummation
of the Arrangement.

 

(4)                
Subsidiaries.
Cortez does not
have Subsidiaries or
any material interests
in any Person,
other than as disclosed
in the Cortez
Filings or
the Cortez Disclosure
Letter.

 

(5)                
Compliance with
Laws.

 

(a)                
To the
knowledge of Cortez,
the operations
of Cortez and
its Subsidiaries have
been and are
now conducted
in compliance with
all Laws of
each jurisdiction, the
Laws of which have
been and are
now applicable to the
operations of Cortez
or of any
of its Subsidiaries;
and none
of Cortez
or any of
its Subsidiaries
has received any notice of
any alleged violation of any such Laws, other than
non- compliance or violations which, individually
or in the aggregate, would not have
a Material Adverse
Effect.

 

(b)                
Neither of
Cortez nor its
Subsidiaries
is in conflict
with, or in
default (including
cross defaults) under
or in violation
of: (a) its
notice of articles
or articles or equivalent
organizational documents; or (b) any agreement
or understanding
to which it or
by which any
of its properties
or assets in
which it has
a controlling interest or
an option to
acquire a controlling
interest is
bound or affected,
except for failures which,
individually or in
the aggregate,
would not have
a Material Adverse Effect.

 

(6)                
Company Authorizations.
Cortez and its
Subsidiaries have
obtained all authorizations necessary
 for 
the  ownership,  operation, 
development,  maintenance, 
or  use  of 
the material assets of
Cortez or its
Subsidiaries or
otherwise in connection
with the material
business or operations
of Cortez or
its Subsidiaries
and such authorizations
are in full
force  and effect.
Cortez and its  Subsidiaries
 have  fully 
complied  with and are  in compliance
with all authorizations, except,
in each case,
for such non-compliance which,
individually
or in the aggregate, would
not have a Material
Adverse Effect. There
is no action, investigation or
proceeding pending or, to the knowledge of Cortez, threatened
regarding any of the authorizations. None of Cortez nor any of its Subsidiaries
has

    	 

    	 

    

 

 

received
any notice,
whether written or
oral, of revocation
or non-renewal of
any such authorizations, or
of any
intention of any
Person to
revoke or
refuse to renew
any of such authorizations,
except in each
case, for
revocations or non-renewals
which, individually
or in the
aggregate, would not
have a
Material Adverse Effect
and, to the knowledge
of Cortez, all
such authorizations
continue to
be effective in
order for Cortez
and its Subsidiaries
to continue to
conduct their
respective businesses
as they
are currently being conducted.

 

(7)                
Regulatory Filings.
The Cortez Filings
have complied in
all material respects
with all requirements of
applicable Law. None
of the Cortez
Filings, at the
time filed
or as subsequently
amended, contained
any untrue
statement
or a material
fact or omitted
to state a 
material
fact required to be stated therein
or necessary in
order to make the statements made therein,
in light of the
circumstances under
which they
were made,
not misleading.

 

(8)                
Capitalization and
Listing.

 

(a)                
The authorized
share capital of
Cortez consists
only of an
unlimited number of Cortez
Shares. As at
the date
of this
Agreement there are:
(A) 9,555,850
Cortez Shares validly issued
and outstanding as
fully-paid and non-assessable
Cortez Shares; (B) 911,000
outstanding Cortez
Options providing
for the issuance
of 911,000 Cortez
Shares upon the
exercise
thereof (comprising 1,000
Cortez Options exercisable at $2.00 per share
until August 20, 2017, and 910,000
Cortez Options exercisable at $0.28 per
share until January 14, 2019); and (C)
outstanding Cortez Warrants providing for the
issuance of 2,965,250 Cortez Shares upon the exercise thereof. There are no other
warrants, conversion privileges, calls or other
rights, shareholder rights plans, agreements,
arrangements, commitments, or obligations
of Cortez or any of
its Subsidiaries to issue or sell any Cortez Shares or
of any of its Subsidiaries or securities or obligations of any kind convertible into,
exchangeable for or otherwise
carrying the right or obligation to acquire any Cortez Shares or any of its Subsidiaries,
and there are
no outstanding stock
appreciation rights, phantom equity
or similar rights, agreements, arrangements or commitments of Cortez or any
of its Subsidiaries, and no Person is entitled
to any pre-emptive or other similar right granted by Cortez or any of its Subsidiaries.

 

(b)                
Schedule 8(c) to the Cortez
Disclosure Letter sets forth, as of the
date hereof, the holders of all
outstanding Cortez
Warrants and
the number, exercise
prices and expiration dates
of each grant
to such holders.
All Cortez Shares
that may be issued
pursuant to
the exercise of outstanding
Cortez Warrants will,
when issued in accordance
with the terms
of the Cortez
Warrants, as the
case may be, be
duly authorized,
validly issued, fully-paid
and non-assessable
and are not and
will not be
subject to or
issued in violation
of, any pre-emptive
rights.

 

(c)                
Schedule 8(b)
to the Cortez Disclosure
Letter sets forth,
as of the
date hereof,
the holders of all
outstanding Cortez Options
and the
number, exercise
prices and expiration dates
of each
grant to such
holders.

    	 

    	 

    

 

 

(d)               
There are
no outstanding contractual
obligations of
Cortez or
any of its Subsidiaries
to repurchase, redeem
or otherwise acquire
any Cortez Shares
or any shares of
its Subsidiaries. No
Subsidiaries of
Cortez own any
Cortez Shares.

 

(e)                
No order
ceasing or
suspending trading in
securities of Cortez
nor prohibiting the
sale of such
securities has been
issued and
is outstanding
against Cortez
or its directors, officers
or promoters.

 

(9)                
Shareholder and
Similar Agreements.
Cortez is not
party to
any shareholder,
pooling, voting  trust
or other similar
agreement relating
to the issued
and outstanding Cortez
Shares or the
shares of any
of its Subsidiaries.

 

(10)            
U.S. Securities
Law Matters.

 

(a)                
There is
no class of
securities of Cortez
which is registered
pursuant to Section

12
of the Exchange
Act, nor is
Cortez subject to
any reporting obligation (whether
active or suspended)
pursuant to Section
15(d) of the
Exchange
Act. Cortez is not,
and has never
been, subject to
any requirement
to register any class
of its equity
securities pursuant to
Section 12(g)
of the Exchange
Act.

 

(b)                
Cortez is
not an investment
company registered
or required to
be registered under
the U. S.
Investment Company
Act of 1940,
as amended.

 

(c)                
The Cortez
Shares have not
been traded on
any national
securities exchange
in the United States
during the past
12 calendar
months, and will
not be so
traded prior to
the Effective Date.

 

(11)            
Reports. Cortez
has filed with
all applicable
Governmental Entities true
and complete copies of
the Cortez Filings
that Cortez is
required
to file therewith.
The Cortez Filings
at the time
filed: (a) did
not contain any
untrue statement
of a material
fact or omit
to state a
material fact required
to be
stated therein
or necessary
to make the
statements
therein, in the
light of the
circumstances under which they were made, not misleading,
and (b) complied in all material respects
with the requirements of applicable Securities
Laws. Cortez has not filed any confidential material change report with any Governmental
Entity which at
the date
hereof remains confidential.

 

(12)            
Financial Statements.

 

(a)                
The audited
consolidated financial statements
of Cortez as
at and for
each of
the fiscal years
ended on February
28, 2013 and
February 28,
2012 including the notes
thereto and
the reports by
Cortez’s auditors thereon,
and the interim consolidated financial
statements for
Cortez for the period ended
November 30, 2014 including
the notes thereto
have been, and all financial
statements of Cortez which
are publicly disseminated
by Cortez
in respect
of any subsequent
periods prior
to the Effective
Date will be,
prepared in
accordance with IFRS applied
on a basis consistent with prior
periods and present fairly,
in all material respects,
the assets, liabilities
(whether accrued,
absolute, contingent
or otherwise), consolidated financial position and results of operations of Cortez

    	 

    	 

    

 

 

and
its Subsidiaries as
of the respective
dates thereof
and its
results of operations
and cash flows
for the respective
periods covered
thereby (except
as may be indicated
expressly in the notes thereto).
There are no outstanding
loans made by Cortez
or any of
its Subsidiaries
to any executive
officer or director
of Cortez.

 

(b)                
Since February
28, 2014,
neither Cortez
nor its Subsidiaries
nor, to Cortez’s knowledge,any
director, officer,
employee, auditor, accountant
or representative of
Cortez
or its Subsidiaries
has received or
otherwise had
or obtained knowledge of
any complaint, allegation,
assertion, or
claim, whether written or
oral, regarding the
accounting or auditing
practices, procedures, methodologies
or methods of Cortez or its Subsidiaries or their respective internal
accounting controls, including
any complaint, allegation,
assertion, or claim that Cortez
or its Subsidiaries has engaged in questionable accounting or auditing practices, which has not been resolved to the satisfaction
of the audit committee of the Cortez Board.

 

(13)            
Undisclosed  Liabilities.
 Neither  Cortez 
nor  its 
Subsidiaries  has  any 
liabilities  or obligations of
any nature, whether
or not accrued,
contingent or otherwise,
except for:

(a)   
liabilities and
obligations that are
specifically presented
on the audited
consolidated statements of
financial position of
Cortez as of
February 28,
2014 (the
“Cortez Statement
of Financial Position”) or
disclosed in the
notes thereto; or (b)
liabilities and obligations incurred
in the Ordinary
Course, that are
not and
would not, individually
or in the aggregate
with all
other liabilities and
obligations of
Cortez and its
Subsidiaries (other than those
disclosed on
the Cortez Statement
of Financial
Position and/or in
the notes
to the Cortez financial statements),
reasonably be expected
to have a Material Adverse Effect, or have
a Material Adverse Effect, or, as a consequence of the consummation of
the Arrangement, have a Material Adverse Effect. Without limiting the foregoing, the
Cortez Statement of Financial Position reflects
reasonable reserves in accordance with
IFRS for contingent liabilities relating to pending litigation and other contingent obligations of Cortez and its Subsidiaries.

 

(14)            
Interest in
Assets.

 

(a)                
All of
Cortez’s and its
Subsidiaries’ real property
interests, buildings,
machinery, equipment, fixtures
and other related
assets as used
in Cortez’s or its
Subsidiaries’ business
(collectively the
“Assets”), are
set out
in Schedule 14(a) of
the Cortez Disclosure
Letter. Other
than such Assets,
neither Cortez
nor its Subsidiaries,
owns or has any interest in any material
real property or other material assets.

 

(b)                
Cortez or
its Subsidiaries is
the legal and
beneficial owner or
has rights to acquire
pursuant to legally
binding and enforceable contracts,
as applicable, the Assets, free
and clear of
any Encumbrances.

 

(c)                
The Assets
are in good
standing under
applicable Law and
all Taxes,
rentals, fees,  expenditures
and other payments
in respect thereof
have been paid
or incurred
and all filings in
respect thereof have
been made.

    	 

    	 

    

 

 

(d)               
There is
no material adverse
claim against
or challenge to
the title
to or ownership of
any of the
Assets.

 

(e)                
Cortez or
a Subsidiary
has the exclusive
right to deal
with the Assets.

 

(f)                 
There are
no material restrictions
on the ability
of Cortez and
its Subsidiaries to use,
transfer or exploit
the Assets, except
pursuant to the
applicable Law.

 

(g)                
Cortez or
a Subsidiary has
all necessary
permits, licences and
authorizations necessary to use
the Assets
in carrying
out the
business now carried
out and planned to
be carried
out by the
Subsidiaries.

 

(h)               
Neither Cortez
nor any of
its Subsidiaries
has received any
notice, whether written or
oral, from any
Governmental Entity
of any revocation
or intention to revoke
any permits, licences
or authorizations
pertaining to the
Assets or
the business carried on
by the Subsidiaries.

 

(15)            
No Option
on Assets. No
Person has any
agreement or
option or any
right or privilege
capable of becoming
an agreement or
option for the
purchase from Cortez
or any of
its Subsidiaries of any
of the
material Assets.

 

(16)            
Operational Matters.
Except as would
not,  individually  or 
in  the 
aggregate,  be reasonably expected
to result in
a Material Adverse
Effect:

 

(a)                
all rentals,
production payments,
net profits, interest
burdens, payments
and obligations due
and payable, or
performable, as
the case
may be,
on or prior
to the date hereof
under, with respect
to, or on
account of, any
direct or indirect assets
of Cortez and
its Subsidiaries,
have been:
(A) duly paid;
(B) duly performed; or
(C) provided for
prior to
the date hereof;
and

 

(b)                
all costs,
expenses, and liabilities
payable on
or prior to
the date hereof
under the terms
of any contracts
and agreements
to which Cortez
or any of
its Subsidiaries is
directly or
indirectly bound have
been properly and
timely paid, except for
such expenses that
are being currently
paid prior
to delinquency
in the Ordinary Course.

 

(17)            
Employment Matters.

 

(a)                
Neither Cortez
nor any of
its Subsidiaries has
entered into any
written or oral agreement
or understanding providing
for severance or
termination payments to
any director, officer
or employee in
connection with the
termination of
their position or their
employment as
a direct
result of a
change in
control of Cortez (including
as a result
of the Arrangement).

 

(b)                
Neither Cortez
nor its Subsidiaries
(i) is a
party to
any collective
bargaining agreement, or (ii)
is subject to
any application for
certification or, to
the knowledge of Cortez,
threatened or
apparent union-organizing campaigns
for employees not
covered under a
collective bargaining agreement.

    	 

    	 

    

 

 

(c)                
Neither
Cortez nor
its Subsidiaries
is subject
to any claim
for wrongful dismissal, constructive
dismissal or any
other tort claim,
actual or, to
the knowledge of Cortez,
threatened, or
any litigation actual,
or to
the knowledge
of Cortez, threatened,
relating to employment
or termination of
employment of employees or
independent contractors. No
labour strike, lock-out,
slowdown or work stoppage is pending
or threatened against or directly affecting Cortez.

 

(18)            
Absence of
Certain Changes
or Events.
Since February 28,
2014, other than
as disclosed in Cortez
Filings:

 

		(a)	Cortez
and its Subsidiaries
have conducted their
respective businesses only
in the Ordinary Course
and consistent with
past practice;

 

(b)                
no liability
or obligation of
any nature
(whether absolute, accrued,
contingent or otherwise) which
has had or
is reasonably likely
to have a
Material Adverse Effect has
been incurred;

 

(c)                
there has
not been any
event, circumstance
or occurrence which
has had
or is reasonably likely
to give rise
to a Material
Adverse Effect;

 

(d)               
there has
not been
any change in
the accounting practices
used by Cortez
and its Subsidiaries,
except as disclosed
in the Cortez
Filings;

 

(e)                
there has
not been any
increase in the
salary, bonus, or
other remuneration payable to
any employees or
officers of any
of Cortez or
its Subsidiaries;

 

(f)                 
there has
not been
any redemption, repurchase
or other acquisition
of Cortez Shares by
Cortez, or any
declaration, setting aside
or payment of
any dividend
or other distribution
(whether in cash,
shares or
property)
with respect to
the Cortez Shares;

 

(g)                
there has
not been
any entering
into, or an
amendment
of, any Material Contract;

 

(h)               
there has
not been any
satisfaction or settlement
of any material
claims or material liabilities
that were not
reflected in
Cortez’s audited financial
statements, other than
the settlement of
claims or
liabilities incurred
in the
Ordinary Course consistent
with past
practice; and

 

(i)                 
except
for ordinary course
adjustments, there
has not been
any increase in
the salary, bonus, or
other remuneration
payable to
any officers or
senior or executive officers
of Cortez
or its Subsidiaries.

 

(19)            
Litigation. There
is no claim,
action, proceeding or
investigation pending
or, to the knowledge
of Cortez, threatened
against or relating
to Cortez or
its Subsidiaries,
the business of Cortez
or any of
its Subsidiaries
or affecting
any of their
Assets before or
by any  Governmental
Entity which,
if adversely
determined, would have,
or reasonably
could be expected to have, a Material Adverse Effect or prevent
or materially delay the

    	 

    	 

    

 

 

consummation
of the Arrangement,
nor to the
knowledge of Cortez are
there any events or circumstances
which could
reasonably be expected
to give
rise to
any such
claim,
action, proceeding or
investigation (provided
that this representation
shall not apply
to claims, actions, proceedings,
or investigations which
may arise after
the date of
this Agreement which do
not have a
reasonable prospect
of succeeding
or,
if successful,
would not give
rise to, nor reasonably
be expected
to give rise
to, a Material
Adverse Effect). Neither Cortez nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which has had or is reasonably
likely to have a Material Adverse
Effect or which would prevent or materially delay consummation of the transactions
contemplated by this Agreement.

