Aurcana Corporation

  • Date: 2016-01-07

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Court File No. CV-15-11157-00CL ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST IN THE MATTER OF AN APPLICATION UNDER SECTION 192 OF THE CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, C. C-44, AS AMENDED, AND RULES 14.05(2) AND 14.05(3) OF THE RULES OF CIVIL PROCEDURE AND IN THE MATTER OF A PROPOSED ARRANGEMENT OF AURCANA CORPORATION AND 9490248 CANADA CORPORATION AND INVOLVING SILVER ASSETS, INC., CANE SILVER INC., PERFORADORA AURCANA S. DE R.L. DE C.V., MINERA AURCANA S.A. DE C.V., RIO GRANDE MINING COMPANY, SHAFTER PROPERTIES INC., MINERA LA NEGRA, S.A. DE C.V. AND REAL DE MACONI, S.A. DE C.V. AURCANA CORPORATION AND 9490248 CANADA CORPORATION Applicants

AMENDED PLAN OF ARRANGEMENT

January 7, 2016

Court File No. CV-15-11157-00CL ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST IN THE MATTER OF AN APPLICATION UNDER SECTION 192 OF THE CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, C. C-44, AS AMENDED, AND RULES 14.05(2) AND 14.05(3) OF THE RULES OF CIVIL PROCEDURE AND IN THE MATTER OF A PROPOSED ARRANGEMENT OF AURCANA CORPORATION AND 9490248 CANADA CORPORATION AND INVOLVING SILVER ASSETS, INC., CANE SILVER INC., PERFORADORA AURCANA S. DE R.L. DE C.V., MINERA AURCANA S.A. DE C.V., RIO GRANDE MINING COMPANY, SHAFTER PROPERTIES INC., MINERA LA NEGRA S.A. DE C.V. AND REAL DE MACONI, S.A. DE C.V. AURCANA CORPORATION AND 9490248 CANADA CORPORATION Applicants

TABLE OF CONTENTS Page ARTICLE 1 INTERPRETATION ........................................................................................................................................ 1 1.1 Definitions. .................................................................................................................................................. 1 1.2 Accounting Terms. ..................................................................................................................................... 5 1.3 Currency. .................................................................................................................................................... 5 1.4 Articles of Reference. ................................................................................................................................. 5 1.5 Interpretation Not Affected by Headings................................................................................................. 6 1.6 Date for Any Action. .................................................................................................................................. 6 1.7 Time............................................................................................................................................................. 6 1.8 Definitions in the CBCA. ........................................................................................................................... 6 1.9 Statutory References. ................................................................................................................................. 6 1.10 Successors and Assigns. ............................................................................................................................. 6 1.11 Governing Law. .......................................................................................................................................... 6 ARTICLE 2 PURPOSE AND EFFECT OF THIS PLAN .................................................................................................. 7 2.1 Arrangement Agreement. .......................................................................................................................... 7 2.2 Purpose. ...................................................................................................................................................... 7 2.3 Effectiveness. .............................................................................................................................................. 7 2.4 Persons Not Affected. ................................................................................................................................. 7 ARTICLE 3 TREATMENT OF THE LENDER ................................................................................................................. 7 3.1 Treatment of the Lender. .......................................................................................................................... 7 ARTICLE 4 IMPLEMENTATION ...................................................................................................................................... 8 4.1 Corporate Authorizations. ........................................................................................................................ 8 4.2 Implementation Date Transactions. ......................................................................................................... 8 4.3 Payment in Full before Implementation. ................................................................................................. 9 ARTICLE 5 RELEASES ....................................................................................................................................................... 9 5.1 Release of Aurcana Released Parties. ....................................................................................................... 9 5.2 Release of the Lender Released Parties. ................................................................................................. 10

-25.3

Intercompany Claims. ............................................................................................................................. 10

ARTICLE 6 COURT SANCTION, CONDITIONS PRECEDENT AND IMPLEMENTATION ................................ 10 6.1 Application for a Final Order. ................................................................................................................ 10 6.2 Conditions Precedent. .............................................................................................................................. 10 6.3 Waiver of Conditions. .............................................................................................................................. 12 6.4 Implementation Provisions. ..................................................................................................................... 12 ARTICLE 7 GENERAL ...................................................................................................................................................... 12 7.1 Binding Effect. .......................................................................................................................................... 12 7.2 Waiver of Defaults based on the Arrangement. .................................................................................... 12 7.3 Deeming Provisions. ................................................................................................................................. 13 7.4 Non-Consummation. ................................................................................................................................ 13 7.5 Amendment. ............................................................................................................................................. 13 7.6 Severability of Plan Provisions. .............................................................................................................. 13 7.7 Paramountcy. ........................................................................................................................................... 13 7.8 Notices. ...................................................................................................................................................... 14 7.9 Further Assurances. ................................................................................................................................. 15

ARTICLE 1 INTERPRETATION 1.1

Definitions. In this Plan of Arrangement, unless otherwise stated: (a)

“Amalco” has the meaning given to such term in Section 4.2;

(b)

“Amalgamation” means the amalgamation of Aurcana and Aurcana ArrangeCo to form Amalco pursuant to this Plan;

