May 22, 2009
Exhibit 99.1
May 22, 2009
New Gold Inc.
0000-000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Dear Sirs:
Re: Arrangement between Western
Goldfields Inc. (“WGI”) and New Gold Inc. (“New Gold”)
This letter sets out our agreement with respect
to certain matters in connection with the proposed business combination by way
of arrangement pursuant to a business combination agreement dated as of March 3,
2009 between WGI and New Gold (the “Agreement”) and as amended by
letter agreement dated April 8, 2009. For good and valuable consideration
(for which receipt is hereby acknowledged by both of us), we agree as
follows:
1.
The Parties have determined that the Arrangement will not have the U.S. federal
income tax consequences described in section 2.10 of the Agreement.
2.
Accordingly, and pursuant to section 7.01 of the Agreement and section 6.01 (a)
of the Plan of Arrangement, the Plan of Arrangement shall be amended such that
the merger of New Gold Subco and Western shall not occur, and the steps
described in paragraphs 3.01(e),(f),(g) and (h) of the Plan of Arrangement (in
the form attached as Appendix “A” to the Proxy Circular) shall be deleted.
3.
The Plan Arrangement, as amended in accordance with Section 2 above, shall be in
the form attached hereto as Schedule “A”.
4.
Terms that are not otherwise defined herein shall have the meanings ascribed
thereto in the Agreement.
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By:
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“Xxxxx
Xxxxx”
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Name: Xxxxx Xxxxx
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Title: Chief Financial Officer
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Accepted as
of the date above.
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NEW GOLD
INC.
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By:
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“Xxxxx
Xxxxx”
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Name: Xxxxx Xxxxx
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Title: Corporate
Secretary
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SCHEDULE
“A”
PLAN OF
ARRANGEMENT
UNDER SECTION 182 OF THE
BUSINESS CORPORATIONS ACT
(ONTARIO)
ARTICLE 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS AND INTERPRETATION
1.01
Definitions
In this Plan of Arrangement, unless the context otherwise requires, the
following words and terms with the initial letter or letters thereof capitalized
shall have the meanings ascribed to them below:
(a)
“Arrangement” means the
arrangement under the provisions of the OBCA on the terms and subject to the
conditions set forth in this Plan of Arrangement, subject to any amendment or
supplement hereto made in accordance with the Business Combination Agreement, the provisions hereof or at
the direction of the Court in the Final Order;
(b)
“Business Combination
Agreement” means the business combination arrangement agreement dated as
of March 3, 2009 between New Gold Inc. and Western Goldfields Inc., as amended,
amended and restated or supplemented prior to the Effective Date;
(c)
“Business Day” means any
day other than a Saturday, a Sunday or a statutory holiday in Toronto, Ontario
or Vancouver, British Columbia;
(d)
“Canadian Resident”
means a beneficial owner of Western Common Shares immediately prior to the
Effective Time who is a resident of Canada for purposes of the Tax Act (other
than a Tax Exempt Person), or a partnership any member of which is a resident of
Canada for the purposes of the Tax Act (other than a Tax Exempt Person);
(e)
“Court” means the
Ontario Superior Court of Justice (Commercial List);
(f)
“CRA” means the Canada
Revenue Agency;
(g)
“Depositary” means
Computershare Investor Services Inc. or any other trust company, bank or
financial institution agreed to in writing between New Gold and Western for the
purpose of, among other things, exchanging certificates representing Western
Common Shares for New Gold Common Shares in connection with the
Arrangement;
(h)
“Dissent Right” shall
have the meaning ascribed thereto in Article 4.01;
(i)
“Dissenting Shareholder”
means a registered holder of Western Common Shares who dissents in respect of
the Arrangement in strict compliance with the Dissent Rights and who is
ultimately entitled to be paid fair value for their Western Common Shares;
(j)
“Effective Date” means
the date shown on the certificate of arrangement issued under the OBCA
giving effect to the Arrangement;
(k)
“Effective Time” means
12:01 am (Toronto Time) on the Effective Date;
(l)
“Electing Holdco
Shareholder” means a Qualifying Holdco Shareholder who has elected the