 

(20)            
Taxes.

 

(a)                
Each of
Cortez and its
Subsidiaries has duly
and in a
timely manner made
or prepared all Tax
Returns required
to be
made or
prepared by it,
and duly and
in a timely manner
filed all Tax
Returns required to
be filed by
it with the appropriate
Governmental Entity, such
Tax Returns
were complete and
correct in all
material respects and
Cortez and
each of its
Subsidiaries has paid
all Taxes, including installments on account of Taxes
for the current year required by
applicable Law, which are due and
payable by it whether or not assessed by the appropriate Governmental Entity.
Since such publication date, no material
liability in respect of Taxes not reflected in such statements or otherwise provided
for has been assessed, proposed to be assessed,
incurred or accrued, other than in the Ordinary Course.

 

(b)                
Each of
Cortez and its
Subsidiaries has
duly and timely
withheld all Taxes
and other amounts required
by Law to
be withheld by
it (including Taxes
and other amounts required
to be withheld by
it in respect
of any amount
paid or credited or
deemed to
be paid
or credited
by it
to or for
the benefit
of any Person)
and has duly and
timely remitted to
the appropriate Governmental Entity
such Taxes or other
amounts required by
Law to be
remitted by it.

 

(c)                
Each of
Cortez and
its Subsidiaries
has duly and
timely collected
all amounts on account
of any sales,
use or transfer
Taxes, including
goods and services,
harmonized sales, provincial
and territorial
taxes and
state
and local taxes,
required by Law
to be collected
by it and
has duly and
timely remitted to
the appropriate Governmental Entity such
amounts required by Law to be
remitted by it.

 

(d)               
None of
Cortez nor any of
its Subsidiaries
has made,
prepared and/or filed
any elections, designations or
similar filings
relating to
Taxes or entered
into any agreement or
other arrangement
in respect of
Taxes or
Tax Returns that
has effect for
any period ending
after the Effective
Date.

 

(e)                
There are no
proceedings, investigations, audits or
claims now pending or threatened
against Cortez
or any of
its Subsidiaries in
respect of any
Taxes and there
are no matters
under discussion, audit
or appeal with
any Governmental Entity relating
to Taxes.

    	 

    	 

    

 

 

(f)                 
None of
Cortez nor any
of its Subsidiaries
has acquired
property from a
non- arm’s length Person, within the
meaning of the
Tax Act: (i) for consideration the
value of which
is less than
the fair
market value of
the property; or
(ii) as a contribution
of capital for
which no shares
were issued
by the acquirer
of the property.

 

(g)                
For the
purposes of the
Tax Act and
any other
relevant Tax purposes:

 

		(i)	Cortez is
resident in
Canada and
a “taxable
Canadian corporation”;
and

 

		(ii)	Each
of Cortez’s Subsidiaries
is resident
in the jurisdiction
in which it
was formed, and is
not resident
in any
other country.

 

(h)               
There are
no Encumbrances
for Taxes
upon any Assets
of Cortez or
any of
its Subsidiaries (other than
Encumbrances relating
to Taxes
not yet due
and payable and for
which adequate reserves
have been recorded
on the most
recent balance sheet
included in Cortez’s
audited financial
statements).

 

(21)            
Books and
Records. The corporate
records and minute
books of Cortez
and its Subsidiaries
have been maintained
in accordance with
all applicable
Laws, and the
minute books of
Cortez and its
Subsidiaries as provided
to Starcore are
complete and accurate in
all material respects.
The corporate
minute books for
Cortez and its Subsidiaries
contain minutes of
all meetings and
resolutions of
the directors and
Cortez Securityholders held. The
financial books and
records and accounts
of Cortez and
its Subsidiaries in all material respects: (a) have
been maintained in accordance with good business practices and in accordance with IFRS and with the accounting principles generally
accepted in the country of domicile of each such entity, on a basis consistent
with prior years; (b) are stated in reasonable
detail and, in the case of Cortez’s Subsidiaries,
accurately and fairly
reflect the
transactions and
dispositions of assets
of Cortez and its Subsidiaries; and (c) in the case of Cortez’s Subsidiaries,
accurately and fairly reflect the basis for Cortez’s consolidated financial statements.

 

(22)            
Insurance.

 

(a)                
Cortez has
in place reasonable
and prudent insurance
policies appropriate for its
size, nature
and stage
of development. All
premiums payable prior
to the date hereof
under such policies
of insurance have
been paid and
neither
Cortez nor its Subsidiaries
has failed
to make
a claim thereunder
on a timely
basis.

 

(b)                
Each of
such policies
and other forms
of insurance is
in full force
and effect on the
date hereof
and Cortez will
use reasonable commercial
efforts to
keep them in full
force and
effect or renew
them as appropriate
through the Effective
Date. No written (or to the knowledge of
Cortez other) notice of cancellation or termination
has been received
by Cortez
or its Subsidiaries
with respect to
any such policy.

 

(23)            
Non-Arm’s Length
Transactions. Except as
disclosed in the
Cortez  Filings  and 
for employment or employment
compensation agreements
entered into
in the Ordinary

    	 

    	 

    

 

 

Course,
there are no
current contracts, commitments,
agreements, arrangements
or other transactions (including
relating to indebtedness
by Cortez or
its Subsidiaries) between Cortez
or its Subsidiaries
on the one
hand, and any
(i) officer or
director of
Cortez or any of
its Subsidiaries, (ii)
any holder of
record or, to
the knowledge
of Cortez, beneficial
owner of five percent or more
of the voting securities
of Cortez, or (iii) any affiliate or
associate of any officer,
director or beneficial owner,
on the other
hand.

 

		(24)	Environmental.
Except for
any matters that,
individually or in
the aggregate, would
not have or would
not reasonably
be expected
to have
a Material Adverse
Effect:

 

(a)                
Since February
28, 2014, all
facilities and
operations of Cortez
and its Subsidiaries have
been conducted, and
are now, in
compliance with all Environmental
Laws;

 

(b)                
Cortez and
its Subsidiaries
are in possession
of, and in
compliance with, all environmental
permits that are
required to
own and lease
the Assets
and operate their
businesses as they
are now
being conducted;

 

(c)                
no environmental,
reclamation or closure
obligation, demand, notice,
work order or other
liabilities presently exist
with respect to
any portion of
any currently or formerly
owned, leased,
used or otherwise
controlled property, interests and
rights or relating
to the
operations and business
of Cortez and
its Subsidiaries and,
to the knowledge
of Cortez, there
is no basis
for any such obligations, demands,
notices, work orders or liabilities to arise in the future as a result of any activity in respect of such
property, interests, rights, operations
and business;

 

(d)               
neither Cortez
nor any of
its Subsidiaries
is subject to
any proceeding, application, order
or directive
which relates to
environmental, health or
safety matters, and
which may
require any material
work, repairs,
construction or expenditures;

 

(e)                
to the
knowledge of
Cortez, there
are no changes
in the
status, terms
or conditions of any
environmental permits
held
by Cortez
or any of
its Subsidiaries
or any renewal,
modification, revocation,
reassurance, alteration, transfer
or amendment
of any such
environmental approvals,
consents, waivers, permits,
orders and exemptions,
or any review
by, or approval
of, any Governmental Entity
of such environmental approvals,
consents, waivers, permits, orders and exemptions
that are required in connection with the execution or delivery
of this Agreement, the consummation of
the transactions contemplated herein or the continuation of the business of Cortez
or any of its Subsidiaries following the Effective Date;

 

(f)                 
Cortez and
its Subsidiaries have
made available
to Starcore all
material audits, assessments,
investigation reports, studies,
plans, regulatory correspondence
and similar information
with respect to
environmental matters;
and

    	 

    	 

    

 

 

(g)                
to the
knowledge of Cortez,
Cortez and its
Subsidiaries are not
subject to any past
or present fact,
condition or circumstance
that could
reasonably be expected to
result in liability
under any
Environmental Laws that
would individually
or in the
aggregate, constitute
a Material
Adverse Effect.

 

(25)            
Restrictions on
Business Activities.
There is no
agreement, judgement,
injunction, order or
decree binding upon
Cortez or any
of its Subsidiaries
that has or
could reasonably be
expected  to have
the  effect  of 
prohibiting,  restricting  or 
materially  impairing  any
business practice of
Cortez or any
of its Subsidiaries,
any acquisition of
assets by Cortez or
any of its
Subsidiaries,
or the conduct
of business by
Cortez or any
of its Subsidiaries
as currently conducted (including following the transaction contemplated by this
Agreement) other  than such agreements, judgements,
injunctions, orders or decrees which would not, individually or in the aggregate,
reasonably be expected
to have a Material
Adverse Effect.

 

(26)            
Material Contracts.
Cortez and 
its  Subsidiaries 
have  performed 
in  all  respects 
all respective obligations
required to
be performed
by them to
date under the
Material Contracts. Neither
Cortez nor any
of its Subsidiaries
is in breach
or default under
any Material Contract to
which it is
a party or
bound, nor does
Cortez have knowledge
of any condition that
with the passage of time or the giving
of notice or both would
result
in such a breach or default, except
in each case where any such breaches or defaults would not, individually
or in the
aggregate, reasonably
be expected to
result in, or
result in, a Material Adverse Effect.
Neither Cortez nor any of its Subsidiaries
knows of, or has received
written notice of, any breach or
default under (nor,
to the knowledge of
Cortez, does there exist any condition
which with the passage of time or the
giving of notice or
both would result
in such a breach
or default under)
any such Material
Contract by
any other party thereto except
where any such
violation or
default would not,
individually or in the aggregate,
reasonably be expected to result in, or result in, a Material Adverse
Effect. Prior to the date hereof, Cortez
has made available to Starcore true and
complete copies of all
of the Material
Contracts of Cortez.
All Material Contracts
are legal, valid,
binding and in full force and effect and are enforceable
by Cortez (or its Subsidiaries,
as the case may be) in accordance with their respective terms (subject to bankruptcy,
insolvency and other
applicable Laws affecting
creditors’ rights 
generally, and to general
principles of equity)
and are the
product of fair
and arms’ length
negotiations between the parties thereto.

 

(27)            
Winding Up.
No order has
been made, petition
presented or
meeting convened for
the purpose of winding
up of Cortez
or any
of its Subsidiaries,
or for the
appointment of any provisional
liquidator or
in relation to
any other process
whereby the business
is terminated and the
assets
of Cortez or
any of its
Subsidiaries are
distributed amongst the creditors
and/or shareholders or
other contributors,
and there
are no proceedings under any
applicable insolvency, bankruptcy,
reorganization or similar laws in
any relevant jurisdiction, and no events
have occurred which, under applicable
Laws, would be reasonably likely to justify any
such cases or proceedings.

 

(28)            
Brokers. None
of Cortez, any
of its
Subsidiaries, or any
of their respective
officers, directors or
employees has employed
any broker or
finder or incurred
any liability for

    	 

    	 

    

 

 

any brokerage
fees, commissions
or finder’s fees
in connection with
the transactions contemplated
by this Agreement.

 

(29)            
Reporting Issuer
Status. Except as
disclosed in the
Cortez Disclosure Letter,
as of the
date  hereof, Cortez
is a reporting
issuer not in
default (or the
equivalent) under the
Securities Laws of each
of the Provinces
of British Columbia
and Alberta.

 

(30)            
Stock Exchange
Compliance. Cortez
is in compliance
in all
material respects with
the applicable listing and
corporate governance
rules and regulations
of the TSXV.

    	 

    	 

    

 

SCHEDULE
D

 

REPRESENTATIONS
AND WARRANTIES
OF STARCORE

 

Except
as set
forth in the
correspondingly numbered
paragraph of the
Starcore Disclosure Letter, or
as disclosed in
the Starcore Filings
filed before the
date of this Agreement,
Starcore hereby represents
and warrants to
Cortez Gold Corp.
(“Cortez Gold”)as follows,
and acknowledges and
agrees that Cortez
Gold is relying
upon such representations
and warranties in connection with
the entering into of the Agreement:

 

(1)            
Organization and
Qualification. Each of
Starcore, Compañia Minera
Peña de Bernal,

S.A.
de C.V., American
Consolidated Minerals Corp.
and Creston Moly
Corp., (the “Starcore
Subsidiaries”) is a
corporation duly
incorporated
and validly existing under
all applicable
Laws of
its respective
jurisdiction
of incorporation,
continuance or creation and has full corporate power and authority
to own its assets and
conduct its business as
now owned
and conducted.
Starcore and each
of the Starcore Subsidiaries
is duly qualified
to carry on business and is in
good standing
in each jurisdiction in which the character of its respective properties
or the nature of its respective activities makes
such qualification
necessary, except
where the failure
to be so qualified
will not, individually
or in the aggregate,
have a Material Adverse Effect. True
and complete copies of
the constating
documents of Starcore have
been delivered or made available to American Consolidated.

 

(2)                
Authority Relative
to this
Agreement. Starcore has
the requisite
corporate power and authority
to enter into
this Agreement
and to perform
its obligations hereunder.
The execution and
delivery of this
Agreement by Starcore
and the consummation
by Starcore of the
transactions contemplated
by  this  Agreement 
have  been  duly authorized
by the board
of directors of
Starcore and
no other
corporate proceedings on
the part of Starcore or any of the Starcore
Subsidiaries are necessary to authorize this
Agreement. This Agreement has been duly executed and delivered by Starcore and constitutes
a valid and binding obligation
of Starcore, enforceable by American
Consolidated against Starcore in  accordance
with its terms, except as the enforcement
thereof may be limited by bankruptcy,
insolvency and other applicable Laws  affecting
the enforcement of creditors’ rights generally and subject
to the qualification
that equitable remedies
may be granted only
in the discretion
of a court of
competent jurisdiction.

 

(3)                
No Conflict;
Required Filings
and Consent. The
execution and
delivery by Starcore
of this  Agreement
and the
performance by it
of its
obligations hereunder
and the
completion of the
Arrangement will
not violate, conflict
with
or result in a
breach of any provision
of the constating documents of Starcore
or those of any of the Starcore
Subsidiaries, and except as would
not, individually or in the aggregate, have or reasonably be expected
to have a Material  Adverse Effect, will not: (a) violate,
conflict with or result
in a breach of: (i) any agreement, contract, indenture,
deed of trust, mortgage, bond,
instrument, Authorization, license
or permit to which Starcore or any of the Starcore Subsidiaries is a party or by which
Starcore or any of the Starcore Subsidiaries
is bound; or (ii) any  Law to which Starcore or any of the

    	 

    	 

    

 

 

Starcore
Subsidiaries is
subject or
by which Starcore
or any of
the Starcore Subsidiaries
is bound;
(b) give rise
to any right
of termination, or
the acceleration of any
indebtedness, under
any such agreement,
contract, indenture, Authorization,
deed of trust,
mortgage, bond, instrument,
license or
permit;
or (c)
give rise
to any rights of first refusal or
rights of first offer, trigger any
change in control or influence
provisions or any restriction or limitation under any such agreement, contract, indenture, Authorization,
deed of trust, mortgage, bond,
instrument, license or permit, or
result in the imposition of any Encumbrance, charge or lien upon any of Starcore’s assets (including mineral properties)
or the assets of any of the Starcore Subsidiaries
(including mineral
properties). Other than
Starcore Shareholder Approval, if
required, and
conditional listing approval
of the TSX
of the
Starcore Shares issued as Consideration, no authorization, consent or approval
of, or filing with, any Governmental
Entity or any court or other authority is necessary on the part of Starcore for the consummation by Starcore of its obligations
in connection with the Arrangement under this Agreement or for the completion of the Arrangement
not to cause
or result in
any loss of
any rights
or assets
or any interest therein
held by Starcore
or any of the
Starcore Subsidiaries in
any material assets or properties,
except for such Authorizations, consents, approvals and filings as to
which the failure
to obtain or
make would not, individually
or in the
aggregate, prevent or materially delay consummation of the Arrangement.

