Exhibit 99.1

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS     Date: JANUARY 14, 2025   Time: 11:00 A.M. (Pacific Time)     2500- 666 Burrard Street Vancouver, BC V6C 2X8     Record Date: Record Date: November 25, 2024				NOTICE OF SPECIAL MEETING   NOTICE is hereby given that a special meeting (the ”First Majestic Special Meeting”) of the holders (the ”First Majestic Shareholders”) of common shares (“First Majestic Common Shares”) of First Majestic Silver Corp. (“First Majestic”) will be held at the offices of Bennett Jones LLP at Suite 2500 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8, on January 14, 2025 at 11:00 a.m. (Pacific Time). At the First Majestic Special Meeting, First Majestic Shareholders will be asked to consider and, if deemed advisable by them, to pass, with or without variation, an ordinary resolution (the ”Share Issuance Resolution”), the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting” to the accompanying management information circular of First Majestic dated December 6, 2024 (the ”Management Information Circular”) authorizing and approving the issuance of the number of First Majestic Common Shares as shall be necessary to satisfy the Merger Consideration under the terms of the Merger Agreement (as such terms are defined in the Management Information Circular), anticipated to be up to an aggregate of 190,000,000 First Majestic Common Shares.   We will also consider other business that may properly be brought before the First Majestic Special Meeting or any adjournment or postponement thereof. This Notice of Special Meeting is accompanied by the Management Information Circular and a form of proxy or voting instruction form (as applicable). First Majestic Shareholders are referred to the Management Information Circular for more detailed information regarding the First Majestic Special Meeting.   The board of directors of First Majestic unanimously recommends that First Majestic Shareholders VOTE FOR the Share Issuance Resolution. It is a condition to the completion of the Transaction (as such term is defined in the Management Information Circular) that the Share Issuance Resolution be approved at the First Majestic Special Meeting. If the Transaction is not completed, the First Majestic Shares referred to in the Share Issuance Resolution will not be issued, even if the Share Issuance Resolution is approved at the First Majestic Special Meeting.   The record date for notice and for voting at the First Majestic Special Meeting is November 25, 2024. Only registered shareholders as of the close of business on November 25, 2024, will be entitled to vote at the First Majestic Special Meeting.   If you are a registered shareholder of First Majestic and are unable to attend the First Majestic Special Meeting, please read, sign and date the form of proxy for the First Majestic Special Meeting (the ”Proxy”) and deposit it with Computershare Investor Services Inc. (“Computershare”) by courier or mail at 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy Department, or by facsimile at 1-866-249-7775 (toll-free in North America) or 1-416-263-9524 (international) by 11:00 a.m. (Pacific Time) on January 10, 2025 or at least 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Special Meeting. Alternatively, registered shareholders may vote by telephone (1-866-732-8683) or online (www.investorvote.com) using the control number listed on the Proxy. The Company cannot guarantee that proxies sent by mail will be received prior to the proxy deposit deadline for the Special Meeting due to the ongoing Canada Post labour dispute. Accordingly, shareholders are encouraged to use the alternative methods described above for depositing their proxies. The deadline for the deposit of Proxies may be waived or extended by the Chair of the Meeting at his sole discretion, without notice.

				If you are a non-registered shareholder of First Majestic, please complete and return the voting instruction form (or other accompanying form) in accordance with the instructions for completion and deposit. All shareholders may attend the First Majestic Special Meeting but must follow the instructions set out in the accompanying Management Information Circular if they wish to vote at the Special Meeting.   The Company has adopted the notice and access model (“Notice and Access”) provided for under National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer for the delivery of the Notice of Special Meeting and Management Information Circular (collectively, the ”Meeting Materials”) to shareholders for the First Majestic Special Meeting. Under Notice and Access, instead of receiving printed copies of the Meeting Materials, shareholders receive a Notice and Access notification containing details of the Meeting date, location and purpose, as well as information on how they can access the Meeting Materials electronically. Shareholders with existing instructions on their account to receive printed materials will receive a printed copy of the Meeting Materials. Other shareholders wishing to receive a printed copy of the Meeting Materials should follow the instructions set out in the Notice and Access notification. The Company cannot guarantee that paper copies of the Meeting Materials will be received by requesting shareholders with Canadian addresses in advance of the proxy deposit deadline for the Special Meeting due to the ongoing Canada Post labour dispute. In light of this, shareholders who wish to receive paper copies of the Meeting Materials may request these from the Company by calling toll free 1-866-529-2807 or by sending an e-mail to info@firstmajestic.com. Alternatively, shareholders may request that the Company send them a copy of the Meeting Materials by e-mail.   Any First Majestic Shareholders who require assistance in voting their First Majestic Common Shares may contact Kingsdale Advisors, the Company’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.   DATED at Vancouver, British Columbia, this 6th day of December, 2024.   ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST MAJESTIC SILVER CORP.   (signed) “Keith Neumeyer”   Keith Neumeyer President & Chief Executive Officer

 

Exhibit 99.2

 

 

NOTICE AND ACCESS NOTIFICATION TO SHAREHOLDERS

Special Meeting of Shareholders

to be held on January 14, 2025

You are receiving this notification as First Majestic Silver Corp. (“First Majestic”, the “Company”, “we”, “us” or “our”) is using the notice and access model (“Notice and Access”) for the delivery of meeting materials to our shareholders for the special meeting of shareholders that will be held on Tuesday, January 14, 2025 (the “Special Meeting”).

Under Notice and Access, shareholders will still receive a proxy or voting instruction form, as applicable, enabling them to vote at the Special Meeting. However, instead of receiving a paper copy of the Company’s management information circular (the “Information Circular”) and notice of meeting (together with the Information Circular, the “Meeting Materials”) for the Special Meeting, our shareholders are receiving this notification which contains information on how to access the Meeting Materials electronically.

First Majestic uses Notice and Access as an alternative means of delivery of the Meeting Materials to our shareholders in a more environmentally friendly and sustainable way that helps reduce paper usage and our carbon footprint, and that reduces our printing and mailing costs.

 

First Majestic has retained Kingsdale Advisors (“Kingsdale”) as a Strategic Advisor and to assist in the solicitation of proxies for the Special Meeting. Shareholders may contact Kingsdale for assistance with voting by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com.
You can access the Meeting Materials and get assistance in voting your First Majestic common shares by scanning the QR code to the right with your smartphone or other smart device.

Meeting Date and Location

 

When:		Tuesday, January 14, 2025		Where:		Bennett Jones LLP
		11:00 a.m. (Pacific Time)				Suite 2500 – 666 Burrard Street
						Vancouver, British Columbia V6C 2X8

Business of the Meeting

On September 5, 2024, First Majestic entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gatos Silver, Inc. (“Gatos”) and Ocelot Transaction Corporation, a wholly-owned subsidiary of First Majestic, that provides for the acquisition of Gatos by First Majestic pursuant to a merger under Delaware law (together with the other transactions contemplated by the Merger Agreement, the “Transaction”).

 

925 West Georgia Street, Suite 1800, Vancouver, B.C. Canada V6C 3L2

Phone: 604.688.3033 | Fax: 604.639.8873 | Toll Free: 1.866.529.2807 | Email: info@firstmajestic.com

www.firstmajestic.com

 

The Merger Agreement and the Transaction were unanimously approved by the respective boards of directors of First Majestic and Gatos.

Under the Merger Agreement, each share of common stock of Gatos (“Gatos Common Stock”), other than certain excluded shares as described in the Merger Agreement, will be converted automatically into the right to receive 2.55 First Majestic common shares (the “Exchange Ratio”), with any fractional shares to be paid in cash, without interest. The Exchange Ratio is fixed and will not be adjusted to reflect changes in the prices of First Majestic common shares or Gatos Common Stock between the date of the Merger Agreement and the closing of the Transaction.

At the Special Meeting, First Majestic’s shareholders will be asked to approve the following resolution in connection with the Transaction:

 

1.	Share Issuance Resolution: Approve an ordinary resolution authorizing and approving the issuance of up to 190,000,000 First Majestic common shares in connection with the Transaction. The full text of the Share Issuance Resolution is set out in Appendix A to the Information Circular.

 

2.	Conduct such other business properly brought before the Meeting or any adjournment or postponement of the Meeting (see the section entitled “Other Business” in the Information Circular).

First Majestic reminds shareholders that it is important that they review the Information Circular before voting. See the remainder of this notice for instructions on how to view the Information Circular, and how to vote.

Accessing the Meeting Materials Online

Shareholders can view the Meeting Materials online under our SEDAR+ profile at www.sedarplus.com, or on our Special Meeting website at www.AGSpecialMeeting.com.

How to Request Printed Meeting Materials

Shareholders will not receive paper copies of the Meeting Materials unless they have existing instructions on their account to receive paper copies, or unless they specifically request them from the Company. Shareholders should be aware that delivery of paper copies of the Meeting Materials will be effected by mail. As at the date of this notice, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. As a result, delivery of paper copies of Meeting Materials may be impacted and the Company cannot guarantee that delivery to Canadian addresses can be completed prior to the proxy deposit deadline for the Special Meeting. In light of this, shareholders may contact the Company at 1-866-529-2807 (toll-free) or info@firstmajestic.com and request that the Company send them a copy of the Meeting Materials by email.

The Company will mail paper copies of the Meeting Materials in response to any such requests received by the Company prior to January 2, 2025; however, the Company cannot guarantee that paper copies of the Meeting Materials will be received by the requesting shareholder in advance of the proxy deposit deadline for the Special Meeting.

 

925 West Georgia Street, Suite 1800, Vancouver, B.C. Canada V6C 3L2

Phone: 604.688.3033 | Fax: 604.639.8873 | Toll Free: 1.866.529.2807 | Email: info@firstmajestic.com

www.firstmajestic.com

 

Shareholders who wish to receive paper copies of the Meeting Materials may request these from the Company by calling toll free 1-866-529-2807 or by sending an e-mail to info@firstmajestic.com. Alternatively, shareholders may request that the Company send them a copy of the Meeting Materials by email.

In addition, shareholders may request paper copies of the Meeting Materials be sent to them by postal delivery at no cost to them for up to one year from the date the Information Circular was filed on SEDAR+. These requests should be made by email to info@firstmajestic.com, or by contacting the General Counsel & Corporate Secretary at 1-866-529-2807 (toll-free). Meeting Materials will be mailed to shareholders within ten calendar days of their request if such requests are made after the Special Meeting. Delivery of paper copies of the Meeting Materials after the date of the Special Meeting may also be disrupted by the ongoing Canada Post labour dispute.

Voting

This notice is accompanied by either a form of proxy (for registered shareholders) or a voting instruction form (for non-registered shareholders).

As of the date of this notice, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. Accordingly, all shareholders (including international shareholders) are advised not to rely on postal delivery of proxies in Canada and to instead utilize the telephone or online proxy delivery processes described below.

Registered shareholders are asked to return their proxies using the following methods by 11:00 a.m. (Pacific Time) on Friday, January 10, 2025 or at least 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Meeting:

 

INTERNET:		www.investorvote.com   Follow the instructions using the 15-digit control number noted on your proxy.		MAIL:		Computershare Investor Services Inc. Attention: Proxy Department 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1
TELEPHONE:		1.866.732.8683 (North America) 1.312.588.4290 (if outside North America)   You will need the 15-digit control number noted on your proxy.

If you are a registered shareholder and you did not receive a form of proxy with your control number, please contact Computershare Investor Servies Inc. at 1-800-564-6253 (toll-free in North America) or +1-514-982-7555 (international) as soon as possible to obtain a form of proxy and/or your control number to allow you to vote your First Majestic common shares.

Non-registered shareholders are asked to return their voting instructions using the methods set out on their voting instruction form or business reply envelope, or as set out below, at least one business day in advance of the proxy deposit date noted on your voting instruction form:

 

925 West Georgia Street, Suite 1800, Vancouver, B.C. Canada V6C 3L2

Phone: 604.688.3033 | Fax: 604.639.8873 | Toll Free: 1.866.529.2807 | Email: info@firstmajestic.com

www.firstmajestic.com

 

CANADA				UNITED STATES
INTERNET:		www.proxyvote.com   Follow the instructions using the 16-digit control number from your voting instruction form.		INTERNET:		www.proxyvote.com   Follow the instructions using the 16-digit control number from your voting instruction form.
TELEPHONE:		1.800.474.7493 (for English) 1.800.474.7501 (for French)   You will need the 16-digit control number noted on your voting instruction form.		TELEPHONE:		1.800.454.8683   You will need the 16-digit control number noted on your voting instruction form.
MAIL:		Data Processing Centre P.O. Box 3700, STN Industrial Park Markham, Ontario L3R 9Z9 Canada		MAIL:		Proxy Services P.O. Box 9104 Farmingdale, New York 11735-9533, USA

If you are a non-registered shareholder and you did not receive a voting information form with your control number, please contact your broker or other intermediary as soon as possible to obtain a voting instruction form and/or your control number to allow you to vote your shares.

Any shareholder who needs assistance with voting their First Majestic common shares should contact Kingsdale, the Company’s strategic advisor and proxy solicitation agent for the Special Meeting, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com.

 

QUESTIONS   Shareholders with questions about Notice and Access can contact the Company’s General Counsel & Corporate Secretary at 1-866-529-2807 (toll-free) or by e-mail to info@firstmajestic.com.   Dated at Vancouver, British Columbia this 6th day of December, 2024.   BY ORDER OF THE BOARD OF DIRECTORS.   (signed) “Keith Neumeyer”   Keith Neumeyer President & Chief Executive Officer, and Director		Scan this QR code to access the Meeting Materials

 

925 West Georgia Street, Suite 1800, Vancouver, B.C. Canada V6C 3L2

Phone: 604.688.3033 | Fax: 604.639.8873 | Toll Free: 1.866.529.2807 | Email: info@firstmajestic.com

www.firstmajestic.com

Exhibit 99.3

 

FROM THE CHAIR     Thomas F. Fudge, Jr.				TO OUR SHAREHOLDERS   You are invited to participate in the special meeting of shareholders of First Majestic Silver Corp. to be held at 11:00 a.m. (Pacific Time) on January 14, 2025 at the offices of our legal counsel, Bennett Jones LLP, located at Suite 2500 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8.   The business to be considered at the special meeting is described in the accompanying Notice of Special Meeting and Management Information Circular, which contains important information about the special meeting and the voting process.   Registered First Majestic Shareholders are requested to complete and return the enclosed form of proxy to ensure that your First Majestic common shares are voted at the special meeting, whether or not you, as a First Majestic shareholder, are personally able to attend the special meeting. Please complete the enclosed form of proxy and deposit it with Computershare Investor Services Inc. as soon as possible but no later than 11:00 a.m. (Pacific Time) on January 10, 2025 or 48 hours prior to the time of any adjournment or postponement of the meeting (excluding Saturdays, Sundays and holidays). In addition to completing the enclosed form of proxy, registered shareholders can also vote their shares online at https://www.investorvote.com.   Non-registered (Beneficial) First Majestic Shareholders who receive these materials through their broker or other intermediary should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by their broker or intermediary.   If you have any questions or require assistance voting your First Majestic common shares, you may contact Kingsdale Advisors, the Company’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic common shares, please visit www.AGSpecialMeeting.com.   Your vote is important. We encourage you to participate in this process by voting your shares.   Thank you for your support as shareholders and I hope you can join us on January 14, 2025.   (signed) “Thomas F. Fudge, Jr.”   Thomas F. Fudge, Jr. Chair of the Board   You can access the materials for the Special Meeting and get assistance in voting your First Majestic Common Shares by scanning the following QR code:

FROM THE PRESIDENT & CEO       Keith Neumeyer				TO OUR SHAREHOLDERS   On September 5, 2024, First Majestic Silver Corp. (“First Majestic”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gatos Silver, Inc. (“Gatos”) and Ocelot Transaction Corporation, a wholly-owned subsidiary of First Majestic, in respect of the acquisition of Gatos by First Majestic pursuant to a merger under Delaware law (together with the other transactions contemplated by the Merger Agreement, the “Transaction”). Gatos is a silver dominant producer with a 70% interest in the Los Gatos Joint Venture, which owns the producing Cerro Los Gatos underground silver, lead and zinc mine in Chihuahua, Mexico. The Transaction consolidates three world-class producing silver mining districts in Mexico under one corporation.   We are pleased to invite you to attend a special meeting of the holders (“First Majestic Shareholders”) of our common shares (“First Majestic Common Shares”) to be held at 11:00 a.m., (Pacific Time) on January 14, 2025 (the “First Majestic Special Meeting”). First Majestic is holding the First Majestic Special Meeting at the offices of our legal counsel, Bennett Jones LLP, at Suite 2500 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8. First Majestic Shareholders will be able to vote on all business properly brought before the First Majestic Special Meeting as further described in the accompanying management information circular of First Majestic dated December 6, 2024 (the “Management Information Circular”). More details about voting can be found in the Management Information Circular under the heading “General Information for the First Majestic Special Meeting – Voting of Proxies”.   The Merger Agreement and the Transaction were unanimously approved by the respective boards of directors of First Majestic and Gatos. Under the Merger Agreement, each share of common stock of Gatos (“Gatos Common Stock”), other than certain excluded shares as described in the Merger Agreement, will be converted automatically into the right to receive 2.55 First Majestic Common Shares (the ”Exchange Ratio”), with any fractional shares to be paid in cash, without interest. The Exchange Ratio is fixed and will not be adjusted to reflect changes in the prices of First Majestic Common Shares or Gatos Common Stock between the date of the Merger Agreement and the closing of the Transaction.   At the First Majestic Special Meeting, you will be asked to approve an ordinary resolution (the ”Share Issuance Resolution”), approving the issuance of up to an aggregate of 190,000,000 First Majestic Common Shares, representing the number of First Majestic Common Shares expected to be necessary to satisfy the consideration under the terms of the Merger Agreement. To be effective, the Share Issuance Resolution must be approved by a simple majority of the votes cast on the Share Issuance Resolution by the First Majestic Shareholders present or represented by proxy at the First Majestic Special Meeting. It is a condition under the Merger Agreement and a requirement under the policies of the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”) that the Share Issuance Resolution be approved in order for the Transaction to close.

				National Bank Financial Inc. (“National Bank Financial”) and TD Securities Inc. (“TD Securities”) have acted as financial advisors to First Majestic and the board of directors of First Majestic (the ”First Majestic Board”), respectively, in connection with the Transaction and each has provided the First Majestic Board with an opinion that, as of the date of such opinion and subject to the assumptions, limitations, qualifications, and other matters stated in such opinion, in the case of National Bank Financial the Exchange Ratio is fair, and in the case of TD Securities the consideration to be paid is fair, from a financial point of view to First Majestic. The fairness opinion of National Bank Financial is attached as “Appendix C – National Bank Financial Fairness Opinion” to the Management Information Circular and the fairness opinion of TD Securities is attached as “Appendix E – TD Securities Fairness Opinion” to the Management Information Circular.   The First Majestic Board, after careful consideration, including consultations with its legal and financial advisors, and, among other things, following thorough review and careful consideration of the fairness opinions rendered by National Bank Financial and TD Securities, has unanimously determined that it is in the best interests of First Majestic to enter into the Merger Agreement and complete the Transaction.   The Transaction cannot be completed without First Majestic Shareholders approving the Share Issuance Resolution. The First Majestic Board unanimously recommends that First Majestic Shareholders vote FOR the Share Issuance Resolution. Your vote is important, regardless of the number of First Majestic Common Shares you own.   Please refer to the Management Information Circular for a more detailed description of the Transaction, including information about Gatos, the terms and conditions of the Merger Agreement, the opinions of First Majestic’s financial advisors, information about the First Majestic Special Meeting, a summary of the factors considered by the First Majestic Board in considering the Transaction and the risk factors relating to First Majestic, Gatos, and the closing of the Transaction. Please give the Management Information Circular your careful consideration and, if you require assistance, consult your financial or other professional advisors.   In the Management Information Circular, you will find important information and instructions about how to participate at the First Majestic Special Meeting. Every vote matters. Please remember to vote your First Majestic Common Shares by proxy, telephone, or online in advance of the First Majestic Special Meeting. If First Majestic Shareholders have questions or require assistance voting your First Majestic Common Shares, you can contact our strategic advisor and proxy solicitation agent, Kingsdale Advisors, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.   (signed) “Keith Neumeyer”   Keith Neumeyer President & CEO

TABLE OF CONTENTS

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS     Date: JANUARY 14, 2025   Time: 11:00 A.M. (Pacific Time)     2500- 666 Burrard Street Vancouver, BC V6C 2X8     Record Date: Record Date: November 25, 2024				NOTICE OF SPECIAL MEETING   NOTICE is hereby given that a special meeting (the ”First Majestic Special Meeting”) of the holders (the ”First Majestic Shareholders”) of common shares (“First Majestic Common Shares”) of First Majestic Silver Corp. (“First Majestic”) will be held at the offices of Bennett Jones LLP at Suite 2500 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8, on January 14, 2025 at 11:00 a.m. (Pacific Time). At the First Majestic Special Meeting, First Majestic Shareholders will be asked to consider and, if deemed advisable by them, to pass, with or without variation, an ordinary resolution (the ”Share Issuance Resolution”), the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting” to the accompanying management information circular of First Majestic dated December 6, 2024 (the ”Management Information Circular”) authorizing and approving the issuance of the number of First Majestic Common Shares as shall be necessary to satisfy the Merger Consideration under the terms of the Merger Agreement (as such terms are defined in the Management Information Circular), anticipated to be up to an aggregate of 190,000,000 First Majestic Common Shares.   We will also consider other business that may properly be brought before the First Majestic Special Meeting or any adjournment or postponement thereof. This Notice of Special Meeting is accompanied by the Management Information Circular and a form of proxy or voting instruction form (as applicable). First Majestic Shareholders are referred to the Management Information Circular for more detailed information regarding the First Majestic Special Meeting.   The board of directors of First Majestic unanimously recommends that First Majestic Shareholders VOTE FOR the Share Issuance Resolution. It is a condition to the completion of the Transaction (as such term is defined in the Management Information Circular) that the Share Issuance Resolution be approved at the First Majestic Special Meeting. If the Transaction is not completed, the First Majestic Shares referred to in the Share Issuance Resolution will not be issued, even if the Share Issuance Resolution is approved at the First Majestic Special Meeting.   The record date for notice and for voting at the First Majestic Special Meeting is November 25, 2024. Only registered shareholders as of the close of business on November 25, 2024, will be entitled to vote at the First Majestic Special Meeting.   If you are a registered shareholder of First Majestic and are unable to attend the First Majestic Special Meeting, please read, sign and date the form of proxy for the First Majestic Special Meeting (the ”Proxy”) and deposit it with Computershare Investor Services Inc. (“Computershare”) by courier or mail at 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy Department, or by facsimile at 1-866-249-7775 (toll-free in North America) or 1-416-263-9524 (international) by 11:00 a.m. (Pacific Time) on January 10, 2025 or at least 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Special Meeting. Alternatively, registered shareholders may vote by telephone (1-866-732-8683) or online (www.investorvote.com) using the control number listed on the Proxy. The Company cannot guarantee that proxies sent by mail will be received prior to the proxy deposit deadline for the Special Meeting due to the ongoing Canada Post labour dispute. Accordingly, shareholders are encouraged to use the alternative methods described above for depositing their proxies. The deadline for the deposit of Proxies may be waived or extended by the Chair of the Meeting at his sole discretion, without notice.

