Invictus Gold Limited, in the matter of Invictus Gold Limited [2013] FCA 1132

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 381 of 2013

IN THE MATTER OF INVICTUS GOLD LIMITED (ACN 145 891 907) BETWEEN: INVICTUS GOLD LIMITED (ACN 145 891 907)

JUDGE: BARKER J DATE: 24 OCTOBER 2013 PLACE: PERTH

OVERVIEW 1 On 24 October 2013, the Court made orders under s 411(1) of the Corporations Act 2001 (Cth) (Act) convening: a meeting of the holders of fully paid ordinary shares in the capital of the plaintiff (Invictus) (other than Impact Minerals Ltd (Impact)) (shareholders) for the purpose of considering a proposed scheme of arrangement between Invictus and the shareholders in relation to the acquisition of all of the remaining ordinary shares in Invictus by Impact (proposed share scheme); and a meeting of the holders of listed options to subscribe for shares in Invictus (optionholders) for the purpose of considering a proposed scheme of arrangement between Invictus and the optionholders in relation to the acquisition of all of the remaining listed options by Impact (proposed option scheme). 2 The Court also made various ancillary orders. 3 These are short reasons for the making of the orders.

BACKGROUND 4 Invictus is a mining exploration company with various projects in Australia and Turkey. Invictus was incorporated on 20 August 2010 and is listed on the Australian Securities Exchange (ASX). 5 The board of directors of Invictus comprises four directors: Mr Peter John Unsworth (non-executive chairperson), Dr Michael Griffith Jones (managing director), Mr Michael John Busbridge (executive director) and Mr Richard John Basham (non-executive director). 6 Invictus has: an issued share capital of 111,335,875 ordinary shares; 8,000,000 options on issue which are admitted to official quotation on the ASX and exercisable at $0.25 with an expiry date of 30 November 2015 (scheme options); and 27,700,000 unquoted options which are exercisable at various prices between $0.10 and $0.30 and with various expiry dates between 30 June 2014 and 30 November 2016 (non-scheme options). 7 Impact is a mining exploration company with various projects in Australia and Botswana. Impact was incorporated on 31 March 2006 and is listed on the ASX. Impact currently holds approximately 73.99% of the ordinary shares in Invictus and none of the scheme options.

