Securities Law & Instruments

Headnote

Subsection 1(6) of the Business Corporations Act (Ontario) -- application for an order that an issuer is deemed to have ceased to be offering its securities to the public -- the applicant is a wholly owned subsidiary of another issuer as a result of a plan of arrangement under the Business Corporations Act (Ontario).

Statutes Cited

Business Corporations Act, R.S.O. 1990, c. B. as am., s. 1(6).

IN THE MATTER OF THE BUSINESS CORPORATIONS ACT (ONTARIO) R.S.O. 1990, c. B.16, AS AMENDED (THE "OBCA") AND IN THE MATTER OF U.S. SILVER & GOLD INC. (THE "APPLICANT")

ORDER (Subsection 1(6) Of the OBCA)

UPON the application of the Applicant to the Ontario Securities Commission (the "Commission") for an order pursuant to subsection 1(6) of the OBCA to be deemed to have ceased to be offering its securities to the public;

AND UPON the Applicant representing to the Commission that:

1. The Applicant is an "offering corporation" as defined in the OBCA and has an authorized capital consisting of an unlimited number of common shares ("Common Shares").

2. The Applicant's head office is located at Suite 2870, 145 King Street West, Toronto, Ontario, M5H 1J8.

3. The Applicant was formed by the amalgamation (the "Amalgamation") of U.S. Silver & Gold Inc. ("Target") and 2441996 Ontario Inc. ("Amalgamation Sub") pursuant to a plan of arrangement (the "Arrangement") under section 182 of OBCA, which became effective at 12:01 a.m. (the "Effective Time") on December 23, 2014 (the "Effective Date").

4. Scorpio Mining Corporation ("Acquiror") is a corporation existing under the laws of Canada. The authorized capital of Acquiror consists of an unlimited number of common shares ("Acquiror Shares"). The Acquiror Shares are listed on the Toronto Stock Exchange (the "TSX") under the symbol "SPM".

5. Immediately prior to the Effective Time, Target was a corporation existing under the laws of Ontario and had the following outstanding securities: (i) 81,826,629 common shares ("Target Shares"); (ii) 6,588,608 options to purchase Target Shares ("Target Options"); and (iii) 23,069,867 warrants to purchase Target Shares ("Target Warrants"). The Target Shares were listed on the TSX under the symbol "USA". The Target Warrants were not listed on any exchange. Target also had restricted share units ("Target RSUs") outstanding in respect of 841,481 Target Shares, each of which upon redemption in accordance with the terms of the restricted share unit plan of Target (the "Target RSU Plan") entitled the holder thereof to a cash payment from Target based on the fair market value of the Target Shares. Pursuant to the terms of the Target RSU Plan, the Target RSUs were non-transferrable. Target was a reporting issuer in each of the Provinces of Ontario, Alberta and British Columbia (the "Jurisdictions").

6. As of the date hereof, all of the outstanding Common Shares are held by Acquiror. The Applicant has 23,069,867 warrants ("Warrants") outstanding, each of which is exercisable for Acquiror Shares, as described below. The Applicant also has restricted share units ("RSUs") outstanding in respect of 1,843,410 Acquiror Shares, each of which upon redemption in accordance with the terms of the restricted share unit plan of the Applicant (the "RSU Plan") entitles the holder thereof to a cash payment from the Applicant based on the fair market value of the Acquiror Shares. The Applicant does not have any debt securities outstanding.

7. Immediately prior to the Effective Time, Amalgamation Sub was a corporation existing under the laws of Ontario and was wholly-owned by Acquiror.

8. The holders of Target Warrants, Target Options and Target RSUs received notice of the meeting of the holders of Target Shares to consider the Arrangement.

9. Pursuant to the Arrangement, among other things, the following occurred as of the Effective Time:

(a) Target and Amalgamation Sub amalgamated to form the Applicant. On the Amalgamation:

(i) each outstanding common share of Amalgamation Sub held by Acquiror was exchanged for a Common Share;

(ii) each outstanding Target Share was exchanged for 1.68 Acquiror Shares (the "Exchange Ratio");

(iii) the Applicant issued additional Common Shares to Acquiror; and

(iv) each outstanding Target Option was exchanged for an option to purchase Acquiror Shares (an "Acquiror Option") based on the Exchange Ratio; and

(b) the Target RSU Plan was amended to provide that the value of each Target RSU outstanding immediately prior to the Effective Time was adjusted based on the Exchange Ratio and the obligation to make a payment in respect of each Target RSU was adjusted such that following the Effective Time any payments to be made on the redemption of the Target RSUs would be based on the fair market value of the Acquiror Shares.

10. As a result of the Amalgamation (i) the Applicant became liable for the obligations of Target in respect of each Target Warrant and each Target Warrant became a Warrant and (ii) the Applicant became liable for the obligations of Target in respect of the Target RSU Plan and each Target RSU, the Target RSU Plan became the RSU Plan and each Target RSU became an RSU.

11. Following the Effective Date, the Acquiror Shares issued under the Arrangement were listed on the TSX and additional Acquiror Shares were reserved for issuance upon exercise of the Acquiror Options and the Warrants.

12. The Common Shares (formerly Target Shares) were delisted from the TSX as of the close of business on December 31, 2014.

13. Following the Effective Date, pursuant to the terms of the Warrants, each holder of Warrants outstanding immediately prior to the Effective Date became entitled to receive, upon the exercise of such Warrants, in lieu of each Target Share to which such holder was previously entitled, 1.68 Acquiror Shares, subject to adjustment in accordance with the terms of such Warrants. As a party to the Arrangement, Acquiror is obligated to issue the number of Acquiror Shares required to meet the Applicant's obligations upon exercise of the Warrants. The Applicant is not required to remain a reporting issuer pursuant to the terms of the Warrants.

14. The only outstanding securities of the Applicant held by persons other than Acquiror are the Warrants and the RSUs. The Applicant has made diligent enquiry based on a review of its books and records to confirm the number of beneficial holders of the Warrants and the RSUs. To the best of the Applicant's knowledge and belief, there are 60 beneficial holders of Warrants, 41 of which are in Ontario. To the best of the Applicant's knowledge and belief, there are 20 beneficial holders of RSUs, five of whom are in Ontario and 15 of whom are in the United States. The RSUs were issued to employees and officers of Target. Pursuant to the terms of the RSU Plan, the RSUs are non-transferrable.

15. No securities of the Applicant, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 -- Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.

16. The Applicant has no intention to seek public financing by way of an offering of securities.

17. As of the date hereof, the Applicant is a reporting issuer or equivalent in the Jurisdictions and is not in default of any of its obligations under the legislation in each of the Jurisdictions as a reporting issuer.

18. The Applicant has applied for exemptive relief to cease to be a reporting issuer in each of the Jurisdictions and upon the granting of the requested relief will not be a reporting issuer or equivalent in any jurisdiction of Canada.

AND UPON the Commission being satisfied to do so would not be prejudicial to the public interest;

IT IS HEREBY ORDERED by the Commission pursuant to subsection 1(6) of the OBCA that the Applicant be deemed to have ceased to be offering its securities to the public for the purposes of the OBCA.

DATED at Toronto, Ontario on this 27th day of March, 2015.

"James D. Carnwath"
 
"Deborah Leckman"