Adamus Resources Limited, in the matter of Adamus Resources Limited [2011] FCA 1324

Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Corporations Act): (a) Adamus Resources Limited (ACN 094 543 398) (Adamus) convene a meeting (Scheme Meeting) of the holders of ordinary shares in Adamus (Adamus Shareholders), other than the holders of Excluded Shares in respect of those Excluded Shares, for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Adamus and Adamus Shareholders (Scheme), being the scheme substantially in the form of the draft contained in the scheme booklet containing the Explanatory Statement in relation to the Scheme, being Tab 5 of Exhibit "SR2" of the affidavit of Simon Rear of 20 October 2011 in these proceedings, as supplemented by the amendments in Annexure "SR3" of the affidavit of Simon Rear of 21 October 2011 (Scheme Booklet). (b) The Scheme Meeting be held at 10.00 am (WST) on 28 November 2011, at the Heritage Boardroom, The Melbourne Hotel, Cnr Hay and Milligan Streets, Perth WA. (c) The Chairperson of the Scheme Meeting be Mr Peter William Rowe, and in his absence, Mr Martin Richard Reed. (d) The Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion. (e) All voting at the Scheme Meeting be by poll as declared by the Chairperson. (f) At the Scheme Meeting, a person will be entitled to one vote for each Adamus share that the person is registered as holding at 7.00 pm (AEDST) on 26 November 2011. (g) The Explanatory Statement in the Scheme Booklet for the Scheme be approved for distribution to Adamus Shareholders. (h) There be dispatched to each Adamus Shareholder: (i) a covering letter; (ii) a document substantially in the form of the Scheme Booklet, which includes the Explanatory Statement; (iii) a proxy form for the Scheme Meeting; and (iv) a reply paid (for use in Australia only) envelope addressed to Computershare Investor Services Pty Limited, GPO Box 242, Melbourne VIC 3001 Australia, for the return of the proxy form, in the case of each Adamus Shareholder who has a registered address in Australia, by prepaid post and, in the case of each Adamus Shareholder who has a registered address outside Australia, by prepaid airmail or air courier, in each case addressed to the relevant address set out in the Adamus register of members or to the extent a shareholder has so nominated under section 249J(3A) of the Corporations Act to receive electronic notification of notices of meetings, Adamus will give notice of the Scheme Meeting and the Scheme Booklet by such electronic means. (i) The time by which the Adamus Shareholders must return their proxy forms for the Scheme Meeting be 10.00 am (WST) on 26 November 2011. (j) Adamus place an advertisement in The Australian and The West Australian newspapers, substantially in the form of "Annexure A" to these orders, on or before 29 November 2011 and Adamus shall otherwise be exempted from the requirement to publish the notice of the hearing of the application to approve the Scheme at least 5 days before the date fixed for the hearing of the application, in each case, pursuant to rule 3.4(3) of the Federal Court (Corporations) Rules 2000 (Cth). (k) Subject to these orders, the Scheme Meeting shall be convened and conducted so far as is practicable in accordance with: (i) such provisions of Part 2G.2 of the Corporations Act (other than a provision referred to as a replaceable rule which is not a mandatory rule for public companies) as would be applicable if the Scheme Meeting was a general meeting of Members; and (ii) such provisions of the Plaintiff's constitution as would be applicable if the Scheme Meeting was a general meeting of Members, except to the extent that those provisions are inconsistent with Part 2G.2 of the Corporations Act.