 

(4)                
Regulatory Filings.
The Starcore Filings
have complied
in all material
respects with all requirements
of applicable Law.
None of the
Starcore Filings, at
the time
filed or as subsequently
amended, contained
any untrue
statement or
a material fact
or omitted to state
a material
fact required to
be stated therein
or necessary
in order to make
the statements
made therein, in
light of the
circumstances under which
they were made, not misleading.

 

(5)                
Compliance with
Laws.

 

(a)                
The operations
of Starcore and
the Starcore Subsidiaries
have been
and are now
conducted in compliance
with all Laws
of each jurisdiction,
the Laws of which
have been and
are now applicable
to the operations
of Starcore or
of any of the
Starcore Subsidiaries
and none of
Starcore or any
of the Starcore Subsidiaries
has received any
notice of any alleged
violation of any such Laws, other than non-compliance or violations
which, individually or in the aggregate, would not have a Material Adverse Effect.

 

(b)                
None of
Starcore or any
of the Starcore
Subsidiaries is
in conflict
with, or in default
(including cross defaults)
under or in
violation of: (A)
its notice of articles
or articles or
equivalent organizational documents;
or (B) any agreement
or understanding to
which
it or by
which any of
its properties or assets
in which it has a controlling
interest or an option to acquire a
controlling interest is
bound or affected,
except for failures
which, individually or in the aggregate,
would not have a Material Adverse Effect.

 

(6)                
Starcore Authorizations.
Starcore and the
Starcore Subsidiaries
have obtained all authorizations
necessary for
the ownership, operation,
development, maintenance,

    	 

    	 

    

 

 

or
use of the
material assets of
Starcore or
the Starcore Subsidiaries
or otherwise in
connection with the
material business
or operations
of Starcore or
the Starcore Subsidiaries and
such authorizations
are in full
force and effect.
Starcore and the Starcore
Subsidiaries have
fully complied
with and are
in compliance
with all authorizations, except,
in each case,
for such non-compliance
which, individually or
in the aggregate, would
not have a
Material Adverse
Effect. There is
no action, investigation or
proceeding pending or, to
the knowledge of Starcore,
threatened regarding any of the authorizations. None of Starcore or any of the Starcore Subsidiaries
has received any
notice, whether
written or oral,
of revocation
or non- renewal of any such authorizations, or of any intention of any Person
to revoke or refuse to renew any of such authorizations, except in each case, for revocations or
non-renewals which, individually
or in the aggregate,
would
not have
a Material Adverse
Effect and, to
the knowledge of
Starcore, all
such authorizations
continue to be effective in order
for Starcore and
the Starcore Subsidiaries
to continue to conduct their respective
businesses as they are currently being conducted.

 

(7)                
Capitalization and
Listing.

 

(a)                
The authorized
share capital of
Starcore consists
of an unlimited
number of Starcore Shares.
As at the
date of this
Agreement there
are: (A) 151,946,847
Starcore Shares
validly issued and
outstanding as fully-paid
and non- assessable
Starcore Shares; and
(B) outstanding options
providing for
the issuance  of  11,385,000
 Starcore  Shares 
upon  the  exercise
 thereof; 
and

(C)
outstanding common
share purchase
warrants providing for
the issuance of
557,135 Starcore
Shares upon the
exercise
thereof. Other than
as disclosed in the
Starcore Disclosure Letter,
there are
no warrants, conversion
privileges, calls or other
rights, shareholder rights
plans, agreements,
arrangements, commitments, or
obligations of Starcore or
any of the Starcore
Subsidiaries to issue or
sell any Starcore
Shares or of
any of the
Starcore Subsidiaries or securities
or obligations of any kind convertible into, exchangeable
for or otherwise carrying the right or
obligation to acquire
any Starcore Shares or any of the
Starcore Subsidiaries, and
there are no
outstanding stock appreciation rights, phantom equity
or similar rights, agreements, arrangements or
commitments of Starcore
or any of the Starcore Subsidiaries, and no Person
is entitled to any pre-emptive or
other similar right granted by Starcore
or any
of the Starcore
Subsidiaries.

 

(b)                
Other than
as disclosed in
the Starcore Filings,
there are no
outstanding contractual obligations
of Starcore or any of the Starcore
Subsidiaries to repurchase, redeem or
otherwise acquire any
Starcore Shares or
any shares of any
of the Starcore
Subsidiaries. No Subsidiary
of Starcore owns
any Starcore Shares.

 

(c)                
No order
ceasing or suspending
trading in
securities of Starcore
nor prohibiting the sale
of such securities
has been
issued and is
outstanding against Starcore
or its directors,
officers or promoters.

    	 

    	 

    

 

 

(8)                
Shareholder  and 
Similar  Agreements. 
Starcore  is 
not  party 
to  any  shareholder, pooling,
voting trust or
other similar agreement
relating  to  the 
issued  and outstanding Starcore
Shares or the
shares of
any of the
Starcore Subsidiaries.

 

(9)                
Reports. Starcore
has filed with
all applicable
Governmental Entities
true and complete
copies of the
Starcore Filings that
Starcore is required
to file therewith. Starcore
Filings at the
time filed: (i)
did not contain
any untrue statement
of a material fact
or omit to
state a
material fact
required to be
stated therein or
necessary to make the
statements
therein, in the
light of the
circumstances under
which they were made, not
misleading, and (i) complied in all material
respects with the requirements of applicable Securities
Laws. Starcore has not filed any confidential material change report
with any Governmental Entity which
at the date hereof remains confidential.

 

(10)            
Financial Statements.

 

(a)                
The audited
consolidated financial statements
of Starcore as
at and for
each of the
fiscal years ended
July 31, 2014
and July 31,
2013, including
the notes thereto
and the reports
by Starcore’s auditors
thereon, and the
interim consolidated financial
statements for
Starcore for
the period ended
January 31, 2015
including the notes
thereto have
been, prepared in
accordance with IFRS applied
on a basis
consistent with
all applicable Laws
and present fairly, in all material
respects, the assets, liabilities (whether accrued, absolute, contingent
or otherwise), consolidated financial position and results of operations of
the respective businesses as of the respective
dates thereof and its results of operations and cash flows for the respective periods covered thereby
(except as may
be indicated expressly
in the notes
thereto).

 

(b)                
Since July
31, 2014,
neither Starcore
nor any of
the Starcore Subsidiaries
nor, to Starcore’s knowledge,
any director, officer,
employee, auditor, accountant or
representative
of Starcore
or any of
the Starcore
Subsidiaries has
received or otherwise
had or obtained
knowledge of any
complaint, allegation, assertion,
or claim,
whether written or
oral, regarding the
accounting or auditing
practices,
procedures, methodologies
or methods of
Starcore or
any of the Starcore
Subsidiaries or
their respective internal
accounting controls,
including any
complaint, allegation, assertion,
or claim that Starcore or any
of the Starcore Subsidiaries has engaged
in questionable accounting or auditing
practices, which has not been resolved to the satisfaction of the audit committee of
the Starcore Board.

 

(11)            
Undisclosed Liabilities.
Neither Starcore nor
any of the
Starcore Subsidiaries
has any liabilities
or obligations of
any  nature, 
whether  or 
not  accrued,  contingent 
or otherwise, except for:
(a) liabilities and
obligations that are
specifically
presented on the 
audited consolidated statements
of financial
position of Starcore
as of July
31, 2014 (the 
“Starcore Statement
of Financial Position”)
or disclosed in
the notes thereto; or (b)
liabilities and obligations incurred in the Ordinary
Course, that are not and would not, individually
or in the aggregate with all other liabilities and
obligations of Starcore and the Starcore Subsidiaries (other than those
disclosed on

    	 

    	 

    

 

 

the
Starcore Statement of
Financial Position and/or
in the notes
to the
Starcore financial statements),
reasonably be expected
to have a
Material Adverse
Effect, or have a
Material Adverse Effect,
or, as a
consequence of
the consummation of
the Arrangement, have
a Material Adverse
Effect. Without limiting
the foregoing,
the Starcore Statement
of Financial
Position reflects
reasonable reserves in
accordance with IFRS for
contingent liabilities relating
to pending litigation
and other
contingent obligations of Starcore and the Starcore Subsidiaries.

 

(12)            
Interest in
Properties and Mineral
Rights.

 

(a)                
All of
Starcore’s and the
Starcore Subsidiaries’ real
properties
(collectively, and where material,
the “Starcore Property”)
and all of
Starcore’s and
the Starcore Subsidiaries’ mineral
interests and rights
(including any material
claims, mineral leases,
concessions, exploration
licenses, exploitation licenses
and prospecting permits)
(collectively, and where
material, the
“Starcore Mineral Rights”),
are disclosed in the Starcore Filings.
Other than the Starcore Property and the Starcore Mineral Rights
disclosed in the Starcore Filings, neither Starcore nor the Starcore Subsidiaries,
owns or has any interest in any material real property or any material
mineral interests and rights.

 

(b)                
Starcore or
one of the
Starcore Subsidiaries
is the recorded
holder of the Starcore
Mineral Rights and
all of the
Starcore Mineral Rights
have been properly
recorded and are
comprised of
valid and subsisting
concessions.

 

(c)                
The Starcore
Mineral Rights are
in good standing
under applicable Law
and, all work required
to be performed
and filed in
respect thereof has
been performed and filed,
all Taxes,
rentals, fees,
expenditures and
other payments in respect
thereof have been
paid or incurred
and all filings
in respect thereof have
been made.

 

(d)               
There is
no material adverse
claim against
or challenge
to the title
to or ownership of
any of the
Starcore Mineral Rights.

 

(e)                
Except as
disclosed in the
Starcore Filings,
and a 2%
net smelter royalty
on the Molybrook
Project and
a 3% net
profit interest on
the El Creston
project, no Person
other than
Starcore and
the Starcore
Subsidiaries has any
interest in the
Starcore Property or
any of the
Starcore Mineral Rights
or the production or profits
therefrom or any royalty in respect thereof
or any right to acquire
any such interest.

 

(f)                 
Except as
disclosed in Starcore’s
Filings, there
are no back-in
rights, earn-in rights, rights
of first refusal
or similar provisions
or rights which
would affect Starcore’s
or a
Subsidiary’s
interest
in the
Starcore
Property or
any of the Starcore
Mineral Rights.

    	 

    	 

    

 

 

(g)                
There are
no material restrictions
on the ability
of Starcore and
the Starcore Subsidiaries to
use, transfer or
exploit the Starcore
Property or any
of the Starcore Mineral
Rights, except
pursuant to
the applicable
Law.

 

(h)               
Neither Starcore
nor any of
the Starcore Subsidiaries
has received any
notice, whether written
or oral, from
any Governmental
Entity of any
revocation or intention to
revoke any
interest of
Starcore or a
Subsidiary in any
of the Starcore Mineral
Rights.

 

(i)                 
Starcore and
the Starcore
Subsidiaries have all
surface rights necessary
to conduct exploration and mining activities as
currently conducted by Starcore
and the
Starcore Subsidiaries.

 

(13)            
Mineral Reserves 
and  Resources.  The 
mineral  reserves  and 
mineral  resources declared
by Starcore, as
set forth in
the Starcore
Filings, were prepared
in all material respects
in accordance with
sound  mining, 
engineering,  geoscience  and 
other applicable industry standards
and practices, and 
in  all  material 
respects  in accordance with
all applicable Laws,
including  the  requirements
 of  National
Instrument 43-101 – Standards
of Disclosure for Mineral Projects.
All information regarding the Starcore Mineral Rights, including
all drill
results, technical reports
and studies, that are required
to be disclosed at Law, have
been disclosed in the Starcore Filings
on or before the date hereof.

 

(14)            
No Option
on Assets. No
Person has any
agreement or option
or any right
or privilege capable
of becoming an
agreement or
option for the
purchase from Starcore or
any of the
Starcore Subsidiaries of
the material assets
of Starcore.

 

(15)            
Operational Matters.
Except as would
not,  individually 
or  in  the 
aggregate,  be reasonably expected
to result in
a Material Adverse
Effect:

 

(a)                
all rentals,
royalties, overriding royalty
interests, production
payments, net profits, interest
burdens, payments
and obligations due
and payable, or performable,
as the case
may be, on
or prior to
the date hereof
under, with respect to,
or on account
of, any direct
or indirect assets
of Starcore and
the Starcore Subsidiaries, have
been: (A) duly
paid; (B) duly
performed; or (C) provided
for prior
for the date
hereof; and

 

(b)                
all costs,
expenses, and
liabilities payable on
or prior to the date hereof
under the terms of
any contracts
and agreements
to which Starcore
or any of
the Starcore Subsidiaries
is directly or
indirectly bound have
been properly and timely
paid, except for
such expenses that
are being currently
paid prior to delinquency
in the Ordinary
Course.

 

(16)            
Absence of
Certain Changes
or Events.
Since July 31,
2014, except
as set
out in the Starcore
Filings:

 

(a)                
Starcore and
the Starcore Subsidiaries
 have  conducted 
their  respective businesses only
in the Ordinary
Course and consistent
with past
practice;

    	 

    	 

    

 

 

(b)                
no liability
or obligation
of any nature
(whether absolute, accrued,
contingent or  otherwise)
which has had
or is  reasonably 
likely  to  have 
a  Material Adverse Effect
has been incurred;

 

(c)                
there has not been
any event, circumstance or
occurrence which has had or is reasonably
likely to give
rise to a
Material Adverse
Effect;

 

(d)               
there has
not been
any change in
the accounting
practices used by
Starcore and the
Starcore Subsidiaries;

 

(e)                
there has
not been any
redemption, repurchase
or other acquisition
of Starcore Shares by
Starcore, or any
declaration, setting
aside or payment
of any dividend or other distribution (whether
in cash, shares or property) with
respect to the
Starcore Shares, except
as disclosed
in the Starcore
Disclosure Letter; and

 

(f)                 
there has
not been
any satisfaction or
settlement of any
material claims or material
liabilities that
were not reflected
in Starcore’s audited
financial statements, other than
the settlement of
claims or liabilities
incurred in the Ordinary
Course consistent with
past
practice.

 

(17)            
Litigation. There
is no claim,
action, proceeding or
investigation pending or,
to the knowledge of
Starcore, threatened against or
relating to Starcore or any
of the Starcore Subsidiaries,
the business of
Starcore or any
of the
Starcore Subsidiaries or affecting
any of their properties (including
mineral projects), assets, before
or by any Governmental
Entity which, if
adversely determined,
would have, or
reasonably could be expected
to have,
a Material Adverse
Effect or prevent
or materially delay
the consummation of
the Arrangement, nor
to knowledge of Starcore
are there any events
or circumstances which could reasonably
be expected to give rise to any
such claim, action, proceeding or investigation
(provided that this representation
shall not apply to claims, actions, proceedings,
or investigations which may arise after the date of this Agreement which do not have a reasonable prospect of succeeding or, if
successful, would not give rise to, nor reasonably be expected to give rise to, a
Material Adverse Effect). Neither Starcore
nor any of the Starcore Subsidiaries is subject to any
outstanding order, writ, injunction or decree which has had or is reasonably likely
to have a Material Adverse Effect or
which would prevent or materially delay consummation of the transactions
contemplated by this Agreement.

 

(18)            
Taxes.

 

(a)                
Each of
Starcore and
the Starcore Subsidiaries
has duly and
in a timely
manner made
or prepared all
Tax Returns
required to be
made or prepared by
it, and duly
and in a
timely manner
filed all material
Tax Returns required
to be filed
by it with
the appropriate Governmental
Entity, such
Tax Returns were complete
and correct in
all material
respects and Starcore
and each of the
Starcore Subsidiaries has
paid all Taxes,
including installments on account of Taxes for the current year required
by applicable Law, which are due and payable by it whether or not assessed
by the appropriate

    	 

    	 

    

 

 

Governmental
Entity. Since
such publication date,
no material liability
in respect of Taxes
not reflected in
such statements or
otherwise provided for has
been assessed,
proposed to
be assessed,
incurred or accrued,
other than in the
Ordinary Course.

 

(b)                
There are
no proceedings,
investigations, audits or
claims now pending
or threatened against Starcore
or any of
the Starcore Subsidiaries
in respect of any
Taxes and
there are no
matters
under discussion, audit
or appeal with any
Governmental Entity
relating to Taxes.