(c)

“Applicable Law” means any law, statute, order, decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States or any other country, or any domestic or foreign state, county, province, city or other political subdivision of any Governmental Entity, and includes any securities or stock exchange rules or regulations;

(d)

“Arrangement” means the arrangement under Section 192 of the CBCA, on the terms and subject to the conditions set forth in this Plan;

(e)

“Arrangement Agreement” means the arrangement agreement dated October 30, 2015 between Aurcana, Silver Assets, Rio Grande, Shafter Properties, Cane Silver, Perforadora Aurcana, Minera Aurcana, Minera La Negra, Real de Maconi, Aurcana ArrangeCo and the Lender, as amended or restated from time to time, pursuant to which such parties have agreed to implement the steps required to complete the Arrangement;

(f)

“Articles of Arrangement” means the articles of arrangement of Aurcana in respect of the Arrangement that are required to be filed with the Director after the Final Order is made in order for the Arrangement to become effective on the Implementation Date;

(g)

“Aurcana” means Aurcana Corporation;

(h)

“Aurcana ArrangeCo” means 9490248 Canada Corporation, a corporation incorporated under the laws of Canada;

(i)

“Aurcana Companies” means Aurcana and all of its direct or indirect subsidiaries in existence at this time or from time to time, including Silver Assets, Rio Grande, Shafter, Cane Silver, Cane Insurance, Real de Maconi, Minera La Negra, Minera Aurcana, Perforadora Aurcana and Aurcana ArrangeCo;

(j)

“Aurcana Note” means a promissory note having a principal amount equal to $6,989,895 (or such other amount as may be agreed by Newco and Aurcana prior to the Effective Time) to be issued by Aurcana to Real de Maconi pursuant to paragraph 4.2(c) of this Plan;

(k)

“Aurcana Released Parties” means Aurcana and all of its direct and indirect subsidiaries, including Aurcana ArrangeCo, other than the Mexican Subsidiaries;

(l)

“Aurcana Share Purchase Note” means the promissory note having a principal amount equal to $23,870 (or such other amount as may be agreed by Newco and Aurcana prior to the Effective Time) to be issued by Newco to Aurcana in consideration for the transfer by Aurcana of its shares in Minera La Negra to Newco pursuant to Section 4.2(b) of this Plan;

(m)

“Business Day” means any day, other than a Saturday or a Sunday or a statutory or civic holiday, that banks are open for business in Toronto, Ontario, Vancouver, British Columbia and New York, New York;

-2(n)

“Cane Insurance” means Cane Insurance Company Limited, a corporation incorporated under the laws of Barbados;

(o)

“Cane Silver” means Cane Silver Inc., a corporation incorporated under the laws of Barbados;

(p)

“CBCA” means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;

(q)

“Certificate” means the certificate of arrangement to be issued by the Director giving effect to this Plan;

(r)

“Claim” means any right or claim of any Person that may be asserted or made in whole or in part against any member of the Aurcana Companies, in any capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, whether at law or in equity, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including, any legal, statutory, equitable or fiduciary duty) or by reason of any equity interest, right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and together with any security enforcement costs or legal costs associated with any such claim, and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, perfected, unperfected, present or future, known or unknown, by guarantee, warranty, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature including any claim arising from or caused by the termination, disclaimer, resiliation, assignment or repudiation by any member of the Aurcana Companies of any contract, lease or other agreement, whether written or oral, any claim made or asserted against any member of the Aurcana Companies through any affiliate, subsidiary, associated or related person, or any right or ability of any Person to advance a claim for an accounting, reconciliation, contribution, indemnity, restitution or otherwise with respect to any matter, grievance, action (including any class action or proceeding before an administrative tribunal), cause or chose in action, whether existing at present or commenced in the future;

(s)

“Credit Agreement” means the amended and restated credit facility agreement dated April 29, 2014 entered into by Aurcana, the Lender and each of the Guarantors (as the same may have been and may further be amended, restated, modified or varied from time to time);

(t)

“Common Shares” means the common shares in the capital of Aurcana;

(u)

“Court” means the Ontario Superior Court of Justice (Commercial List);

(v)

“Director” means the Director appointed under Section 260 of the CBCA;

(w)

“Effective Time” means a time on the Implementation Date agreed to by Aurcana and the Lender;

(x)

“Equipment” means certain equipment of Aurcana and/or certain of the Guarantors, as set out in the list attached as Schedule A to the Term Sheet;

(y)

“Final Order” means the Order of the Court approving the Plan;

(z)

“First Intercompany Receivable” means an amount of $20,053,910 (or such other amount as may be agreed by Newco and Aurcana prior to the Effective Time) owing to Aurcana by Minera La Negra immediately prior to the Effective Time;

(aa)

“GAAP” has the meaning given to such term in Section 1.2;

-3(bb)

“Guarantors” means, collectively, Silver Assets, Rio Grande, Shafter Properties, Cane Silver, Real de Maconi, Minera Aurcana, Minera La Negra and Perforadora Aurcana, as guarantors under the Credit Agreement;

(cc)

“Governmental Entity” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, crown corporation, court body, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power;