Holdco Alternative in accordance with the Business Combination Agreement;
(m)
“Eligible Holder” means:
(i) a Canadian Resident, or (ii) an Eligible Non-Resident or (iii) an Electing
Holdco Shareholder;
(n)
“Eligible Non-Resident”
means a beneficial owner of Western Common Shares immediately prior to the
Effective Time who is not, and is not deemed to be, a resident of Canada for
purposes of the Tax Act and whose Western Common Shares are “taxable Canadian
property” and not “treaty-protected property”, in each case as defined in the
Tax Act;
(o)
“Final Order” means the
final order of the Court made in connection with the approval of the
Arrangement, including all amendments thereto made prior to the Effective
Time;
(p)
“Former Western
Shareholders” means the holders of Western Common Shares immediately
prior to the Effective Time;
(q)
“Holdco Alternative”
shall have the meaning ascribed thereto in the Business Combination
Agreement;
(r)
“In-The-Money Amount” in
respect of a stock option means the amount, if any, by which the aggregate fair
market value at that time of the securities subject to the option exceeds the
aggregate exercise price under the option;
(s)
“Interim Order” means
the interim order of the Court made pursuant to Section 182(5) of the OBCA in
connection with the Arrangement, including any amendment thereto;
(t)
“New Gold” means New
Gold Inc., a corporation existing under the Business Corporations Act
(British Columbia);
(u)
“New Gold Common Shares”
means the common shares in the capital of New Gold;
(v)
“New Gold Replacement
Option” shall have the meaning ascribed thereto in Section 3.01(d);
(w)
“OBCA” means the Business Corporations Act
(Ontario);
(x)
“Plan of Arrangement”
means this plan of arrangement, as amended, modified or supplemented from time
to time in accordance herewith, and with the Business Combination Agreement and
any order of the Court;
(y)
“Qualifying Holdco”
shall have the meaning ascribed thereto in the Business Combination
Agreement;
(z)
“Qualifying Holdco
Shareholder” shall have the meaning ascribed thereto in the Business
Combination Agreement;
(aa)
“Section 85 Election”
shall have the meaning ascribed thereto in Section 3.02(c);
(bb)
“Share Consideration”
means the Share Exchange Ratio plus $0.0001 in cash for each Western Common
Share;
(cc)
“Share Exchange Ratio”
means 1.0 of a New Gold Common Share for each Western Common Share;
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(dd)
“Tax Act” means the
Income Tax Act (Canada)
and the regulations thereunder, as amended from time to time;
(ee)
“Tax Exempt Person”
means a person who is exempt from tax under Part I of the Tax Act;
(ff)
“Western” means Western
Goldfields Inc., a corporation existing under the OBCA;
(gg)
“Western Common Shares”
means the issued and outstanding common shares of Western;
(hh)
“Western Meeting” means
the special meeting of the holders of Western Common Shares held to consider and
approve, among other things, the Arrangement;
(ii)
“Western Options” means
collectively the outstanding options to purchase Western Common Shares issued
pursuant to the Western Stock Option Plan and pursuant to stand alone option
agreements to which Western is a party; and
(jj)
“Western Stock Option
Plan” means the 2006 Incentive Stock Option Plan of Western, as
amended.
In addition, words and phrases used
herein and defined in the OBCA and not otherwise defined herein shall have the
same meaning herein as in the OBCA unless the context otherwise
requires.
1.02
Interpretation Not Affected by Headings
The division of this Plan of Arrangement into
articles, sections, paragraphs and subparagraphs and the insertion of headings
herein are for convenience of reference only and shall not affect the
construction or interpretation of this Plan of Arrangement. The terms “this Plan
of Arrangement”, “hereof’, “herein”, “hereto”, “hereunder” and similar
expressions refer to this Plan of Arrangement and not to any particular article,
section or other portion hereof and include any instrument supplementary or
ancillary hereto.
1.03
Number, Gender and Persons
In this Plan of Arrangement, unless the
context otherwise requires, words importing the singular shall include the
plural and vice versa, words importing the use of either gender shall include
both genders and neuter and the word person and words importing persons shall
include a natural person, firm, trust, partnership, association, corporation,
joint venture or government (including any governmental agency, political
subdivision or instrumentality thereof) and any other entity or group of persons
of any kind or nature whatsoever.