 

		(c)	For the
purposes of the
Tax Act and
any other
relevant Tax purposes:

 

		(i)	Starcore
is resident in
Canada and
a “taxable
Canadian corporation”; and

 

		(ii)	Each
of Starcore’s Subsidiaries
is resident
in the jurisdiction
in which it was
formed, and
is not resident
in any other
country.

 

(d)               
There are
no Encumbrances for
Taxes upon any
properties or assets
of Starcore or any
of the Starcore
Subsidiaries (other
than Encumbrances relating to
Taxes not
yet due and
payable and for
which adequate
reserves have been recorded
on the most
recent balance
sheet included
in Starcore’s audited
financial statements).

 

(19)            
Books and
Records. The
corporate records and
minute books of
Starcore and the Starcore
Subsidiaries have been
maintained in accordance
with all applicable
Laws. The  corporate 
minute  books  for 
Starcore  and  the 
Starcore  Subsidiaries 
contain minutes of
all meetings
and resolutions of
the directors
and Starcore Securityholders held.

 

(20)            
Insurance.

 

(a)                
Starcore has
in place insurance
policies appropriate
for its size,
nature and stage
of development. All
premiums payable prior
to the date
hereof under such
policies of
insurance have been
paid and neither Starcore
nor any of
the Starcore
Subsidiaries has failed to
make a claim
thereunder on
a timely basis.

 

(b)                
Each of
such policies
and other forms
of insurance is
in full force
and effect on the
date hereof and
Starcore will
use reasonable commercial
efforts to keep
them in
full force and
effect or
renew them
as appropriate through
the Effective Date.
No written (or
to the knowledge
of Starcore other)
notice of cancellation or
termination has
been received by
Starcore or any
of the Starcore Subsidiaries with
respect to any such policy.

 

(21)            
Non-Arm’s Length
Transactions.
Except as disclosed
in the Starcore
Filings, the Starcore Disclosure
Letter and
for employment
or employment compensation
agreements and incentive
stock option agreements
entered into
in the
Ordinary Course, there are
no current contracts,
commitments, agreements, arrangements
or

    	 

    	 

    

 

 

other
transactions (including
relating to indebtedness
by Starcore or
any of the
Starcore Subsidiaries) between
Starcore or
any of the
Starcore Subsidiaries on
the one hand,
and any
(i) officer or
director of
Starcore or any
of the
Starcore Subsidiaries,

(ii)
any holder of
record or,
to the knowledge
of Starcore, beneficial
owner of five

percent
or more of
the voting securities
of Starcore, or
(iii) any
affiliate or associate
of any officer, director
or beneficial owner,
on the other
hand.

 

(22)            
Environmental.
 Except
for any
matters
that, individually
or in the aggregate,
would not have or
would not reasonably
be expected
to have a
Material Adverse
Effect:

 

(a)                
Since July
31, 2014,
all facilities and
operations of
Starcore and the
Starcore Subsidiaries have been
conducted, and are
now, in compliance
with all Environmental Laws;

 

(b)                
Starcore and
the Starcore Subsidiaries
are in possession
of, and in
compliance with, all
environmental permits that
are required
to own, lease
and operate the Starcore
Property and Starcore
Mineral Rights
at its current
stage of development
and to conduct
their respective business
as they
are now being
conducted;

 

(c)                
no environmental,
reclamation or closure
obligation, demand,
notice, work order or
other liabilities
presently exist
with respect to
any portion of
any currently or formerly
owned, leased,
used or otherwise
controlled property, interests and
rights or relating
to the operations
and business of
Starcore and the Starcore
Subsidiaries;

 

(d)               
to the
knowledge of
Starcore, there are
no changes in
the status,
terms or conditions
of any environmental permits held
by Starcore or any of the Starcore
Subsidiaries or any
renewal, modification,
revocation, reassurance, alteration,
transfer or
amendment of
any such environmental
approvals, consents, waivers,
permits, orders and
exemptions, or
any review by,
or approval of, any
Governmental Entity
of such environmental
approvals, consents, waivers, permits, orders and exemptions that are required
in connection with the execution or delivery
of this Agreement, the consummation of the
transactions contemplated
herein or the
continuation of the business of Starcore
or any of the Starcore Subsidiaries following the Effective Date.

 

(e)                
Starcore and
the Starcore Subsidiaries
have made available
to American Consolidated
all material audits,
assessments, investigation
reports, studies, plans, regulatory
correspondence and
similar information
with respect to environmental
matters; and

 

(f)                 
Starcore and
the Starcore
Subsidiaries are not
subject to any
present fact, condition or
circumstance that
could reasonably
be expected
to result in liability
under any
Environmental Laws that
would individually or
in the aggregate, constitute
a Material Adverse
Effect.

    	 

    	 

    

 

 

(23)            
Restrictions on
Business Activities.
There is no
agreement, judgement, injunction,
order or decree
binding upon Starcore
or any of
the Starcore Subsidiaries
that has or
could  reasonably be
expected to
have the effect
of prohibiting, restricting 
or materially impairing any
business practice of
Starcore or any
of the Starcore
Subsidiaries, any acquisition of property
by Starcore  or any  of 
the Starcore Subsidiaries, or the conduct
of business by Starcore or any of the
Starcore Subsidiaries as
currently conducted (including  following the 
transaction contemplated by 
this  Agreement) other than such
agreements, judgements, injunctions, orders
or decrees which
would not, individually or
in the aggregate,
reasonably be expected
to have a
Material Adverse Effect.

 

(24)            
Material Contracts.
Starcore and the
Starcore Subsidiaries have
performed in all respects
all respective obligations
required to
be performed by
them to date
under the Material Contracts.
Neither Starcore nor
any of the
Starcore Subsidiaries is
in breach or default
under any Material
Contract to which
it is a
party or bound,
nor does Starcore have
knowledge of
any condition that
with the passage
of time or
the giving of notice
or both would result
in such a breach
or default, except in
each case
where any such breaches or defaults
would not, individually or
in the aggregate, reasonably be
expected to result
in, or result
in, a
Material Adverse Effect.
Neither Starcore nor any of
the Starcore
Subsidiaries knows of,
or has received
written notice of, any breach or default under (nor, to the knowledge of Starcore, does
there exist any condition which with
the passage
of time or the
giving of notice or both would result
in such a breach
or default under)
any such Material Contract by any other party
thereto except
where any such
violation or default
would not, individually
or in the aggregate,
reasonably be expected to result
in, or result in, a
Material Adverse
Effect.

 

(25)            
Reporting Issuer
Status. As of
the date hereof,
Starcore is a
reporting issuer not
in default  (or
the equivalent) under
the Securities Laws
of each of
the Provinces of
British Columbia, Alberta
and Ontario.

 

(26)            
Stock Exchange
Compliance. Starcore is
in compliance
in all material
respects with the
applicable listing and
corporate governance
rules and regulations
of the TSX.Exhibit 10.1

 

FACILITY AGREEMENT

 

FACILITY AGREEMENT (this “Agreement”), dated as of May 11, 2016, between Neos Therapeutics, Inc., a Delaware Corporation (the “Borrower”), and the lenders set forth on the signature page of this Agreement (together with their successors and permitted assigns, the “Lenders” and, together with the Borrower, the “Parties”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrower wishes to borrow from the Lenders a maximum of Sixty Million Dollars ($60,000,000) for the purpose described in Section 2.1; and

 

WHEREAS, the Lenders desire to make loans to the Borrower for such purpose,

 

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the Parties agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1            General Definitions.  Wherever used in this Agreement, the Exhibits or the Schedules attached hereto, unless the context otherwise requires, the following terms have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly:

 

(a)           owns more than 10% of the beneficial ownership interest of such Person;

 

(b)           controls, or is controlled by, or is under common control with, such Person; or

 

(c)           is a general partner, or managing member of such Person.

 

A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to vote ten percent (10%) or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

“Agreement Date” means the date of this Agreement.

 

“Applicable Laws” means all statutes, rules and regulations of Governmental Authorities in the United States or elsewhere applicable to the Borrower and its Subsidiaries.

 

“Authorizations” has the meaning set forth in Section 3.1(q).

 

 

“Business Day” means a day on which banks are open for business in The City of New York.

 

“Change of Control” means (a) any “Person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than the holders of Borrower’s voting stock on the Agreement Date or their Controlled Investment Affiliates, is or shall at any time become the “beneficial owner” (as defined in Rule 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of greater than 50% of the voting interest in Borrower’s stock, or (b) a sale of substantially all of the assets of Borrower and its Subsidiaries.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any Treasury Regulations promulgated thereunder.

 

“Commercial Products” has the meaning given to it in Section 5.4.

 

“Controlled Investment Affiliate” means as to any Person, any other Person that (a) directly or indirectly, is in Control of, is Controlled by, or is under common Control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies.

 

“Default” means any event which, at the giving of notice, lapse of time or fulfillment of any other applicable condition (or any combination of the foregoing), would constitute an Event of Default.

 

“Disbursement” and “Disbursement Request” have the meaning given to them in Section 2.2.

 

“Dollars” and the “$” sign mean the lawful currency of the United States of America.

 

“Event of Default” has the meaning given to it in Section 5.4.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

 

“Excluded Taxes” means with respect to any Lender, (a) Taxes imposed on (or measured by) such Lender’s net income, franchise Taxes and branch profit Taxes, in each case (i) imposed by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender is organized or incorporated or in which the applicable lending office of such Lender is located, or (ii) that are Other Connection Taxes, (b) any United States federal withholding Tax imposed on amounts payable to such Lender under the laws in effect at the time such Lender becomes a party to this Agreement or such Lender changes its lending office, except to the extent such Lender acquired its interest in the Loan from a transferor that was entitled, immediately before such transfer, to receive such Additional Amounts with respect to such withholding Tax pursuant to Section 2.5(a), (c) any United States withholding Tax imposed on amounts payable to such Lender as a result of such Lender’s failure to comply with Section 2.5(d) other than as a result of such Lender’s legal inability to comply with Section 2.5(d) as a result of a change in law occurring subsequent to the date such Lender became a party to this Agreement, or (d) any

 

2

 

United States withholding Tax imposed on amounts payable to such Lender due to such Lender’s non-compliance with FATCA.

 

“Excluded Transaction” means any of the following transactions:

 

The entering into any collaborative arrangement, licensing, joint venture, partnership, royalty agreement or similar agreements or other research, development manufacturing or other commercial exploitation arrangements relating to Borrower or any Subsidiary’s Intellectual Property or other assets (provided, that Borrower has a reasonable basis for believing that the downstream economics potentially to be received by Borrower and its Subsidiaries in connection with such collaborative arrangement, licensing, joint venture, partnership, royalty agreement or similar agreements or other research, development, manufacturing or other commercial exploitation arrangements relating to the IP, when combined with the potential downstream economics of rights in the IP retained by Borrower and its Subsidiaries are adequate to enable Borrower to timely satisfy all obligations of the Borrower and its Subsidiaries under this Agreement), including, without limitation, but subject to the conditions set forth above, (1) any grant to any entity engaged in, or owned by an entity engaged in, the pharmaceutical or biotechnology industry of a license or option to obtain a license to any of Borrower’s or any Subsidiary’s Intellectual Property or other assets, provided that Borrower or a Subsidiary directly receives from such entity all consideration paid or payable by such entity in consideration of such grant, which consideration may, but need not, include (without limitation) upfront, milestone, royalty and profit-sharing payments, (2) any grant of a license or option to obtain a license to any entity that intends to research, develop, commercialize or manufacture products or services covered by such Intellectual Property or other assets whether directly or through Borrower, any Subsidiary or another entity, and (3) any arrangement or transfers of assets for the manufacture, research, promotion and development of Borrower’s or any Subsidiary’s products and clinical trial management, and data analysis and similar activities in support of Borrower’s or any Subsidiary’s development programs.

 

“Essex” means Essex Capital Corporation.

 

“Existing Lenders” means, collectively, Hercules and Essex.

 

“Existing Loan Documents” means that certain Loan and Security Agreement dated March 28, 2014, between Borrower, Pharmafab Texas, LLC and Neos Therapeutics, LP and Hercules and that certain Third Amended and Restated Subordinated Promissory Note dated December 31, 2013, by and between Borrower and Essex, each as amended, amended and restated, supplemented, extended or otherwise modified from time to time.

 

“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantially comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements entered into in connection with the foregoing.

 

“FDA” means the US Food and Drug Administration.

 

3

 

“GAAP” means generally accepted accounting principles consistently applied as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession).

 

“Governmental Authority” means any government, quasi-governmental agency, governmental department, ministry, cabinet, commission, board, bureau, agency, court, tribunal, regulatory authority, instrumentality, judicial, legislative, fiscal, or administrative or public body or entity, whether domestic or foreign, federal, state or local, having jurisdiction over the matter or matters and Person or Persons in question, including, but not limited to the FDA.

 

“Health Care Laws” means all laws relating to the provision and/or administration of, and/or payment for, healthcare products or services, including, without limitation, Applicable Laws with respect to (in each case, to the extent applicable):  (a) health care fraud and abuse (including without limitation the following statutes, as amended, modified or supplemented from time to time and any successor statutes thereto and regulations promulgated from time to time thereunder:  the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)); the Stark Law (42 U.S.C. § 1395nn); the civil False Claims Act (31 U.S.C. § 3729 et seq.); 42 U.S.C. §§ 1320a-7, 1320a-7b; the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173)); and any state, commonwealth or local laws similar to any of the foregoing; (b) Medicare, Medicaid or other programs which are sponsored or maintained by a governmental payor; (c) quality, safety certification and accreditation standards and requirements; (d) HIPAA; (e) prescription drug, medical device or controlled substances registration, approval, importation, sale, use, distribution, compounding, dispensing, transporting, purchasing, storage, tracking, marketing and security, including state pharmacy and controlled substance laws, the Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act, the Prescription Drug Marketing Act of 1987, and Food and Drug Administration rules and regulation; (l) the provision of free or discounted care or services; and (m) the conditions of participation or enrollment as a provider/supplier in and Laws governing health programs administered by or paid for, in whole or in part by, Governmental Payors.

 

“Health Care Permits” means any and all Permits issued or required under applicable Health Care Laws.

 

“Hercules” means, collectively, Hercules Technology III, L.P. and Hercules Technology Growth Capital, Inc.

 

“HIPAA” means the (a) Health Insurance Portability and Accountability Act of 1996; (b) the Health Information Technology for Economic and Clinical Health Act (Title XIII of the American Recovery and Reinvestment Act of 2009); and (c) any state, commonwealth and local laws regulating the privacy and/or security of individually identifiable health information, including state laws providing for notification of breach of privacy or security of individually identifiable health information, in each case with respect to the laws described in clauses (a), (b) and (c) of this definition, as the same may be amended, modified or supplemented from time to time, any successor statutes thereto, any and all rules or regulations promulgated from time to time thereunder.

 

4

 

“Indebtedness” means the following:

 

(i)            all indebtedness for borrowed money;

 

(ii)           the deferred purchase price of assets or services (other than payables) which in accordance with GAAP would be shown to be a liability (or on the liability side of a balance sheet);

 

(iii)          all guarantees of Indebtedness;

 

(iv)          all letters of credit issued or acceptance facilities established for the account of the Borrower and any of its Subsidiaries, including without duplication, all drafts drawn thereunder (except to the extent cash collateralized);

 

(v)           all capitalized lease obligations;

 

(vi)          all indebtedness of another Person secured by any Lien on any property of the Borrower or its Subsidiaries, whether or not such indebtedness has been assumed or is recourse (with the amount thereof, in the case of any such indebtedness that has not been assumed by the Borrower or its Subsidiaries, being measured as the lower of (x) fair market value of such property and (y) the amount of the indebtedness secured); and

 

(vii)         indebtedness created or arising under any conditional sale or title retention agreement.

 

“Indemnified Person” has the meaning given to it in Section 6.11.

 

“Indemnified Taxes” means all Taxes including Other Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document.

 

“Indemnity” has the meaning given to it in Section 6.11.

 

“Interest Rate” means 12.95% per annum.

 

“IP”, “Company IP” and “Intellectual Property” have the meaning given to it in Section 3.1(m).

 

“IRS” means the United States Internal Revenue Service.

 

“License” means any license of Intellectual Property.