(dd)

“Implementation Date” means the date on which the Plan is implemented;

(ee)

“Intercompany Claims” means all intercompany claims and indebtedness existing between (i) any of the Remaining Aurcana Entities, and (ii) any of the Mexican Subsidiaries, or between any of the Mexican Subsidiaries amongst themselves;

(ff)

“Intercompany Receivables” means collectively the First Intercompany Receivable and the Second Intercompany Receivable;

(gg)

“La Negra” means the La Negra silver-copper-zinc-lead mine located in Querétaro, Mexico, indirectly owned by Real de Maconi;

(hh)

“Lender” means Orion Mine Finance (Master) Fund I L.P., as lender under the Credit Agreement;

(ii)

“Lender Claims” means the Claims of the Lender in connection with the Obligations;

(jj)

“Lender Released Parties” means the Lender, Newco and their respective affiliates;

(kk)

“Material Adverse Change” means any change, development, effect, event, circumstance, fact or occurrence that individually or in the aggregate with other such changes, developments, effects, events, circumstances, facts or occurrences is or would reasonably be expected to be materially adverse to the assets, properties, business, operations or liabilities of the Mexican Subsidiaries except, any change, development, effect, event, circumstance, fact or occurrence resulting from or relating to: (a) any change in generally accepted accounting principles as applied in the relevant jurisdiction; (b) any change in currency exchange rates or commodity prices; (c) any adoption, proposal, implementation or change in Applicable Law or any interpretation thereof by any Governmental Entity (provided that in the case of (b) and (c) above, such conditions do not have a materially disproportionate effect on the Mexican Subsidiaries relative to other companies in their industry); (d) the execution, announcement or performance of the Support Agreement, the Term Sheet, the Plan or any other related agreement and the completion of the transactions contemplated thereby; (e) the failure, in and of itself, of any entity in the Aurcana Companies to meet any internal or public projections, forecasts or estimates of future revenues or future earnings; (f) any action taken by any entity in the Aurcana Companies which is contemplated in the Support Agreement or is consented to by the Lender; or (g) any change in the market price or trading volume of any securities of the Aurcana Companies (it being understood that the causes underlying such change in market price or trading volume (other than those in items (a) to (f) above) may be taken into account in determining whether a Material Adverse Change has occurred);

(ll)

“Mexican Subsidiaries” means, collectively, those of Real de Maconi, Minera La Negra, Minera Aurcana and Perforadora Aurcana as shall be designated by the Lender in writing prior to the Implementation Date;

-4(mm)

“Mexican Subsidiary Shares” means the shares and/or partners interests held, either directly or indirectly, by Aurcana of the Mexican Subsidiaries;

(nn)

“Minera Aurcana” means Minera Aurcana S.A. de C.V., a corporation incorporated under the laws of Mexico;

(oo)

“Minera La Negra” means Minera La Negra S.A. de C.V., a corporation incorporated under the laws of Mexico;

(pp)

“Newco” means an entity to be incorporated by the Lender in advance of the Implementation Date;

(qq)

“Newco Consultants” means, collectively, Kevin Drover, the President and Chief Executive Officer of Aurcana, and Salvador Huerta, the Chief Financial Officer of Aurcana;

(rr)

“Newco Consulting Agreements” means the agreements to be entered into by Newco and Aurcana, pursuant to which Aurcana shall agree to provide the Newco Consultants to provide services to Newco as consultants in connection with the operations of the Mexican Subsidiaries for a total period of twelve (12) months following the Implementation Date;

(ss)

“Obligations” has the meaning given to such term in the Credit Agreement;

(tt)

“Order” means any order of the Court in the CBCA proceedings;

(uu)

“Outside Date” means January 8, 2016 (or such other date as the Aurcana Companies and the Lender may agree);

(vv)

“Perforadora Aurcana” means Perforadora Aurcana S. de R.L. de C.V., a corporation incorporated under the laws of Mexico;

(ww)

“Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body;

(xx)

“Plan” means this plan of arrangement pursuant to Section 192 of the CBCA, as amended from time to time pursuant to the terms hereof;

(yy)

“Purchase Price” means $3,500,000, being the purchase price for the Equipment;

(zz)

“Real de Maconi” means Real de Maconi, S.A. de C.V., a corporation incorporated under the laws of Mexico;

(aaa)

“Real de Maconi Share Purchase Note” means the promissory note having a principal amount equal to $3,826,130 (or such other amount as may be agreed by Newco and Aurcana prior to the Effective Time) to be issued by Newco to Real de Maconi in consideration for the transfer by Real de Maconi of its shares in Minera La Negra to Newco pursuant to Section 4.2(b) of this Plan;

(bbb)

“Released Claims” has the meaning given to such term in Section 5.1;

(ccc)

“Remaining Aurcana Entities” means, collectively, Aurcana or any of the Aurcana Companies other than the Mexican Subsidiaries;

(ddd)

“Rio Grande” means Rio Grande Mining Company, a corporation incorporated in Nevada;

-5(eee)

“Second Intercompany Receivable” means an amount of $3,163,765 (or such other amount as may be agreed by Newco and Aurcana prior to the Effective Time) owing to Real de Maconi by Minera La Negra immediately prior to the Effective Time;