1.04
Date for any Action
If the 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.
1.05
Statutory References
Any reference in this
Plan of Arrangement to a statute includes all regulations made thereunder, all
amendments to such statute or regulation in force from time to time and any
statute or regulation that supplements or supersedes such statute or
regulation.
1.06
Currency
Unless otherwise stated, all references herein
to amounts of money are expressed in lawful money of Canada.
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1.07
Time of the Essence
Time shall be of the essence with respect to every provision of this Plan
of Arrangement.
ARTICLE 2
BUSINESS COMBINATION AGREEMENT
BUSINESS COMBINATION AGREEMENT
This Plan of Arrangement is made pursuant to, and is subject to the
provisions of, the Business Combination Agreement, except in respect of the
sequence of the steps comprising the Arrangement, which shall occur in the order
set forth herein.
ARTICLE 3
ARRANGEMENT
ARRANGEMENT
3.01
Arrangement
At the Effective Time, the following shall occur and shall be deemed to
occur sequentially in the following order without any further act or
formality:
(a)
each Western Common Share held by a Dissenting Shareholder shall be deemed to be
transferred by the holder thereof, without any further act or formality on its
part, free and clear of all liens, claims and encumbrances, to New Gold and New
Gold shall thereupon be obliged to pay the amount therefor determined and
payable in accordance with Article 4 hereof, and the name of such holder shall
be removed from the central securities register as a holder of Western Common
Shares and New Gold shall be recorded as the registered holder of the Western
Common Shares so transferred and shall be deemed to be the legal owner of such
Western Common Shares;
(b)
each Western Common Share held by a Former Western Shareholder (other than a
Dissenting Shareholder, a Qualifying Holdco the shares of which are owned by an
Electing Holdco Shareholder, New Gold or any subsidiary of New Gold) shall be
transferred to New Gold and in consideration therefor New Gold shall issue and
pay the Share Consideration for each Western Common Share, subject to Sections
3.03, 3.04 and Article 5 hereof;
(c)
simultaneously with the transfer of the Western Common Shares pursuant to
Section 3.01(b), all of the shares outstanding immediately prior to the
Effective Time of each Qualifying Holdco that are owned by an Electing Holdco
Shareholder, if any, shall be transferred by the holders thereof to New Gold in
consideration for the Share Consideration that the Qualifying Holdco would have
been entitled to receive pursuant to Section 3.01(b), subject to Sections 3.03,
3.04 and Article 5 hereof; and
(d)
each Western Option outstanding immediately prior to the Effective Time, whether
or not vested, shall be exchanged, simultaneously with the transfer of the
Western Common Shares pursuant to Section 3.01(b), for an option (a “New Gold
Replacement Option”) to acquire, on the same terms and conditions as were
applicable to such Western Option immediately before the Effective Time under
the relevant Western Option Plan under which it was issued and/or the agreement
evidencing such issuance, the number (rounded down to the nearest whole number)
of New Gold Common Shares equal to the product of: (A) the number of
Western Common Shares subject to such Western Option immediately prior to the
Effective Time and (B) the Share Exchange Ratio. The exercise price per New Gold
Common Share subject to any such New Gold Replacement Option shall be an amount
(rounded up to the nearest one-hundredth of a cent) equal to the quotient of (A)
the exercise price per Western Common Share subject to such Western
Option immediately before the Effective Time divided by (B) the Share Exchange
Ratio, provided that the exercise price otherwise determined shall be adjusted
to the extent, if any, required to ensure that the In the Money Amount of the
New Gold Replacement Option immediately after the exchange is not greater than
the In the Money Amount of the exchanged Western Option immediately before
the Effective Time. The terms of each New Gold Replacement Option shall be
the same as the terms of the Western Option it is exchanged therefor, except as
provided above and except that such New Gold Replacement Option shall be fully
vested and that it shall not expire earlier as a result of the Arrangement being
a change of control.