PROPOSED SCHEMES 8 The proposed schemes result from Invictus entering into a merger implementation agreement with Impact on 22 August 2013. Each proposed scheme is conditional on the approval of the other. However, Impact may waive the condition that makes the proposed share scheme conditional upon approval of the proposed option scheme. 9 The proposed share scheme, if implemented, will result in all of the ordinary shares in Invictus being transferred to Impact. In exchange, each shareholder (other than certain overseas shareholders) will receive five ordinary shares in Impact for every four Invictus shares that they hold. 10 The proposed option scheme, if implemented, will result in all of the scheme options being transferred to Impact. In exchange, each optionholder (other than certain overseas optionholders) will receive one new Impact option with an exercise price of $0.20 and an expiry date of 30 November 2015 for every scheme option that they hold. 11 Under the terms of the merger implementation agreement, shareholders and optionholders with a registered address other than Australia or New Zealand will not be eligible to receive the proposed share scheme or proposed option scheme consideration (unless Invictus and Impact are reasonably satisfied that the issue of Impact shares and options in the holder's jurisdiction is neither prohibited by law nor unduly onerous) (ineligible foreign holders). Instead, the Impact shares and options that would have been issued to the ineligible foreign holders will be issued to a sale agent who will be directed to sell and distribute the net proceeds from the sale of the shares and options to the ineligible foreign holders. There are five "ineligible foreign shareholders" (who hold approximately 0.57% of the ordinary shares in Invictus) and four "ineligible foreign optionholders (who hold approximately 1.45% of the scheme options). 12 Further, under the terms of the merger implementation agreement, Invictus and Impact are required to discuss in good faith and cooperate with each other to ensure that the non-scheme options are cancelled, acquired by Impact, converted into shares in Invictus or otherwise dealt with to Impact's satisfaction before any second Court hearing. It appears that Invictus has entered into private agreements with the majority of the holders of the non-scheme options (other than Impact) pursuant to which these holders have agreed to cancel 13,400,000 of the 14,900,000 non-scheme options held by those individuals for no cash consideration, subject to the proposed schemes being approved by the Court on terms that are reasonably acceptable to the holders. However, Impact proposes to separately make an offer to certain employees and a consultant of Invictus whereby, for no consideration, Impact will issue unlisted options to acquire shares in Impact on terms similar to the cancelled non-scheme options. These options will apparently be issued in order to provide incentives to the holders to continue their involvement with Impact and having regard to the fact that their non-scheme options in Invictus are to be cancelled. 13 The merger implementation agreement also contains provisions that prevent Invictus and its representatives, during a defined "exclusivity period" of a maximum of approximately four months, from soliciting or negotiating alternative, competing proposals to the proposed schemes, and requiring Invictus to notify Impact of any alternative proposals (exclusivity provisions). However, the exclusivity provisions are framed so that they are subject to an overriding obligation not to breach the directors' fiduciary or other legal duties. 14 Finally, two of Invictus's directors, Mr Unsworth and Dr Jones, are directors of and hold securities in both Invictus and Impact. Mr Basham deposes that due to their positions on both boards, Mr Unsworth and Dr Jones have been excluded from all board deliberations and voting in relation to Invictus's entry into the merger implementation agreement. If the proposed schemes are implemented it is proposed that Mr Unsworth and Dr Jones will remain directors of both Invictus and Impact on the same terms and conditions as their existing appointments. Mr Basham deposes that if Mr Unsworth and Dr Jones vote at one or more of the scheme meetings Invictus intends to "tag" the votes cast by them and have the chairperson of the meetings report to the Court at any second Court hearing on the manner in which the votes were cast.

CONSIDERATION 15 The Court is satisfied that the proposed schemes are ones that may be approved under s 411 of the Act. 16 The level of disclosure to be provided by the draft scheme booklet is satisfactory. 17 An independent expert has provided a report, to be included with the draft scheme booklet to be given to shareholders and optionholders, that states that: the proposed share scheme is fair and reasonable and in the best interests of shareholders; and the proposed option scheme is not fair but is reasonable and is in the best interests of the optionholders. 18 There is no demonstrated performance risk in relation to the proposed schemes that should prevent them from going forward to the meetings of shareholders and optionholders. Further, it is not for the Court as this point to exercise commercial judgment in respect of the proposed schemes, but to leave the shareholders and optionholders to exercise that judgment. 19 The meetings of shareholders and optionholders will be chaired by Mr Basham or, failing him, Mr Busbridge. Mr Basham and Mr Busbridge have disclosed the extent of their commitments and obligations to Invictus, none of which disqualifies either of them as an appropriate chairperson at the meetings. 20 There is nothing in the exclusivity provisions that, in my opinion, should cause the Court to think that shareholders or optionholders at the meetings may not fairly consider supporting or rejecting the proposed schemes. In my view, the exclusivity provisions will be adequately brought to the attention of the shareholders and optionholders, are for no more than a reasonable period and are appropriately framed so that they are subject to an overriding obligation not to breach the directors' fiduciary duties or be otherwise unlawful: Re Arthur Yates & Co Ltd [2002] NSWSC 40; (2001) 36 ACSR 758 at [9]. 21 Finally, pursuant to s 411(2) of the Act, the Australian Securities and Investments Commission has been given the required notice of the hearing of the application and a copy of the draft scheme booklet and has provided a letter indicating that it does not currently propose making any submissions in relation to the proposed schemes or intervening to oppose them.

CONCLUSION AND ORDERS 22 In all of these circumstances, appropriate disclosure of any relevant matters having been made on behalf of Invictus, the Court is satisfied that the orders proposed should be made. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.