(fff)

“Shafter Properties” means Shafter Properties Inc., a corporation incorporated in Texas;

(ggg)

“Share Purchase Notes” means the Real de Maconi Share Purchase Note and the Aurcana Share Purchase Note;

(hhh)

“Silver Assets” means Silver Assets, Inc., a corporation incorporated in California;

(iii)

“Support Agreement” means the support agreement dated as of October 15, 2015 entered into by Aurcana, the Guarantors and the Lender;

(jjj)

“Term Sheet” means the term sheet dated as of October 15, 2015, attached as Schedule “A” to the Support Agreement;

(kkk)

“Transaction” means the transaction contemplated by this Plan;

(lll)

“Unaffected Claimholders” means holders, whether directly or indirectly, of Unaffected Claims; and

(mmm) “Unaffected Claims” means Claims other than the Lender Claims, the Released Claims and the Intercompany Claims. 1.2

Accounting Terms.

All accounting terms not otherwise defined herein shall have the meaning ascribed to them in accordance with Canadian generally accepted accounting principles including those prescribed by the Canadian Institute of Chartered Accountants (“GAAP”). 1.3

Currency. Unless otherwise stated, all monetary amounts contained herein are expressed in U.S. dollars.

1.4

Articles of Reference.

(1)

References to a specific article, section or subsection shall, unless something in the subject matter or context is inconsistent therewith, be construed as references to that specific article, section or subsection of this Plan, whereas the terms “this Plan”, “hereof”, “herein”, “hereto”, “hereunder” and similar expressions shall be deemed to refer generally to this Plan and not to any particular article, section or subsection or other portion of this Plan and include any documents supplemental hereto.

(2)

A reference to an article, section, subsection, clause or paragraph shall, unless otherwise stated, refer to an article, section, subsection, clause or paragraph of this Plan.

(3)

Unless otherwise expressly stated herein, any reference to an instrument, agreement or an Order or an existing document or exhibit filed or to be filed means such instrument, agreement, Order, document or exhibit as it may have been or may be amended, modified, or supplemented in accordance with its terms.

(4)

The use of words in the singular or plural, or with a particular gender, including a definition, shall not limit the scope or exclude the application of any provision of this Plan to such Person (or Persons) or circumstances as the context otherwise permits.

(5)

The words “includes” and “including” and similar terms of inclusion shall not, unless expressly modified by the words “only” or “solely”, be construed as terms of limitation, but rather shall mean “includes but is

-6not limited to” and “including but not limited to”, so that references to included matters shall be regarded as illustrative without being either characterizing or exhaustive. (6)

Unless otherwise specified, all references to time herein and in any document issued pursuant hereto mean local time in Toronto, Ontario and any reference to an event occurring on a Business Day shall mean prior to 5:00 p.m. on such Business Day.

(7)

Unless otherwise specified, time periods within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends.

(8)

The word “or” is not exclusive.

1.5

Interpretation Not Affected by Headings.

The division of this Plan into articles, sections, subsections, clauses and paragraphs and the insertion of a table of contents and headings are for convenience of reference only and shall not affect the construction or interpretation of this Plan. 1.6

Date for Any Action.

In the event that any date on which any action is required to be taken hereunder is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. 1.7

Time. Time shall be of the essence in this Plan.

1.8

Definitions in the CBCA.

A word or words with initial capitalized letters used herein and not defined herein but defined in the CBCA shall have the meaning(s) ascribed thereto in the CBCA as of the date hereof unless the context otherwise requires. 1.9

Statutory References.

Except as provided herein, any reference in this Plan to a statute includes all regulations made thereunder, all amendments to such statute or regulations in force from time to time, and any statute or regulation that supplements or supersedes such statute or regulation. 1.10

Successors and Assigns.

This Plan shall be binding upon and shall enure to the benefit of the heirs, administrators, executors, legal personal representatives, successors and assigns of any Person named or referred to herein, affected hereby or subject to this Plan. 1.11

Governing Law.

This Plan shall be governed by and construed in accordance with the laws of Ontario and the federal laws of Canada applicable therein. All questions as to the interpretation or application of this Plan and all proceedings taken in connection with this Plan shall be subject to the exclusive jurisdiction of the Court.

-7ARTICLE 2 PURPOSE AND EFFECT OF THIS PLAN 2.1

Arrangement Agreement. This Plan is made pursuant to the Arrangement Agreement.

2.2

Purpose.

The purpose of this Plan is to effect the Arrangement, pursuant to which the Obligations will be compromised and extinguished in exchange for the Mexican Subsidiary Shares and other good and valuable consideration as contemplated by the Support Agreement and the Term Sheet, all pursuant to this Plan to be implemented pursuant to the CBCA, in order to allow the Aurcana Companies to retain sufficient liquidity to enable the Aurcana Companies to continue their business as a going concern. 2.3

Effectiveness.