				If you are a non-registered shareholder of First Majestic, please complete and return the voting instruction form (or other accompanying form) in accordance with the instructions for completion and deposit. All shareholders may attend the First Majestic Special Meeting but must follow the instructions set out in the accompanying Management Information Circular if they wish to vote at the Special Meeting.   The Company has adopted the notice and access model (“Notice and Access”) provided for under National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer for the delivery of the Notice of Special Meeting and Management Information Circular (collectively, the ”Meeting Materials”) to shareholders for the First Majestic Special Meeting. Under Notice and Access, instead of receiving printed copies of the Meeting Materials, shareholders receive a Notice and Access notification containing details of the Meeting date, location and purpose, as well as information on how they can access the Meeting Materials electronically. Shareholders with existing instructions on their account to receive printed materials will receive a printed copy of the Meeting Materials. Other shareholders wishing to receive a printed copy of the Meeting Materials should follow the instructions set out in the Notice and Access notification. The Company cannot guarantee that paper copies of the Meeting Materials will be received by requesting shareholders with Canadian addresses in advance of the proxy deposit deadline for the Special Meeting due to the ongoing Canada Post labour dispute. In light of this, shareholders who wish to receive paper copies of the Meeting Materials may request these from the Company by calling toll free 1-866-529-2807 or by sending an e-mail to info@firstmajestic.com. Alternatively, shareholders may request that the Company send them a copy of the Meeting Materials by e-mail.   Any First Majestic Shareholders who require assistance in voting their First Majestic Common Shares may contact Kingsdale Advisors, the Company’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.   DATED at Vancouver, British Columbia, this 6th day of December, 2024.   ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST MAJESTIC SILVER CORP.   (signed) “Keith Neumeyer”   Keith Neumeyer President & Chief Executive Officer

 

FIRST MAJESTIC MANAGEMENT INFORMATION CIRCULAR   INFORMATION CONTAINED IN THIS MANAGEMENT INFORMATION CIRCULAR

 

 

This Management Information Circular is provided in connection with the solicitation, by and on behalf of management of First Majestic, of proxies from First Majestic Shareholders for use at the First Majestic Special Meeting and any adjournment or postponement thereof, for the purposes set out in the Notice of Special Meeting. No person has been authorized to give any information or make any representation in connection with the Transaction or any other matters described herein other than those statements and representations contained in this Management Information Circular. Information in this Management Information Circular is given as of November 25, 2024 or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies.

First Majestic has supplied all information contained in or incorporated by reference in this Management Information Circular relating to First Majestic, and Gatos has supplied all information contained in or incorporated by reference in this Management Information Circular relating to Gatos. See “Information Contained in this Management Information Circular Regarding Gatos”.

First Majestic Shareholders should not construe the contents of this Management Information Circular as legal or financial advice and should consult with their own professional advisors as to the relevant legal, financial, or other matters which pertain to their individual circumstances.

Capitalized terms used in this Management Information Circular and not otherwise defined have the meanings set forth under the heading “Glossary of Terms”.

Any First Majestic Shareholders who require assistance in voting their First Majestic Common Shares may contact Kingsdale Advisors, the Company’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 1

Information Contained in this Management Information Circular

 

Cautionary Statement Regarding Forward-Looking Statements

This Management Information Circular contains certain forward-looking information, including future-oriented financial information, and forward-looking statements (collectively, “forward-looking information”) within the meaning of applicable securities laws. These statements relate to future events or First Majestic’s future performance, business prospects or opportunities that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management made in light of management’s experience and perception of historical trends, current conditions and expected future developments. Forward-looking statements include, but are not limited to: the pending Transaction, including its expected benefits, impacts on the companies’ capital structures and the number of shares to be issued, the timing and consummation of the Transaction, receipt of required approvals, (including certain required antitrust approvals), and satisfaction of other customary closing conditions, expected listing of the First Majestic Common Shares to be issued in the Transaction on the NYSE and the TSX, expectations regarding future exploration and the development, growth and potential of operations, projects and investments, including in respect of the Cerro Los Gatos Mine and the Los Gatos district, the success of integration plans and the ability of First Majestic to realize the anticipated benefits of the Transaction and First Majestic’s combination with Gatos, the ability of First Majestic to retain key employees following integration, the ability of the management of First Majestic, its subsidiaries and affiliates to execute key priorities, including those priorities in connection with the Transaction, inconsistencies in standard controls, procedures and policies following integration, future financings, the redemption and/or conversion of First Majestic’s securities, statements with respect to First Majestic’s business strategy, future planning processes, commercial mining operations, anticipated mineral recoveries, projected quantities of future mineral production, interpretation of drill results and other technical data, anticipated development, expansion, exploration activities and production rates and mine plans and mine life, metal price assumptions and mining cost assumptions, First Majestic’s ability to comply with future legislation or regulations, First Majestic’s intent to comply with future regulatory and compliance matters, future regulatory trends, future market conditions, future staffing levels and needs, First Majestic’s ability to attract, train and retain qualified personnel, assessment of future opportunities of First Majestic, the production, projected quantities of silver bullion production, sales and other commissioning and production, assumptions of management, maintaining relations with local communities, maintaining relations with employees, renewing contracts related to material properties, expectations regarding the effects of public health crises including pandemics such as COVID-19 on First Majestic’s operations, the global economy and the market for First Majestic’s products and securities, the anticipated contribution of annual free cash flow resulting from Cerro Los Gatos Mine, those factors identified under the caption “Risk Factors” herein, and other statements identified as such in the documents incorporated by reference herein. All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable mineral reserves and mineral resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered as and if the property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “forecast”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) are not statements of historical fact and may be “forward-looking statements”.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These forward-looking statements involve risks and uncertainties relating to, among other things, global economic conditions, satisfaction or waiver of all applicable closing conditions for the Transaction on a timely basis or at all including, without limitation, receipt of all necessary shareholder, stock exchange and regulatory approvals or consents and lack of material changes with respect to First Majestic and Gatos and their respective businesses, all as more definitively set out in the Merger Agreement and the timing of the closing of the Transaction and the failure of the Transaction to close for any reason, the outcome of any legal proceedings that may be instituted against First Majestic or Gatos and others related to the Transaction, unanticipated difficulties or expenditures relating to the Transaction, risks related to the value of the consideration to be issued in connection with the Transaction, the diversion of management time on pending Transaction-related issues, the synergies expected from the Transaction not being realized, business integration risks, public health threats, changes in commodity

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 2

Information Contained in this Management Information Circular

 

prices, particularly silver, gold, lead and zinc prices, changes in exchange rates, access to skilled mining development and mill production personnel, labour relations, costs of labour, relations with local communities and aboriginal groups, results of exploration and development activities, accuracy of resource estimates, uninsured risks, defects in title, availability and costs of materials and equipment, inability to meet future financing needs on acceptable terms, changes in national or local governments, changes in applicable legislation or application thereof, timeliness of government approvals, actual performance of facilities, equipment, and processes relative to specifications and expectations, and unanticipated environmental impacts on operations. Additional factors that could cause actual results to differ materially include, but are not limited to, the risk factors described herein. See “Risk Factors”. First Majestic has approved the future-oriented financial information in this Management Information Circular as at the date hereof and has included this information as it believes it may be useful to First Majestic Shareholders when reviewing the Transaction and considering the Share Issuance Resolution.

First Majestic believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this Management Information Circular should not be unduly relied upon. These statements speak only as of the date of this Management Information Circular or as of the date specified in the documents incorporated by reference into this Management Information Circular, as the case may be. First Majestic does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Non-GAAP Measures

This Management Information Circular includes reference to certain financial measures which are not standardized measures under First Majestic’s and Gatos’ respective financial reporting frameworks. These measures include all-in sustaining costs (or “AISC”) per payable silver equivalent ounce and free cash flow. First Majestic believes that these measures, together with measures determined in accordance with GAAP or IFRS, provide investors with an improved ability to evaluate the underlying performance of First Majestic and/or certain assets. These measures are widely used in the mining industry as a benchmark for performance but do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures disclosed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For a complete description of how First Majestic calculates such measures and a reconciliation of certain measures to IFRS terms please see “Non-GAAP Measures” in First Majestic’s most recent management discussion and analysis filed on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov/edgar. For a complete description of how Gatos calculates such measures and a reconciliation of certain measures to GAAP terms, please see “Non-GAAP Measures” in Gatos’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 21, 2024, as amended by Amendment No. 1 to such annual report filed with the SEC on May 6, 2024 at www.sec.gov/edgar.

Information Contained in this Management Information Circular Regarding Gatos

Certain information in this Management Information Circular has been provided by Gatos, including, but not limited to, information pertaining to Gatos contained in “Appendix G – Information Concerning Gatos Silver, Inc.”, including the documents incorporated by reference which have been filed on SEDAR+ by Gatos, which includes without limitation, the executive summary of the technical report entitled “Mineral Resource and Reserve Update to the Los Gatos Joint Venture, Chihuahua, Mexico” referred to in the list of documents below. With respect to this information, First Majestic and the First Majestic Board have relied exclusively upon Gatos, without independent verification by First Majestic. Although First Majestic does not have any knowledge that would indicate that such information is untrue or incomplete, neither First Majestic nor any of its directors or officers assumes any responsibility for the accuracy or completeness of such information, including any of Gatos’ financial statements, or for the failure by Gatos to disclose events or information that may affect the completeness or accuracy of the information provided by Gatos.

 

 

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Information Contained in this Management Information Circular

 

Information Incorporated by Reference

The following documents, filed with the securities commissions or similar regulatory authorities in Canada are specifically incorporated by reference in, and form an integral part of, this Management Information Circular, provided that such documents are not incorporated by reference or to the extent that their contents are modified or superseded by a statement contained in this Management Information Circular or in any other subsequently filed document that is also incorporated by reference in this Management Information Circular:

 

1.	annual information form of First Majestic for the year ended December 31, 2023 dated April 1, 2024 (“First Majestic AIF”);

 

2.	audited annual consolidated financial statements of First Majestic as at and for the years ended December 31, 2023 and 2022, together with the notes thereto (“First Majestic Annual Financial Statements”);

 

3.	the management’s discussion and analysis of First Majestic for the year ended December 31, 2023 dated February 21, 2024 (“First Majestic Annual MD&A”);

 

4.	unaudited interim consolidated financial statements of First Majestic as at and for the three and nine months ended September 30, 2024, together with the notes thereto (the “First Majestic Interim Financial Statements”);

 

5.	management’s discussion and analysis, for the three and nine months ended September 30, 2024 and (the “First Majestic Interim MD&A”);

 

6.	management information circular dated April 11, 2024 in respect of First Majestic’s annual meeting of First Majestic Shareholders held on May 23, 2024 (“First Majestic Annual Management Information Circular”);

 

7.	material change report of First Majestic dated September 6, 2024 in respect of the Transaction;

 

8.

annual report on Form 10-K for the year ended December 31, 2023 of Gatos, as amended by amendment no.1, as updated by subsequent quarterly reports on Form 10-Q filed by Gatos on SEDAR+ on May 6, 2024, August 6, 2024 and November 12, 2024 and current reports on Form 8-K filed by Gatos on SEDAR+ on May 6, 2024 (solely with respect to Item 4.02), September 6, 2024, September 6, 2024, September 10, 2024 and October 16, 2024;

 

9.	press release announcing the results of the Gatos Annual General Meeting held on June 6, 2024, and filed on SEDAR+ on June 7, 2024;

 

10.	definitive proxy statement filed by Gatos on SEDAR+ on April 25, 2024 in respect of Gatos’ annual meeting of Gatos stockholders held on June 6, 2024; and

 

11.	the section entitled “Executive Summary” in the technical report entitled “Mineral Resource and Reserve Update Los Gatos Joint Venture, Chihuahua, Mexico” dated October 22, 2024 with an effective date of July 1, 2024 filed by Gatos on SEDAR+ on October 22, 2024.

Any statement contained in this Management Information Circular or in a document incorporated by reference in this Management Information Circular shall be deemed to be modified or superseded to the extent that a statement contained herein or in any other subsequently filed document which is also deemed to be incorporated by reference in this Management Information Circular modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document which it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not constitute a part of this Management Information Circular except as so modified or superseded.

All documents of the type referred to above, including material change reports (but excluding any confidential material change reports), any other document of the type referred to in section 11.1 of Form 44-101F1 – Short Form Prospectus and any other document explicitly described therein as being incorporated by reference in this

 

 

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Information Contained in this Management Information Circular

 

Management Information Circular that is filed by First Majestic or Gatos under their respective profiles on SEDAR+ at www.sedarplus.ca after the date of this Management Information Circular and before the First Majestic Special Meeting are deemed to be incorporated by reference in this Management Information Circular.

In addition, investors and First Majestic Shareholders may obtain free copies of this Management Information Circular and other documents filed with the applicable securities regulators in Canada by First Majestic online at www.AGSpecialMeeting.com and www.sedarplus.ca, upon written request delivered to First Majestic at Suite 1800 – 925 West Georgia Street, Vancouver, British Columbia V6C 3L2, Canada, Attention: General Counsel & Corporate Secretary, or by calling First Majestic at 1-604-688-3033 and may obtain free copies of the documents filed with the SEC by Gatos online at https://investor.gatossilver.com/financials/sec-filings/ and www.sec.gov, upon written request delivered to Gatos at Suite 910 – 925 West Georgia Street, Vancouver, British Columbia V6C 3L2, Canada, Attention: Corporate Secretary, or by calling Gatos at 1-604-841-7937.

Currency and Exchange Rate Information

All references in this Management Information Circular to dollars or “$”, unless otherwise indicated, are expressed in U.S. dollars, and Canadian dollars are referred to as “C$”. On November 25, 2024, the daily rate of exchange for one Canadian dollar as expressed in United States dollars, as reported by the Bank of Canada, was C$1.00 = $0.7153. The foregoing rate may differ from the actual rates used in First Majestic’s accounting processes and in the preparation of First Majestic’s consolidated financial statements or the unaudited pro forma financial information presented in this Management Information Circular.

 

 

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GLOSSARY OF TERMS

 

 

The following is a glossary of certain terms used in this Management Information Circular. This Glossary of Terms does not apply to the Appendices to this Management Information Circular, unless stated otherwise.

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

“BCBCA” means the Business Corporations Act (British Columbia), including the regulations promulgated thereunder.

“BofA Securities” means BofA Securities, Inc., the financial advisor to Gatos.

“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking and savings and loan institutions are authorized or required by Law to be closed in New York, New York, or Vancouver, British Columbia.

“Change of Recommendation” has the meaning ascribed thereto in the section “Change of Recommendation”.

“Closing” means the closing of the Transaction.

“Closing Date” means the date on which the Closing occurs.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“COFECE” means the Mexican Federal Economic Competition Commission (Comisión Federal de Competencia Económica) or any governmental entity which substitutes it or assumes its functions.

“combined company” means First Majestic, immediately after the closing of the Transaction.

“Common Share Issuance” means the issuance of First Majestic Common Shares as Merger Consideration.

“DGCL” refers to the General Corporation Law of the State of Delaware.

“D&O Support Agreements” means the voting and support agreements entered into among First Majestic, Merger Sub and the directors and certain executive officers of Gatos on September 5, 2024.

“Dowa” means Dowa Metals and Mining Co., Ltd.

“Effect” means any change, effect, development, circumstance, condition, state of facts, event or occurrence.

“Effective Time” such time as a certificate of merger in connection with the Transaction has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by Gatos and First Majestic in writing and specified in the certificate of merger in accordance with the laws of the State of Delaware.

“Electrum” means Electrum Silver US LLC and Electrum Silver US II LLC.

“Electrum Support Agreement” means the voting and support agreement entered into among First Majestic, Merger Sub and Electrum on September 5, 2024.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 6

Glossary of Terms

 

“Exchange Agent” means Computershare Trust Company of Canada or a bank or trust company designated by First Majestic and reasonably acceptable to Gatos to act as the exchange agent in connection with the Merger.

“Exchange Ratio” means 2.55 First Majestic Common Shares for each share of Gatos Common Stock.

“Fairness Opinions” means, collectively, the National Bank Financial Fairness Opinion and TD Securities Fairness Opinion.

“First Majestic” means First Majestic Silver Corp.

“First Majestic AIF” has the meaning ascribed thereto under the section “Information Incorporated by Reference”.

“First Majestic Annual Financial Statements” has the meaning ascribed thereto under the section “Information Incorporated by Reference”.

“First Majestic Annual MD&A” has the meaning ascribed thereto under the section “Information Incorporated by Reference”.

“First Majestic Board” means the Board of Directors of First Majestic.

“First Majestic Board Recommendation” means the recommendation of the First Majestic Board to the First Majestic Shareholders to approve the Share Issuance Resolution in connection with the Merger.

“First Majestic Common Share” means a common share in the capital of First Majestic.

“First Majestic Interim Financial Statements” has the meaning ascribed thereto under “Information Incorporated by Reference”.

“First Majestic Interim MD&A” has the meaning ascribed thereto under “Information Incorporated by Reference”.

“First Majestic Shareholders” means holders of First Majestic Common Shares.

“First Majestic Shareholder Approval” means the approval of the Share Issuance Resolution by simple majority of the votes cast by holders of First Majestic Common Shares present in person or by proxy at the First Majestic Special Meeting and entitled to vote at the First Majestic Special Meeting.

“First Majestic Special Meeting” means the special meeting of the holders of First Majestic Common Shares for the purpose of seeking the First Majestic Shareholder Approval, including any postponement or adjournment thereof.

“Form F-4” means the U.S. registration statement on Form F-4 pursuant to which the offer and sale of First Majestic Common Shares in connection with the Transaction have been registered pursuant to the U.S. Securities Act and in which the Proxy Statement / Prospectus is included, together with any supplements thereto.

“Gatos” means Gatos Silver, Inc.

“Gatos Board” means the Board of Directors of Gatos.

“Gatos Common Stock” means the outstanding shares of common stock, par value $0.001 per share, of Gatos.

“Gatos DSU” means a notional instrument entitling non-employee directors to receive a certain number of shares of Gatos Common Stock, granted under the Gatos LTIP.

“Gatos Equity Awards” means, collectively, all outstanding Gatos Options, Gatos RSUs, Gatos PSUs and Gatos DSUs.

 

 

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Glossary of Terms

 

“Gatos LTIP” means the 2023 Gatos Amended and Restated Long Term Incentive Plan.

“Gatos Merger Proposal” means the proposal to adopt the Merger Agreement that Gatos Stockholders will consider and vote on at the Gatos Special Meeting.