REASONS FOR JUDGMENT 1 This is an application made under s 411(1) of the Corporations Act 2001 (Cth) for the convening of meetings for the purpose of considering, and if thought fit, approving a scheme of arrangement between Adamus Resources Limited (Adamus) and its members. 2 The scheme essentially proposes a merger between Adamus and a company, Endeavour Gold Corporation, which is a subsidiary of Endeavour Mining Corporation (Endeavour), a company which is listed on the Toronto Stock Exchange, and which has mining interests in West Africa. Endeavour owns a 90% interest in the Youga Gold Mine in Burkina Faso and has exploration and development projects in other parts of West Africa, including the Ivory Coast. Adamus also has mining interests in West Africa and the proposal is to combine the mining interests of the two companies. 3 The scheme consideration is that the members of Adamus will receive 0.285 new Endeavour shares for each Adamus share. The new Endeavour shares will be taken either in the form of CHESS depositary instruments for listing on the Australian Stock Exchange, or shares in Endeavour which, as I understand it, will be listed on the Toronto Stock Exchange. 4 There are also options on issue and something called performance rights, but those matters will be dealt with outside of the scheme. The proposed meeting is a meeting only of the company's members. 5 In the case of Re Hills Motorway Limited (2002) 43 ACSR 101 at [5], Barrett J identified the matters to which the Court should have regard. Barrett J observed as follows: The task of the court, in deciding whether to make orders under s 411 convening a meeting of members, has been expressed in various ways. According to the formulation adopted by Santow J in Re NRMA Insurance Ltd, the court must see, on the material placed before it, that the proposal fits within the statutory concept of arrangement or compromise, that there will be available to members all the main facts relevant to the exercise of their judgment, that ASIC has had a reasonable opportunity to examine the proposal and that the scheme is so conceived and presented as to that structure, purpose and effect that there is no apparent reason, so far as can be foreseen, why it should not, in due course, receive the court's approval if the necessary majority of members' votes is achieved. (Citation omitted.) 6 As to the first consideration, namely, that the proposed scheme of arrangement falls within the concept of a statutory arrangement, there is no doubt that it does. The scheme provides for a merger arrangement of a nature which is frequently approved by the courts. 7 I am satisfied that there is sufficient disclosure of the details of the scheme in the scheme booklet. The evidence shows that there have been dealings between the company and the Australian Securities and Investments Commission (ASIC) and that, as a consequence of those dealings, changes have over time, been made to the draft scheme booklet to satisfy the disclosure requirement. 8 The evidence also shows that ASIC has provided a letter to the solicitors acting for the company saying that it does not propose to attend this Court hearing to oppose the making of orders for the convening of a meeting of members. It is not unusual for ASIC to write such a letter, after it has been engaged in communication with the proponent of the scheme, over a period of time, as to the content of the scheme booklet. 9 The next issue which I have to consider is whether there is any reason which would preclude the scheme from being approved at the second hearing, if the statutory majorities were obtained at the meeting. On the face of it, there is nothing which would preclude this from happening. 10 In this regard, I observe that there is contained in the scheme booklet, expert opinion to the effect that, the scheme is fair and reasonable. 11 Further, senior counsel for the company, has brought to my attention a number of matters in relation to the contents of the merger implementation agreement. 12 The first of those matters relates to, what was referred to as, the "exclusivity" provision, in the merger implementation agreement. This provision imposes a restriction on the ability of the company to deal with offers which might be made by other parties to acquire the shares of Adamus. The concern of the courts in relation to provisions of this nature, is that such a provision may, depending on its terms, impose restrictions which may inhibit the directors of the target company from giving effect to their fiduciary duties in dealing with any competing offers to acquire the shares in the company. 13 However, I accept submissions of senior counsel for the company that the terms of this particular exclusivity provision are not such, as would preclude this Court from making the orders sought today. 14 First, the exclusivity period, namely, about four months, is not, in my view, unreasonable. 15 Secondly, the exclusivity provision contains, what is referred to in the cases, as a "fiduciary carve out" which does permit the directors to consider alternative proposals, provided that they are of sufficient quality, if they come to the view that failure to do so would breach their fiduciary duty. 16 Further, there is a sufficient prominence given to the existence of this exclusivity provision in the scheme booklet. 17 There is also what is referred to as, a "break fee" provision, in the merger implementation agreement. The main concern of the courts in relation to a break fee provision, is that it might constitute an impediment to the free exercise of the votes of the members. 18 However, this break fee falls within the guidelines set out in the Takeovers Panel's Guidance Note No 7: Lock-up Devices which provides that a break fee should not exceed 1% of the equity value of the company. In addition, both parties have the benefit and burden of a break fee. 19 Further, at paras 74-78 of his affidavit, Mr Mark Connelly, managing director and chief executive officer of the company, has deposed at some length to the negotiations in respect of the break fee provision, and also the exclusivity provision, and has said that these negotiations were conducted at arms-length, with each side being represented by external advisers, both legal and financial. 20 Accordingly, I am of the view, that the break fee provision, also, does not constitute an impediment to the making of the orders sought today. 21 I note that the company has also provided to the Court, a schedule which sets out the manner in which the company has satisfied the applicable requirements of the Corporations Act. 22 In those circumstances, I am prepared to make the orders in terms of the minute of proposed orders, as amended, during oral submissions, at the request of Mr Dharmananda SC for the company. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

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