Subject to the satisfaction, completion or waiver (to the extent permitted pursuant to Section 6.3) of the conditions precedent set out herein, this Plan will become effective in the sequence described in Section 4.2 from and after the Effective Time and shall be binding on and enure to the benefit of the Aurcana Companies, the Lender, Newco, past and present directors and officers of the Aurcana Companies, the Aurcana Released Parties, the Lender Released Parties and all other Persons named or referred to herein, affected hereby or subject to this Plan and their respective successors and assigns and their respective heirs, executors, administrators and other legal representatives, successors and assigns. 2.4

Persons Not Affected.

For greater certainty, this Plan does not affect the Unaffected Claimholders with respect to and to the extent of their Unaffected Claims. Nothing in this Plan shall affect the Aurcana Companies’ rights and defences, both legal and equitable, with respect to any Unaffected Claims, including but not limited to all rights with respect to legal and equitable defences or entitlements to set-offs or recoupments against such Unaffected Claims. ARTICLE 3 TREATMENT OF THE LENDER 3.1

Treatment of the Lender.

(1)

On the Implementation Date and in accordance with the steps and transactions set forth in this Plan, all of the Obligations shall be extinguished in consideration for the transfer by Aurcana to the Lender of the Intercompany Receivables and the Share Purchase Notes and the corresponding transfer of ownership of Minera La Negra to Newco.

(2)

After giving effect to the terms of Section 3.1(1) above, the Lender shall, and shall be deemed to, have irrevocably and finally extinguished all of its right, title and interest in and to the Obligations through the receipt of the Intercompany Receivables and the Share Purchase Notes and the corresponding transfer of ownership of Minera La Negra to Newco, and no further payment of any kind in connection with the Obligations, including of principal, interest, default interest, any other interest of any kind, additional amounts, fees, expenses, costs, charges, make-whole payments, penalties or any other amounts, whether imposed in connection with a payment default, a prepayment or otherwise, shall be payable to or on behalf of the Lender or Newco.

(3)

All amounts paid or payable hereunder on account of the Obligations under the Credit Agreement (including, for greater certainty, any securities received hereunder) shall be applied as follows: (i) first, in respect of the principal amount of the Obligations under the Credit Agreement, and (ii) second, if such principal amounts have been fully repaid, in respect of any accrued but unpaid interest on such Obligations under the Credit Agreement.

-8ARTICLE 4 IMPLEMENTATION 4.1

Corporate Authorizations.

The adoption, execution, delivery, implementation and consummation of all matters contemplated under this Plan involving corporate action of any members of the Aurcana Companies will occur and be effective as of the Implementation Date (or such other date as Aurcana and the Lender may agree), and will be authorized and approved under this Plan and by the Court, where appropriate, as part of the Final Order, in all respects and for all purposes without any requirement of further action by shareholders, directors or officers of any member of the Aurcana Companies. All necessary approvals to take actions shall be deemed to have been obtained from the shareholders or directors of the Aurcana Companies. 4.2

Implementation Date Transactions.

Commencing at the Effective Time, the following events or transactions will occur, or be deemed to have occurred and be taken and effected, in the following order in five minute increments and at the times set out in this Section 4.2 (or in such other manner or order or at such other time or times as the Aurcana Companies and the Lender may agree, acting reasonably), without any further act or formality required on the part of any Person, except as may be expressly provided herein: (a)

Aurcana shall transfer to the Lender the First Intercompany Receivable in partial satisfaction of the Obligations under the Credit Agreement;

(b)

Real de Maconi and Aurcana shall transfer all of their shares in the capital stock of Minera La Negra to Newco for the Share Purchase Notes;

(c)

Real de Maconi shall transfer to Aurcana the Real de Maconi Share Purchase Note and the Second Intercompany Receivable in exchange for the Aurcana Note;

(d)

Aurcana shall transfer to the Lender the Second Intercompany Receivable and the Share Purchase Notes in further partial satisfaction of the Obligations under the Credit Agreement;

(e)

the Lender shall release and discharge, and the Aurcana Companies shall be and be deemed to be absolutely released and discharged of and from, all remaining Obligations arising under the Credit Agreement;

(f)

the releases referred to in Article 5 shall become effective; and

(g)

as soon as reasonably possible upon completion of the foregoing, Aurcana and Aurcana ArrangeCo shall be amalgamated with the same effect as under Section 184 of the CBCA to form one corporation (“Amalco”) in accordance with the following: (i)

Name: Aurcana Corporation;

(ii)

Registered Office: Suite 250 – 1090 West Georgia Street, Vancouver BC, V6E 4A2;

(iii)

Restrictions on Business: None;

(iv)

Articles: The articles of Aurcana amended prior to the Amalgamation shall be deemed to be the articles of amalgamation of Amalco;

(v)

Number of Directors: Amalco shall have the same number of directors and same first directors as that of Aurcana immediately prior to the Amalgamation;

-9-

4.3

(vi)

Shares: All shares of Aurcana ArrangeCo shall be cancelled without any repayment of capital in respect thereof; no shares will be issued by Amalco in connection with the Amalgamation and all shares of Aurcana prior to the Amalgamation shall be unaffected and continue as shares of Amalco;

(vii)

Stated Capital: The stated capital account of the shares of Amalco shall be equal to the stated capital account in respect of the Common Shares of Aurcana immediately prior to the Amalgamation;