“Gatos Option” means an outstanding and unexercised (whether vested or unvested) option to purchase shares of Gatos Common Stock, granted under the Gatos LTIP.

“Gatos PSU” means a performance-vesting restricted stock unit covering shares of Gatos Common Stock, granted under the Gatos LTIP.

“Gatos RSU” means a time-vesting restricted stock unit covering shares of Gatos Common Stock, granted under the Gatos LTIP.

“Gatos Special Committee” means a special committee of the Gatos Board comprised of directors who were not and are not affiliated with Gatos’ largest stockholder, Electrum and its affiliates, and who were not and are not members of management of Gatos.

“Gatos Special Meeting” means the special meeting of Gatos Stockholders to be held on January 14, 2025, including any postponement or adjournment thereof.

“Gatos Stockholders” means, collectively, holders of shares of Gatos Common Stock.

“Gatos Stockholder Approval” means the affirmative vote of the holders of at least a majority of the outstanding shares of Gatos Common Stock entitled to vote on the Gatos Merger Proposal at the Gatos Special Meeting in favour of such authorization.

“GenCap” means GenCap Mining Advisory Ltd., the financial advisor to the Gatos Special Committee.

“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board.

“interim period” means the time period between the date of the Merger Agreement and the earlier of the Effective Time and termination of the Merger Agreement.

“Law” means any federal, state, provincial, local, and foreign law, statute, ordinance, rule, resolutions, determinations, injunctions, common law rulings, awards (including awards of any arbitrator) regulation, judgment, Order, injunction or decree of any Governmental Entity.

“LGD” means the Los Gatos district, located in Chihuahua, Mexico.

“LGJV” means the Los Gatos Joint Venture.

“Management Information Circular” means this management information circular of First Majestic dated December 6, 2024 to be sent to First Majestic Shareholders in connection with the First Majestic Special Meeting.

“Merger” means the merger of Merger Sub with and into Gatos with the Surviving Corporation becoming a direct wholly-owned Subsidiary of First Majestic on the terms and subject to the conditions set forth in the Merger Agreement.

“Merger Agreement” means the agreement and plan of merger dated September 5, 2024, by and among First Majestic, Merger Sub and Gatos Silver, the full text of which is attached as “Appendix B – Merger Agreement”.

“Merger Consideration” means the right to receive in exchange for each share of Gatos Common Stock that Gatos Stockholders own immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) 2.55 First Majestic Common Shares with any fractional shares to be paid in cash, without interest.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 8

Glossary of Terms

 

“Merger Sub” means Ocelot Transaction Corporation, a Delaware corporation and wholly-owned subsidiary of First Majestic.

“Mexico’s Antitrust Law” means Mexico’s Federal Economic Competition Law (Ley Federal de Competencia Económica).

“National Bank Financial” means National Bank Financial Inc., financial advisor to First Majestic.

“National Bank Financial Fairness Opinion” means the fairness opinion provided to the First Majestic by National Bank Financial, the full text of which is attached as “Appendix C – National Bank Financial Fairness Opinion”.

“Notice of Special Meeting” means the notice of the First Majestic Special Meeting dated December 6, 2024.

“NYSE” means the New York Stock Exchange.

“Order” means any judgment, order, injunction, decree, stipulation, decision, ruling, writ of any governmental entity, or any settlement agreement or compliance agreement entered into in connection with any claim, complaint, litigation, action, petition, suit, arbitration, mediation or similar legal proceeding, whether civil or criminal, at law or in equity, by or before any governmental entity.

“Person” means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity or other entity or organization, including analogous foreign entities.

“Proxy Statement/Prospectus” means the proxy statement relating to the Gatos Special Meeting, which will be used as a prospectus of First Majestic under U.S. securities laws with respect to the First Majestic Common Shares issuable to Gatos Stockholders in connection with the Merger (together with any amendments or supplements thereto).

“Record Date” means November 25, 2024.

“Required Antitrust Approvals” means all approvals of the Transaction required by the Antitrust Laws in Mexico.

“SEC” means the Securities and Exchange Commission.

“SEDAR+” means the System for Electronic Document Analysis Retrieval+ of the Canadian Securities Administrators.

“Share Issuance Resolution” means an ordinary resolution of the First Majestic Shareholders approving the issuance of the number of First Majestic Common Shares as shall be necessary to satisfy the Merger Consideration, which is anticipated to be up to an aggregate of 190,000,000 First Majestic Common Shares, substantially in the form set out in Appendix A.

“Subsidiary” or “Subsidiaries” means with respect to any Person, any other Person of which (a) at least a majority of the outstanding shares of capital stock of, or other equity interests, having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries or (b) with respect to a partnership, such Person or any other Subsidiary of such Person is a general partner of such partnership. For the avoidance of doubt, for purposes of the Merger Agreement, Gatos Silver Canada Corp., Minera Luz del Sol S. de R.L. de C.V., Minera Plata Real S. de R.L. de C.V. and Operaciones San Jose de Plata S. de R.L. de C.V. shall be deemed to be Subsidiaries of Gatos.

“Surviving Corporation” means Gatos as the company that, under the Merger Agreement, survives the Merger under Delaware law as a direct wholly-owned Subsidiary of First Majestic at the Effective Time.

 

 

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Glossary of Terms

 

“TD Securities” means TD Securities Inc., financial advisor to First Majestic.

“TD Securities Fairness Opinion” means the fairness opinion provided to First Majestic by TD Securities, the full text of which is attached as “Appendix E – TD Securities Fairness Opinion”.

“Transaction” means the Merger, and any transactions completed pursuant to, or in furtherance of, the Merger Agreement.

“Treasury Regulations” refers to U.S. Treasury regulations promulgated under the Code.

“TSX” means the Toronto Stock Exchange.

“TSX Company Manual” means the TSX Company Manual setting forth the rules and policies of the TSX, as amended from time to time.

“U.S.” means the United States of America.

“U.S. Exchange Act” means the U.S. Securities Exchange Act of 1934, as may be amended from time to time.

“U.S. GAAP” means U.S. generally accepted accounting principles.

“U.S. Securities Act” means the U.S. Securities Act of 1933, as may be amended from time to time.

“VAT” means value added taxes.

“Voting Support Agreements” means, collectively, the Electrum Support Agreement and the D&O Support Agreements.

“VWAP” means volume weighted average price.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 10

QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE FIRST MAJESTIC SPECIAL MEETING

 

 

The following questions and answers are intended to briefly address some commonly asked questions regarding the Transaction and matters to be addressed at the First Majestic Special Meeting. These questions and answers may not address all questions that may be important to you. To better understand these matters, and for a description of the legal terms governing the Transaction, you should carefully read this entire Management Information Circular, including the attached appendices, as well as the documents that have been incorporated by reference in this Management Information Circular. For more information, see the section entitled “Information Contained in this Management Information Circular”.

Q: Why am I receiving this Notice of Special Meeting and Management Information Circular?

As required by law, you are receiving this Notice of Special Meeting and Management Information Circular in connection with the solicitation by or on behalf of the management of First Majestic of proxies of First Majestic Shareholders to vote in respect of the Share Issuance Resolution.

Q: What am I being asked to vote on and why is it important?

The First Majestic Special Meeting is being held so that First Majestic Shareholders may consider an ordinary resolution, the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting”, approving the issuance of First Majestic Common Shares to Gatos Stockholders in connection with the Transaction.

Your vote is very important, regardless of the number of First Majestic Common Shares that you own. The approval of the Share Issuance Resolution is a condition to the obligations of the parties to complete the Transaction under the Merger Agreement.

First Majestic Shareholders are required pursuant to the rules of the TSX and the NYSE to approve the Share Issuance Resolution because the number of First Majestic Common Shares issuable pursuant to the Transaction exceeds 25% of the issued and outstanding First Majestic Common Shares on a non-diluted basis. Based on the number of First Majestic Common Shares and shares of Gatos Common Stock outstanding or reserved for issuance on November 25, 2024 and including the number of Gatos Equity Awards anticipated to be outstanding at the Effective Time, First Majestic expects to issue (or reserve for issuance) up to an aggregate of 190,000,000 First Majestic Common Shares to Gatos Stockholders at the Effective Time to satisfy the Merger Consideration, representing approximately 38% of the First Majestic Common Shares on a fully-diluted basis, after giving effect to the Transaction and 62.9% of the outstanding First Majestic Common Shares pre-Transaction. Accordingly, each of the TSX and the NYSE requires that the Share Issuance Resolution receive the First Majestic Shareholder Approval. First Majestic will not be able to satisfy the listing requirements of the TSX and the NYSE and therefore will not be able to complete the Transaction unless and until the Share Issuance Resolution is approved.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 11

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

Q. What is the Transaction that the Share Issuance Resolution relates to?

Pursuant to the Merger Agreement, First Majestic has agreed to acquire Gatos through the Merger of Merger Sub with and into Gatos, with the Surviving Corporation becoming a direct wholly-owned Subsidiary of First Majestic. Under the Merger Agreement, at the Effective Time: (a) each share of Gatos Common Stock issued and outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be converted into the right to receive 2.55 validly issued, fully paid and non-assessable First Majestic Common Shares; (b) each outstanding and unexercised Gatos Option (whether vested or unvested) will automatically be exchanged for an option to acquire First Majestic Common Shares on the same terms and conditions as were applicable under such Gatos Option immediately prior to the Effective Time of the Merger with respect to the number of First Majestic Common Shares underlying each such new First Majestic Option (rounded down to the nearest whole number) determined by multiplying (i) the number of shares of Gatos Common Stock subject to such Gatos Option immediately prior to the Effective Time of the Merger by (ii) the Exchange Ratio, with the exercise price applicable to any such Gatos Option at and after the Effective Time of the Merger to be an amount (rounded up to the nearest whole cent) equal to (i) the exercise price applicable to such Gatos Option immediately prior to the Effective Time of the Merger divided by (ii) the Exchange Ratio; (c) each outstanding Gatos DSU, which fully vested on the grant date, will settle for a number of First Majestic Common Shares (rounded down to the nearest whole number) determined by multiplying (i) the number of shares of Gatos Common Stock subject to such Gatos DSU immediately prior to the Effective Time of the Merger by (ii) the Exchange Ratio; (d) each outstanding Gatos PSU, all of which were granted on December 17, 2021, are scheduled to vest following a three-year performance period based on the TSR of Gatos relative to a peer group over a three-year performance period beginning on December 17, 2021 and ending on December 17, 2024 in accordance with the terms of the Gatos PSUs, and will settle for shares of Gatos Common Stock which will receive the same Merger Consideration as other Gatos Stockholders for each share of Gatos Common Stock that they hold at the Effective Time of the Merger; and (e) each outstanding Gatos RSU will, to the extent provided in the applicable award agreement, vest in full immediately prior to the Effective Time of the Merger in accordance with its terms and will settle for a number of First Majestic Common Shares (rounded down to the nearest whole number) determined by multiplying (i) the number of shares of Gatos Common Stock subject to such Gatos RSUs immediately prior to the Effective Time of the Merger by (ii) the Exchange Ratio.

Based on the number of shares of First Majestic Common Shares and shares of Gatos Common stock outstanding or reserved for issuance on November 25, 2024 and including the number of Gatos Equity Awards anticipated to be outstanding at the Effective Time, upon completion of the Transaction, we expect that former Gatos Stockholders will own approximately 38% of the First Majestic Common Shares on a fully-diluted basis, and holders of First Majestic Common Shares immediately prior to the Transaction will own approximately 62% of the First Majestic Common Shares, on a fully-diluted basis.

Each Gatos Stockholder will receive cash (without interest and less any applicable withholding taxes) in lieu of any fractional First Majestic Common Shares that such Gatos Stockholder would otherwise receive as Merger Consideration in the Transaction. Any cash amounts to be received by Gatos Stockholders, in lieu of any fractional First Majestic Common Shares, will be rounded to the nearest cent.

Q: When and where will the First Majestic Special Meeting be held?

First Majestic will hold the First Majestic Special Meeting on January 14, 2025 at 11:00 a.m. (Pacific Time) at the offices of Bennett Jones LLP at Suite 2500 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8. First Majestic Shareholders will be able to vote on all business properly brought before the First Majestic Special Meeting and submit questions for consideration.

Q: Does the First Majestic Board recommend that I vote FOR the Share Issuance Resolution?

Yes, the First Majestic Board unanimously recommends that First Majestic Shareholders vote FOR the Share Issuance Resolution. At a meeting duly called and held, and after due consideration and extensive

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 12

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

consultation with First Majestic’s management and outside legal counsel and with financial advisors to both First Majestic and the First Majestic Board, including the receipt of the fairness opinions from National Bank Financial and TD Securities, the First Majestic Board unanimously approved the Merger Agreement and the Transaction (and related matters) and determined that the Transaction, the terms of which are substantially as set forth in the Merger Agreement, is in the best interests of First Majestic and its stakeholders. The First Majestic Board also unanimously authorized that the Share Issuance Resolution be submitted to the First Majestic Shareholders for approval and recommended that the First Majestic Shareholders vote in favour of the Share Issuance Resolution. In considering the Transaction and making the recommendation to the First Majestic Shareholders, the First Majestic Board considered, among other things, the business, assets and liabilities, results of operations, financial performance, strategic direction, and prospects of First Majestic and Gatos, with a view to the best interests of First Majestic.

For further information regarding First Majestic’s reasons for the Transaction, see the section entitled “The Transaction – First Majestic’s Reasons for the Transaction” and “Risk Factors”.

Q: What are First Majestic’s reasons for the Transaction?

The purpose of the Transaction is for First Majestic to acquire Gatos, which has a 70% joint venture interest in the Cerro Los Gatos Mine in Chihuahua state, Mexico. In unanimously approving the Merger Agreement and the consummation of the Transaction and determining that the Merger Agreement and the Transaction are in the best interests of First Majestic, the First Majestic Board considered and relied upon a number of factors (which are not necessarily presented in order of relative importance), including but not limited to the following:

 

•

diversified portfolio of precious metal assets in Mexico;

 

•

enhanced production profile with strong margins;

 

•

bolstered free cash flow generation potential;

 

•

leveraging a highly experienced combined team with a strong track record;

 

•

maintaining a peer-leading exposure to silver;

 

•

creation of a 350,000 hectare highly prospective land package which has yielded a history of exploration success and economic discoveries;

 

•

receipt of expert advice and fairness opinions;

 

•

strengthened company balance sheet and enhanced capital markets profile;

 

•

the realization and capitalization of meaningful synergies;

 

•

the current conditions of the parties;

 

•

the likelihood of the Transaction being completed; and

 

•

the provisions in the Merger Agreement including the payment of a termination fee in certain situations.

In connection with its deliberations relating to the Transaction, the First Majestic Board also considered potential risks and negative factors concerning the transactions contemplated by the Merger Agreement and, after consideration of these factors, the First Majestic Board unanimously determined that, overall, the potential benefits of the Transaction outweighed the potential risks. For further information regarding First Majestic’s reasons for the Transaction and the potential risks and negative factors considered by the First Majestic Board, see the section entitled “The Transaction – First Majestic’s Reasons for the Transaction”.

Q: What will Gatos Stockholders receive if First Majestic’s acquisition of Gatos is completed?

At the Effective Time, each share of Gatos Common Stock issued and outstanding immediately prior to the Effective Time of the Merger (other than certain excluded shares as described in the Merger Agreement) will automatically be converted into the right to receive the Exchange Ratio of 2.55 validly issued, fully paid and

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 13

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

non-assessable First Majestic Common Shares. Each holder of Gatos Common Stock will receive cash (without interest and less any applicable withholding taxes) in lieu of any fractional First Majestic Common Shares that such Stockholder would otherwise receive as Merger Consideration in the Transaction. Any cash amounts to be received by Gatos Stockholders, in lieu of any fractional First Majestic Common Shares, will be rounded to the nearest cent.

The Exchange Ratio is fixed and will not be adjusted to reflect changes in the price of Gatos Common Stock or First Majestic Common Shares prior to the Effective Time. Based on the number of First Majestic Common Shares and shares of Gatos Common Stock outstanding or reserved for issuance on November 25, 2024, and including the number of Gatos Equity Awards anticipated to be outstanding at the Effective Time, upon completion of the Transaction, we expect that former Gatos Stockholders will own approximately 38% of the First Majestic Common Shares on a fully-diluted basis and holders of First Majestic Common Shares immediately prior to the Transaction will own approximately 62% of the First Majestic Common Shares on a fully-diluted basis immediately after the Transaction. Gatos Common Stock is traded on the NYSE and on the TSX under the symbol “GATO.” We encourage you to obtain current quotes for the First Majestic Common Shares and the Gatos Common Stock.

Because First Majestic will issue a fixed number of First Majestic Common Shares in exchange for each share of Gatos Common Stock, the value of the Merger Consideration that Gatos Stockholders will receive in the Transaction will depend on the market price of First Majestic Common Shares at the Effective Time and will not be known at the time that First Majestic Shareholders vote on the Share Issuance Resolution. The market price of First Majestic Common Shares that Gatos Stockholders receive at the Effective Time could be greater than, less than or the same as the market price of First Majestic Common Shares on the date of this Management Information Circular or at the time of the First Majestic Special Meeting. Based on the closing price of First Majestic Common Shares of $5.29 on the NYSE on September 4, 2024, the last full trading day prior to the date on which the parties entered into the Merger Agreement, the implied value of the Merger Consideration to Gatos Stockholders was approximately $13.49 per share of Gatos Common Stock. On December 5, 2024, the latest practicable trading day before the date of mailing of this Management Information Circular, the closing price of First Majestic Common Shares on the NYSE was $6.20 per share, resulting in an implied value of the Merger Consideration to Gatos Stockholders of $15.81 per share of Gatos Common Stock.

For more information regarding the Merger Consideration to be received by Gatos Stockholders if the Transaction is completed, see the section entitled “The Merger Agreement—Effect of the Merger on Gatos Common Stock” on page 74.

Q: If I am a First Majestic Shareholder, will I receive any securities as part of First Majestic’s acquisition of Gatos?

No. Regardless of whether the Transaction closes, First Majestic Shareholders will continue to hold their First Majestic Common Shares and will not receive any additional securities.

Q: Will there be any changes to the First Majestic Board in connection with First Majestic’s acquisition of Gatos?

Under the Merger Agreement, subject to First Majestic’s corporate governance standards and procedures, including First Majestic’s satisfactory completion of its customary screening and evaluation procedures for directors, First Majestic has agreed to consider the appointment of one director, mutually agreeable to Gatos and First Majestic, to be appointed to serve as a director on the First Majestic Board.

For additional information about First Majestic’s management and board of directors after the Closing, see the section entitled “The Transaction – Board of Directors and Management of First Majestic after the Transaction” and “Appendix I – Information Concerning the Combined Company”.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 14

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

Q: Is the obligation of each of First Majestic and Gatos to effect the Transaction subject to any conditions?

Yes. The respective obligations of First Majestic and Gatos to close the Transaction are subject to the satisfaction or waiver of a number of customary conditions. These conditions include, among other things: (i) the affirmative vote of the holders of at least a majority of the outstanding shares of Gatos Common Stock entitled to vote on the authorization of the Merger Agreement at the Gatos Special Meeting in favour of such authorization; (ii) the approval of the Share Issuance Resolution; (iii) the effectiveness of the Registration Statement on Form F-4 in accordance with the provisions of the U.S. Securities Act and the absence of any stop order suspending the effectiveness of the Form F-4 or proceeding to that effect shall have been commenced or threatened in writing by the SEC unless subsequently withdrawn; (iv) the absence of any rule, regulation or other law or order entered, enacted, promulgated, enforced or issued by any governmental entity of competent jurisdiction which prevents, prohibits or makes illegal the consummation of the transactions contemplated by the Merger Agreement; (v) all required approvals or clearances pursuant to Mexico’s Antitrust Law having been received; (vi) the First Majestic Common Shares to be issued as Merger Consideration having been approved for listing on the NYSE, subject to official notice of issuance, and conditionally approved or authorized for listing on the TSX (subject only to customary listing conditions); (vii) the accuracy of each party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement; (viii) performance by each party in all material respects with such party’s obligations under the Merger Agreement; and (ix) with respect to First Majestic, the absence of a Gatos Material Adverse Effect, and with respect to Gatos, the absence of a First Majestic Material Adverse Effect (as such terms are defined in the Merger Agreement).

For a more detailed discussion of the conditions to the Closing, see the section entitled “The Merger Agreement – Conditions to the Completion of the Merger”.

Q: Are there risks associated with First Majestic’s acquisition of Gatos?

Yes. Before making a decision on how to vote, you are urged to carefully read the section entitled “Risk Factors”. You also should read and carefully consider the risk factors with respect to First Majestic and Gatos that are contained in the documents that are incorporated by reference in this Management Information Circular.

Q: What regulatory approvals are required to complete First Majestic’s acquisition of Gatos?