 

“Lien” means any lien, pledge, mortgage, security interest, deed of trust, charge, assignment, hypothecation, title retention, or other encumbrance on or with respect to property; provided, however, that any grant or license or option to obtain a license to, or the sale or other transfer of, the Borrower’s IP or other assets, whether directly or through the Borrower or another entity shall not constitute a Lien.

 

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“Loan” means the loans made by the Lenders to the Borrower pursuant to Section 2.2 in the aggregate principal amount of Sixty Million Dollars ($60,000,000) or, as the context may require, the principal amount thereof from time to time outstanding.

 

“Loan Documents” means this Agreement, the Notes, the Security Agreement and any other document or instrument executed by the Borrower or any Subsidiary and delivered in connection with any of the foregoing and dated the Agreement Date or subsequent thereto, whether or not specifically mentioned herein or therein.

 

“Loss” has the meaning given to it in Section 6.11.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, financial condition or assets of the Borrower and its Subsidiaries (taken as a whole), (b) the validity or enforceability of any Loan Document, (c) the ability of the Borrower and its Subsidiaries (taken as a whole) to timely perform the Obligations when due or (d) the rights and remedies of the Lenders under any Loan Document; provided, however, that any adverse effect that results directly or indirectly from general economic, business, financial or market conditions shall not be deemed to be a Material Adverse Effect.

 

“Medicaid” means, collectively, the health care assistance program established by Title XIX of the Social Security Act (42 U.S.C. § 1396 et seq.) and any statutes succeeding thereto, and all Laws pertaining to such program, including (a) all federal statutes affecting such program; (b) all state and commonwealth statutes and plans for medical assistance enacted in connection with such program and federal rules and regulations promulgated in connection with such program; and (c) all applicable provisions of all rules, regulations and legally binding manuals, orders and administrative and reimbursement requirements of all Governmental Authorities promulgated in connection with such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

 

“Medicare” means, collectively, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. § 1395 et seq.) and any statutes succeeding thereto, and all Laws pertaining to such program including (a) all federal statutes (whether set forth in Title XVIII of the Social Security Act (42 U.S.C. § 1395 et seq.) or elsewhere) affecting such program; and (b) all applicable provisions of all rules, regulations and legally binding manuals, orders, administrative and reimbursement requirements of all Governmental Authorities promulgated in connection with such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

 

“Notes” means the Notes issued to the Lenders evidencing the Loan in the form attached hereto as Exhibit A.

 

“Obligations” means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement and the other Loan Documents.

 

“Organizational Documents” means for any Person as of any date, such Person’s charter, constitutional or constituent documents, formation documents and/or certificate of incorporation (or equivalent thereof), and each certificate of change of name, and, (a) if such Person is a corporation, its bylaws or memorandum and articles of association (or equivalent

 

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thereof) in current form, (b) if such Person is a limited liability company, its limited liability company agreement or its shareholders agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

 

“Other Connection Taxes” means with respect to any Lender, Taxes imposed as a result of a present or former connection between such Lender and the jurisdiction imposing such Tax (except a connection arising from such Lender having executed, delivered, become a party to, performed its obligations or received a payment under, received or perfected a security interest under, engaged in any transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan Document).

 

“Other Taxes” means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes arising from any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, any Loan Document except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made in connection with the exercise of remedies following an Event of Default).

 

“Paragraph IV Certification” means a certification by an applicant filing an ANDA or 505(b)(2) NDA referencing a drug listed in Approved Drug Products with Therapeutic Equivalence Evaluations to the FDA that the patent relating to such listed drug is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the ANDA or 505(b)(2) NDA is submitted.

 

“Permits” means all permits, licenses, registrations, certificates, qualifications, accreditations, approvals or similar rights required to be obtained, from any Governmental Authority.

 

“Permitted Indebtedness” means Indebtedness existing as of the Agreement Date and set forth on Exhibit B attached hereto and:

 

(i)            The Obligations;

 

(ii)           Indebtedness in respect of letters of credit;

 

(iii)          Indebtedness to trade creditors in the ordinary course of business;

 

(iv)          Indebtedness in respect of netting services, overdraft protections and other similar and customary services in connection with deposit accounts;

 

(v)           Performance bonds, surety bonds and similar instruments incurred in the ordinary course;

 

(vi)          Guarantees with respect to any Permitted Indebtedness;

 

(vii)         Indebtedness in respect of purchase money financing, capital lease obligations and equipment financing facilities covering existing and

 

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newly-acquired equipment, including for the acquisition, installation, qualification and validation of such equipment up to an aggregate amount outstanding at any time of $8,000,000;

 

(viii)        Indebtedness to employees in respect of benefit plans and employment and severance arrangements;

 

(ix)          a working capital facility (“Working Capital Facility”) not to exceed the aggregate sum of $30,000,000 secured by a Lien on Borrower’s and its Subsidiaries’ accounts receivables, the proceeds thereof and related property (but, in no event inventory), and in which the borrowing base thereunder is limited to not more than the sum of eighty five percent (85%) of the outstanding face amount of eligible accounts receivables and on such other terms reasonably acceptable to Lenders, which is subject to an intercreditor agreement between the provider of such Working Capital Facility and Lenders on terms reasonably acceptable to Lenders, including that Lenders have the option to purchase such Indebtedness at par after the occurrence of an event of default under the Working Capital Facility;

 

(x)           reimbursement obligations with respect to corporate credit cards;

 

(xi)          Subordinated Debt;

 

(xii)         to the extent constituting Indebtedness, Permitted Investments;

 

(xiii)        to the extent constituting Indebtedness, Indebtedness incurred in connection with the financing of insurance premiums;

 

(xiv)        Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

 

(xv)         (a) Indebtedness owing from any Subsidiary that is a guarantor to Borrower or any other Subsidiary that is a guarantor, (b) Indebtedness owing from a Subsidiary that is not a guarantor of the Obligations to any other Subsidiary that is not a guarantor of the Obligations, and (c) Indebtedness owing from any Subsidiary that is not a guarantor of the Obligations to Borrower or any Subsidiary that is a guarantor of the Obligations not to exceed $250,000 at any time outstanding;

 

(xvi)        other Indebtedness not to exceed $250,000 at any time outstanding; and

 

(xvii)       extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

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“Permitted Liens” means:

 

(i)            Liens existing on the Agreement Date and set forth on Exhibit B;

 

(ii)           Liens in favor of the Lenders;

 

(iii)          carriers’, warehousemen’s, landlord’s, mechanics’, construction, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business;

 

(iv)          Liens on accounts receivable, the proceeds thereof and property related thereto (but in no event inventory), securing the Indebtedness described in clause (ix) of the definition of Permitted Indebtedness;

 

(v)           Liens for taxes, assessments or governmental charges or levies not past due and payable or that are being contested in good faith by appropriate proceedings;

 

(vi)          Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default;

 

(vii)         Liens in favor of financial institutions arising in connection with the Borrower’s or its Subsidiaries’ accounts maintained in the ordinary course held at such institutions to secure standard fees for services charged by, but not financing made available by, such institutions;

 

(viii)        Liens, pledges or deposits in connection with workers’ compensation, unemployment insurance, old-age pensions, social security and other like obligations;

 

(ix)          Easements, rights of way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially interfere with the conduct of the business of the applicable Person;

 

(x)           Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code (or equivalent in foreign jurisdictions) on items in the course of collection;

 

(xi)          Liens in favor of lessors of equipment;

 

(xii)         Liens securing the Indebtedness permitted by clauses (vii), (x) (but only in cash in a segregated account in an amount not to exceed 110% of the applicable credit card credit limit), (xiii) (but only to the extent attaching to the relevant policies and amounts payable thereunder) and (xvi) (but only with respect to Indebtedness in an aggregate amount of less than $50,000 at any time outstanding) of the definition of Permitted Indebtedness;

 

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(xiii)        the filing of precautionary Uniform Commercial Code financing statements (or equivalent in foreign jurisdictions) in connection with operating leases and consignment arrangements;

 

(xiv)        Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

 

(xv)         Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or any Subsidiary in the ordinary course of business; and

 

(xvi)        deposits securing the performance of bids, trade contracts (other than for borrowed money), contracts for the purchase of property, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business and not representing an obligation for borrowed money.

 

“Person” means and includes any natural person, individual, partnership, limited partnership, joint venture, corporation, trust, limited liability company, limited company, joint stock company, unincorporated organization, government entity or any political subdivision or agency thereof, or any other entity.

 

“Register” has the meaning set forth in Section 1.4(b).

 

“Required Lenders” means, at any time, Lenders holding Loans representing more than 50% of the sum of the Loans outstanding.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.

 

“Security Agreement” means the Guaranty and Security Agreement of even date herewith among Borrower, its Subsidiaries, Deerfield Mgmt, L.P., as collateral agent for Lenders and Lenders.

 

“Subordinated Debt” means unsecured Indebtedness of the Borrower or a Subsidiary of Borrower in an amount approved by Lenders in their sole discretion subordinated to the Obligations, pursuant to subordination terms contained in a written subordination agreement with Lenders acceptable to the Lenders in their sole discretion.

 

“Subsidiary or Subsidiaries” means, as to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

 

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“Tax Affiliate” means (a) the Borrower and its Subsidiaries and (b) any Affiliate of the Borrower with which the Borrower files or is required to file consolidated, combined or unitary tax returns.

 

“Tax Return” has the meaning set forth in Section 3.1(o).

 

“Taxes” means all present or future taxes, levies, imposts, stamp or other duties, deductions, assessments, fees or other charges or withholdings imposed by any Governmental Authority, together with any interest, additions to tax or penalties applicable thereto.

 

Section 1.2            Interpretation.  In this Agreement, unless the context otherwise requires, all words and personal pronouns relating thereto shall be read and construed as the number and gender of the party or parties requires and the verb shall be read and construed as agreeing with the required word and pronoun; the division of this Agreement into Articles and Sections and the use of headings and captions is for convenience of reference only and shall not modify or affect the interpretation or construction of this Agreement or any of its provisions; the words “herein,” “hereof,” “hereunder,” “hereinafter” and “hereto” and words of similar import refer to this Agreement as a whole and not to any particular Article or Section hereof; the words “include,” “including,” and derivations thereof shall be deemed to have the phrase “without limitation” attached thereto unless otherwise expressly stated; references to a specified Article, Exhibit, Section or Schedule shall be construed as a reference to that specified Article, Exhibit, Section or Schedule of this Agreement; and any reference to any of the Loan Documents means such document as the same shall be amended, supplemented or modified and from time to time in effect.

 

Section 1.3            Business Day Adjustment.  If the day by which any payment or other performance is due to be made is not a Business Day, that payment or performance shall be made by the next succeeding Business Day.

 

Section 1.4

 

(a)           The Borrower shall record on its books and records the amount of the Loan, the interest rate applicable, all payments of principal and interest thereon and the principal balance thereof from time to time outstanding.

 

(b)           The Borrower shall establish and maintain at its address referred to in Section 6.1, a record of ownership (the “Register”) in which the Borrower agrees to register by book entry the interests (including any rights to receive payment hereunder) of each Lender in the Loan, and any assignment of any such interest, and accounts in the Register in accordance with its usual practice in which it shall record (1) the names and addresses of the Lenders (and any change thereto pursuant to this Agreement), (2) the amount of the Loan and each funding of any participation therein, (3) the amount of any principal or interest due and payable or paid, and (4) any other payment received by the Lenders from the Borrower and its application to the Loan.

 

(c)           Notwithstanding anything to the contrary contained in this Agreement, the Loan (including any Notes evidencing the Loan) is a registered obligation, the right, title and interest of the Lenders and their assignees in and to the Loan shall be transferable

 

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only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein.  This Section 1.4 shall be construed so that the Loan is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and Treasury Regulations Section 5f.103-1(c).

 

(d)           The Borrower and the Lenders shall treat each Person whose name is recorded in the Register as a Lender for all purposes of this Agreement.  Information contained in the Register with respect to any Lender shall be available for access by the Borrower or such Lender at any reasonable time and from time to time upon reasonable prior written notice.

 

ARTICLE 2

 

AGREEMENT FOR THE LOAN

 

Section 2.1            Use of Proceeds.  The proceeds of the Loan will be used for repayment of existing Indebtedness to the Existing Lenders, for working capital and for general corporate purposes.

 

Section 2.2            Disbursement.  Subject to the conditions set forth in Article 4 and this Section 2.2, the Lenders shall disburse Loans to the Borrower (“Disbursement”) on the date of this Agreement upon receipt from the Borrower of a written request (“Disbursement Request”) for the Disbursement and stating that no Event of Default has occurred and is continuing.  The Lenders shall fulfill the Disbursement in accordance with their respective allocations set forth on Schedule 1 hereto.

 

Section 2.3            Payment.

 

(a)           Borrowers shall repay the outstanding principal amount of the Loan in three equal annual installments in the amount of $15,000,000 each, commencing on May    , 2019 and continuing on the same day of each year thereafter, together with a final payment of all outstanding principal and interest and all other outstanding Obligations due and payable on May    , 2022 (the “Maturity Date”).  Subject to Sections 2.3(b) and 2.3(c) Borrowers may prepay the Obligations in whole or in part at any time, from time to time.

 

(b)           The Borrower shall, subject to the provisions of this Section 2.3(b), prepay all of the outstanding Obligations upon the occurrence of a Change of Control.  Such prepayment shall be accompanied by all accrued and unpaid interest on the principal amount of the Notes prepaid, plus a prepayment fee in the amount of (i) the sum of 9.25% of the amount of principal prepaid plus all interest which, absent such prepayment, would have accrued on the principal amount of the Notes through the first anniversary of the Agreement Date, if such prepayment occurs prior to the first anniversary of the Agreement Date, (ii) 9.25% of the amount of principal prepaid if such prepayment occurs on or after the first anniversary of the Agreement Date, but prior to the second anniversary of the Agreement Date, (iii) 6.0% of the amount of the principal prepaid if such prepayment occurs on or after the second anniversary of the Agreement date but

 

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prior to the third anniversary of the Agreement Date; (iv) 2.75% of the amount of the principal prepaid if such prepayment occurs on or after the third anniversary of the Agreement Date but prior to the fourth anniversary of the Agreement Date and (v) 2.0% of the amount of the principal prepaid on or after the fourth anniversary of the Agreement Date.

 

(c)           Any other prepayment of the Obligations whether voluntary or as a result of acceleration of the Obligations upon the occurrence of an Event of Default shall be accompanied by all accrued and unpaid interest on the principal amount of the Notes prepaid, plus a prepayment fee in the amount of (i) 9.75% of the amount of principal prepaid, plus all interest which, absent such prepayment, would have accrued on the principal amount of the Notes prepaid through the third anniversary of the Agreement Date, if such prepayment occurs prior to the third anniversary of the Agreement Date, (ii) 9.75% of the amount of principal prepaid if such prepayment occurs on or after the third anniversary of the Agreement Date, but prior to the fourth anniversary of the Agreement Date, (iii) 6.5% of the amount of the principal prepaid if such prepayment occurs on or after the fourth anniversary of the Agreement Date but prior to the fifth anniversary of the Agreement Date; and (iv) 3.25% the amount of the principal prepaid if such prepayment occurs on or after the fifth anniversary of the Agreement Date.  Borrowers shall provide Lenders thirty days prior written notice of any voluntary prepayment of the Obligations.

 

(d)           Each prepayment by the Borrower shall be applied first, to accrued and unpaid interest and second, to outstanding principal and shall be allocated among the Lenders in accordance with their respective allocations set forth on Schedule 1 hereto.

 

Section 2.4            Payments.  All payments by the Borrower hereunder and under any of the Loan Documents shall be made without setoff or counterclaim.  Payments of any amounts due to the Lenders under this Agreement shall be made in Dollars in immediately available funds prior to 1:00 p.m. New York City time on such date that any such payment is due, at such bank or places as the Lenders shall from time to time designate in writing at least 5 Business Days prior to the date such payment is due.  The Borrower shall pay all and any costs (administrative or otherwise) imposed by banks, clearing houses, or any other financial institution, in connection with making any payments under any of the Loan Documents, except for any costs imposed by the Lenders’ banking institutions.

 

Section 2.5            Taxes.