(viii)

By-laws: The by-laws of Amalco shall be the same as those of Aurcana immediately prior to the Amalgamation; and

(ix)

Effect of Amalgamation: The provisions of Sections 186(a) to (g) of the CBCA shall apply to the Amalgamation with the result that: (A)

the amalgamation of the amalgamating corporations and their continuance as one corporation become effective;

(B)

the property of each amalgamating corporation continues to be the property of the amalgamated corporation;

(C)

the amalgamated corporation continues to be liable for the obligations of each amalgamating corporation;

(D)

an existing cause of action, claim or liability to prosecution is unaffected;

(E)

a civil, criminal or administrative action or proceeding pending by or against an amalgamating corporation may be continued to be prosecuted by or against the amalgamated corporation;

(F)

a conviction against, or ruling, order or judgment in favour of or against, an amalgamating corporation may be enforced by or against the amalgamated corporation; and

(G)

the articles of amalgamation are deemed to be the articles of incorporation of the amalgamated corporation and the certificate of amalgamation is deemed to be the certificate of incorporation of the amalgamated corporation.

Payment in Full before Implementation.

The Aurcana Companies shall at all times have the right to pay, in cash, all Obligations at any time prior to implementation of the Transaction. ARTICLE 5 RELEASES 5.1

Release of Aurcana Released Parties.

On the Implementation Date, each of the Lender (in its capacity as lender and shareholder of Aurcana), Newco, the Mexican Subsidiaries, and their respective affiliates and present and former direct and indirect shareholders and limited partners shall and shall be deemed to forever irrevocably release and discharge the Aurcana Released Parties, and each of the Aurcana Released Parties’ respective present and former officers, directors, employees, auditors, advisors (including, without limitation, financial advisors), legal counsel and agents from any and all present and future demands, claims, liabilities, actions, causes of action, counterclaims, suits, damages, judgments, executions, debts, sums of money, expenses, accounts, indebtedness, liens, recoveries, and obligations of whatever nature (whether direct or indirect, known or unknown, absolute or contingent, accrued or unaccrued,

- 10 liquidated or unliquidated, matured or unmatured or due or not yet due) based in whole or in part on any act or omission, transaction, dealing or other occurrence existing or taking place on or prior to the Implementation Date (the “Released Claims”), including without limitation in connection with the Aurcana Released Parties, the business and affairs of the Aurcana Released Parties whenever or however conducted, the administration and/or management of the Aurcana Released Parties, any document, instrument, matter or transaction involving the Aurcana Released Parties, the Credit Agreement, the Loan Documents (as defined in the Credit Agreement) and the Obligations. 5.2

Release of the Lender Released Parties.

On the Implementation Date, each of the Remaining Aurcana Entities and Aurcana ArrangeCo shall and shall be deemed to forever irrevocably release and discharge each of the Lender Released Parties and each of the Lender Released Parties’ respective present and former officers, directors, employees, auditors, advisors (including, without limitation, financial advisors), legal counsel and agents from any and all Released Claims, including without limitation in connection with the Aurcana Released Parties, the business and affairs of the Aurcana Released Parties whenever or however conducted, the administration and/or management of the Aurcana Released Parties, any document, instrument, matter or transaction involving the Aurcana Released Parties, the Credit Agreement, the Loan Documents (as defined in the Credit Agreement) and the Obligations. 5.3

Intercompany Claims.

Unless transferred as directed by the Lender in writing in advance of the Implementation Date, all Intercompany Claims shall be deemed satisfied in full and forever irrevocably released and discharged on the Implementation Date. ARTICLE 6 COURT SANCTION, CONDITIONS PRECEDENT AND IMPLEMENTATION 6.1

Application for a Final Order.

Aurcana shall apply for the Final Order on the date set for the hearing for the Final Order or such later date as the Court may set. 6.2

Conditions Precedent.

The implementation of the Plan shall be conditional upon the fulfilment, satisfaction or waiver (in accordance with Section 6.3) by the Aurcana Companies and/or the Lender of the following conditions precedent: (a)

the Arrangement Agreement shall have been entered into and become effective, and shall not have been terminated in accordance with its terms;

(b)

the Lender shall have voted to approve the Arrangement consistent with its obligations under the Support Agreement;

(c)

the Plan shall have been approved by the Court in a form consistent with the Support Agreement or otherwise acceptable to Aurcana and the Lender, each acting reasonably;

(d)

the Implementation Date shall have occurred no later than the Outside Date;

(e)

the Aurcana Companies shall have taken all necessary or desirable corporate actions and proceedings in connection with this Plan;

(f)

no Applicable Law shall have been passed and become effective, the effect of which makes the consummation of this Plan illegal or otherwise prohibited;

- 11 (g)

all required stakeholder, regulatory and Court approvals, consents, waivers and filings shall have been obtained or made, as applicable, on terms satisfactory to the Aurcana Companies and the Lender, each acting reasonably;

(h)

all documents necessary to give effect to all material provisions of the Plan shall have been executed and/or delivered by all relevant Persons in form and substance satisfactory to Aurcana and the Lenders;