Gatos and First Majestic have applied for approval of the Transaction from applicable antitrust authorities in Mexico. Gatos and First Majestic are not currently aware of any material consents or other filings that are required prior to Closing the Transaction other than those described in this Management Information Circular.

Although First Majestic and Gatos believe that they will receive the required authorizations and approvals described herein to complete the transactions contemplated by the Merger Agreement, there can be no assurance as to the timing of these consents and approvals, First Majestic’s or Gatos’ ultimate ability to obtain such consents or approvals (or any additional consents or approvals that may otherwise become necessary), or the conditions or limitations that such approvals may  contain or impose. For more information regarding factors that could impact the closing of the Transaction, see the section entitled “Risk Factors,” on page 39.

For a more detailed discussion of the regulatory approvals required to close the Transaction see the section of this Management Information Circular entitled “The Transaction – Regulatory Approvals Required for the Transaction,” on page 70.

Q: When is the Transaction expected to be completed?

Subject to the satisfaction or waiver of the closing conditions described under the section entitled “The Merger Agreement — Conditions to Completion of the Merger” on page 91, including approval of the Gatos Merger Proposal by Gatos Stockholders, the Transaction is expected to be completed in the first quarter of 2025.

 

 

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Questions and Answers About the Transaction and the First Majestic Special Meeting

 

However, neither Gatos nor First Majestic can predict the actual date on which the Transaction will be completed, or if the Transaction will be completed at all, because completion of the Transaction is subject to conditions and factors outside the control of both companies, including the receipt of certain required antitrust approvals. The Merger Agreement requires First Majestic’s acquisition of Gatos to be completed by the outside date of April 30, 2025, except that such outside date will automatically be extended to May 31, 2025 if the required approval or clearance pursuant to Mexico’s Antitrust Law has not been obtained by April 30, 2025 but all other conditions to Closing have been satisfied (other than those conditions that by their terms are to be satisfied at the Closing, each of which is capable of being satisfied) or (to the extent permitted by law) waived.

Q: Are any termination payments payable if the Merger Agreement is terminated?

If the Merger Agreement is terminated under certain specified circumstances, Gatos may be required to pay First Majestic a termination payment of $28.0 million or First Majestic may be required to pay Gatos a termination payment of $46.0 million.

See the section entitled “The Merger Agreement – Expenses and Termination Fee” on page 94 for a more detailed discussion of these termination payments.

Q: What happens if the Transaction is not completed?

If the Transaction is not completed, First Majestic and Gatos will each remain public companies independent of one another, and the First Majestic Common Shares and the Gatos Common Stock will continue to be listed and traded on the NYSE and on the TSX. In certain circumstances, a termination payment may be paid by First Majestic or Gatos, as applicable.

See the section entitled “The Merger Agreement – Termination of the Merger Agreement” and “The Merger Agreement – Effect of Termination” on pages 93 and 94, respectively, for a more detailed discussion of what happens if the Transaction is not completed. See the section entitled “The Merger Agreement – Expenses and Termination Fee” on page 94 for a more detailed discussion of termination payments.

Q: Who can vote?

The First Majestic Board has fixed November 25, 2024 as the Record Date. If you held First Majestic Common Shares as at the close of business on November 25, 2024, you are entitled to receive notice of and vote your First Majestic Common Shares at the First Majestic Special Meeting on January 14, 2025, or at a reconvened meeting if the First Majestic Special Meeting is postponed or adjourned. Each First Majestic Common Share carries one vote on each item to be voted on at the First Majestic Special Meeting.

Q: Who is soliciting my proxy?

Management of First Majestic is soliciting your proxy in connection with this Management Information Circular and the First Majestic Special Meeting. Proxies will be solicited by mail, in person, by telephone, or by electronic communications. To encourage you to vote, First Majestic employees may contact you by any of these methods. First Majestic employees will not receive a commission or any other form of compensation in connection with soliciting your proxy. First Majestic has retained Kingsdale Advisors to provide a broad array of strategic advisory, proxy solicitation, governance, strategic communications, digital and investor campaign services on a global retainer basis in addition to certain fees accrued during the life of the engagement upon the discretion and direction of First Majestic. First Majestic Shareholders may contact Kingsdale Advisors by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 16

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

Q: What is the quorum for the First Majestic Special Meeting?

A quorum for the transaction of business at the First Majestic Special Meeting is at least two persons present in person at the First Majestic Special Meeting, each being a shareholder entitled to vote at the First Majestic Special Meeting, or a duly appointed proxyholder for or representative of such a shareholder and together holding or representing in the aggregate not less than 25% of the outstanding First Majestic Common Shares entitled to be voted at the First Majestic Special Meeting. If you submit a properly executed form of proxy, you will be considered part of the quorum.

Q: What vote is required to approve the Share Issuance Resolution?

The Transaction cannot close without First Majestic Shareholders approving the Share Issuance Resolution. Approval of the Share Issuance Resolution requires the affirmative vote of a simple majority of the votes cast in respect of the resolution by First Majestic Shareholders present in person or by proxy at the First Majestic Special Meeting and entitled to vote at the First Majestic Special Meeting.

The First Majestic Board unanimously recommends that First Majestic Shareholders vote FOR the Share Issuance Resolution.

Your vote is very important, regardless of the number of First Majestic Common Shares you own. Whether or not you expect to attend the First Majestic Special Meeting, you should authorize a proxy to vote your First Majestic Common Shares as promptly as possible so that your First Majestic Common Shares may be represented and voted at the First Majestic Special Meeting.

Q: Are Gatos shareholders required to approve the Transaction?

Yes. Completion of the Transaction is conditional on Gatos Stockholders approving the Gatos Merger Proposal. Gatos has called the Gatos Special Meeting to be held on January 14, 2025 for the Gatos Stockholders to consider, and if deemed advisable, to approve the Gatos Merger Proposal, which requires the affirmative vote of at least a majority of the outstanding shares of Gatos Common Stock entitled to vote on the Gatos Merger Proposal.

Q: How do I vote in person at the First Majestic Special Meeting?

If you are a registered First Majestic Shareholder at the close of business on the Record Date, you are entitled to receive notice of, and to attend and vote at, the First Majestic Special Meeting. You will be entitled to vote all of the First Majestic Common Shares that you held on the Record Date at the First Majestic Special Meeting.

Q: How do I vote by proxy?

Before the First Majestic Special Meeting, First Majestic Shareholders of record as of the close of business on the Record Date may vote in advance of the First Majestic Special Meeting by completing the form of proxy or voting instruction form, as applicable, in accordance with the instructions provided therein and summarized below.

Registered First Majestic Shareholders

You are a registered First Majestic Shareholder if your First Majestic Common Shares are registered directly in your name and are represented by a share certificate or a Direct Registration System certificate. Registered shareholders may vote by participating in the First Majestic Special Meeting in person, by appointing proxyholders, by telephone or by voting online. As of the date of this Management Information Circular, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. Accordingly, all First Majestic Shareholders (including international First Majestic Shareholders) are advised not to rely on postal delivery of proxies in Canada and to instead utilize the telephone or online proxy delivery processes described herein.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 17

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

Registered shareholders that wish to attend the First Majestic Special Meeting do not need to complete and deposit the form of proxy (the ”Proxy”) and should register with the scrutineer when attending the First Majestic Special Meeting.

Registered shareholders that wish to appoint a proxyholder to vote at the First Majestic Special Meeting may complete the Proxy. The Proxy names a director and/or officer of First Majestic as a proxyholder/alternate proxyholder (the ”Management Designees”). Shareholders have the right to appoint a person or entity (who need not be a shareholder) to attend and act for them on their behalf at the First Majestic Special Meeting other than the persons named in the enclosed instrument of Proxy. Registered shareholders that wish to appoint another person (who need not be a shareholder) to serve as proxyholder/alternate proxyholder at the First Majestic Special Meeting may do so by striking out the names of the Management Designees and inserting the name(s) of the desired proxyholder/alternate proxyholder in the blank space provided in the Proxy.

Registered shareholders may direct the manner in which their First Majestic Common Shares are to be voted or withheld from voting at the First Majestic Special Meeting by marking their instructions on the Proxy. Any First Majestic Common Shares represented by the Proxy will be voted or withheld from voting by the Management Designees/proxyholder/alternate proxyholder in accordance with the instructions of the registered shareholder contained in the Proxy. If there are no instructions, those First Majestic Common Shares will be voted “for” each matter set out in the Notice of Special Meeting. The Proxy grants the proxyholder discretion to vote as such person sees fit on any amendments or variations to matters identified in the Notice of Special Meeting, or any other matters which may properly come before the Meeting.

Registered shareholders may vote by telephone (1-866-732-8683) or online (www.investorvote.com) using the 15-digit control number listed on their Proxy.

If you are a registered First Majestic Shareholder and you did not receive a form of proxy with your control number, please contact Computershare Investor Services Inc. at 1-800-564-6253 (toll-free in North America) or +1-514-982-7555 (international) as soon as possible to obtain a form of proxy and/or your control number to allow you to vote your First Majestic shares.

To be valid, a completed Proxy must be deposited with or telephonic/online votes must be received by Computershare Investor Services Inc. (“Computershare”) by 11:00 a.m. (Pacific Time) on January 10, 2025, or at least 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the First Majestic Special Meeting. The time limit for deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion, without notice.

First Majestic Shareholders may contact Kingsdale Advisors, the Company’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Non-Registered Shareholders

You are a non-registered First Majestic Shareholder if you beneficially own First Majestic Common Shares in the name of an intermediary (such as a broker, bank, trust company, securities dealer, trustees or administrators of RRSPs, RRIFs, RESPs or similar plans) or clearing agency (such as CDS Clearing and Depository Services Inc. or The Depository Trust Company). Non-registered shareholders may participate in the First Majestic Meeting (either themselves or through a proxyholder) or through intermediaries using the voting instruction form (or other accompanying form). Alternatively, non-registered shareholders may be able to vote by telephone or online and should refer to the voting instruction form (or other accompanying form) that is provided to you for further details and instructions. As of the date of this Management Information Circular, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. Accordingly, all shareholders (including international shareholders) are advised not to rely on postal delivery in Canada and to instead utilize the telephone or online processes described below.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 18

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

Non-registered shareholders who do not object to their name being made known to First Majestic may be contacted by Kingsdale Advisors to assist in conveniently voting their First Majestic Common Shares directly by telephone. First Majestic may also utilize the Broadridge QuickVoteTM service to assist such shareholders with voting their First Majestic Common Shares.

If you are a non-registered shareholder and you did not receive a voting information form with your control number, please contact your broker or other intermediary as soon as possible to obtain a voting instruction form and/or your control number to allow you to vote your shares.

First Majestic Shareholders may also contact Kingsdale Advisors, the Company’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Q: What is the voting deadline?

To be effective, your proxy must be received before 11:00 a.m. (Pacific Time) on January 10, 2025 or not less than 48 hours (excluding Saturdays, Sundays, and holidays) prior to the time fixed for holding the First Majestic Special Meeting (or any adjournment or postponement thereof). If you are a non-registered Shareholder your completed voting instruction form must be returned on or before the deadline specified on the voting instruction form. The time limit for the deposit of proxies may be waived or extended by the Chair of the First Majestic Special Meeting at his or her sole discretion without notice. Late proxies may be accepted or rejected by the Chair of the First Majestic Special Meeting at his or her sole discretion without notice.

First Majestic reminds First Majestic Shareholders that only the most recently dated voting instructions will be counted and any prior dated instructions will be disregarded.

Q: Can I change my vote?

Registered First Majestic Shareholders – Revoking your Proxy

You may revoke your Proxy at any time before it is acted on. You may revoke your Proxy by:

(a) completing a Proxy with a later date and depositing it by the time and at the place noted above;

(b) signing and dating a written notice of revocation and delivering it to Computershare at the address indicated on the accompanying Notice of Special Meeting, or by transmitting a revocation by telephonic or electronic means, to Computershare, at any time up to and including the last business day preceding the day of the First Majestic Special Meeting, or any postponement or adjournment, at which the Proxy is to be used, or delivering a written notice of revocation and delivering it to the Chair of the First Majestic Special Meeting on the day of the First Majestic Special Meeting or any postponement or adjournment of the First Majestic Special Meeting, or by delivering the written notice of revocation by any other manner permitted by law; or

(c) attending the First Majestic Special Meeting or any postponement or adjournment and registering with the scrutineer as a shareholder present in person.

As of the date of this Management Information Circular, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. Accordingly, shareholders (including international shareholders) wishing to revoke their proxy are advised not to rely on postal delivery in Canada and to instead utilize the other delivery processes described herein.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 19

Questions and Answers About the Transaction and the First Majestic Special Meeting

 

First Majestic Shareholders may also contact Kingsdale Advisors, First Majestic’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Non-Registered Shareholders

Non-registered shareholders that wish to change their voting instructions or to appoint a proxyholder after delivering voting instructions in accordance with the instructions on a voting instruction form (or other form) that is provided to you should contact First Majestic’s General Counsel & Corporate Secretary toll-free, at 1-866-529-2807, to discuss whether this is possible and what procedures must be followed.

Q: Where can I find more information about First Majestic, Gatos, and the Transaction?

You can find out more information about First Majestic, Gatos, and the Transaction by reading this Management Information Circular and from various sources described in the sections entitled “Information Contained in Management Information Circular – Information Incorporated by Reference” and “Additional Information”.

Q: Do I have dissent rights?

Under the BCBCA, First Majestic Shareholders are not entitled to dissent rights in respect of the Transaction or any others matters to be considered at the First Majestic Special Meeting.

Q: How may I contact First Majestic’s registrar and transfer agent?

You can contact Computershare Investor Services Inc., First Majestic’s registrar and transfer agent, by telephone, on the internet, or by mail using the following contact information:

 

•

Fax / Phone: 1-866-249-7775 (toll-free in North America) or 1-514-982-7555 (international)

 

•

Mail: 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy Department

 

•

E-mail: service@computershare.com

As of the date of this Management Information Circular, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute. Accordingly, shareholders (including international shareholders) are advised not to rely on postal communications in Canada and to instead utilize the phone or e-mail options described above to contact Computershare Investor Services Inc.

Q. Who do I contact if I have questions on how to vote?

If you have questions about the First Majestic Special Meeting or the Transaction, or if you desire additional copies of this Management Information Circular or additional proxies, you may contact Kingsdale Advisors, First Majestic’s strategic advisor and proxy solicitation agent by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Questions? Need Help Voting?

First Majestic Shareholders may contact Kingsdale Advisors by telephone at

1-866-851-3214 (Toll-Free in North America)

Or 1-647-577-3635 (Text and Call Enabled Outside North America)

Or By Email At contactus@kingsdaleadvisors.com

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 20

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 21

Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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Summary

 

 

 

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GENERAL INFORMATION FOR THE FIRST MAJESTIC SPECIAL MEETING

 

 

Date, Time, and Place of the First Majestic Special Meeting

The First Majestic Special Meeting will be held at the offices of First Majestic’s legal counsel, Bennett Jones LLP, located at Suite 2500 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8 on January 14, 2025 at 11:00 a.m. (Pacific Time).

If you are a registered First Majestic Shareholder at the close of business on the Record Date, you are entitled to receive notice of, and to attend and vote at the First Majestic Special Meeting. You will be entitled to vote all of the First Majestic Common Shares that you held on the Record Date at the First Majestic Special Meeting.

When First Majestic Common Shares are held jointly by two or more persons, those shares may be voted at the First Majestic Special Meeting (either in person or by proxy) by any one of those holders, or, alternatively, by all such holders jointly. Each First Majestic Common Share is entitled to one vote.

How to Vote Prior to the First Majestic Special Meeting

Before the First Majestic Special Meeting, First Majestic Shareholders of record as of the close of business on the Record Date may vote in advance of the First Majestic Special Meeting by completing the form of proxy or voting instruction form in accordance with the instructions provided therein and summarized below.

Solicitation of Proxies

This Management Information Circular is furnished in connection with the solicitation of proxies by the management of First Majestic. The accompanying form of proxy (the ”Proxy”) is for use at the First Majestic Special Meeting to be held on January 14, 2025, for the purposes set forth in the accompanying Notice of Special Meeting and at any adjournment thereof. While it is expected that the solicitation will be primarily by mail, proxies may be solicited personally or by telephone by the directors and employees of First Majestic (for no additional compensation). First Majestic may retain other persons or companies to solicit proxies on behalf of management, in which event customary fees for such services will be paid. All costs of solicitation will be borne by First Majestic.

First Majestic has retained Kingsdale Advisors to provide First Majestic with a broad array of strategic advisory, governance, strategic communications, digital and investor campaign services on a global retainer basis in addition to certain fees accrued during the life of the engagement upon the discretion and direction of First Majestic. First Majestic Shareholders may contact Kingsdale Advisors by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Notice and Access Process

First Majestic has adopted the notice and access model (“Notice and Access”) provided for under National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”) for the delivery of the Notice of Meeting and this Management Information Circular (collectively, the ”Meeting Materials”) to shareholders for the First Majestic Special Meeting. First Majestic has adopted this alternative means of delivery in order to further its commitment to environmental sustainability and to reduce its printing and mailing costs.

 

 

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General Information for the First Majestic Special Meeting

 

Under Notice and Access, instead of receiving printed copies of the Meeting Materials, shareholders receive a Notice and Access notification containing the First Majestic Special Meeting date, location and purpose, as well as information on how they can access the Meeting Materials electronically. Shareholders with existing instructions on their account to receive printed materials will receive a printed copy of the Meeting Materials.

Shareholders who receive a Notice and Access notification can request that printed copies of the Meeting Materials be sent to them by postal delivery at no cost to them up to one year from the date of the filing of this Information Circular on SEDAR+. Shareholders with questions about the Notice and Access system, or who would like to request printed copies of the Meeting Materials, should contact the First Majestic’s General Counsel & Corporate Secretary, toll-free, at 1-866-529-2807. A request for printed copies which are required in advance of the First Majestic Special Meeting should be made no later than January 2, 2025 in order to allow sufficient time for delivery.

Canadian Shareholders

At the time of this notice delivery of mail in Canada is severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. As a result, delivery of paper copies of Meeting Materials may be impacted and the Company cannot guarantee that delivery to Canadian addresses can be completed prior to the proxy deposit deadline for the Meeting. Alternatively, shareholders may request that the Company send them a copy of the Meeting Materials by email or facsimile.

Voting Instructions

Registered Shareholders

Registered shareholders are persons who hold common shares of First Majestic that are registered directly in their names and are represented by a share certificate or a Direct Registration System certificate. Registered shareholders may vote by participating in the First Majestic Special Meeting in person, by appointing proxyholders, by telephone or by voting online. As of the date of this Management Information Circular, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. Accordingly, all First Majestic Shareholders (including international First Majestic Shareholders) are advised not to rely on postal delivery of proxies in Canada and to instead utilize the telephone or online proxy delivery processes described herein.

Registered shareholders that wish to attend the First Majestic Special Meeting do not need to complete and deposit the Proxy and should register with the scrutineer when attending the First Majestic Special Meeting.

Registered shareholders that wish to appoint a proxyholder to vote at the First Majestic Special Meeting may complete the Proxy. The Proxy names a director and/or officer of First Majestic as a proxyholder/alternate proxyholder (the ”Management Designees”). Shareholders have the right to appoint a person or entity who need not be a shareholder) to attend and act for them on their behalf at the First Majestic Special Meeting other than the persons named in the enclosed instrument of Proxy. Registered shareholders that wish to appoint another person (who need not be a shareholder) to serve as proxyholder/alternate proxyholder at the First Majestic Special Meeting may do so by striking out the names of the Management Designees and inserting the name(s) of the desired proxyholder/alternate proxyholder in the blank space provided in the Proxy.

Registered shareholders may direct the manner in which their common shares are to be voted or withheld from voting at the First Majestic Special Meeting by marking their instructions on the Proxy. Any First Majestic Common Shares represented by the Proxy will be voted or withheld from voting by the Management Designees/proxyholder/alternate proxyholder in accordance with the instructions of the registered shareholder contained in the Proxy. If there are no instructions, those First Majestic Common Shares will be voted “for” each matter set out in the Notice of Special Meeting. The Proxy grants the

 

 

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General Information for the First Majestic Special Meeting

 

proxyholder discretion to vote as such person sees fit on any amendments or variations to matters identified in the Notice of Special Meeting, or any other matters which may properly come before the Meeting.

At the time of printing of this Management Information Circular, management knows of no other matters which may come before the First Majestic Special Meeting other than those referred to in the Notice of Special Meeting. No person who is a director of First Majestic has informed management that he intends to oppose any action to be taken by management at the First Majestic Special Meeting.

Registered shareholders may vote by telephone (1-866-732-8683) or online (www.investorvote.com) using the 15-digit control number listed on their Proxy.

If you are a registered First Majestic Shareholder and you did not receive a form of proxy with your control number, please contact Computershare Investor Services Inc. at 1-800-564-6253 (toll-free in North America) or +1-514-982-7555 (international) as soon as possible to obtain a form of proxy and/or your control number to allow you to vote your First Majestic Common Shares.