 

(a)           Any and all payments hereunder or under any other Loan Document shall be made, in accordance with this Section 2.5, free and clear of and without deduction for any and all present or future Taxes except as required by Applicable Law.  If Borrower shall be required by Applicable Law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document, (i) Borrower shall make such deductions, (ii) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law, and (iii) to the extent that the deduction is made on account of Indemnified Taxes, the sum payable shall be increased by as much as shall be necessary so that after making all required deductions(including deductions for Taxes applicable to additional sums payable under

 

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this Section 2.5), each Lender shall receive an amount equal to the sum it would have received had no such deductions been made (any and all such additional amounts payable shall hereinafter be referred to as the “Additional Amounts”).  Within thirty (30) days after the date of any payment of such Taxes, Borrower shall furnish to the applicable Lender the original or a certified copy of a receipt evidencing payment thereof or other evidence of such payment reasonably satisfactory to such Lender.

 

(b)           Borrower agrees to pay and authorizes each Lender to pay in its name (but without duplication), all Other Taxes.  If Borrower directly pays such Other Taxes within 30 days after the date of any payment of Other Taxes, Borrower shall furnish to the applicable Lender the original or a certified copy of a receipt evidencing payment thereof or other evidence of such payment reasonably satisfactory to such Lender.

 

(c)           Without duplication with respect to any Additional Amounts, Borrower shall reimburse and indemnify, within 10 days after receipt of demand therefor, each Lender for all Indemnified Taxes (including all Indemnified Taxes imposed on amounts payable under this Section 2.5(c)) paid by such Lender, whether or not such Indemnified Taxes were correctly or legally asserted.  A certificate of the applicable Lender(s) setting forth the amounts to be paid thereunder and delivered to Borrower shall be conclusive, absent manifest error.

 

(d)           Each Lender that is a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for United States federal income tax purposes shall, on or before the date on which the Lender becomes a party to this Agreement, provide to Borrower a properly completed and executed IRS Form W-9 certifying that such Lender is not subject to backup withholding tax.  Each Lender that is not a United States person for United States federal income tax purposes (a “Foreign Lender”) and is entitled to an exemption from or reduction of United States withholding tax with respect to payments under this Agreement shall, on or before the date on which the Lender becomes a party to this Agreement, provide Borrower with a properly completed and executed IRS Form W-8ECI, W-8BEN, W-BENE, W-8IMY or other applicable forms (together with any required supporting documentation), or any other applicable certificate or document reasonably requested by the Borrower, and, if such Foreign Lender is relying on the portfolio interest exception of Section 871(h) or Section 881(c) of the Code (or any successor provision thereto), shall also provide the Borrower with a certificate (a “Portfolio Interest Certificate”) representing that such Foreign Lender is not a “bank” for purposes of Section 881(c) of the Code (or any successor provision thereto), is not a 10% holder of the Borrower described in Section 871(h)(3)(B) of the Code (or any successor provision thereto), and is not a controlled foreign corporation receiving interest from a related person (within the meaning of Sections 881(c)(3)(C) and 864(d)(4) of the Code, or any successor provisions thereto).  Each Lender shall provide new forms (or successor forms) as reasonably requested by Borrower from time to time and shall notify Borrower in writing within a reasonable time after becoming aware of any event requiring a change in the most recent forms previously delivered by such Lender to Borrower.  If the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such

 

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Foreign Lender may provide a Portfolio Interest Certificate on behalf of such direct or indirect Partner.

 

(e)           If a payment to a Lender under this Agreement would be subject to United States withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA, such Lender shall deliver to Borrower, at the times prescribed by law or as reasonably requested by Borrower, such documentation as is required in order for Borrower to comply with its obligations under FATCA, to determine that such Lender has or has not complied with its obligations under FATCA, or to determine the amount to deduct and withhold from such payment.

 

(f)            If a Lender determines in its sole discretion, exercised in good faith, that it has received a refund from a Governmental Authority relating to Taxes in respect of which the Borrower paid Additional Amounts or made a payment pursuant to Sections 2.5(b) or 2.5(c) then, provided no Event of Default has occurred and is continuing, such Lender shall promptly pay such refund (limited to the amount paid by the Borrower under Section 2.5 with respect to the Taxes refunded) to the Borrower, net of all out-of-pocket expense (including Taxes) of such Lender incurred in obtaining such refund or making such payment, provided that the Borrower, upon the request of such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender if such Lender is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this Section 2.5(f), in no event shall a Lender be required to pay any amount to the Borrower pursuant to this Section 2.5(f), the payments of which would place the Lender in a less favorable net after-Tax position than the Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or Additional Amount with respect to such Tax had never been paid.  Nothing in this Section 2.5(f) shall require any Lender to disclose any information it deems confidential (including, without limitation, its tax returns) to any Person, including Borrower.

 

Section 2.6            [Reserved].

 

Section 2.7            Interest.  The outstanding principal amount of the Notes shall bear interest at the Interest Rate (calculated on the basis of a 360 day year for the actual number of days elapsed).  Interest shall be paid quarterly in arrears commencing on June 1, 2016 and on the first Business Day of each September, December, March and June thereafter (each, an “Interest Payment Date”) and on the Maturity Date.  Upon thirty days prior written notice from the Borrower to the Lenders prior to any of the first four Interest Payment Dates, Interest otherwise payable on such Interest Payment Date shall not be paid but shall be added to the then outstanding principal amount of the Loans (the aggregate amount of such interest added to principal and all interest accruing thereon, the “Accrued Interest Amount”).   The Accrued Interest Amount shall be paid on June 1, 2017.

 

Section 2.8            Default Interest; Late Payment Fee.  Without limiting the remedies available to the Lenders under the Loan Documents or otherwise, to the maximum extent permitted by applicable law, if an Event of Default occurs and is continuing, at the Lender’s

 

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election, the amount outstanding under and in respect of the Notes (which shall include all outstanding principal thereunder, together with any interest and other amounts due and payable with respect to the Notes and not paid when due), shall bear interest at the rate per annum equal to the Interest Rate plus 5.00%.  In addition to the foregoing, the Borrower shall pay a late fee on any amount (other than principal) not paid when due (including after giving effect to any grace period provided hereunder) equal to 10% of such overdue amount.

 

Section 2.9            Fee.  In consideration of Lenders’ agreement to extend the Loan to Borrower, Borrower shall pay to Lenders on the Agreement Date, a yield enhancement payment in the amount of $1,350,000, which yield enhancement payment will be deducted by Lenders from the Disbursement.  Borrower agrees to reimburse the Lenders for reasonable, documented out-of-pocket expenses for attorneys, accountants and other professional advisors, and other reasonable documented out-of-pocket expenses incurred by Lenders (i) in connection with their due diligence, negotiation and documentation of the transactions contemplated by the Loan Documents (including their review, negotiation and documentation of any post-closing obligations of the Borrower) and (ii) in connection with all amendments and modifications thereto, whether or not consummated.  At Lender’s election such reimbursable amounts may be deducted from the Disbursement.  The provisions of this Section 2.9 supersede and replace in its entirety that certain Expense Reimbursement Agreement, dated as of April 7, 2016, Neos Therapeutics, Inc. and Deerfield Management Company, L.P. (Series C).

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES

 

Section 3.1            Representations and Warranties of the Borrower.  The Borrower represents and warrants to the Lenders that, except as set forth in a Schedule to this Agreement:

 

(a)           The Borrower and its Subsidiaries are conducting their business in compliance with their Organizational Documents, which are in full force and effect.

 

(b)           No Default or Event of Default has occurred and is continuing.

 

(c)           The Borrower and its Subsidiaries (i) are (taken as a whole), on a consolidated basis, capable of paying their debts as they fall due in the ordinary course of business, (ii) have not admitted their inability in writing to pay their debts as they fall due in the ordinary course of business, and (iii) have not taken action, and no such action has been taken by a third party, for the Borrower’s or any Subsidiary’s winding up, dissolution, or liquidation or similar executory or judicial proceeding or for the appointment of a liquidator, custodian, receiver, trustee, administrator or other similar officer for the Borrower, any Subsidiary or any material portion of or all of their assets or revenues.

 

(d)           No Lien exists on the Borrower’s or any Subsidiary’s assets, except for Permitted Liens.

 

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(e)           The obligation of the Borrower to make any payment under this Agreement (together with all charges in connection therewith) is absolute and unconditional.

 

(f)            No Indebtedness of the Borrower or any Subsidiary exists other than Permitted Indebtedness.

 

(g)           The Borrower is validly existing as a corporation in good standing under the laws of the state of Delaware.  The Borrower and its Subsidiaries have full power and authority to own their properties, conduct their business and enter into the Loan Documents and to consummate the transactions contemplated under the Loan Documents, and are duly qualified to do business as a foreign entity and are in good standing in each jurisdiction where the failure to be so qualified could reasonably be expected to result in a Material Adverse Effect.

 

(h)           There is not pending or, to the knowledge of the Borrower, threatened in writing, any action, suit, hearings or other proceeding before any Governmental Authority (a) to which the Borrower or any of its Subsidiaries is a party or (b) which has as the subject thereof any assets owned by the Borrower or any of its Subsidiaries, except, in each case, as would not reasonably be expected to result in a Material Adverse Effect.  Except as set forth on Schedule 3.1(h), there are no current or, to the knowledge of the Borrower, pending, legal, governmental or regulatory enforcement actions, suits or other proceedings to which the Borrower or any of its Subsidiaries or any of their assets is subject, except as would not reasonably be expected to result in a Material Adverse Effect.

 

(i)            The Loan Documents have been duly authorized, executed and delivered by the Borrower and each Subsidiary a party thereto, and constitute the valid, legal and binding obligation of the Borrower and its Subsidiaries party thereto, enforceable in accordance with their terms, except as such enforceability may be limited by applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law).  The execution, delivery and performance of the Loan Documents by the Borrower and its Subsidiaries and the consummation of the transactions therein contemplated will not (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute an event of default under, or result in the creation or imposition of any Lien (other than pursuant to the Loan Documents) upon any assets of the Borrower or any of its Subsidiaries pursuant to, any material agreement to which the Borrower or any Subsidiary is a party or by which the Borrower or any of its Subsidiaries are bound or to which any of the assets of the Borrower or any Subsidiary is subject, except to the extent that no Material Adverse Effect would reasonably be expected to result therefrom, (B) result in any violation of or conflict with the provisions of the Organizational Documents, (C) result in the violation of any material Applicable Law or (D) result in the violation of any judgment, order, rule, regulation or decree of any Governmental Authority.  No consent, approval, authorization or order of, or registration or filing with any Governmental Authority or other party is required for the execution, delivery and performance of any of the Loan Documents or for the consummation by the Borrower

 

17

 

and its Subsidiaries of the transactions contemplated hereby except for (a) such registrations and filings contemplated by the Security Agreement, (b) as have been obtained or made prior to the date hereof or (c) the failure of which to obtain or make would not reasonably be expected to result in a Material Adverse Effect and the Borrower has the power and authority to enter into the Loan Documents and to consummate the transactions contemplated under the Loan Documents.

 

(j)            [Reserved].

 

(k)           The Borrower and each of its Subsidiaries holds or has applied for, and is operating in good standing and in compliance in all material respects with, all franchises, grants, authorizations, licenses, permits, easements, consents, certificates and orders of any Governmental Authority required for the conduct of its business the failure of which to obtain would reasonably be expected to result in a Material Adverse Effect (collectively, “Necessary Documents”) and all Necessary Documents are valid and in full force and effect; and neither the Borrower not any Subsidiary has received written notice of any revocation or modification of any of the Necessary Documents and neither the Borrower nor any Subsidiary has any reason to believe that any of the Necessary Documents will not be renewed in the ordinary course of business, and each of the Borrower and its Subsidiaries are in compliance in all material respects with all applicable federal, state, local and foreign laws, regulations, orders and decrees applicable to the conduct of its business.

 

(l)            The Borrower and its Subsidiaries have good and marketable title to all of their assets free and clear of all Liens except Permitted Liens.  To Borrower’s knowledge, except as could not reasonably be expected to have a Material Adverse Effect, the property held under lease by the Borrower or any Subsidiary is held under valid, subsisting and enforceable leases with only such exceptions with respect to any particular lease as do not interfere in any material respect with the conduct of the business of the Borrower or any Subsidiary.

 

(m)          Other than as disclosed in any Paragraph IV Certification made in connection with a new drug application, the Borrower and its Subsidiaries own or, where a license is required, have the right to use pursuant to a valid and enforceable written license, implied license or other legally enforceable right, all of the Intellectual Property (as defined below) that they have publicly described as being owned or licensed by them (the “Company IP”) or, to the knowledge of the Borrower, that is necessary for the conduct of their business as currently conducted (the “IP”).  To the knowledge of the Borrower, other than as disclosed in any Paragraph IV Certification made in connection with a new drug application, the Company IP that is registered with or issued by a Governmental Authority is enforceable; there is no outstanding, pending or, to the knowledge of the Borrower, threatened in writing action, suit, other proceeding or claim by any third person challenging or contesting the validity, scope, use, ownership, enforceability, or other rights of the Borrower or any Subsidiary in or to any Company IP and neither the Borrower nor any Subsidiary has received any written notice regarding, any such action, suit, or other proceeding.  To the knowledge of the Borrower, other than as disclosed in any Paragraph IV Certification made in connection with a new drug

 

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application, neither the Borrower nor any Subsidiary has infringed or misappropriated any material rights of others.  There is no pending or, to the knowledge of Borrower, threatened in writing action, suit, other proceeding or claim by others that the Borrower or any Subsidiary infringes upon, violates or uses the Intellectual Property rights of others without authorization, and neither the Borrower nor any Subsidiary has received any written notice regarding, any such action, suit, other proceeding or claim.  Except as set forth on Schedule 3.1(m), neither the Borrower nor any Subsidiary is a party to or bound by any material licenses with respect to IP other than licenses for computer software acquired in the ordinary course of business.  The term “Intellectual Property” as used herein means (i) all patents, patent applications, patent disclosures and inventions (whether patentable or unpatentable and whether or not reduced to practice), (ii) all trademarks, service marks, trade dress, trade names, slogans, logos, and corporate names and Internet domain names, together with all of the goodwill associated with each of the foregoing, (iii) copyrights, copyrightable works, and licenses, (iv) registrations and applications for registration for any of the foregoing, (v) computer software (including but not limited to source code and object code), data, databases, and documentation thereof, (vi) trade secrets and other confidential information, (vii) other intellectual property, and (viii) copies and tangible embodiments of the foregoing (in whatever form and medium).

 

(n)           Neither the Borrower nor any of its Subsidiaries is in violation of the Organizational Documents, or, except as could not reasonably be expected to have a Material Adverse Effect, in breach of or otherwise in default under any material agreement under which it may be bound, or to which any of its assets is subject.

 

(o)           All federal and state income and franchise and all other material Tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed by any Tax Affiliates or extensions have been filed with the appropriate Governmental Authorities, all such Tax Returns are true and correct in all material respects, and all Taxes, assessments and other governmental charges and impositions reflected therein and all other material Taxes, assessments and other governmental charges otherwise due and payable have been paid prior to the date on which any liability may be added thereto for non-payment thereof except for those contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves are maintained on the books of the appropriate Tax Affiliate in accordance with GAAP.  As of the Agreement Date, no income or franchise Tax Return or other material Tax Return of the Borrower or any other Tax Affiliate is under audit by any Governmental Authority, and no Tax Affiliate has received written notice from any Governmental Authority of any audit or examination or any assertion of any material claim for Taxes.  No Tax Affiliate has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b) or has been a member of an affiliated, combined or unitary group other than the group of which a Tax Affiliate is the common parent.

 

(p)           Other than as set forth in Schedule 3.1(p), neither the Borrower nor any Subsidiary has granted rights to market or sell its services to any other Person, and are not bound by any agreement that affects the exclusive right of the Borrower or any Subsidiary to develop, license, market or sell its services.

 

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(q)           Other than as set forth in Schedule 3.1(q), each of the Borrower and its Subsidiaries:  (A) are, as of the date hereof, in compliance with all Applicable Laws in all material respects; (B) has not received any warning letter or other correspondence or notice from any Governmental Authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required in connection with the business of the Borrower or its Subsidiaries by any Applicable Laws (together, the “Authorizations”); (C) possesses and complies in all material respects with the Authorizations, which are valid and in full force and effect (other than those Authorizations for which applications have been submitted but which have not yet been issued), in each case, except as would not reasonably be expected to result in a Material Adverse Effect; (D) has not received written notice that any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorization; (E) has filed, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations as and when required, except, in each case, as would not reasonably be expected to result in a Material Adverse Effect.