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3.02
Post-Effective Time Procedures
(a)
On or promptly after the Effective Date, New Gold shall deliver or arrange to be
delivered to the Depositary certificates representing the New Gold Common Shares
required to be issued to Former Western Shareholders and Electing Holdco
Shareholders (if any) and the requisite cash required to be paid to Former
Western Shareholders and Qualifying Holdco Shareholders (if any) in accordance
with the provisions of Section 3.01 hereof, which certificates and cash shall be
held by the Depositary as agent and nominee for such Former Western Shareholders
and Electing Holdco Shareholders (if any) for distribution to such Former
Western Shareholders and Electing Holdco Shareholders (if any) in accordance
with the provisions of Article 5 hereof.
(b)
Subject to the provisions of Article 5 hereof, Former Western Shareholders
(other than Dissenting Shareholders, New Gold and any subsidiary of New Gold)
and Electing Holdco Shareholders (if any) shall be entitled to receive delivery
of the certificates representing the New Gold Common Shares and a cheque for the
cash consideration to which they are entitled pursuant to Section 3.01(b)
hereof.
(c)
An Eligible Holder whose Western Common Shares or shares of a Qualifying Holdco
are exchanged, in either case, for the Share Consideration pursuant to the
Arrangement shall be entitled to make a joint income tax election, pursuant to
Section 85 of the Tax Act (and any analogous provision of provincial income tax
law) (a “Section 85
Election”) with respect to the exchange by providing two signed copies of
the necessary joint election forms to an appointed representative, as directed
by New Gold, within 90 days after the Effective Date, duly completed with the
details of the number of Western Common Shares or the number and type of shares
of a Qualifying Holdco, transferred and the applicable agreed amounts for the
purposes of such joint elections. New Gold shall, within 90 days after receiving
the completed joint election forms from an Eligible Holder, and subject to such
joint election forms being correct and complete and in compliance with
requirements imposed under the Tax Act (or applicable provincial income tax
law), sign and return them to the Eligible Holder, for filing with the CRA (or
the applicable provincial tax authority). Neither Western, New Gold nor any
successor corporation shall be responsible for the proper completion of any
joint election form nor, except for the obligation to sign and return duly
completed joint election forms which are received within 90 days of the
Effective Date, for any taxes, interest or penalties resulting from the failure
of an Eligible Holder to properly complete or file such joint election forms in
the form and manner and within the time prescribed by the Tax Act (or any
applicable provincial legislation). In its sole discretion, New Gold or any
successor corporation may choose to sign and return a joint election form
received by it more than 90 days following the Effective Date, but will have no
obligation to do so.
(d)
Upon receipt of a letter of transmittal in which an Eligible Holder has
indicated that the Eligible Holder intends to make a Section 85 Election, New
Gold will promptly deliver a tax instruction letter (and a tax instruction
letter for the equivalent Quebec election, if applicable), together with the
relevant tax election forms (including the Quebec tax election forms, if
applicable) to the Eligible Holder.
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3.03
No Fractional New Gold Common Shares
No fractional New Gold Common Shares shall be issued to Former Western
Shareholders or Electing Holdco Shareholders. The number of New Gold
Common Shares to be issued to Former Western Shareholders or Electing Holdco
Shareholders shall be rounded down to the nearest whole New Gold Common Share in
the event that a Former Western Shareholder or an Electing Holdco Shareholder is
entitled to a fractional share.
3.04
Fractional Cash Consideration
Any cash consideration owing to a Former Western Shareholder or Electing
Holdco Shareholder shall be rounded up to the next whole cent.