To be valid, a completed Proxy must be deposited with or telephonic/online votes must be received by Computershare Investor Services Inc. (“Computershare”) by 11:00 a.m. (local time in Vancouver, British Columbia) on January 10, 2025, or at least 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the First Majestic Special Meeting. The time limit for deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion, without notice.

A Proxy may be revoked by:

(a) completing a Proxy with a later date and depositing it by the time and at the place noted above;

(b) signing and dating a written notice of revocation and delivering it to Computershare at the address indicated on the accompanying Notice, or by transmitting a revocation by telephonic or electronic means, to Computershare, at any time up to and including the last business day preceding the day of the First Majestic Special Meeting, or any postponement or adjournment, at which the Proxy is to be used, or delivering a written notice of revocation and delivering it to the Chair of the Meeting on the day of the First Majestic Special Meeting or any postponement or adjournment of the Meeting, or by delivering the written notice of revocation by any other manner permitted by law; or

(c) attending the First Majestic Special Meeting or any postponement or adjournment and registering with the scrutineer as a shareholder present in person.

First Majestic Shareholders may also contact Kingsdale Advisors, First Majestic’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Non-Registered Shareholders

Non-registered shareholders are persons who hold common shares that are registered in the name of an intermediary (such as a broker, bank, trust company, securities dealer, trustees or administrators of RRSPs, RRIFs, RESPs or similar plans) or clearing agency (such as CDS Clearing and Depository Services Inc. or The Depository Trust Company). Non-registered shareholders may participate in the First Majestic Special Meeting (either themselves or through a proxyholder) or through intermediaries using the voting instruction form (or other accompanying form). Alternatively, some non-registered shareholders may be able to vote by telephone or online and should refer to the voting instruction form (or other accompanying form) for further details and instructions. As of the date of this Management Information Circular, delivery of mail in Canada is being severely disrupted as a result of the ongoing Canada Post labour dispute and the Company does not have any indication as to when such disruption may cease. Accordingly, all shareholders (including international shareholders) are advised not to rely on postal delivery in Canada and to instead utilize the telephone or online delivery processes described herein.

 

 

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General Information for the First Majestic Special Meeting

 

If a non-registered shareholder wishes to participate (either in person or through a nominee) and vote at the First Majestic Special Meeting, it is critical to follow the required procedures for appointing proxyholders given that First Majestic does not have unrestricted access to the names of First Majestic’s non-registered shareholders and accordingly would not otherwise have any record of a non-registered shareholder’s entitlement to vote at the First Majestic Special Meeting.

Non-registered shareholders may appoint themselves or nominees as proxyholders using one of the following procedures:

(a) carefully following the instructions for appointing a proxyholder contained in the voting instruction form (or other accompanying form) and ensuring that such request is communicated to the appropriate person well in advance of the First Majestic Special Meeting and in accordance with such instructions; or

(b) unless prohibited by applicable corporate law, submitting any other document in writing to First Majestic requesting the non-registered shareholder or its nominee be given authority to attend, vote and otherwise act for and on behalf of the registered shareholder in respect of all matters that may come before the First Majestic Special Meeting or any postponement or adjournment by 11:00 a.m. (Pacific Time) on January 9, 2025 or at least 72 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the First Majestic Special Meeting.

Non-registered shareholders who have appointed themselves as proxyholders and who wish to attend the First Majestic Special Meeting and vote in person should not complete the voting section of their voting instruction form. Such non-registered shareholders should register with Computershare upon arrival at the First Majestic Special Meeting, and may be asked to present valid picture identification and proof of share ownership to gain admission to the First Majestic Special Meeting.

Non-registered shareholders who have submitted their voting instructions to their intermediary, but nonetheless wish to attend the First Majestic Special Meeting are welcome to do so. Such non-registered shareholders should register with Computershare upon arrival at the First Majestic Special Meeting, and may be asked to present valid picture identification and proof of share ownership to gain admission to the First Majestic Special Meeting. Such shareholders should not complete and sign any ballot that may be called for at the Meeting as their voting instructions will already have been followed.

Non-registered shareholders that wish to vote through their intermediaries using the voting instruction form (or other form) accompanying the Notice and Access notification should carefully follow the instructions contained in the voting instruction form (or other form) accompanying the Notice and Access notification and should ensure that such instructions are communicated to the appropriate person well in advance of the First Majestic Special Meeting.

Non-registered shareholders should refer to the voting instruction form (or other form) accompanying the Notice and Access notification to determine if telephonic or online voting is available.

Non-registered shareholders that wish to change their voting instructions or to appoint a proxyholder after delivering voting instructions in accordance with the instructions on a voting instruction form (or other form) accompanying the Notice and Access notification should contact First Majestic’s General Counsel & Corporate Secretary toll-free, at 1-866-529-2807, to discuss whether this is possible and what procedures must be followed.

Non-registered shareholders who do not object to their name being made known to First Majestic may be contacted by Kingsdale Advisors to assist in conveniently voting their First Majestic Common Shares directly by telephone. First Majestic may also utilize the Broadridge QuickVoteTM service to assist such shareholders with voting their First Majestic Common Shares.

If you are a non-registered shareholder and you did not receive a voting information form with your control number, please contact your broker or other intermediary as soon as possible to obtain a voting instruction form and/or your control number to allow you to vote your shares.

 

 

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General Information for the First Majestic Special Meeting

 

First Majestic Shareholders may contact Kingsdale Advisors, First Majestic’s strategic advisor and proxy solicitation agent, by telephone at 1-866-851-3214 (toll-free in North America) or 1-647-577-3635 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com. To obtain current information about voting your First Majestic Common Shares, please visit www.AGSpecialMeeting.com.

Distribution to Non-Registered Shareholders

Pursuant to the provisions of NI 54-101, First Majestic is sending the Notice and Access notification to both registered and non-registered shareholders. Non-registered shareholders fall into two categories: those who object to their identity being known to First Majestic (“OBOs”) and those who do not object to their identity being made known to First Majestic (“NOBOs”).

First Majestic is sending the Notice and Access notification directly to NOBOs pursuant to NI 54-101. If you are a non-registered shareholder, and First Majestic or its agent has sent the Notice and Access notification directly to you, your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding common shares on your behalf. By choosing to send the Notice and Access notification to you directly, First Majestic (and not the intermediary holding common shares on your behalf) has assumed responsibility for (i) delivering the Notice and Access notification to you, and (ii) executing your proper voting instructions.

First Majestic will assume the costs of delivery of proxy-related materials for the First Majestic Special Meeting to OBOs.

Electronic Delivery of First Majestic Special Meeting Materials

Non-registered shareholders are asked to consider signing up for electronic delivery (“E-delivery”) of the First Majestic Special Meeting materials. E-delivery has become a convenient way to make distribution of materials more efficient and is an environmentally responsible alternative by eliminating the use of printed paper and the carbon footprint of the associated mail delivery process. Signing up is quick and easy: go to www.proxyvote.com and sign in with your control number, submit your vote in respect of the resolutions for the First Majestic Special Meeting and, following your vote confirmation, you will be able to select the E-delivery box and provide your email address. Once you have registered for E-delivery, going forward you will receive your First Majestic Special Meeting materials by email and will be able to vote on your device by simply following a link in the email sent by your financial intermediary, provided your intermediary supports this service.

Purpose of First Majestic Special Meeting

The First Majestic Special Meeting is being held so that First Majestic Shareholders may consider the Share Issuance Resolution. The Share Issuance Resolution is an ordinary resolution of First Majestic Shareholders, the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting”, approving the issuance of up to an aggregate of 190,000,000 First Majestic Common Shares (the ”Aggregate First Majestic Shares”), comprised of the number of First Majestic Common Shares as shall be necessary to satisfy the Merger Consideration under the terms of the Merger Agreement.

The Transaction cannot close without First Majestic Shareholders approving the Share Issuance Resolution.

Share Issuance Resolution

Under section 611(C) of the TSX Company Manual, security holder approval is required if the number of securities issued or issuable by a listed issuer in payment of the purchase price for an acquisition, exceeds 25% of the number of securities of the listed issuer which are outstanding, on a pre-acquisition, non-diluted basis. Under the terms of the Merger Agreement, First Majestic has agreed to issue 2.55 First Majestic Common Shares in exchange for each share of Gatos Common Stock issued and outstanding immediately prior to the Effective Time. Issuances by Gatos of shares of Gatos Common Stock are restricted under the terms of the Merger Agreement, subject to certain limited exceptions or the prior written consent of First Majestic. As a result, the actual number of First Majestic Common Shares that will be issued at the Effective Time cannot be determined at

 

 

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General Information for the First Majestic Special Meeting

 

the date of this Management Information Circular and will depend on the number of Gatos Common Stock outstanding at the Effective Time. For information regarding restrictions on issuances of Gatos Common Stock, see the section entitled “The Merger Agreement – Conduct of Business Pending the Merger”.

First Majestic Shareholders are being asked to approve the issuance of the Aggregate First Majestic Shares. Based on the number of First Majestic Common Shares and the shares of Gatos Common Stock outstanding or reserved for issuance on November 25, 2024 and including the number of Gatos Equity Awards anticipated to be outstanding at the Effective Time, First Majestic anticipates to issue (or reserve for issuance) up to an aggregate of 190,000,000 First Majestic Common Shares to satisfy the Merger Consideration representing approximately 38% of the First Majestic Common Shares on a fully-diluted basis after giving effect to the Transaction and 62.9% of the outstanding First Majestic Common Shares pre-Transaction.

Accordingly, the TSX requires that the Share Issuance Resolution be approved by an ordinary resolution of First Majestic Shareholders, being a simple majority of the votes cast by holders of outstanding First Majestic Common Shares represented in person or by proxy and entitled to vote at the First Majestic Special Meeting. First Majestic will not be able to satisfy the listing requirements of the TSX unless the Share Issuance Resolution is approved.

The actual number of First Majestic Common Shares to be issued under the Merger Agreement will be determined immediately prior to the Effective Time based on the Exchange Ratio and the number of shares of Gatos Common Stock outstanding at such time.

At the First Majestic Special Meeting, First Majestic Shareholders will be asked to consider the Share Issuance Resolution, the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting”, approving the issuance of the number of First Majestic Common Shares as is necessary to satisfy the Merger Consideration under the terms of the Merger Agreement, which is anticipated to be up to 190,000,000 First Majestic Common Shares.

In accordance with the terms of the Merger Agreement, it is a condition to the Closing that the Share Issuance Resolution be approved by the First Majestic Shareholders. At the First Majestic Special Meeting, First Majestic Shareholders will be asked to consider the Share Issuance Resolution, the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting”, subject to such amendments, variations or additions as may be approved at the First Majestic Special Meeting, approving the issuance of First Majestic Common Shares under the Merger Agreement. Approval of the Share Issuance Resolution requires the affirmative vote of a simple majority of the votes cast in respect of the resolution of First Majestic Shareholders present in person or represented by proxy at the First Majestic Special Meeting.

Based on current information available to First Majestic, other than set out below no current Gatos Stockholder will immediately following the Transaction beneficially own, or exercise control or direction over, 10% or more of the outstanding First Majestic Common Shares, and the Transaction will not materially affect control of First Majestic:

 

Name		Anticipated Number of First Majestic Common Shares				Anticipated Ownership Percentage
Electrum(1)			56,111,158				11.7	%(2)

 

(1)	Refers to Electrum Silver US LLC and Electrum Silver US II LLC collectively.

(2)	Based on an aggregate of 479,012,353 First Majestic Common Shares outstanding following the Transaction, on a non-diluted basis.

The First Majestic Board recommends that First Majestic Shareholders vote FOR the Share Issuance Resolution. Unless otherwise specified in your proxy, the Management Designees named in your proxy intend to vote FOR the Share Issuance Resolution.

Record Date and First Majestic Shareholders Entitled to Vote

The First Majestic Board has fixed November 25, 2024 as the Record Date. If you held First Majestic Common Shares as at the close of business on November 25, 2024 you are entitled to receive notice of and vote your First

 

 

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General Information for the First Majestic Special Meeting

 

Majestic Common Shares at the First Majestic Special Meeting on January 14, 2025, or at a reconvened meeting if the First Majestic Special Meeting is postponed or adjourned. Each First Majestic Common Share carries one vote on each item to be voted on at the First Majestic Special Meeting. As of November 25, 2024, there were 301,863,851 First Majestic Common Shares issued and outstanding.

Quorum

A quorum for the transaction of business at the First Majestic Special Meeting, other than the election of a chair of the meeting and the adjournment of the meeting, is at least two persons present at the First Majestic Special Meeting, each holding or representing by proxy not less than 25% of the outstanding First Majestic Common Shares entitled to be voted at the First Majestic Special Meeting. If you submit a properly executed form of proxy you will be considered part of the quorum.

If a quorum is not present or if there are not sufficient votes for the approval of the Share Issuance Resolution, First Majestic expects that the First Majestic Special Meeting will be adjourned or postponed to solicit additional proxies. At any subsequent reconvening of the First Majestic Special Meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the First Majestic Special Meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting. See the section entitled “General Information for the First Majestic Special Meeting – Adjournment or Postponement”.

Required Vote

The Transaction cannot close without First Majestic Shareholders approving the Share Issuance Resolution. Approval of the Share Issuance Resolution requires the affirmative vote of a simple majority of the votes cast in respect of the resolution by First Majestic Shareholders present in person or represented by proxy at the First Majestic Special Meeting.

Adjournment or Postponement

The Merger Agreement provides that First Majestic shall have the right, following consultation with Gatos, to make (and, if so requested by Gatos, shall be required to make) one or more successive postponements or adjournments of the First Majestic Special Meeting (of not more than 15 days individually) (i) to allow time for the filing and dissemination of any supplemental or amended disclosure document that the First Majestic Board has determined in good faith is required to be filed and disseminated under applicable law; or (ii) if as of the time that the First Majestic Special Meeting is originally scheduled there are insufficient First Majestic Common Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the First Majestic Special Meeting.

Under the Merger Agreement, the First Majestic Special Meeting shall not be adjourned or postponed to a date that is more than 30 Business Days after the date for which the First Majestic Special Meeting was previously scheduled (without giving effect to any postponement).

At any subsequent reconvening of the First Majestic Special Meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the First Majestic Special Meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting. See the section entitled “General Information for the First Majestic Special Meeting – Voting Instructions”.

Voting Securities and Principal Holders Thereof

The authorized share structure of First Majestic consists of an unlimited number of common shares without par value. As of the Record Date, there were 301,863,851 First Majestic Common Shares issued and outstanding.

To the knowledge of the directors and senior officers of First Majestic, as of the Record Date, there are no persons or companies who beneficially own or exercise control or direction, directly or indirectly, over common shares carrying more than 10% of the voting rights attached to all outstanding common shares of First Majestic.

 

 

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RISK FACTORS

 

 

In addition to the other information contained in or incorporated by reference in this Management Information Circular, including the matters addressed in the section entitled “Information Contained in Management Information Circular – Cautionary Statement Regarding Forward-Looking Statements”, you should carefully consider the following risks in deciding whether to vote for the Share Issuance Resolution. Readers are cautioned that such risk factors are not exhaustive. These risk factors should be considered in conjunction with the other information contained in this Management Information Circular, including the documents incorporated by reference herein.

In addition, First Majestic’s and Gatos’ respective businesses are subject to numerous risks and uncertainties, including the risks and uncertainties described, in the case of First Majestic, in the First Majestic Annual Information Form for the year ended December 31, 2023 and its most recent Management Discussion & Analysis and, in the case of Gatos, in its Annual Report on Form 10-K for the year ended December 31, 2023, as amended by Amendment No. 1, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each of which are incorporated by reference into this Management Information Circular.

Risks Related to the Transaction

The Exchange Ratio is fixed and will not be adjusted in the event of any change in price of either First Majestic Common Shares or Gatos Common Stock.

At the Effective Time, each share of Gatos Common Stock that is outstanding immediately prior to the Effective Time (excluding Gatos Common Stock to be cancelled as described in the Merger Agreement) will be converted into the right to receive 2.55 First Majestic Common Shares. Because the Exchange Ratio is fixed, the value of the Merger Consideration will depend on the market price of First Majestic Common Shares at the Effective Time. The market prices of First Majestic Common Shares and Gatos Common Stock has fluctuated since the date of the announcement of the Transaction and are expected to continue to fluctuate from the date of this Management Information Circular until the Closing Date, which could occur a considerable amount of time after the date hereof. Changes in the price of First Majestic Common Shares and Gatos Common Stock may result from a variety of factors, including, among others, general market and economic conditions, changes in First Majestic’s and Gatos’ respective businesses, operations and prospects, risks inherent in their respective businesses, changes in market assessments of the likelihood that the proposed Transaction will be completed and/or the value that may be generated by the proposed Transaction and changes with respect to expectations regarding the timing of the proposed Transaction and regulatory considerations. Many of these factors are beyond Gatos’ and First Majestic’s control.

The Transaction is subject to various closing conditions, including regulatory and stockholder/shareholder approvals as well as other uncertainties, and there can be no assurances as to whether and when it may be completed.

Closing of the Transaction is subject to the satisfaction or waiver of a number of conditions specified in the Merger Agreement, and it is possible that such conditions may prevent, delay or otherwise materially adversely affect the completion of the Transaction. These conditions include, among other things: (1) receipt of the Gatos Stockholder Approval; (2) receipt of the First Majestic Shareholder Approval; (3) effectiveness of the Form F-4 in accordance with the provisions of the U.S. Securities Act and no stop order suspending the effectiveness of the Form F-4 having been issued and remaining in effect and no proceeding to that effect having been commenced or threatened; (4) the accuracy of representations and warranties under the Merger Agreement (subject to the materiality standards set forth in the Merger Agreement) and the performance of the parties’ obligations under the Merger Agreement in all material respects; (5) the absence of any adverse law or order prohibiting or making illegal the consummation of the Transaction; (6) receipt of approvals or clearances pursuant to Mexico’s Antitrust Law (see the section entitled “The Transaction Regulatory Approvals Required for the Transaction,” on page 70); (7) the First Majestic Common Shares issuable in the Merger having been approved for listing on the NYSE,

 

 

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Risk Factors

 

subject to official notice of issuance, and conditionally approved or authorized for listing on the TSX, subject to customary listing requirements; (8) absence of a material adverse effect since the signing of the Merger Agreement; and (9) receipt of an opinion from counsel to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a tax-deferred “reorganization” within the meaning of Section 368(a) of the Code.

The governmental authorities from which authorizations are required have broad discretion in administering the governing laws and regulations and may take into account various facts and circumstances in their consideration of the Transactions contemplated by the Merger Agreement. These governmental authorities may initiate proceedings or otherwise seek to prevent the Transaction. As a condition to the authorization of the Transactions contemplated by the Merger Agreement, these governmental authorities may also impose requirements, limitations or costs, require divestitures or place restrictions on the conduct of First Majestic’s business after the combination of First Majestic and Gatos following receipt of final antitrust approval. The First Majestic Special Meeting may take place before the required regulatory approvals have been obtained and before all conditions to such approvals, if any, are known. Notwithstanding the foregoing, if the Share Issuance Resolution is approved by the First Majestic Shareholders, First Majestic may not be required to seek further approval of the First Majestic Shareholders.

We cannot provide any assurance that all required consents and approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, if all required consents and approvals are obtained and all closing conditions are satisfied (or waived, if applicable), we cannot provide any assurance as to the terms, conditions and timing of such consents and approvals or the timing of the completion of the Transaction. Many of the conditions to completion of the Transaction are not within either Gatos’ or First Majestic’s control, and neither company can predict when or if these conditions will be satisfied (or waived, if applicable). Any delay in completing the Transaction could cause First Majestic and/or the combined company not to realize some or all of the benefits that each expects to achieve if the Transaction is successfully completed within the expected timeframe and an extended timeframe could increase the chance that an adverse event occurs with respect to Gatos or First Majestic.

For more information, see the sections entitled “The Transaction – Regulatory Approvals Required for the Transaction” and “The Merger Agreement – Conditions to the Completion of the Merger” on pages 70 and 91, respectively.

After First Majestic’s combination with Gatos, First Majestic may fail to realize the projected benefits of the Transaction, which could adversely affect the value of First Majestic Common Shares.

First Majestic and Gatos have operated and, absent closing of the Merger, will continue to operate independently. The success of First Majestic’s combination with Gatos will depend, in part, on First Majestic’s ability to realize the anticipated benefits from combining the businesses of Gatos and First Majestic following the Merger, including operational and other synergies that we believe the combined company will achieve. The anticipated benefits of First Majestic’s combination with Gatos may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that we do not currently foresee. The integration process may result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies. There could be potential unknown liabilities and unforeseen expenses associated with the Transaction that were not discovered in the course of performing due diligence. Coordinating certain aspects of the operations and personnel of First Majestic with Gatos after the combination of First Majestic and Gatos will involve operational, technological and personnel-related challenges. Additionally, the integration will require significant time and focus from management following the combination which may disrupt the business of the combined company. First Majestic’s production estimates and capital and operating cost estimates relating to the combined company following the Transaction are based on certain assumptions and are inherently subject to significant uncertainties. Actual results for the combined company may differ from current estimates and assumptions, and these differences may be material. Experience from actual mining or processing operations may identify new or unexpected conditions which could reduce production below, and/or increase capital and/or operating costs above, current estimates. If actual results are less favourable than current estimates, the combined company’s business, results of operations, financial condition and liquidity could be adversely impacted.