(i)

there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, no application shall have been made to any Governmental Entity, and no action or investigation shall have been announced, threatened or commenced by any Governmental Entity, in consequence of or in connection with the Transaction that restrains, impedes or prohibits (or if granted would reasonably be expected to restrain, impede or inhibit), the Transaction or any part thereof or requires or purports to require a variation of the Transaction;

(j)

the Support Agreement shall not have been terminated in accordance with its terms;

(k)

the Aurcana Companies and the Lender shall each have complied with their obligations under the Support Agreement;

(l)

all conditions set out in the Support Agreement, including the Term Sheet, shall have been satisfied or waived by the applicable parties pursuant to the terms of the Support Agreement or Term Sheet, as applicable;

(m)

Newco shall have entered into a joinder agreement to the Support Agreement;

(n)

Newco shall have assumed from the Remaining Aurcana Entities the contractual obligations and the contractual rights of the Remaining Aurcana Entities relating to, arising from, or in connection with La Negra that will be set out on a schedule to be agreed among Aurcana and Newco, and to the extent that any contract counterparty’s consent for any such assumption and assignment is required, such consent shall have been obtained, including to the extent that any such consent is required to avoid triggering any change of control provision;

(o)

all matters set out in the Term Sheet under the headings Definitive Documents and Other Approvals and Conditions shall have been completed;

(p)

there shall have been no Material Adverse Change;

(q)

all Intercompany Claims shall either be transferred as may be directed by the Lender in writing in advance of the Implementation Date, or shall be deemed satisfied in full, in either case as agreed by the Lender and Aurcana, each acting reasonably;

(r)

Newco shall have purchased the Equipment on an “as is, where is” basis as it shall exist on the Implementation Date, for the Purchase Price (excluding the $1,000,000 portion of the Purchase Price to be paid on April 30, 2016) that shall have been paid in accordance with the Term Sheet to Aurcana ArrangeCo or Aurcana as Aurcana Arrangeco may direct;

(s)

the Newco Consulting Agreements shall have been agreed to and entered into;

(t)

Aurcana shall obtain, if not already obtained, and maintain in good standing directors’ and officers’ insurance coverage for the Newco Consultants (or any replacements provided by Newco pursuant to the terms and conditions agreed to by Newco and Aurcana) in respect of their respective capacities for Aurcana, and will enter into, if not already entered into, and maintain indemnification agreements with the Newco Consultants, in a form satisfactory to Aurcana and the Lender, acting reasonably, in respect of their respective capacities for Aurcana;

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6.3

(u)

the Articles of Arrangement shall have been filed pursuant to Section 192 of the CBCA in form and substances satisfactory to the Lender, acting reasonably; and

(v)

the Director shall have issued the Certificate.

Waiver of Conditions.

Aurcana and the Lender may at any time and from time to time waive the fulfillment or satisfaction, in whole or in part, of the conditions set out herein, to the extent and on such terms as such parties may agree to in writing. 6.4

Implementation Provisions.

If the conditions contained in Section 6.2 are not satisfied or waived in accordance with Section 6.3 by the Outside Date, unless the Aurcana Companies and the Lender agree in writing to extend such period, this Plan and the Final Order shall cease to have any further force or effect and will not be binding on any Person. ARTICLE 7 GENERAL 7.1

Binding Effect.

At the Effective Time:

7.2

(a)

the Plan will become effective;

(b)

the treatment of (i) the Aurcana Companies, (ii) the Lender and (iii) Newco shall be final and binding for all purposes and shall enure to the benefit of the Aurcana Companies, the Lender and Newco, all Aurcana Released Parties, past and present directors or officers of the Aurcana Companies, the Lender Released Parties and all other Persons and parties named or referred to herein, affected hereby or subject to this Plan and their respective heirs, executors, administrators, legal representatives, successors and assigns;

(c)

the Aurcana Companies shall have been absolutely released and discharged of and from all remaining Obligations arising under the Credit Agreement;

(d)

the Lender shall be deemed to have consented and agreed to all of the provisions of this Plan in its entirety;

(e)

the Lender shall be deemed to have executed and delivered to the Aurcana Companies all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out this Plan in its entirety; and

(f)

all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out this Plan in its entirety shall be deemed to have been executed and delivered to the Aurcana Companies.

Waiver of Defaults based on the Arrangement.

From and after the Effective Time, all Persons shall be deemed to have waived any and all defaults or events of default of any member of the Aurcana Companies then existing or previously committed by any of them, or caused by any of them, any of the provisions in this Plan or steps contemplated in this Plan, or non-compliance with any covenant, warranty, representation, term, provision, condition or obligation, expressed or implied, in any contract, instrument, credit document, lease, licence, guarantee, agreement for sale or other agreement, written or oral, in each case relating to, arising out of, or in connection with any Support Agreement, the Arrangement, the Arrangement Agreement, this Plan, the Transaction contemplated hereunder and any proceedings commenced with

- 13 respect to or in connection with this Plan, and any and all amendments or supplements thereto, and any and all notices of default and demands for payment or any step or proceeding taken or commenced in connection therewith under any of the foregoing shall be deemed to have been rescinded and of no further force or effect, provided that nothing shall be deemed to excuse any member of the Aurcana Companies and their respective successors from performing its obligations under this Plan. 7.3

Deeming Provisions. In this Plan, the deeming provisions are not rebuttable and are conclusive and irrevocable.