ARTICLE 4
DISSENT RIGHTS
DISSENT RIGHTS
4.01
Dissent Rights
Holders of Western Common Shares may exercise
rights of dissent (“Dissent
Rights”) pursuant to and in the manner set forth under section 185 of the
OBCA, as modified by the Interim Order, with respect to Western Common
Shares in connection with the Arrangement, provided that notwithstanding
subsection 185(6) of the OBCA, the written objection to the special resolution
to approve the Arrangement contemplated by Section 185(6) of the OBCA must be
sent to Western by holders who wish to dissent and received by Western not later
than 5:00 pm (Toronto Time) on the date that is one Business Day immediately
prior to the Western Meeting or any date to which the Western Meeting may be
postponed or adjourned and provided further that holders who exercise such
rights of dissent and who:
(a)
are ultimately entitled to be paid fair value for their Western Common Shares,
which fair value shall be the fair value of such shares immediately before the
passing by the holders of the Western Common Shares of the resolution approving
the Arrangement, shall be paid an amount equal to such fair value by New Gold;
and
(b)
are ultimately not entitled, for any reason, to be paid fair value for their
Western Common Shares shall be deemed to have participated in the Arrangement,
as of the Effective Time, on the same basis as a non-dissenting holder of
Western Common Shares and shall be entitled to receive only the consideration
contemplated in Section 3.01(a) hereof that such holder would have received
pursuant to the Arrangement if such holder had not exercised Dissent
Rights,
but in no case shall New Gold,
Western or any other person be required to recognize holders of Western Common
Shares who exercise Dissent Rights as holders of Western Common Shares after the
time that is immediately prior to the Effective Time, and the names of such
holders of Western Common Shares who exercise Dissent Rights shall be deleted
from the central securities register as holders of Western Common Shares at the
Effective Time.
ARTICLE 5
DELIVERY OF NEW GOLD COMMON SHARES
DELIVERY OF NEW GOLD COMMON SHARES
5.01
Delivery of New Gold Common Shares
(a)
Upon surrender to the Depositary for cancellation of a certificate that
immediately before the Effective Time represented one or more outstanding
Western Common Shares or shares of Qualifying Holdco, as the case may be, that
were exchanged for New Gold Common Shares in accordance with Section 3.01
hereof, together with such other documents and instruments as would have been
required to effect the transfer of the Western Common Shares or shares of
Qualifying Holdco, as the case may be, formerly represented by such certificate
under the OBCA and the articles of Western and such additional documents and
instruments as the Depositary may reasonably require, the holder of such
surrendered certificate shall be entitled to receive in exchange therefor, and
the Depositary shall deliver to such holder following the Effective Time, a
certificate representing the New Gold Common Shares that such holder is entitled
to receive in accordance with Section 3.01 hereof and a cheque for the cash
consideration to which such holder is entitled.
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(b)
After the Effective Time and until surrendered for cancellation as contemplated
by Section 5.01(a) hereof, each certificate that immediately prior to the
Effective Time represented one or more Western Common Shares or shares of
Qualifying Holdco shall be deemed at all times to represent only the right to
receive in exchange therefor a certificate representing the New Gold Common
Shares and the cash consideration that the holder of such certificate is
entitled to receive in accordance with Section 3.01 hereof.
5.02
Lost Certificates
In the event any certificate, that immediately
prior to the Effective Time represented one or more outstanding Western Common
Shares that were exchanged for New Gold Common Shares and the cash consideration
in accordance with Section 3.01 hereof, shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the holder claiming
such certificate to be lost, stolen or destroyed, the Depositary shall deliver
in exchange for such lost, stolen or destroyed certificate, a certificate
representing the New Gold Common Shares and a cheque in the amount of the cash
consideration that such holder is entitled to receive in accordance with Section
3.01 hereof. When authorizing such delivery of a certificate representing the
New Gold Common Shares and the cash consideration that such holder is entitled
to receive in exchange for such lost, stolen or destroyed certificate, the
holder to whom a certificate representing such New Gold Common Shares and a
cheque in the amount of the cash consideration is to be delivered shall, as a
condition precedent to the delivery of such New Gold Common Shares and cheque,
give a bond satisfactory to New Gold and the Depositary in such amount as New
Gold and the Depositary may direct, or otherwise indemnify New Gold and the
Depositary in a manner satisfactory to New Gold and the Depositary, against any
claim that may be made against New Gold or the Depositary with respect to the
certificate alleged to have been lost, stolen or destroyed and shall otherwise
take such actions as may be required by the articles of Western.