 

(r)            The audited financial statements of the Borrower and its Subsidiaries as of December 31, 2014 and as of December 31, 2015, together with the related notes fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of operations and changes in cash flows for the periods therein specified in conformity with GAAP consistently applied throughout the periods involved.

 

(s)            (i) To the knowledge of the Borrower, no “prohibited transaction” as defined under Section 406 of ERISA or Section 4975 of the Code that is not exempt under ERISA Section 408 or Section 4975 of the Code, under any applicable regulations and published interpretations thereunder or under any applicable prohibited transaction, individual or class exemption issued by the Department of Labor, has occurred with respect to any Employee Benefit Plan, except as for such transaction that would not reasonably be expected to have a Material Adverse Effect, (ii) at no time within the last seven (7) years has the Borrower or any ERISA Affiliate maintained, sponsored, participated in, contributed to or has or had any liability or obligation in respect of any Employee Benefit Plan subject to Section 302 of ERISA, Title IV of ERISA, or Section 412 of the Code or any “multiemployer plan” as defined in Section 3(37) of ERISA, (iii) no Employee Benefit Plan represents any current or future liability for retiree health, life insurance, or other retiree welfare benefits except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state law, (iv) each Employee Benefit Plan is and has been operated in compliance with its terms and all Applicable Laws, including but not limited to ERISA and the Code, except for such failures to comply that would not reasonably be expected to have a Material Adverse Effect, (v) no event has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists that would subject the Borrower to any tax, fine, lien, penalty or liability imposed by ERISA, the Code or other Applicable Law, except for any such tax, fine, lien, penalty or liability that would not reasonably be

 

20

 

expected to, individually or in the aggregate, have a Material Adverse Effect and (vi)  the Borrower does not have any obligations under any collective bargaining agreement.  As used in this clause (t), “Employee Benefit Plan” means any material “employee benefit plan” within the meaning of Section 3(3) of ERISA, and all stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, under which (A) any current or former employee, director or independent contractor of the Borrower or any of its Subsidiaries has any present or future right to benefits and which are contributed to, sponsored by or maintained by the Borrower or any of its respective Subsidiaries or (B) the Borrower or any of its Subsidiaries has had or has any present or future obligation or liability on behalf of any such employee, director or independent contractor; “ERISA” means the Employee Retirement Income Security Act of 1974, as amended; “ERISA Affiliate” means any member of the Borrower’s controlled group as defined in Code Section 414 (b), (c), (m) or (o); and “Foreign Benefit Plan” means any Employee Benefit Plan mandated by a government other than the United States of America is subject to the laws or a jurisdiction outside of the United States.

 

(t)            The Borrower’s Subsidiaries are set forth in Schedule 3.1(t).

 

(u)           Compliance with Health Care Laws.  Other than as set forth in Schedule 3.1(u), each of Borrower and its Subsidiaries is in compliance in all material respects with all Health Care Laws applicable to it, its assets, business or operations.

 

(v)           Health Care Permits.  Each of Borrower and its Subsidiaries holds all Health Care Permits necessary for it to own, lease, sublease or operate its assets or to conduct its business or operations as presently conducted.  All such Health Care Permits are in full force and effect and there is and has been no default under, violation of, or other noncompliance with the terms and conditions of any such Health Care Permit except as would not reasonably be expected to result in a Material Adverse Effect.  No Governmental Authority has taken, or to the knowledge of Borrower intends to take, action to suspend, revoke, terminate, place on probation, materially restrict or not renew any material Health Care Permit of Borrower or any of its subsidiaries.

 

(w)          [Reserved].

 

(x)           Proceedings; Audits.  Other than as set forth on Schedule 3.1(x), there are no pending (or, to the knowledge of Borrower, threatened in writing) audits, actions, hearings or proceedings (collectively, “Proceedings”) against or affecting Borrower or any of its Subsidiaries relating to any actual or alleged non-compliance with any Health Care Law.  There exist no restrictions, deficiencies, required plans of correction or other such remedial measures with respect to any material Health Care Permit of Borrower or any of its Subsidiaries.

 

Section 3.2            Borrower Acknowledgment.  The Borrower acknowledges that it has made the representations and warranties referred to in Section 3.1 with the intention of

 

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persuading the Lenders to enter into the Loan Documents and that the Lenders have entered into the Loan Documents on the basis of, and in full reliance on, each of such representations and warranties and such representations and warranties shall survive the execution of this Agreement until the Obligations are repaid in full.

 

Section 3.3            Representations and Warranties of the Lenders.  Each Lender represents and warrants to the Borrower as of the Agreement Date that:

 

(a)           Such Lender is duly organized and validly existing under the laws of the jurisdiction of its formation.

 

(b)           Each Loan Document to which it is a party has been duly authorized, executed and delivered by such Lender and constitutes the valid and legally binding obligation of such Lender, enforceable in accordance with its terms, except as such enforceability may be limited by (i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting creditors’ rights generally, and (ii) applicable equitable principles (whether considered in a proceeding at law or in equity).

 

(c)           Such Lender has full power and authority to make each Disbursement and to enter into and perform its other obligations under each of the Loan Documents and carry out the other transactions contemplated thereby.

 

ARTICLE 4

 

CONDITIONS OF DISBURSEMENT

 

Section 4.1            Conditions to the Disbursement.  The obligation of the Lenders to make the Disbursement shall be subject to the fulfillment of the following conditions:

 

(a)           The Lenders shall have received executed counterparts of the Loan Documents from the Borrower and its Subsidiaries, and the other documents and deliveries set forth on the Closing Checklist attached hereto as Exhibit C;

 

(b)           No Event of Default shall have occurred and be continuing;

 

(c)           All of the representations and warranties set forth in Section 3.1 shall be true and correct in all material respects (except for representations or warranties which relate to a specific date, in which case such representations and warranties shall have been true and correct in all material respects as of such date); and

 

(d)           All existing Indebtedness of Borrower to the Existing Lenders pursuant to the Existing Loan Documents shall be satisfied with the proceeds of the Loans on the Agreement Date.

 

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ARTICLE 5

 

PARTICULAR COVENANTS AND EVENTS OF DEFAULT

 

Section 5.1            Affirmative Covenants.  Unless the Required Lenders shall otherwise agree:

 

(i)            The Borrower shall and shall cause its Subsidiaries to maintain its existence and qualify and remain qualified to do its business as currently conducted, except for any merger or dissolution of a Subsidiary in accordance with Section 5.2(i) and except where the failure to so qualify would not reasonably be expected to result in a Material Adverse Effect.

 

(ii)           The Borrower shall and shall cause its Subsidiaries to comply in all material respects with all Applicable Laws, except where the necessity of compliance therewith is contested in good faith by appropriate proceedings diligently pursued or where such noncompliance would not reasonably be expected to have a Material Adverse Effect.

 

(iii)          The Borrower shall obtain and shall cause its Subsidiaries to obtain and keep in full force and effect all Authorizations, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

 

(iv)          The Borrower shall promptly notify the Lenders of the occurrence of (i) any Event of Default and (ii) any claims, litigation, arbitration, mediation or administrative or regulatory proceedings that are instituted or threatened in writing against the Borrower or any of its Subsidiaries in which an adverse decision would reasonably be expected to result in a Material Adverse Effect.

 

(v)           If the Borrower is not required to file reports pursuant to Sections 13 or 15(d) of the Exchange Act, the Borrower will provide to the Lenders quarterly financial statements for itself and its Subsidiaries within 45 days after the end of each quarter, and audited annual financial statements within 120 days after the end of each fiscal year prepared in accordance with GAAP with a report thereon by the Borrower’s independent certified public accountants.  If the Borrower is required to file such reports, the Borrower will timely file with the SEC (subject to appropriate extensions made under Rule 12b-25 of the Exchange Act) any annual reports, quarterly reports and other periodic reports required to be filed by Borrower pursuant to Section 13 or 15(d) of the Exchange Act, and the Borrower and its Subsidiaries will provide to the Lenders copies of all documents, reports, financial data and other information not available on the SEC EDGAR system and not containing any material non-public information generally prepared in the ordinary course of the Borrower’s business that the Lenders may reasonably request.

 

(vi)          The Borrower shall reimburse Lenders on the Agreement Date for all reasonable documented out-of-pocket costs, fees and expenses, including

 

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reasonable documented out-of-pocket attorneys’ fees and expenses, in connection with the negotiation, documentation and closing of this Agreement and the other Loan Documents.

 

(vii)         The Borrower shall at all times maintain cash on deposit in accounts subject to a Control Agreement (as defined in the Security Agreement) in favor of Lenders of not less than $5,000,000.

 

Section 5.2            Negative Covenants.  Unless the Required Lenders shall otherwise agree:

 

(i)            The Borrower shall not and shall not permit any Subsidiary to (a) liquidate, provided that a Subsidiary may merge into the Borrower or any other Subsidiary, or dissolve (unless such Subsidiary ceases to own any operating assets or conduct business), or (b) enter into any merger, consolidation or reorganization, unless the Borrower or a Subsidiary is the surviving corporation.  The Borrower shall not establish any Subsidiary unless any such Subsidiary organized under the laws of the United States of America executes and delivers to the Lenders a Security Agreement substantially in the form delivered to the Lenders by the Borrower and its Subsidiaries on the Agreement Date and takes all steps required to grant the Lenders a Lien on all of its assets (other than Excluded Assets).

 

(ii)           The Borrower shall not, and shall not permit any Subsidiary to, (a) except for Excluded Transactions, enter into any partnership, joint venture, syndicate, pool, profit-sharing or royalty agreement or other combination, or engage in any transaction with any stockholder of the Borrower, any Affiliate of the Borrower or any equity holder of such Affiliate, whereby its income or profits are, or might be, shared with another Person other than a wholly owned Subsidiary (other than royalty agreements with owners of IP resulting from the challenge of any Paragraph IV Certification made in connection with a new drug application), (b) enter into any management contract or similar arrangement whereby a substantial part of its business is managed by another Person, or (c) distribute, or permit the distribution of, any of its assets, including its intangibles, to any stockholder of the Borrower, any Affiliate of the Borrower or any equity holder of such Affiliate other than (x) as may be required under an Employee Benefit Plan (as defined in Section 3.1(s)) or (y) any Tax distributions by any Subsidiary to permit Borrower to pay any Tax liabilities with respect to the income of such Subsidiary.

 

(iii)          The Borrower shall not and shall not permit any Subsidiary to (a) create, incur or suffer any Lien upon any of its assets, except Permitted Liens or (b) assign, sell, transfer or otherwise dispose of, any Loan Document, or its rights and obligations thereunder.

 

(iv)          The Borrower shall not and shall not permit any Subsidiary to create, incur, assume, guarantee or be liable with respect to any Indebtedness, other than Permitted Indebtedness.

 

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(v)           The Borrower shall not and shall not permit any Subsidiary to acquire any assets (other than assets acquired in the ordinary course of business), directly or indirectly, in one or more related transactions, for a consideration, in cash or other property (valued at its fair market value) greater than $500,000.

 

(vi)          The Borrower shall not and shall not permit any Subsidiary to sell or otherwise transfer any of their respective assets other than:

 

(A)          in the ordinary course of business, including sales of inventory, and sales, transfers and other dispositions of used, surplus, obsolete or outmoded machinery or equipment;

 

(B)          sales or transfers to the Borrower or any Subsidiary if such Subsidiary is a Grantor and Guarantor (as defined in the Security Agreement) party to the Security Agreement;

 

(C)          the sale or discount of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and not in connection with any financing transaction;

 

(D)          dispositions of assets subject to any casualty or condemnation proceeding (including in lieu thereof);

 

(E)           leases or subleases of real property granted by the Borrower or any Subsidiary to third Persons not interfering in any material respect with the business of the Borrower or any Subsidiary;

 

(F)           Excluded Transactions;

 

(G)          the use or transfer of cash or cash equivalents in a manner not otherwise prohibited under the Loan Documents;

 

(H)          sales, transfers or issuances of equity interests not resulting in a Change of Control; and

 

(I)            Other dispositions or transfers having a fair market value not to exceed $250,000 per fiscal year.

 

Section 5.3            [Reserved.]

 

Section 5.4            General Acceleration Provision upon Events of Default.  If one or more of the events specified in this Section 5.4 shall have happened and be continuing beyond the applicable cure period (each, an “Event of Default”), the Required Lenders, by written notice to the Borrower, may declare the outstanding principal of, and accrued and unpaid interest on, all of the Notes or any part of any of them (together with any other amounts accrued or payable under the Loan Documents) to be, and the same shall thereupon become, immediately due and payable, without any further notice and without any presentment, demand, or protest of any kind, all of which are hereby expressly waived by the Borrower, and take any further action available at law

 

25

 

or in equity, including, without limitation, the sale of the Loan and all other rights acquired in connection with the Loan:

 

(a)           The Borrower shall have failed to (i) make payment of principal or interest under the Notes when due and payable or (ii) pay any other Obligations under the Loan Documents within five (5) Business Days of the date when due.

 

(b)           The Borrower shall have failed to comply with the due observance or performance of any covenant contained in any Loan Document (other than the covenants described in (a) above), and such failure shall not have been cured by the Borrower within 20 days after receiving written notice of such failure from the Lenders.

 

(c)           Any representation or warranty made by the Borrower in any Loan Document shall have been incorrect, false or misleading in any material respect (except to the extent that such representation or warranty is qualified by reference to materiality or Material Adverse Effect, to which extent it shall have been incorrect, false or misleading in any respect) as of the date it was made.

 

(d)           (i) The Borrower shall generally be unable to pay its debts as such debts become due in the ordinary course of business, or shall admit in writing its inability to pay its debts as they come due or shall make a general assignment for the benefit of creditors; (ii) the Borrower shall declare a moratorium on the payment of its debts; (iii) the commencement by the Borrower of proceedings to be adjudicated bankrupt or insolvent, or the consent by it to the commencement of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, intervention or other similar relief under any applicable law, or the consent by it to the filing of any such petition or to the appointment of an intervenor, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of all or substantially all of its assets; (iv) the commencement against the Borrower of a proceeding in any court of competent jurisdiction under any bankruptcy or other applicable law (as now or hereafter in effect) seeking its liquidation, winding up, dissolution, reorganization, arrangement, adjustment, or the appointment of an intervenor, receiver, liquidator, assignee, trustee, sequestrator (or other similar official), and any such proceeding shall continue undismissed, or any order, judgment or decree approving or ordering any of the foregoing shall continue unstayed or otherwise in effect, for a period of sixty (60) days; (v) the making by the Borrower of an assignment for the benefit of creditors.

 

(e)           One or more final uninsured judgments in excess of $500,000 against the Borrower or any Subsidiary or attachments against any of their respective property remain(s) unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 30 days from the date of entry of such judgment.

 

(f)            Any material authorization of a Government Authority necessary for the execution, delivery or performance of any Loan Document or for the validity or enforceability of any of the Obligations under any Loan Document is not given or is withdrawn or ceases to remain in full force or effect.

 

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(g)           The validity of any Loan Document shall be contested by the Borrower, or any Applicable Law shall render any Loan Document invalid or unenforceable or shall cause the Obligations to cease to be in full force and effect.

 

(h)           There is a failure to perform in any agreement involving obligations in excess of $500,000 of the Borrower or any Subsidiary to which the Borrower or any Subsidiary is a party with a third party or parties resulting in such third party’s or parties acceleration of the maturity of any Indebtedness for borrowed money in an amount in excess of $500,000.

 

(i)            If any Governmental Authority issues any injunction or other order that prohibits Borrower or its Subsidiaries from marketing, selling or manufacturing any of Borrower’s products currently approved by the FDA or any future products of Borrower or its Subsidiaries once approved by the FDA (collectively, the “Commercial Products”) if sales of such products covered by such injunction or order accounted for more than 50% of total sales revenue of Borrower and its Subsidiaries for the most recently ended four fiscal quarter periods, and such injunction or other prohibition shall continue to be in force or otherwise effective for more than 60 consecutive calendar days; provided, however, that with respect to manufacturing, if there is one or more alternative manufacturers of the Commercial Product manufacturing on Borrower’s or its Subsidiaries’ behalf that is not enjoined or otherwise prohibited from manufacturing the Commercial Product and are able to deliver product on Borrower’s or its Subsidiaries’ behalf in a manner that is consistent with prior levels without a commercial distribution delay, it shall not be an Event of Default under this clause (i) if the Borrower or any of its Subsidiaries are enjoined or otherwise prohibited from manufacturing the Commercial Product.