 

 

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Risk Factors

 

The announcement and pendency of the Transaction could adversely affect each of Gatos’ and First Majestic’s business, results of operations and financial condition.

The announcement and pendency of the Transaction could cause disruptions in and create uncertainty surrounding Gatos’ and First Majestic’s businesses, including affecting Gatos’ and First Majestic’s relationships with their respective existing suppliers and employees, which could have an adverse effect on Gatos’ or First Majestic’s business, results of operations and financial condition, regardless of whether the Transaction is completed. In particular, Gatos and First Majestic could potentially lose important personnel as a result of the departure of employees who decide to pursue other opportunities in light of the Transaction. The attention of Gatos’ and First Majestic’s respective management may be directed towards closing the Transaction, including obtaining required approvals and other Transaction-related considerations and may be diverted from the day-to-day business operations of Gatos and First Majestic and matters related to the Transaction may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial to Gatos and First Majestic. The Merger Agreement generally requires Gatos and First Majestic to conduct their respective business in all material respects in the ordinary course prior to the earlier of the termination of the Merger Agreement and the Effective Time. In addition, the Merger Agreement includes a variety of specified restrictions on the conduct of Gatos’ and First Majestic’s businesses, which, in the event the Merger Agreement is not earlier terminated, expire at the Effective Time. Gatos and First Majestic may find that these and other contractual restrictions in the Merger Agreement delay or prevent Gatos and First Majestic from making certain changes, or limit their ability to make certain changes, during such period, even if Gatos’ or First Majestic’s management, as applicable, believes that making such changes may be advisable. The pendency of the Transaction may also divert management’s attention and resources away from First Majestic’s and Gatos’ ongoing business and operations.

Gatos and First Majestic will each incur substantial transaction fees and costs in connection with the Transaction.

Gatos and First Majestic have incurred and expect to incur additional material, non-recurring expenses in connection with the Transaction, including costs relating to obtaining required approvals and, in the case of Gatos, compensation payments to its executives triggered by the change in control of Gatos as a result of the Transaction. Gatos and First Majestic have incurred significant financial services, accounting, tax, consulting and legal fees in connection with the process of negotiating and evaluating the terms of the Transaction. Additional significant, unanticipated costs may be incurred in the course of coordinating and combining the businesses of Gatos and First Majestic. Pursuant to the Merger Agreement certain costs relating to regulatory applications and the filing, printing and mailing of the Proxy Statement/Prospectus and this Management Information Circular will be shared, however all other costs incurred will be solely for the account of the party incurring them. Such costs may be significant and could have an adverse effect on the parties’ future results of operations, cash flows and financial condition. In addition to its own fees and expenses, if the Merger Agreement is terminated under specified circumstances, Gatos will be required to pay to First Majestic a $28.0 million termination payment. In addition to its own fees and expenses, if the Merger Agreement is terminated under other specified circumstances, First Majestic will be required to pay to Gatos a $46.0 million termination payment. For more information, see the section entitled “The Merger Agreement – Termination of the Merger Agreement”, “The Merger Agreement – Effect of Termination” and “The Merger Agreement – Expenses and Termination Fee” on pages 93, 94 and 94, respectively.

Significant demands will be placed on First Majestic as a result of the combination of the two companies.

As a result of the combination of First Majestic and Gatos, significant demands will be placed on the managerial, operational, and financial personnel and systems of First Majestic. First Majestic cannot assure you that its systems, procedures and controls will be adequate to support the expansion of operations following and resulting from the combination of the two companies. The future operating results of the combined company will be affected by the ability of its officers and key employees to manage changing business conditions and to implement and expand its operational and financial controls and reporting systems in response to the Transaction.

 

 

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Risk Factors

 

The unaudited pro forma condensed combined financial information of First Majestic and Gatos is presented for illustrative purposes only and may not be indicative of the actual results of operations or financial condition of the combined company following the combination of First Majestic and Gatos.

The unaudited pro forma condensed combined financial information included in this Management Information Circular has been prepared using the consolidated historical financial statements of First Majestic and Gatos, is presented for illustrative purposes only and should not be considered to be an indication of the results of operations or financial condition of the combined company after the combination of First Majestic and Gatos. In addition, the unaudited pro forma condensed combined financial information included in this Management Information Circular is based in part on certain assumptions regarding the Transaction. These assumptions may not prove to be accurate, and other factors may affect the combined company’s results of operations or financial condition following the combination of First Majestic and Gatos. Accordingly, the historical information incorporated by reference in this Management Information Circular and the unaudited pro forma condensed combined financial information included in this Management Information Circular does not necessarily represent the combined company’s results of operations and financial condition had Gatos and First Majestic operated as a combined entity during the periods presented, or of the combined company’s results of operations and financial condition after the combination of First Majestic and Gatos. The combined company’s potential for future business success and operating profitability must be considered in light of the risks, uncertainties, expenses and difficulties typically encountered by recently combined companies.

In preparing the unaudited pro forma condensed combined financial information contained in this Management Information Circular, First Majestic has given effect to, among other items, the combination of First Majestic and Gatos and the payment of the Merger Consideration. The unaudited pro forma condensed combined financial information may not reflect all of the costs that may be incurred by Gatos and First Majestic in connection with the Transaction.

For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information”, on page 97, including the notes thereto.

First Majestic or Gatos may waive one or more of the closing conditions without re-soliciting shareholder approval or stockholder approval, respectively.

Certain conditions to First Majestic’s and Gatos’ obligations, respectively, to close the Transaction may be waived, in whole or in part, to the extent legally permissible, either unilaterally or by agreement of First Majestic and Gatos. In the event that any such waiver does not require re-solicitation of First Majestic’s Shareholders or Gatos’ Stockholders or an amendment of this Management Information Circular or any re-solicitation of proxies or voting forms, as applicable, the parties will have the discretion to close the Transaction without seeking further approval of First Majestic Shareholders or Gatos Stockholders, as applicable.

The Fairness Opinions rendered to the First Majestic Board do not reflect changes in circumstances between the signing of the Merger Agreement and the Closing of the Transaction.

National Bank Financial and TD Securities were retained by First Majestic and the First Majestic Board, respectively, to provide financial advisory services in connection with the Transaction. In connection with their mandates, at a meeting of the First Majestic Board held on September 4, 2024, National Bank Financial and TD Securities provided oral opinions, which were subsequently confirmed in writing, that, as of the date thereof, and based upon and subject to the assumptions, limitations, qualifications and other matters stated therein, in the case of National Bank Financial, the Exchange Ratio is fair, and in the case of TD Securities the consideration to be paid was fair, in each case from a financial point of view, to First Majestic. The First Majestic Board has not obtained updated opinions from either National Bank Financial or TD Securities as of the date of this Management Information Circular. Changes in the operations and prospects of First Majestic or Gatos, general market and economic conditions, and other factors that may be beyond the control of First Majestic or Gatos, and on which the forecasts and assumptions used by National Bank Financial and TD Securities in connection with rendering of their opinions may have been based, may significantly alter the value of First Majestic or Gatos or the prices of

 

 

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Risk Factors

 

the First Majestic Common Shares or of the shares of Gatos Common Stock by the time the Transaction is completed. The Fairness Opinions do not speak as of the time the Transaction will be completed or as of any date other than the date of such opinions and the First Majestic Board does not anticipate asking its financial advisors to update such opinions.

For more information regarding the Fairness Opinions, see the sections entitled “The Transaction – National Bank Financial Fairness Opinion” and “The Transaction – TD Securities Fairness Opinion”.

Failure to complete the transactions contemplated by the Merger Agreement could negatively impact the price of First Majestic Common Shares, and First Majestic’s future business and financial results.

If the transactions contemplated by the Merger Agreement are not completed for any reason, First Majestic’s ongoing business may be materially and adversely affected and First Majestic would be subject to a number of risks, including, but not limited to, the following:

 

•

First Majestic may experience negative reactions from the financial markets, including negative impacts on trading prices of First Majestic Common Shares, and from First Majestic’s employees and suppliers; and

 

•

First Majestic will be required to pay Gatos a termination payment of $46.0 million if the Merger Agreement is terminated in certain circumstances.

In addition, First Majestic could be subject to litigation related to any failure to complete the Transaction or related to any proceeding to specifically enforce First Majestic’s performance obligations under the Merger Agreement.

If any of these risks materialize, they may materially and adversely affect First Majestic’s business, financial condition, financial results and stock prices.

Except in specified circumstances, if the Effective Time has not occurred by the Outside Date, either Gatos or First Majestic may choose not to proceed with the Transaction.

Either Gatos or First Majestic may terminate the Merger Agreement if the Effective Time has not occurred by April 30, 2025 (i.e. the Outside Date); provided, that to the extent the condition to obtain Mexican antitrust clearance required to be obtained with respect to the Transaction has not been satisfied or waived on or prior to April 30, 2025, but all other conditions to Closing have been satisfied or, to the extent permitted or waived (except for those conditions that by their nature are to be satisfied at the Closing), the Outside Date will be automatically extended to May 31, 2025. However, this right to terminate the Merger Agreement will not be available to Gatos or First Majestic if such party has breached its obligations under the Merger Agreement and such breach has been the cause of the failure to consummate the Transaction on or before the Outside Date. For more information, see the section entitled “The Merger Agreement – Termination of the Merger Agreement”, on page 93.

Resales of First Majestic Common Shares following the Transaction may cause the market value of First Majestic Common Shares to decline.

Based on the number of shares of First Majestic Common Shares and shares of Gatos Common Stock outstanding or reserved for issuance as of November 25, 2024, and the number of Gatos Equity Awards expected to be issued by Gatos prior to the Effective Time of the Transaction, First Majestic expects to issue or reserve for issuance up to an aggregate of 190 million First Majestic Common Shares at the Effective Time in connection with the Transaction. The issuance of these new First Majestic Common Shares could have the effect of depressing the market value of First Majestic’s Common Shares. The increase in the number of First Majestic Common Shares may lead to sales of such First Majestic Common Shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market value of, First Majestic Common Shares. In addition, some Gatos Stockholders may decide not to continue to hold the First Majestic Common Shares they receive as a result of the Transaction, and any such sales of First Majestic Common Shares could have the effect of depressing their market price.

 

 

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Risk Factors

 

The market value of First Majestic Common Shares may decline as a result of the combination of First Majestic and Gatos.

The market value of First Majestic Common Shares may decline as a result of the combination of First Majestic and Gatos if, among other things, the combined company is unable to achieve the expected benefits of the Merger or if the transaction costs related to the Transaction are greater than expected. The market value of First Majestic Common Shares also may decline if the combined company does not achieve the perceived benefits of the combination as rapidly or to the extent anticipated by the market or if the effect of the Transaction on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, First Majestic Common Shares, regardless of First Majestic’s actual operating performance after the combination of First Majestic and Gatos.

Current First Majestic Shareholders and Gatos Stockholders will have a reduced ownership and voting interest after the Transaction and will have less input into the management of the combined company.

Based on the number of shares of First Majestic Common Shares and Gatos Common Stock outstanding or reserved for issuance as of November 25, 2024, and the number of Gatos Equity Awards expected to be issued prior to the Effective Time of the Transaction, First Majestic expects to issue or reserve for issuance up to an aggregate of 190 million First Majestic Common Shares at the Effective Time in connection with the Transaction. As a result, it is expected that, immediately after the Effective Time, holders of First Majestic Common Shares prior to the Effective Time will own approximately an aggregate of 62% of the First Majestic Common Shares on a fully-diluted basis upon closing of the Transaction. Consequently, current First Majestic Shareholders in the aggregate will have less input into the management and policies of the combined company than they currently have over the management and policies of First Majestic, and Gatos Common Stockholders in the aggregate will have significantly less input into the management and policies of the combined company than they currently have over the management and policies of Gatos.

Gatos and First Majestic have received demand letters and may be targets of legal claims, securities class actions, derivative lawsuits and other claims which could result in substantial costs and may delay or prevent the Transaction from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. Gatos and First Majestic have received a number of demand letters alleging that the disclosures contained in the proxy statement/prospectus included in the Form F-4 were deficient and demanding that certain corrective disclosures be made (the “Demand Letters”). Gatos and First Majestic believe the claims asserted in the Demand Letters are without merit but cannot predict the outcome of any such matters. Lawsuits and additional demand letters arising out of the Transaction may also be filed or received in the future. The outcome of any such demands and complaints and any litigation ensuing from such demands and complaints cannot be assured, including the amount of fees and costs associated with defending these claims or any other liabilities that may be incurred in connection therewith. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the Transaction, then that injunction may delay or prevent the Transaction from being completed.

The combined company may be exposed to increased litigation, which could have an adverse effect on the combined company’s business and operations.

The combined company may be exposed to increased litigation from stockholders and third parties due to the combination of First Majestic’s business and Gatos’ business. Such litigation may have an adverse impact on the combined company’s business and results of operations or may cause disruptions to the combined company’s operations.

 

 

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Risk Factors

 

The IRS may not agree that First Majestic should be treated as a foreign corporation for U.S. federal income tax purposes.

Under current U.S. federal income tax law, a corporation generally will be considered to be a U.S. corporation for U.S. federal income tax purposes only if it is created or organized under the laws of the United States, any state thereof or the District of Columbia. Accordingly, under generally applicable United States federal income tax rules, First Majestic, which is organized under the laws of British Columbia, would generally be classified as a non-U.S. corporation. However, Section 7874 of the Code and the Treasury Regulations promulgated thereunder contain specific rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes (or to be subject to certain other adverse tax consequences). Based on the percentage of outstanding First Majestic Common Shares that is expected to be owned by former Gatos Stockholders immediately after the Merger, First Majestic believes that it should not be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury Regulations promulgated thereunder immediately following the Merger. There can be no assurance, however, that the IRS will not take a contrary position or that the relevant U.S. federal income tax law will not be changed (possibly with retroactive effect) in a manner that would result in a contrary conclusion. If it were determined that First Majestic is treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury Regulations promulgated thereunder, First Majestic could be subject to substantial U.S. tax liability and its non-U.S. shareholders could be subject to U.S. withholding tax on any dividends.

First Majestic and Gatos may have difficulty attracting, motivating and retaining executives and other key employees in light of the combination of First Majestic and Gatos.

First Majestic’s success after closing the Transaction will depend in part on the ability of First Majestic to retain key executives and other employees with critical skills and knowledge, which are crucial for the combined company to achieve key milestones and synergy realization. Uncertainty about the effect of the Transaction on First Majestic and Gatos employees may have an adverse effect on each of First Majestic and Gatos separately and consequently, on the combined company. This uncertainty may impair First Majestic’s and/or Gatos’ ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the Transaction, as employees of First Majestic and Gatos may experience uncertainty about their future roles in the combined company.

Furthermore, if key employees of First Majestic or Gatos depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the combined company, First Majestic may have to incur significant costs in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent, and the combined company’s ability to realize the anticipated benefits of the Transaction may be materially and adversely affected. No assurance can be given that the combined company will be able to attract or retain key employees to the same extent that First Majestic and Gatos have been able to attract or retain employees in the past.

The Merger Agreement contains provisions that make it more difficult for First Majestic and Gatos to pursue alternatives to the Transaction.

The Merger Agreement contains provisions that make it difficult for First Majestic to sell its business during the Interim Period and more difficult for Gatos to sell its business to a party other than First Majestic. These provisions include a general prohibition on each party soliciting any competing proposal, subject to limited exceptions. Further, there are only limited circumstances in which a party may terminate the Merger Agreement to accept a competing proposal and limited exceptions to its agreement that its board of directors will not withdraw or modify its recommendation in a manner adverse to the Transaction. See “The Merger Agreement – Agreement Not to Solicit Other Offers” and “The Merger Agreement – Termination of the Merger Agreement,” on pages 82 and 93, respectively.

The parties believe these provisions are reasonable, customary and not preclusive of other offers, but these restrictions might discourage a third party that has an interest in acquiring all or a significant part of either Gatos or First Majestic from considering or proposing an alternative proposal.

 

 

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Risk Factors

 

If a Competing Proposal to acquire Gatos or First Majestic is made, consummation of the Transaction may be delayed or impeded.

If a Competing Proposal to acquire Gatos or First Majestic is made, the attention of Gatos’ and First Majestic’s respective management teams may be diverted away from the Transaction, which may delay or impede consummation of the Transaction. Matters related to such Competing Proposal, including any potential related litigation, may require commitments of time and resources of both parties and their respective representatives, which could otherwise have been devoted to consummating the Transaction.

Risks Related to the combined company

Risks Related to First Majestic’s Business

First Majestic Shareholders should read and consider the risk factors specific to First Majestic’s business that will also affect the combined company after the completion of the Transaction. These risks are described in the First Majestic AIF Form, First Majestic’s most recent Management’s Discussion & Analysis, and in other documents that are incorporated by reference in this Management Information Circular. See the section entitled “Information Contained in Management Information Circular – Information Incorporated by Reference” for the location of information incorporated by reference in this Management Information Circular and “Appendix H – Information Concerning First Majestic Silver Corp.”.

Risks Related to Gatos’ Business

First Majestic Shareholders should read and consider the risk factors specific to Gatos’ business that will also affect the combined company after the completion of the Transaction. These risks are described in Gatos’ Annual Report on Form 10-K for the year ended December 31, 2023, as amended by Amendment No. 1, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are incorporated by reference in this Management Information Circular, and in other documents that are incorporated by reference in this Management Information Circular. See the section entitled “Information Contained in Management Information Circular – Information Incorporated by Reference” for the location of information incorporated by reference in this Management Information Circular and “Appendix G – Information Concerning Gatos Silver, Ltd.”.

 

 

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INFORMATION ABOUT FIRST MAJESTIC, MERGER SUB, GATOS, AND THE COMBINED COMPANY

 

 

First Majestic Silver Corp.

First Majestic is a company existing under the Business Corporations Act (British Columbia). It is in the business of the production, development and exploration and acquisition of mineral properties, with a focus on silver and gold production in Mexico and the United States. Specifically, First Majestic owns and operates the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine, and the La Encantada Silver Mine, all located in Mexico, as well as a portfolio of development and exploration assets, including the Jerritt Canyon Gold Mine located in northeastern Nevada, U.S.A. First Majestic is a primary silver producer with approximately 42% of its revenue in 2023 from the sale of silver and approximately 58% of its revenue in 2023 from the sale of gold.

For additional information about First Majestic, see the section entitled “Additional Information” on page 116 and “Appendix H – Information Concerning First Majestic Silver Corp.”.

Ocelot Transaction Corporation

Merger Sub is a Delaware corporation and a direct, wholly-owned subsidiary of First Majestic which was formed solely for the purpose of facilitating the transactions contemplated by the Merger Agreement. Merger Sub has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the Merger Agreement. By operation of the Merger, Merger Sub will merge with and into Gatos. As a result, immediately following the Merger, Gatos will survive as a direct, wholly-owned subsidiary of First Majestic.

Merger Sub’s registered office is located at 838 Walker Road Suite 21-2, Dover, County of Kent, Delaware, 19904, U.S.A.

Gatos Silver, Inc.

Gatos is a Canadian-headquartered, Delaware-incorporated silver dominant exploration, development and production company that discovered a new silver and zinc-rich mineral district in southern Chihuahua State, Mexico. As a 70% owner of the Los Gatos Joint Venture (the “LGJV”), Gatos is primarily focused on operating the Cerro Los Gatos mine and on growth and development of the Los Gatos district, located in Chihuahua, Mexico (the “LGD”). The LGD is comprised of approximately 103,000 hectares of land, consisting of multiple mineralized zones. Two of the identified mineralized zones, Cerro Los Gatos and Esther, have reported mineral resources. The deposits in the LGD are characterized by predominantly silver-lead-zinc epithermal mineralization.

For additional information about Gatos, see the section entitled “Appendix G – Information Concerning Gatos Silver, Ltd.”.

Information Concerning the Combined Company

Upon completion of the Transaction, Gatos will be a wholly-owned subsidiary of First Majestic, Gatos will cease to be a reporting issuer and the Gatos Common Stock will be delisted from the TSX and the NYSE. For additional information about the Combined Company, see “Appendix I – Information Concerning the Combined Company”.