7.4

Non-Consummation.

If the Implementation Date does not occur by the Outside Date, (a) this Plan shall be null and void in all respects, and (b) nothing contained in this Plan, and no acts taken in preparation for consummation of this Plan, shall (i) constitute or be deemed to constitute a waiver or release of any Claims by or against any of the Aurcana Companies or their respective successors or any other Person; (ii) prejudice in any manner the rights of the Aurcana Companies, their respective successors or any other Person in any further proceedings involving the Aurcana Companies or their respective successors; or (iii) constitute an admission of any sort by the Aurcana Companies, their respective successors or any other Person. 7.5

Amendment.

(1)

Subject to the prior consent of the Lender, the Aurcana Companies reserve the right, at any time and from time to time, to amend, restate, modify and/or supplement this Plan, provided that any such amendment, restatement, modification or supplement must be contained in a written document which is filed with the Court and, to the extent that any such amendment substantively affects any Person other than the Lender, approved by the Court.

(2)

Notwithstanding Section 7.5(1), any amendment, restatement, modification or supplement may be made by the Aurcana Companies to this Plan at any time and from time to time with the consent of the Lender and without requiring filing with, or approval of, the Court, provided that it concerns a matter which is of an administrative nature and is required to better give effect to the implementation of this Plan and the Final Order or to cure any errors, omissions or ambiguities.

(3)

Any amended, restated, modified or supplementary plan or plans of arrangement and reorganization filed with the Court and, if required by this Section 7.5, approved by the Court with the prior consent of the Lender, shall, for all purposes, be and be deemed to be a part of and incorporated in this Plan.

7.6

Severability of Plan Provisions.

If, prior to the Effective Time, any term or provision of this Plan is held by the Court to be invalid, void or unenforceable, at the request of any member of the Aurcana Companies, made with the consent of the Lender, the Court shall have the power to either (a) sever such term or provision from the balance of this Plan and provide the Aurcana Companies and the Lender with the option to proceed with the implementation of the balance of this Plan as of and with effect from the Effective Time, or (b) alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted, provided that the Lender has approved such alteration or interpretation. Notwithstanding any such holding, alteration or interpretation, and provided that this Plan is implemented, the remainder of the terms and provisions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation. 7.7

Paramountcy.

From and after the Implementation Date, any conflict between this Plan and the covenants, warranties, representations, terms, conditions, provisions or obligations, expressed or implied, of any contract, mortgage,

- 14 security agreement, indenture, trust indenture, loan agreement, commitment letter, by-laws or other agreement, written or oral, and any and all amendments or supplements thereto existing between the Lender and any of the Aurcana Companies as at the Implementation Date shall be deemed to be governed by the terms, conditions and provisions of this Plan and the Final Order, which shall take precedence and priority. 7.8

Notices.

Any notices or communications to be made or given hereunder shall be in writing and shall reflect this Plan and may, subject as hereinafter provided, be made or given by the Person making or giving it or by any agent of such Person authorized for that purpose by personal delivery, ordinary mail, email or by facsimile addressed to the respective parties as follows: (i)

if to any member of the Aurcana Companies:

Aurcana Corporation 1090 West Georgia Street, Suite 250 Vancouver, BC V6E 3V7 Canada Attention: Facsimile No.:

Chief Executive Officer 604.633.9179

with a required copy (which shall not be deemed notice) to: Goodmans LLP 333 Bay Street, Suite 3400 Toronto, ON M5H 2S7 Canada Attention: Email: Facsimile No.: (ii)

Robert J. Chadwick / Brendan O’Neill [email protected] / [email protected] 416.979.1234

if to the Lender or to Newco:

Orion Mine Finance (Master) Fund I LP c/o MUFG Fund Services Limited 26 Burnaby Street, Hamilton HM 11 Bermuda with a required copy (which shall not be deemed notice) to: Orion Resource Partners 1211 Avenue of the Americas New York, NY 10036 U.S.A. Attention: Email:

Limor Nissan, Chief Operating Officer and General Counsel [email protected]

- 15 and to: Norton Rose Fulbright Canada LLP Royal Bank Plaza, South Tower 200 Bay Street, Suite 3800, P.O. Box 84 Toronto, ON M5J 2Z4 Canada Attention: Email:

Geoffrey Gilbert / Evan Cobb [email protected]/ [email protected]

or to such other address as any party may from time to time notify the others in accordance with this Section 7.8. Any such communication so given or made shall be deemed to have been given or made and to have been received on the day of delivery if delivered, or on the day of faxing or emailing, provided that such day in either event is a Business Day and the communication is so delivered, faxed, emailed or sent before 5:00 p.m. on such day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the next following Business Day. 7.9

Further Assurances.

Notwithstanding that the Transaction shall occur and be deemed to occur in the order set out herein without any other additional act or formality, each of the Persons named or referred to herein, affected hereby or subject to, this Plan shall 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 to accomplish the purpose of the Plan or to assure other parties the benefits of this Plan.

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