 

Section 5.5            Automatic Acceleration on Dissolution or Bankruptcy.  Notwithstanding any other provisions of this Agreement, if an Event of Default under Section 5.4(d) shall occur, the principal of the Notes (together with any other amounts accrued or payable under this Agreement) shall thereupon become immediately due and payable without any presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower.

 

Section 5.6            Recovery of Amounts Due.  If any amount payable hereunder is not paid as and when due, the Borrower hereby authorizes the Lenders to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker’s lien or counterclaim, against any moneys or other assets of the Borrower to the full extent of all amounts payable to the Lenders.

 

ARTICLE 6

 

MISCELLANEOUS

 

Section 6.1            Notices.  Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) or by facsimile or by

 

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electronic mail and shall be effective five (5) days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or by courier (including a recognized overnight delivery service) or by facsimile, or when received by electronic mail in each case addressed to a party.  The addresses for such communications shall be the following (or such other addresses provided by written notice to the parties hereto from time to time):

 

If to the Borrower:

 

Neos Therapeutics, Inc.

2940 N. Hwy 360, Suite 400

Grand Prairie, TX 75050

Fax:  (972) 408-1143

E-mail: reisenstadt@neostx.com

Attention:  Richard Eisenstadt

 

With a copy to:

 

Goodwin Procter LLP
 53 State Street
 Boston, MA 02109
 Fax: (617) 523-1231
 Email: adodson@goodwinprocter.com
 Attention: Anna E. Dodson, Esq.

 

If to the Lenders:

 

Deerfield Management Company, L.P.

780 Third Avenue, 37th Floor

New York, NY 10017

Fax:  212-599-3075

Email:  dclark@deerfield.com

Attn:  David J. Clark

 

With a copy to:

 

Katten Muchin Rosenman LLP
 575 Madison Avenue
 New York, New York 10022
 Fax:  (212) 940-8776
 Email:  mark.fisher@kattenlaw.com
 Attn:  Mark I. Fisher, Esq.

 

Section 6.2            Waiver of Notice.  Whenever any notice is required to be given to the Lenders or the Borrower under any of the Loan Documents, a waiver thereof in writing signed by the Person or Persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

 

28

 

Section 6.3            Reimbursement of Legal and Other Expenses.  If any amount owing to the Lenders under any Loan Document shall be collected through enforcement of this Agreement, any Loan Document or restructuring of the Loan in the nature of a work-out, settlement, negotiation, or any process of law, or shall be placed in the hands of third Persons for collection, the Borrower shall pay (in addition to all monies then due in respect of the Loan or otherwise payable under any Loan Document) all reasonable and documented external attorneys’ and other reasonable documented fees and out-of-pocket expenses incurred in respect of such collection.

 

Section 6.4            Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed in such State.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 

Section 6.5            Successors and Assigns.  This Agreement shall bind and inure to the respective successors and permitted assigns of the Parties, except that (a) the Borrower may not assign or otherwise transfer all or any part of its rights under the Loan Documents without the prior written consent of the Lenders; and (b) absent an Event of Default the Lenders may not assign or otherwise transfer all or part of their rights under the Loan Documents to any Person other than an investment fund managed by Deerfield Management, L.P., without the prior written consent of the Borrower (which consent shall not be unreasonably withheld).  Before any Lender assigns all or any part of its rights under this Agreement or the Notes to a party other than an investment fund managed by Deerfield Management, L.P., or there are more than five (5) Lenders, the Parties shall negotiate in good faith to amend this Agreement to appoint an administrative agent providing such agent and the Parties with rights and duties customary among syndicated credit facilities.  Upon a Lender’s assignment of a Note in accordance with the foregoing sentence, such Lender shall provide notice of a permitted transfer to Borrower for recordation in the Register pursuant to Section 1.4.  Upon receipt of a notice of a transfer of an interest in a Note, Borrower shall record the identity of the transferee and other relevant

 

29

 

information in the Register and the transferee shall (to the extent of the interests transferred to such transferee) have all the rights and obligations of, and shall be deemed, a Lender hereunder.

 

Section 6.6            Entire Agreement.  The Loan Documents contain the entire understanding of the Parties with respect to the matters covered thereby and supersede any and all other written and oral communications, negotiations, commitments and writings with respect thereto (including, without limitation, any agreement on the reimbursement of costs, etc. referenced in Section 2.9). The provisions of this Agreement may be waived, modified, supplemented or amended only by an instrument in writing signed by the authorized officer of each of Borrower and the Required Lenders.

 

Section 6.7            Severability.  If any provision of this Agreement shall be invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provision.

 

Section 6.8            Counterparts.  This Agreement may be executed in several counterparts, and by each Party on separate counterparts, each of which and any photocopies and facsimile copies thereof shall be deemed an original, but all of which together shall constitute one and the same agreement.

 

Section 6.9            Survival.

 

(a)           This Agreement and all agreements, representations and warranties made in the Loan Documents, and in any document, certificate or statement delivered pursuant thereto or in connection therewith shall be considered to have been relied upon by the other Parties and shall survive the execution and delivery of this Agreement and the making of the Loan hereunder, and shall continue in force until payment in full of the Obligations (other than inchoate indemnification or reimbursement obligations or other obligations which, by their terms, survive termination of this Agreement), and the Lenders shall not be deemed to have waived, by reason of making the Loan, any Event of Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that the Lenders may have had notice or knowledge of any such Event of Default or may have had notice or knowledge that such representation or warranty was false or misleading at the time the Disbursement was made.

 

(b)           The obligations of the Borrower under Sections 1.4 and 2.5 and the obligations of the Borrower and the Lenders under this Article 6 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loan, or the termination of this Agreement or any provision hereof.

 

Section 6.10         No Waiver.  Neither the failure of, nor any delay on the part of, any Party in exercising any right, power or privilege hereunder, or under any agreement, document or

 

30

 

instrument mentioned herein, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder, or under any agreement, document or instrument mentioned herein, preclude other or further exercise thereof or the exercise of any other right, power or privilege; nor shall any waiver of any right, power, privilege or default hereunder, or under any agreement, document or instrument mentioned herein, constitute a waiver of any other right, power, privilege or default or constitute a waiver of any default of the same or of any other term or provision.  No course of dealing and no delay in exercising, or omission to exercise, any right, power or remedy accruing to the Lenders upon any default under this Agreement, or any other agreement shall impair any such right, power or remedy or be construed to be a waiver thereof or an acquiescence therein; nor shall the action of the Lenders in respect of any such default, or any acquiescence by it therein, affect or impair any right, power or remedy of the Lenders in respect of any other default.  All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law.

 

Section 6.11         Indemnity.

 

(a)           The Borrower shall, at all times, indemnify and hold each Lender harmless (the “Indemnity”) and each of their respective directors, partners, officers, employees, agents, counsel and advisors (each, an “Indemnified Person”) in connection with any losses, claims (including the reasonable documented out-of-pocket attorneys’ fees incurred in defending against such claims), damages, liabilities, penalties, or other expenses arising out of, or relating to, the Loan Documents, the extension of credit hereunder or the Loan or the use of the Loan, which an Indemnified Person may incur or to which an Indemnified Person may become subject, but excluding all Taxes (each, a “Loss”).  The Indemnity shall not apply to the extent that a court or arbitral tribunal of competent jurisdiction issues a final judgment that such Loss resulted from the gross negligence or willful misconduct of any Indemnified Person.  The Indemnity is independent of and in addition to any other agreement of Borrower under any Loan Document to pay any amount to the Lenders, and any exclusion of any obligation to pay any amount under this subsection shall not affect the requirement to pay such amount under any other section hereof or under any other agreement.

 

(b)           Promptly after receipt by an Indemnified Person under this Section 6.11 of notice of the commencement of any action (including any governmental action), such Indemnified Person shall, if a Loss in respect thereof is to be made against the indemnifying person under this Section 6.11, deliver to Borrower a written notice of the commencement thereof, and Borrower shall have the right to participate in, and, to the extent Borrower so desires, to assume control of the defense thereof.

 

(c)           An Indemnified Person shall have the right to retain its own counsel with the documented reasonable fees and out-of-pocket expenses to be paid by the indemnifying person, if, in the reasonable opinion of counsel for the Indemnified Person, the representation by such counsel of the Indemnified Person and Borrower would be inappropriate due to actual or potential differing interests between such Indemnified Person and any other party represented by such counsel in such proceeding.  The Borrower shall pay for only one separate such legal counsel for all of the Indemnified Persons.  The failure of an Indemnified Person to deliver written notice to the Borrower

 

31

 

within a reasonable time of the commencement of any such action shall not relieve the Borrower of any liability to the Indemnified Person under this Section 6.11, except to the extent that Borrower is actually prejudiced in its ability to defend such action.  The indemnification required by this Section 6.11 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.

 

Section 6.12         No Usury.  The Loan Documents are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the amount paid or agreed to be paid to the Lenders for the Loan exceed the maximum amount permissible under applicable law.  If from any circumstance whatsoever fulfillment of any provision hereof, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstance the Lenders shall ever receive anything which might be deemed interest under applicable law that would exceed the highest lawful rate, such amount that would be deemed excessive interest shall be applied to the reduction of the principal amount owing on account of the Loan, or if such deemed excessive interest exceeds the unpaid balance of principal of the Loan, such deemed excess shall be refunded to the Borrower.  All sums paid or agreed to be paid to the Lenders for the Loan shall, to the extent permitted by applicable law, be deemed to be amortized, prorated, allocated and spread throughout the full term of the Loan until payment in full so that the deemed rate of interest on account of the Loan is uniform throughout the term thereof.  The terms and provisions of this Section shall control and supersede every other provision of this Agreement and the Notes.

 

Section 6.13         Further Assurances.  From time to time, the Borrower shall perform any and all acts and execute and deliver to the Lenders such additional documents as may be reasonably requested by the Lenders to carry out the purposes of any Loan Document or to preserve and protect the Lenders’ rights as contemplated therein.

 

Section 6.14         Confidentiality.  Lenders agree that they will hold any confidential information they may receive from Borrower in connection with the Loan Documents in confidence, unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 6.14 by Lenders, (b) is or has been independently developed or conceived by Lenders without use of Borrower’s confidential information, or (c) is or has been made known or disclosed to Lender by a third party without a breach of any obligation of confidentiality such third party may have to Borrower; provided, however, that Lenders may disclose confidential information (i) to their attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with this Agreement and the other Loan Documents; (ii) to any prospective purchaser of any Loan from Lenders, if a transfer to such prospective purchaser is permitted and such prospective purchaser agrees to be bound by the provisions of this Section 6.14; (iii) to any existing or prospective Affiliate, partner, member, shareholder or wholly owned subsidiary of a Lender in the ordinary course of business, provided that Lenders inform such Person that such information is confidential and direct such Person to maintain the confidentiality of such information; (iv) as may otherwise be required by law, regulation or legal process; or (v) to any Person in connection with any legal proceeding to which it is a party.

 

32

 

[SIGNATURE PAGE FOLLOWS]

 

33

 

IN WITNESS WHEREOF, the Lenders and the Borrower have caused this Agreement to be duly executed as of the date set forth above.

 

	
BORROWER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
NEOS   THERAPEUTICS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/Richard   Eisenstadt
    	
 
    	
 
    
	
Name:
    	
Richard   Eisenstadt
    	
 
    	
 
    
	
Title:
    	
Chief   Financial Officer, Secretary and Treasurer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDERS:
    	
 
    	
DEERFIELD PRIVATE DESIGN FUND   III, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: Deerfield Mgmt III,   L.P., General Partner
    
	
 
    	
 
    	
By: J.E. Flynn Capital   III, LLC, General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/David J. Clark
    
	
 
    	
 
    	
Name:
    	
David J. Clark
    
	
 
    	
 
    	
Title:
    	
Authorized Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
DEERFIELD SPECIAL SITUATIONS   FUND, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: Deerfield Mgmt III,   L.P., General Partner
    
	
 
    	
 
    	
By: J.E. Flynn Capital,   LLC, General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/David J. Clark
    
	
 
    	
 
    	
Name:
    	
David J. Clark
    
	
 
    	
 
    	
Title:
    	
Authorized Signatory
    

 

34

 

SCHEDULE 1

 

	
LENDER
    	
 
    	
ALLOCATION OF
   DISBURSEMENTS AND
   PAYMENTS
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Deerfield   Private Design Fund III, L.P.
    	
 
    	
66 2/3
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
Deerfield   Special Situations Fund, L.P.
    	
 
    	
33 1/3
    	
%
    

 

1

 

EXHIBIT A

 

PROMISSORY NOTE

 

THIS NOTE IS BEING ISSUED with original issue discount in the amount of $             .

 

May     , 2016

 

FOR VALUE RECEIVED, Neos Therapeutics, Inc., a Delaware corporation (the “Maker”), by means of this Promissory Note (this “Note”), hereby unconditionally promises to pay [                 ] (the “Payee”), a principal amount equal to the lesser of (a) [          ] and (b) the aggregate outstanding amount of Disbursements made to Maker by Payee pursuant to Section 2.2 of the Facility Agreement referenced to below, in lawful money of the United States of America and in immediately available funds, on the dates provided in the Facility Agreement.

 

This Note is a “Note” referred to in the Facility Agreement dated as of May     , 2016 between the Maker, the Payee and the other parties thereto (as amended, modified and supplemented and in effect from time to time, the “Facility Agreement”), with respect to the Loan made by the Payee thereunder.  Capitalized terms used herein and not expressly defined in this Note shall have the respective meanings assigned to them in the Facility Agreement.

 

This Note shall bear interest on the outstanding principal amount hereof pursuant to the provisions of the Facility Agreement.

 

The Maker shall make all payments to the Payee of interest and principal under this Note in the manner provided in and otherwise in accordance with the Facility Agreement.

 

If an Event of Default has occurred and is continuing, this Note may in accordance with the applicable provisions of the Facility Agreement, become immediately due and payable.

 

Subject to the terms of the Facility Agreement, all payments will be free and clear of, and without deduction or withholding for, any present or future taxes.  The Maker shall pay all and any costs (administrative or otherwise) imposed by the Maker’s banks, clearing houses, or any other financial institution, in connection with making any payments hereunder.

 

The Maker shall pay all reasonable documented out-of-pocket costs of collection, including, without limitation, all reasonable documented out-of-pocket, legal expenses and attorneys’ fees, paid or incurred by the Payee in collecting and enforcing this Note.

 

Other than those notices required to be provided by Payee to Maker under the terms of the Facility Agreement, the Maker and every endorser of this Note, or the obligations represented hereby, expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Note and the Facility Agreement or the performance of the obligations under this Note and/or the Facility Agreement.  No renewal or extension of this Note or the Facility Agreement, no delay in the enforcement of payment of this Note or the Facility Agreement, and no delay or omission in exercising any right or power under this Note or the Facility Agreement shall affect the liability of the Maker or any endorser of this Note.

 

A-1

 

No delay or omission by the Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right.  The provisions of this Note may be waived or amended only in a writing signed by the Maker and the Payee.  This Note may be prepaid in whole or in part in accordance with the provisions of the Facility Agreement.

 

This Note, and any rights of the Payee arising out of or relating to this Note shall be enforced by the Payee in the courts of the United States of America located in the Southern District of the State of New York.  For the benefit of the Payee, the Maker hereby irrevocably agrees that any legal action, suit or other proceeding arising out of or relating to this Note shall be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and hereby consents that personal service of summons or other legal process may be made as set forth in Section 6.1 of the Facility Agreement, which service the Maker agrees shall be sufficient and valid.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE MAKER AND THE PAYEE HEREBY WAIVE ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED BY THIS NOTE.

 

This Note shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed in such State.

 

[Signature page follows]

 

A-2

 

IN WITNESS WHEREOF, an authorized representative of the Maker has executed this Note as of the date first written above.

 

	
 
    	
NEOS   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title
    

 

A-3

 

EXHIBIT B

 

PERMITTED INDEBTEDNESS

 

None

 

B-1

 

EXHIBIT B

 

PERMITTED LIENS

 

None

 

B-2

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