 

 

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THE TRANSACTION

 

 

This section of this Management Information Circular describes the various aspects of the Transaction and related matters. This section may not contain all of the information that is important to you. You should carefully read this entire Management Information Circular and the documents incorporated by reference in this Management Information Circular, including the full text of the Merger Agreement, a copy of which is attached to this Management Information Circular as “Appendix B – Merger Agreement”, for a more complete understanding of the Transaction. In addition, important business and financial information about each of First Majestic and Gatos is included in or incorporated by reference in this Management Information Circular. For a list of the documents incorporated by reference in this Management Information Circular, see the section entitled “Information Contained in Management Information Circular – Information Incorporated by Reference”.

Transaction Structure

Under the Merger Agreement, at the Effective Time, Merger Sub will merge with and into Gatos with Gatos surviving the Merger as a wholly-owned subsidiary of First Majestic. The terms and conditions of the Transaction are contained in the Merger Agreement, which is described in this Management Information Circular and attached to this Management Information Circular as “Appendix B – Merger Agreement”. You are encouraged to read the Merger Agreement carefully, as it is the legal document that governs the Transaction. All descriptions and summaries in this Management Information Circular of the terms and conditions of the Transaction are qualified in their entirety by reference to the full text of the Merger Agreement.

Merger Consideration

Under the Merger Agreement, at the Effective Time, each share of Gatos Common Stock that is outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be converted automatically into the right to receive 2.55 validly issued, fully paid and non-assessable First Majestic Common Shares (subject to the terms of the Merger Agreement with respect to dividends and distributions and fractional shares).

The Merger Agreement does not contain any provision that would adjust the Exchange Ratio based on fluctuations in the market value of either company’s shares. Because of this, the implied value of the consideration to Gatos Stockholders will fluctuate between now and the completion of the Merger and will depend on the market value of First Majestic Common Shares at the time the Merger is completed.

The Merger Consideration will be adjusted appropriately, without duplication, in the event of any stock split, reverse stock split, stock dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Gatos Common Stock or First Majestic Common Shares prior to the Effective Time, to proportionately reflect such change.

Fractional shares will not be issued in accordance with the Merger. Any Gatos Stockholder that would have received a fractional First Majestic Common Share based on the Exchange Ratio above (after aggregating all Gatos Common Stock held by such Gatos Stockholder), will instead receive an amount in cash equal to the product of such fractional part, multiplied by the volume-weighted average trading price of First Majestic Common Shares for the five trading days preceding the date of the completion of the Merger.

For more detailed information, see the sections entitled “The Merger Agreement – Effects of the Merger on Gatos Common Stock; Merger Consideration” and “The Merger Agreement – Treatment of Gatos Equity Awards” on pages 74 and 74, respectively.

 

 

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The Transaction

 

Background of the Transaction

The terms of the Merger are the result of arm’s length negotiations between Gatos and First Majestic. The following is a summary of the events leading up to the agreement to merge and the key meetings, negotiations, discussions and actions by and between Gatos and First Majestic and their respective advisors that preceded the public announcement of the Merger. The description of events relating to Gatos only have been provided by Gatos. First Majestic was not aware at the relevant times of all meetings, negotiations, discussions and other actions undertaken by Gatos that did not involve First Majestic.

First Majestic regularly considers business and strategic opportunities in the precious metals mining sector with the objective of maximizing shareholder value in a manner consistent with the best interests of the company. In March 2024, during its regular evaluation of potential acquisitions, divestitures, or strategic opportunities in the industry, First Majestic management identified Gatos as a potentially attractive acquisition opportunity for First Majestic.

As part of its regular strategic assessment process, on November 2, 2023, the Gatos Board met to discuss Gatos’ long-term strategy. During that meeting, the Gatos Board together with Gatos’ senior management, assessed both current and projected performance of Gatos’ business. In the context of that assessment, the Gatos Board considered the Cerro Los Gatos mine, the LGJV’s and Gatos’ mineral reserves and resources, the exploration potential in the Los Gatos district, the LGJV’s and Gatos’ financial condition and the challenges of continuing to operate as a single-asset silver mining company in Mexico, including geographic and commodity risks. The Gatos Board also considered organic and other growth opportunities, including potential acquisitions, sales or business combinations with third parties. Gatos’ senior management team discussed with the Gatos Board its efforts to monitor opportunities with other market participants in the ordinary course of its business, including informal and high-level interactions with third parties regarding potential strategic transactions. At this meeting, the Gatos Board authorized management to, in addition to pursuing its strategy of expanding and optimizing Gatos’ current assets, further evaluate potential strategic transactions available to Gatos and, in consultation with members of the Gatos Board, to consider and engage financial advisors to assist in this effort.

Following this meeting, in November and December 2023, Gatos, including members of the Gatos Board, engaged in confidential discussions and meetings with several potential financial advisors to assist in Gatos’ consideration of strategic alternatives. Following this exercise, Gatos determined to engage BofA Securities as Gatos’ financial advisor. Gatos selected BofA Securities to assist with Gatos’ evaluation of strategic opportunities, including continuing to operate on a stand-alone basis, based on, BofA Securities’ reputation in the investment community, its experience and knowledge of the metals and mining industry, its familiarity with Gatos and its business and its experience in advising companies in mergers and acquisitions, among other factors. Gatos and BofA Securities executed an engagement letter on January 7, 2024 to formally engage BofA Securities as the Gatos’ Board’s financial advisor.

On January 15, 2024 and January 16, 2024, members of Gatos management and representatives of BofA Securities held meetings to discuss potential strategic alternatives, review potential counterparties and begin to outline an appropriate process for Gatos to consider strategic alternatives. Gatos’ senior management team subsequently worked with BofA Securities to prepare for further meetings with the Gatos Board at which such strategic options would be explored. Additionally, during January and February 2024, members of Gatos’ senior management team engaged in preliminary discussions with several parties regarding potential opportunities that Gatos could pursue with such parties, but such discussions were informal and preliminary in nature and no proposals were developed as a result of such discussions. In February 2024, Gatos engaged White & Case to act as its U.S. legal counsel and McCarthy Tetrault as its Canadian legal counsel in connection with Gatos’ review of strategic alternatives.

On February 20, 2024, the Gatos Board held a regular board meeting. As part of this meeting, the Gatos Board discussed with Gatos’ management team and with representatives of BofA Securities the business and financial condition of Gatos, including its recent stock price performance, and various strategic options available to Gatos, including continuing to operate on a stand-alone basis, strategic acquisitions, or a potential sale, merger or other

 

 

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The Transaction

 

similar transaction. The Gatos Board discussed with management and representatives of BofA Securities the parameters of a potential process to solicit interest in a strategic transaction with Gatos, potential counterparties to a transaction and potential alternatives that could be considered. Members of Gatos’ management and the Gatos Board, with the assistance of BofA Securities, identified a number of parties that would be likely to have strategic interest in Gatos, based on both perceived interest and likelihood to transact. The Gatos Board did not make any determination at this meeting that a business combination transaction would be the optimal strategic opportunity for Gatos, but determined to commence a process to consider such opportunities and authorized management, with the assistance of its advisors including BofA Securities, to commence an outreach process to solicit interest from the identified potential counterparties. Some of the identified potential counterparties were considered merger of equals partners because of their similar market capitalization relative to Gatos. Additionally, the Gatos Board formally ratified the engagement of BofA Securities as exclusive financial advisor for this purpose. Over the course of the following weeks, members of Gatos’ senior management worked with BofA Securities to prepare relevant materials necessary for the phased strategic process, including preparation of due diligence materials and customary confidential marketing materials for Phase 1 of the process which would be to solicit non-binding indications of interest from select counterparties.

Between February 26, 2024 and May 2, 2024, BofA Securities, at the direction of Gatos, was in contact with thirteen potential counterparties, including First Majestic, to gauge their interest in a potential transaction. During this time, representatives of White & Case and members of Gatos’ senior management team negotiated the terms of confidentiality agreements, initially with nine parties who indicated to BofA Securities their interest in exploring a strategic transaction, and subsequently with an additional two counterparties. First Majestic and Gatos entered into a confidentiality agreement on March 11, 2024. Each of the confidentiality agreements included customary standstill provisions ranging from 12 to 18 months in duration and each of the standstill provisions allowed the counterparty to make private proposals to the Gatos Board. The standstill provisions expired if either (i) Gatos announced that it had entered into an agreement with a third party for a transaction involving the acquisition of a majority of Gatos’ voting equity securities or a sale of all or substantially all of its consolidated assets or (ii) Gatos recommended acceptance of a third-party tender or exchange offer for a majority of Gatos’ voting equity securities. Most of the confidentiality agreements contained confidentiality and standstill provisions that bound only the counterparty. The confidentiality agreements with potential merger of equal counterparties, however, were mutual in light of the potential that such a transaction would be structured as a merger of equals.

Beginning on March 20, 2024, the potential counterparties that signed confidentiality agreements, including First Majestic, were provided access to a Phase 1 data room containing non-public financial information on Gatos and a confidential information packet, including financial and technical data. Based on this access, First Majestic commenced due diligence on Gatos and its business and properties. Additionally, each party to a confidentiality agreement as part of the Phase 1 diligence process was offered an opportunity to meet with senior management of Gatos for an executive session as part of their initial due diligence investigation. Six counterparties, including First Majestic and Company A (defined below) availed themselves of this opportunity and participated in such executive sessions at various times during their Phase 1 diligence efforts, but primarily during April and May 2024. During these executive sessions, Mr. Dale Andres, Chief Executive Officer of Gatos, Mr. Anthony Scott, Senior Vice President of Corporate Development and Technical Services of Gatos and Mr. André van Niekerk, Chief Financial Officer of Gatos, and other members of the Gatos senior management team, made presentations and answered questions regarding various matters including operational information, a life-of-mine business model, exploration opportunities and Gatos’ financial position.

Beginning on April 5, 2024, BofA Securities, at the direction of Gatos, delivered to the potential counterparties (including First Majestic) who had executed confidentiality agreements and continued participating in the process, a letter requesting that initial non-binding indications of interest in a potential merger with or acquisition of Gatos be submitted to BofA Securities on behalf of Gatos, by May 8, 2024 and providing access to a virtual data room to those parties.

On April 15, 2024, Gatos delivered to Dowa Metals and Mining Co., Ltd. (“Dowa”), Gatos’ joint venture partner, a confidentiality agreement in advance of Gatos discussing with Dowa, among other things, the fact that Gatos was exploring strategic alternatives that could include a merger transaction. The confidentiality agreement was subsequently executed on April 17, 2024.

 

 

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On April 29, 2024, First Majestic retained National Bank Financial as its financial advisor in connection with a possible transaction involving the direct or indirect acquisition or other business combination involving Gatos. On or about the same time, First Majestic engaged Bennett Jones LLP (“Bennett Jones”) and Dorsey & Whitney LLP (“Dorsey”) as its legal advisors in connection with a potential transaction with Gatos.

On May 2, 2024, the Gatos Board met for a regular board meeting. During the meeting the Gatos Board discussed operational, financial and strategic matters unrelated to a potential transaction. In addition, Mr. Andres provided the Gatos Board with an update on the ongoing process and discussions with potential strategic counterparties for Gatos.

In late April and early May two additional parties executed confidentiality agreements with Gatos were granted access to the Phase 1 virtual data room and were requested to make non-binding indications of interest as soon as possible due to their late entry into the Phase 1 process.

During the period March 11, 2024 to May 7, 2024 First Majestic and its professional advisors conducted certain preliminary due diligence regarding Gatos and its properties.

On May 7, 2024, First Majestic delivered a non-binding indication of interest to Gatos (the ”First Majestic NBIO”) to acquire all of the outstanding shares of Gatos Common Stock for a fixed exchange ratio of 1.789 First Majestic Common Shares for each share of Gatos Common Stock. The First Majestic NBIO implied a price of $12.25 per share of Gatos Common Stock based on the five-day VWAP of Gatos Common Stock and First Majestic Common Shares on the NYSE. Additionally, the First Majestic NBIO indicated that upon completion of the proposed transaction, Gatos would own approximately 31% of the issued and outstanding common shares of the combined entity following the Merger. The First Majestic NBIO also set forth key non-financial terms of the proposed transaction, including transaction structure, governance of the combined companies by First Majestic’s senior management team and First Majestic Board, and remaining due diligence.

On May 8, 2024, Gatos received a non-binding indication of interest from a strategic counterparty (“Company A”) (the ”Company A NBIO”) to acquire all of the outstanding shares of Gatos Common Stock for a fixed exchange ratio of Company A common stock for each share of Gatos Common Stock. The Company A NBIO stated that its proposal implied a price of $11.66 per Gatos Common Stock based on Company A’s closing share price on May 7, 2024. The Company A NBIO also set forth key non-financial terms of the proposed transaction, including transaction structure, collaborative governance of the combined companies and additional diligence requirements.

During the period leading up to May 8, 2024, BofA Securities also received feedback from five other potential bidders that had executed confidentiality agreements with Gatos up to that date. These bidders indicated that they chose not to pursue a transaction with Gatos for various reasons, including that when reviewing anticipated valuations for Gatos, the bidders expected they would not be competitive based on market conditions, inopportune timing in light of other important priorities for such bidders, reluctance to participate in a competitive process and/or lack of strategic fit.

On May 14, 2024, the Gatos Board convened a special meeting to discuss the ongoing process to consider potential strategic transactions with a focus on the non-binding indications of interest received from First Majestic and Company A. Members of Gatos’ senior management team and representatives of BofA Securities were also present at this meeting. Gatos’ senior management team provided an update on the Phase 1 process of soliciting indications of interest in potential strategic transactions and representatives of BofA Securities described the First Majestic NBIO and Company A NBIO, including background information about both bidders and a financial analysis of each proposal. The Gatos Board discussed with BofA Securities the efforts undertaken by the potential bidders and relative merits of the proposals received. BofA Securities noted that there continued to be four additional potential bidders, two of whom had signed confidentiality agreements at that time, that were potentially interested and with whom discussions were ongoing. The Gatos Board did not determine whether either of the two existing proposals was acceptable and asked Gatos’ management team and BofA Securities to continue to the next stage of the process with Company A and First Majestic while also continuing to work with the other four bidders who were undertaking diligence and reviewing confidentiality agreements as part of an

 

 

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extended Phase 1 process and that might ultimately propose a strategic transaction. All of such parties would ultimately execute confidentiality agreements with Gatos but each declined to make any proposal for reasons similar to those identified by the other potential bidders who declined to make proposals.

On May 15, 2024, representatives of BofA Securities, following the mandate from the Gatos Board, made telephone calls to representatives of each of First Majestic and Company A to invite them to proceed to the next phase in the process. During these calls, the representatives of BofA Securities described the anticipated parameters and timing of the next phase, including that the potential bidders would have an opportunity for access to more detailed non-public information in the Phase 2 data room and customary question and answer process, the possibility of a site visit to the Cerro Los Gatos mine, and a preliminary discussion with Electrum. BofA Securities also informed both First Majestic and Company A of the need for reciprocal due diligence by Gatos, and both parties confirmed a reciprocal data room would be made available to Gatos.

On May 23, 2024, Gatos provided Company A and First Majestic access to expanded diligence materials in the data room which included material in response to diligence requests received from Company A and First Majestic and their representatives. Between May 23, 2024 and July 29, 2024, there were several due diligence sessions held between representatives of Gatos and Company A with respect to each other.

During the period from May 23, 2024 to July 29, 2024 First Majestic and its professional advisors continued with detailed technical, financial, legal and tax due diligence investigations regarding Gatos and its properties.

At a board meeting of First Majestic on May 23, 2024, First Majestic’s management provided a briefing to the First Majestic Board regarding the potential strategic transaction with Gatos. Management also informed the First Majestic Board that Gatos’ financial advisor, BofA Securities had notified First Majestic that it had been successful in being moved to the second phase of discussions, along with an unknown number of other interested parties. The First Majestic Board was supportive of the potential transaction and authorized management to continue with the process.

On May 24, 2024, Gatos was initially provided with access to non-public information about Company A to facilitate its due diligence review of Company A. The existing confidentiality agreement with Company A contained mutual confidentiality and standstill obligations.

During previous discussions with potential bidders, First Majestic and Company A had expressed a desire to meet with Electrum to gauge Electrum’s support for a potential transaction in light of Electrum’s significant ownership position in Gatos. On May 24, 2024, Mr. Andres, together with representatives of BofA Securities, met with Mr. Ali Erfan, a director of Gatos and Co-Vice Chairman of Electrum to inform Mr. Erfan of the status of the discussions with potential bidders for Gatos. Gatos and White & Case anticipated that in light of Electrum’s ownership position, potential bidders would not only want to speak with Electrum, but that Electrum would also be asked to enter into a customary voting and support agreement in connection with any transaction the Gatos Board might ultimately determine to approve. In preparation for such expected discussions with Electrum, Gatos and Electrum entered into a customary confidentiality agreement on May 28, 2024 to facilitate discussions among Gatos and Electrum regarding the proposals received by Gatos and a potential voting and support agreement that Electrum might be asked to execute in connection with a potential transaction. This confidentiality agreement supplemented the existing confidentiality provisions contained in the Shareholders Agreement, dated October 30, 2020, by and among Gatos, Electrum Silver US LLC, Electrum Silver US II LLC, Tigris Financial Group Ltd., GRAT Holdings LLC, Manual Capital Management LLC, and the Municipal Employees’ Retirement System of Michigan. The representatives of Electrum expressed to Mr. Andres that in any such discussions they would intend to be supportive of the process undertaken by Gatos to consider strategic alternatives and would remain impartial as between the proposals.

On May 30, 2024, at the request of Gatos, representatives of BofA Securities and each of First Majestic and Company A separately met with representatives of Electrum to discuss each other’s businesses, the broader silver market and the potential transaction between Gatos and each of the two counterparties.

 

 

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In early June 2024, Gatos requested that BofA Securities deliver a customary relationship disclosure and BofA Securities delivered such disclosure to Gatos on June 6, 2024. Gatos did not identify any potential or actual conflicts that would affect the ability of BofA Securities to fulfill its responsibilities as Gatos’ financial advisor.

In light of the fact that the First Majestic NBIO involved a share exchange transaction, and to facilitate necessary due diligence by Gatos with respect to First Majestic, in early June 2024 representatives of White & Case and First Majestic engaged in negotiations to amend the existing confidentiality agreement with First Majestic so that it would contain mutual confidentiality and standstill obligations. On June 7, 2024, Gatos and First Majestic amended and restated their confidentiality agreement to allow for the exchange of information from First Majestic to Gatos. On June 11, 2024, Gatos was initially provided with access to non-public information about First Majestic to facilitate its due diligence review of First Majestic.

During June 2024, representatives of each of First Majestic and Company A conducted customary site visit due diligence with respect to Gatos’ Cerro Los Gatos mine, including with respect to the underground mine, processing plant, exploration activities, tailings storage facility, surface infrastructure and relationships with the local community. Additionally, members of Gatos’ senior management team and management from the Cerro Los Gatos mine conducted customary site visit due diligence with respect to the mining operations of Company A. The respective management teams of each of First Majestic and Gatos engaged in numerous diligence sessions regarding legal, financial and operational issues during the June to August 2024 time frame and similar due diligence sessions occurred between the management teams of Gatos and Company A.

On June 27, 2024, in accordance with the mandate previously provided by the Gatos Board, BofA Securities delivered second round process letters to First Majestic and Company A. The letters outlined the procedures for submitting a revised proposal for a potential strategic transaction with Gatos by July 29, 2024 and provided access to a more comprehensive virtual data room. The letters explained that during July 2024 Gatos would provide a draft merger agreement and requested that the parties submit comments on the draft merger agreement to White & Case by July 22, 2024. On July 1, 2024, Mr. Andres provided the Gatos Board with a written update regarding the process.

On July 6, 2024, Gatos sent to Electrum an initial draft of a customary voting and support agreement to be entered into between Electrum and a successful bidder, pursuant to which, among other things, Electrum would agree to vote all of its shares of Gatos Common Stock in favour of any transaction approved by the Gatos Board. In subsequent conversations between Gatos and Electrum the parties determined to not include reference to a voting and support agreement with Electrum in the documents to be made available to bidders at that time and to, instead, wait to see if any bidders requested such an agreement from Electrum.

On July 10, 2024, representatives of BofA Securities, at the direction of Gatos, sent the two counterparties a draft of the Merger Agreement.

On July 18, 2024, a draft of the Gatos disclosure schedules was delivered to each of Company A and First Majestic.

On July 22, 2024, management of First Majestic provided the First Majestic Board with an update on the status of the proposed transaction.