5.03
Distributions with Respect to Unsurrendered Certificates
No dividend or other distribution declared or
made after the Effective Time with respect to New Gold Common Shares with a
record date after the Effective Time shall be delivered to the holder of any
unsurrendered certificate that, immediately prior to the Effective Time,
represented outstanding Western Common Shares or shares of Qualifying Holdco
unless and until the holder of such certificate shall have complied with the
provisions of Section 5.01 or Section 5.02 hereof. Subject to applicable law and
to Section 5.04 hereof, at the time of such compliance, there shall, in addition
to the delivery of a certificate representing the New Gold Common Shares and a
cheque for the cash consideration to which such holder is thereby entitled, be
delivered to such holder, without interest, the amount of the dividend or other
distribution with a record date after the Effective Time theretofore paid with
respect to such New Gold Common Shares.
5.04
Withholding Rights
New Gold and the Depositary shall be entitled to deduct and withhold from
all dividends or other distributions otherwise payable to any Former Western
Shareholder such amounts as New Gold or the Depositary 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 any applicable
federal, provincial, state, local or foreign tax law or treaty, in each case, as
amended. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the Former Western
Shareholder in respect of which such deduction and withholding was made,
provided that such withheld amounts are actually remitted to the appropriate
taxing authority.
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5.05
Limitation and Proscription
To the extent that a Former Western Shareholder or Electing Holdco
Shareholder shall not have complied with the provisions of Section 5.01 or
Section 5.02 hereof on or before the date that is six years after the Effective
Date (the “final proscription
date”), then the New Gold Common Shares that such Former Western
Shareholder or Electing Holdco Shareholder was entitled to receive shall be
automatically cancelled without any repayment of capital in respect thereof and
the certificates representing such New Gold Common Shares, together with the
cash consideration to which such Former Western Shareholder or Electing Holdco
Shareholder was entitled, shall be delivered to New Gold by the Depositary and
the share certificates shall be cancelled by New Gold, and the interest of the
Former Western Shareholder or Electing Holdco Shareholder in such New Gold
Common Shares and the cash consideration to which it was entitled shall be
terminated as of such final proscription date.
5.06
Legality of New Gold Common Shares forming part of the Share
Consideration
Notwithstanding anything else in this Plan of Arrangement, if it appears to
New Gold that it would be contrary to applicable law to issue New Gold Common
Shares to Former Western Shareholders or Electing Holdco Shareholders pursuant
to the Arrangement to a person that is not a resident of Canada or the United
States, the New Gold Common Shares that otherwise would be issued or
transferred, as the case may be, to that person will be issued or transferred,
as the case may be, and delivered to the Depositary for sale of the New Gold
Common Shares by the Depositary on behalf of that person. The New Gold
Common Shares delivered to the Depositary will be pooled and sold as soon as
practicable after the Effective Date, on such dates and at such prices as the
Depositary determines in its sole discretion. The Depositary shall not be
obligated to seek or obtain a minimum price for any of the New Gold Common
Shares sold by it. Each such person will receive a pro rata share of the
cash proceeds from the sale of the New Gold Common Shares sold by the Depositary
(less commissions, other reasonable expenses incurred in connection with the
sale of the New Gold Common Shares and any amount withheld in respect of
applicable taxes) in lieu of New Gold Common Shares. The payment of the
net proceeds will be subject to Section 5.04. None of Western, New Gold or
the Depositary will be liable for any loss arising out of any such sales.
ARTICLE 6
AMENDMENTS
AMENDMENTS
6.01
Amendments to Plan of Arrangement
(a)
New Gold and Western reserve the right to amend, modify or supplement this Plan
of Arrangement at any time and from time to time, provided that each such
amendment, modification or supplement must be (i) set out in writing, (ii)
agreed to in writing by New Gold and Western, (iii) filed with the Court and, if
made following the Western Meeting, approved by the Court, and (iv) communicated
to holders or former holders of Western Common Shares if and as required by the
Court.
(b)
Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by Western at any time prior to the Western Meeting provided that New
Gold shall have consented thereto in writing, with or without any other prior
notice or communication, and, if so proposed and accepted by the persons voting
at the Western Meeting (other than as may be required under the Interim Order),
shall become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to
this Plan of Arrangement that is approved by the Court following the Western
Meeting shall be effective only if: (i) it is consented to in writing by each of
New Gold and Western; and (ii) if required by the Court, it is consented to by
holders of the Western Common Shares voting in the manner directed by the
Court.
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