On July 22, 2024, representatives of Company A and First Majestic’s legal counsel provided initial mark-ups of the draft Merger Agreement to White & Case. First Majestic’s markup reflected a number of changes to the draft Merger Agreement delivered to First Majestic including: requiring that Electrum and Gatos’ directors and officers enter into voting and support agreements requiring them to vote in favour of the proposed transaction; the removal of a provision that would require the payment of cash consideration in lieu of the issuance of fractional First Majestic Common Shares; the addition of a closing condition requiring that a voting and support agreement from Electrum would continue to be in full force and effect; the addition or expansion of representations and warranties of Gatos; the addition or expansion of interim operating covenants restricting Gatos operations between signing and closing; changes to the no-shop and exclusivity provisions including the addition of a

 

 

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“force-the-vote” provision which only applied to Gatos and prohibited Gatos from terminating the Merger Agreement if the Gatos Board were to change its recommendation and would force Gatos to submit the proposed transaction to Gatos Stockholders for approval in such circumstances; rejection of the “hell or high water” efforts provision with respect to antitrust approvals; changes that would make the Transaction contingent on the absence of any claim by Dowa that the proposed transaction required the consent of Dowa; proposed reciprocal termination fees of $40 million payable by Gatos and First Majestic, respectively, if the Transaction was terminated for certain reasons; and proposed a $3 million expense reimbursement payable by Gatos if Gatos Stockholders did not approve the proposed transaction. The Company A markup also reflected a number of changes to the draft Merger Agreement delivered to Company A including: requiring that Electrum and Gatos’ directors and officers and certain other stockholders enter into voting and support agreements requiring them to vote in favour of the proposed transaction at a meeting of Gatos’ Stockholders; the expansion of certain closing conditions; the addition or expansion of Gatos’ representations and warranties and interim operating covenants restricting Gatos operations between signing and closing; changes to the definition of “material adverse effect” that would make it more likely Gatos could experience a material adverse effect; rejection of the “hell or high water” efforts provision with respect to antitrust approvals; and proposed reciprocal termination fees of 3% of the equity value of Gatos payable by Gatos and Company A, respectively, if the Transaction were terminated for certain reasons.

On July 24, 2024, First Majestic’s management met with the First Majestic Board to provide an analysis of the proposed Transaction, including the terms of First Majestic’s proposed offer, financial analysis of the pro forma entity, proposed transaction structure, tax considerations, technical, operational and risk analysis, and due diligence considerations, including diligence outstanding items pending resolution. During the meeting the First Majestic Board received a presentation from National Bank Financial including an analysis of the proposed merger consideration and proposed exchange ratio. Bennett Jones provided an analysis of the key terms of the draft Merger Agreement and the changes that First Majestic proposed making as compared to the version initially provided by BofA Securities with the second-round process letters. Bennett Jones and First Majestic’s Mexican counsel then discussed the results of their due diligence to date on Gatos and its business and identified key items for the First Majestic Board. Following these presentations and discussions the First Majestic Board approved the submission of First Majestic’s Phase 2 offer, which proposed an exchange ratio of 2.413 First Majestic Common Shares for each share of Gatos Common Stock.

On July 26, 2024, representatives of White & Case met with legal counsel to Company A and First Majestic, respectively, to provide feedback on their mark-ups of the draft merger agreement. Discussions primarily focused on the treatment of fractional shares in the Merger, scope of representations and warranties, the scope of interim operating covenants applicable to each of the parties, closing conditions, the no-shop provisions including First Majestic’s request for a “force the vote” provision, the efforts required to obtain antitrust approvals and the size of termination fees payable by each party and the circumstances under which such fees would be payable, including First Majestic’s request for a $3 million expense reimbursement if Gatos’ stockholders did not approve the proposed transaction. Counsel to First Majestic indicated during the call that it was unlikely to alter its markup of the draft merger agreement in advance of the impending deadline for the submission of second round offers but would continue to discuss the issues raised during the call if Gatos determined to continue discussions with First Majestic.

On July 29, 2024, Gatos received revised proposals from each of Company A and First Majestic. Company A submitted a written proposal to acquire all of the outstanding common stock of Gatos in a stock-for-stock transaction with a fixed exchange ratio of shares in Company A for each share of Gatos Common Stock. The Company A proposal indicated that it implied a price of $12.80 per share of Gatos Common Stock. The revised Company A proposal proposed a governance structure whereby the combined entity would have an eight-member board of directors, three of whom would be Gatos nominees. Company A also required that Electrum and all of Gatos’ directors and executive officers would enter into customary voting and support agreements contemporaneous with execution of a merger agreement. Additionally, Company A submitted a revised draft of a merger agreement which reflected certain improvements from Gatos’ perspective. First Majestic submitted a written proposal to acquire all of the outstanding stock of Gatos in a stock-for-stock transaction with a fixed exchange ratio of 2.413 shares in First Majestic for each share of Gatos. The First Majestic proposal implied a

 

 

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price of $14.08 per Gatos share based on the 30-day VWAP share price of Gatos Common Stock and First Majestic Common Shares. Additionally, the First Majestic proposal indicated that it would result in the Gatos Stockholders owning approximately 37% of the combined company. The revised proposal noted that First Majestic had the ability to appoint an additional member to the First Majestic Board and was receptive to considering a proposed director nominee suggested by Gatos. It also noted that First Majestic anticipated terminating the chief executive officer and chief financial officer of Gatos immediately following the closing of the transaction. The First Majestic proposal also required that major shareholders and Gatos’ directors and officers would enter into customary voting and support agreements contemporaneous with execution of a merger agreement and requested an introductory meeting with Dowa. First Majestic declined to amend its markup of the draft Merger Agreement at that time.

Following submission of its proposal to Gatos on July 29, 2024 until execution of the Merger Agreement on September 5, 2024 First Majestic and its professional advisors continued to conduct follow-up due diligence on outstanding matters.

On July 31, 2024, in anticipation of an upcoming Gatos Board meeting following receipt of the revised proposals from Company A and First Majestic, BofA Securities provided to Gatos an update to its customary relationship disclosures. Gatos did not identify any potential or actual conflicts in such updated disclosure that would affect the ability of BofA Securities to fulfill its responsibilities as Gatos’ financial advisor.

On August 1, 2024, the Gatos Board held a regular meeting with members of Gatos management and representatives of White & Case and BofA Securities in attendance, which included the receipt of an update from Gatos management and BofA Securities with respect to the ongoing strategic alternatives process and review of the revised proposals received from First Majestic and Company A. BofA Securities provided the Gatos Board with an update of the overall process and noted that, in addition to First Majestic and Company A, two additional parties continued to have access to the data room but, based on recent conversations, appeared unlikely to submit indicative proposals at that time or within the process timeframe. At the request of the Gatos Board, representatives of BofA Securities then presented an overview of each of the potential counterparties, including their share performance and trading histories, historical financial information, net asset values and operating metrics and certain projections provided by each of the bidders relating to their operational and financial performance. The Gatos Board discussed the due diligence process and the relative terms of the proposals. Mr. Bodley provided an update to the Gatos Board regarding the markups of the merger agreement received from each of First Majestic and Company A and described the material issues raised in such markups. Representatives of BofA Securities noted for the Gatos Board the expected timeline set by Gatos senior management going forward. A representative of White & Case provided a review of the Gatos Board’s fiduciary duties. Additionally, the representative of White & Case noted that it would be expected that bidders would seek to enter into a customary voting and support agreement with Electrum in connection with any potential transaction and that it was important to consider whether the Gatos Board should approve Electrum negotiating and entering into such an agreement, which the Gatos Board then approved.

Also, during the meeting, the Gatos Board discussed with representatives of White & Case whether to formally establish a Gatos Special Committee of directors. The Gatos Board considered the fact that both proposals required Electrum to enter into a voting and support agreement, the fact that Electrum would be a significant minority stockholder in the combined entity following completion of either transaction and the possibility that First Majestic or Company A could request additional discussions with Electrum regarding Electrum’s ownership of shares after the completion of any transaction, including potential lock-up arrangements. The Gatos Board was also aware that Electrum had highlighted from time to time the limited liquidity of Gatos’ shares, including in light of Electrum’s inability to exercise its registration rights during certain periods. The Gatos Board ultimately determined it was in the best interests of stockholders to form the Gatos Special Committee of directors that was independent of management and Electrum. The Gatos Board then authorized and formed the Gatos Special Committee consisting of Ms. Janice Stairs, Mr. Igor Gonzales and Mr. Karl Hanneman, each of whom were not and are not affiliated with Electrum and who were not and are not members of management. The Gatos Special Committee had full authority to review, consider and negotiate any potential transaction, determine whether a potential transaction is in the best interests of Gatos and its stockholders and report such recommendation to the

 

 

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Gatos Board. The Gatos Board resolved that the Gatos Board would not approve, or recommend for approval, any transaction to the Gatos Stockholders without a prior favourable recommendation by the Gatos Special Committee. The Gatos Board also authorized the Gatos Special Committee to retain, at Gatos’ expense, its own legal, financial and other advisors.

The Gatos Special Committee met on the same day, with members of Gatos management, representatives of BofA Securities and White & Case also in attendance. Mr. Andres provided an overview of the strategic process and proposed next steps, including the provision of additional diligence materials to the bidders and the continuation of due diligence by Gatos on each of the bidders. In particular, the Gatos Special Committee discussed with management and BofA Securities the potential effect of certain updates to the Gatos life of mine plan and upcoming earnings releases for Gatos and each of the bidders. BofA Securities, at the request of the Gatos Board, presented to the Gatos Special Committee an overview of the financial elements of the two proposals received from First Majestic and Company A. BofA Securities and the Gatos Special Committee then discussed the proposed approach to providing feedback to Company A and First Majestic with respect to their proposals. The Gatos Special Committee discussed with BofA Securities and Gatos senior management the fact that the proposal by Company A reflected a lower premium proposal consistent with the Company A NBIO originally proposed, whereas the proposal by First Majestic represented a higher premium to the current trading price of Gatos Common Stock and improved financial terms compared to the initial First Majestic NBIO. Representatives of White & Case highlighted key elements of the bidders’ respective merger agreement markups with the objective of providing feedback to encourage First Majestic and Company A to improve the legal elements of their proposals. With respect to First Majestic, the feedback would focus on the “force the vote” and expense reimbursement provisions, among other things, and with respect to Company A, the feedback would highlight a desire for greater deal certainty and less conditionality. In both cases, the feedback would seek to reduce the requested termination fees. The Gatos Special Committee determined not to select either proposal at that time and instructed BofA Securities to work with the Gatos management team to provide feedback to each of the bidders to encourage them to improve their proposals. After BofA Securities and the members of Gatos senior management left the meeting, the Gatos Special Committee discussed its role in the process and the hiring of advisors and White & Case confirmed it was free of conflicts that could impair its independence from Gatos’ management or Electrum. After White & Case was excused from the meeting, the Gatos Special Committee approved the engagement of White & Case as legal counsel to the Gatos Special Committee and elected Ms. Stairs as Chair.

On August 6, 2024, pursuant to the instructions of the Gatos Special Committee, representatives of BofA Securities had a telephone call with First Majestic’s Vice President of Corporate Development and representatives of National Bank Financial, First Majestic’s financial advisor, to provide feedback on First Majestic’s proposal. At the direction of the Gatos Board, BofA Securities encouraged First Majestic to propose an enhanced premium consistent with relevant precedent public company acquisition transactions and encouraged First Majestic to revise its proposed merger agreement, focusing on the force the vote and expense reimbursement provisions. At the direction of the Gatos Board, representatives of BofA Securities also had a telephone call with Company A’s financial advisor on August 6, 2024, during which BofA Securities provided feedback on Company A’s existing proposal, informing Company A that an increase in their proposed exchange ratio would be necessary for their bid to be price competitive and providing feedback on the markup of its merger agreement. At the direction of the Gatos Board, BofA Securities requested that each bidder submit revised proposals by August 9, 2024. Consistent with the discussion with the Gatos Special Committee, BofA Securities informed both parties that, if Gatos determined to pursue a transaction, it expected to sign definitive documentation by August 26, 2024.

On August 7, 2024, the Gatos Special Committee met with members of Gatos management with representatives of BofA Securities and White & Case also in attendance. BofA Securities provided the Gatos Special Committee with an update on the discussions with Company A and First Majestic. Members of Gatos management provided a report on the ongoing update to Gatos’ reserve and life of mine plan and also provided the Gatos Special Committee with an update on the technical, operational, legal, financial and other diligence being conducted by Gatos management with respect to both bidders. Mr. Andres highlighted certain potential liabilities in connection with assessments and claims by Mexico’s Tax Administration Service against First Majestic. The Gatos Special Committee requested that Gatos’ management team undertake additional diligence with the support of expert

 

 

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advisors, among other things, with respect to such potential liabilities. The Gatos Special Committee agreed to reconvene on August 12, 2024 to receive further updates regarding the due diligence process and a report regarding feedback from First Majestic and Company A.

On August 9, 2024, First Majestic’s management presented the First Majestic Board with an update regarding the potential transaction with Gatos and discussed an updated offer with an increased exchange ratio.

On August 9, 2024, First Majestic delivered a further revised written proposal to Gatos (the ”August 9 Proposal”) to acquire all of the outstanding common stock of Gatos in a stock-for-stock transaction with an increased fixed exchange ratio of 2.55 First Majestic Common Shares for each outstanding share of Gatos Common Stock. The August 9 Proposal implied a price of $12.83 per Gatos Common Stock based on the 30-day VWAP of Gatos Common Stock and First Majestic Common Shares on the NYSE, and a premium of 23% to Gatos Stockholders based on the 30-day VWAP. Additionally, the August 9 Proposal indicated that it would result in the Gatos Stockholders owning approximately 38% of the combined company and represented an increase of approximately 60 million First Majestic Common Shares over the initial First Majestic NBIO and an increase of 11 million First Majestic common shares over the proposal delivered on July 29, 2024. The August 9 Proposal did not materially alter the other financial or governance terms set forth in the proposal delivered on July 29, 2024, but it requested an introductory meeting with Dowa and requested that Gatos agree to enter into an attached exclusivity agreement providing for an exclusive period of negotiations to expire on August 26, 2024.

The August 9 Proposal included a further revised markup of the draft Merger Agreement. The revised markup of the Merger Agreement removed the force-the-vote provision, lowered the termination fee payable by Gatos to $30 million (approximately 3.2% of the indicated offer value), increased the termination fee payable by First Majestic to $50 million (approximately 3.5% of First Majestic’s equity value) and removed the expense reimbursement provision.

On August 10, 2024, a representative of Company A’s financial advisor telephonically advised a representative of BofA Securities that it was withdrawing its proposal, as Company A was not prepared to improve its previous proposal, was not interested in continuing to participate in a competitive process and would not be able to meet the targeted timeline for the transaction. Later that same day, Mr. Andres called the chief executive officer of Company A seeking to clarify the message BofA Securities had received from Company A’s financial advisor. During this call the chief executive officer of Company A repeated the same message to Mr. Andres that BofA Securities had received from Company A’s financial advisor and confirmed that Company A was withdrawing from the process.

On August 12, 2024, and August 13, 2024, the Gatos Special Committee met, with members of Gatos management and representatives of BofA Securities and White & Case also in attendance. The meeting began on August 12, 2024 and was adjourned and reconvened on August 13, 2024. During the meeting the Gatos Special Committee discussed First Majestic’s revised bid and Company A’s July 29, 2024 proposal and subsequent notification of withdrawal from the strategic process. Representatives of BofA Securities presented preliminary financial analyses with respect to the August 9 Proposal and the withdrawn Company A proposal and discussed with the Gatos Special Committee possible alternatives with respect to the ongoing process, including the possibility of re-engaging with Company A. Members of Gatos management reported on the ongoing update to Gatos’ reserve and life of mine plan and also provided the Gatos Special Committee with an update on the ongoing due diligence efforts with respect to First Majestic.

On August 14, 2024, the Gatos Board held a special meeting, with members of Gatos management and representatives of White & Case and BofA Securities in attendance. At the meeting, management provided an update on Gatos’ reserve and life of mine plan which was still being finalized, noting that while it was expected to add additional reserve tonnes and extend mine life which would be value-accretive it was likely that the reserve estimate additions would be somewhat below the current life-of-mine average. The management team also reviewed with the Gatos Board the counterparty diligence conducted with respect to each of First Majestic and Company A, including technical, financial, tax, legal and security-related diligence and key areas of focus, including the potential tax liabilities identified with respect to First Majestic. The management team, together with

 

 

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BofA Securities provided an update to the Gatos Board regarding the August 9 Proposal and the withdrawn Company A proposal. At the request of the Gatos Board, BofA Securities provided a summary and preliminary analysis of the August 9 Proposal and the withdrawn Company A proposal, as well as market conditions, the performance of each of First Majestic, Company A and Gatos relative to their respective peers, management projections of each company as adjusted by Gatos and other financial metrics. Mr. Andres reported that he had made further outreach to the chief executive officer of Company A, but the chief executive officer had not been receptive to further conversations. The Gatos Board determined not to make further outreach to Company A and to focus Gatos’ efforts on the August 9 Proposal.

On August 14, 2024, at the request of Gatos, representatives of BofA Securities advised First Majestic that First Majestic was now the preferred counterparty in the Gatos process.

Between August 15, 2024 and August 23, 2024, Gatos together with its legal and tax advisors, McCarthy Tetrault and Diaz Rivera, Lalieu Rosas, S.C. continued to engage in due diligence investigations, including with respect to First Majestic’s Mexican tax issues.

On August 16, 2024, a representative of Company A sent a notice to BofA Securities, which BofA Securities transmitted to Gatos, in which Company A requested that Gatos destroy all information provided by Company A to Gatos in accordance with the confidentiality agreement entered into between Gatos and Company A and certifying that Company A had destroyed such information provided to Company A by Gatos. On August 27, 2024, Gatos sent a notice to Company A confirming that all information received by Gatos had been destroyed by Gatos and its representatives.

On August 20, 2024, the Gatos Special Committee met with members of Gatos management and representatives from White & Case and BofA Securities also in attendance. During the meeting, members of Gatos management provided the Gatos Special Committee with an update on the diligence being conducted on First Majestic including with respect to upcoming site visits to First Majestic’s key producing assets. Management also provided a further update on the ongoing work with respect to Gatos’ reserve estimates and the life of mine plan. Representatives of BofA Securities, at the direction of the Gatos Board, reviewed with the Gatos Special Committee a preliminary financial analysis of First Majestic’s revised proposal. The BofA Securities presentation included a discussion of First Majestic’s trading liquidity, shareholder base and market profile. Representatives of White & Case discussed with the Gatos Special Committee the material items reflected in the latest markup of the Merger Agreement submitted by First Majestic and the Gatos Special Committee provided guidance to White & Case with respect to those issues for inclusion in a revised draft that would be circulated to First Majestic and its counsel, including with respect to decreasing the termination fee payable by Gatos and elimination of conditionality related to third party consents.

On August 21, 2024, the Gatos Board held a special meeting with members of Gatos management and representatives from White & Case and BofA Securities also in attendance. During the meeting, members of Gatos management provided the Gatos Board with further updates on the First Majestic diligence process, including the focus on site visits and further analysis of Mexican tax issues, and the ongoing work with respect to Gatos’ reserve estimates and the life of mine plan. BofA Securities reviewed with the Gatos Board a preliminary financial analysis of First Majestic’s revised proposal incorporating, at the direction of Gatos, projections of Gatos’ management with respect to Gatos and First Majestic and discussed First Majestic’s trading profile including liquidity, shareholder base and market profile. The Gatos Board discussed the historical operation and market performance of First Majestic. The BofA Securities presentation also included the potential receptiveness of Gatos Stockholders to a transaction with First Majestic, and potential market reaction to such transaction.

On August 24, 2024, representatives of White & Case sent a revised draft of the merger agreement to representatives of Bennett Jones and Dorsey.

On August 25, 2024, management of First Majestic held a conference call with Bennett Jones and Dorsey to discuss the revised Merger Agreement and to discuss First Majestic’s position regarding certain key matters, which are discussed in the paragraph immediately below.

 

 

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On August 26, 2024, representatives of White & Case and Bennett Jones held a telephone call in which the representatives of Bennett Jones highlighted First Majestic’s intended approach with respect to certain key issues reflected in the revised Merger Agreement including with respect to third party consents, the efforts required of First Majestic to obtain Mexican Antitrust approvals, the requirement to obtain voting and support agreements from directors and officers of Gatos, certain representations related to diligence materials and informational covenants related to tax matters as well as First Majestic’s request that Gatos provide First Majestic with a short period of exclusivity to conclude negotiations on definitive transaction documents.

On August 26, 2024, the Gatos Special Committee met with members of Gatos’ management and representatives of White & Case also in attendance. Mr. Andres updated the Gatos Special Committee with respect to ongoing diligence efforts. He noted that during discussions BofA had with First Majestic, First Majestic indicated a preference for targeting signing and announcing a transaction on or around September 5, 2024, in advance of an upcoming precious metals industry conference and that First Majestic had renewed its request for exclusivity that was originally contained in the August 9 Proposal. A representative of White & Case provided the Gatos Special Committee with an update on the Merger Agreement negotiations with First Majestic. The Gatos Special Committee determined that, although it was not yet prepared to recommend a transaction with First Majestic, due diligence review and negotiations had resulted in sufficient progress such that the Gatos Special Committee agreed to authorize Gatos to negotiate and enter into an exclusivity agreement with First Majestic to facilitate continuing diligence and negotiations. The Gatos Special Committee then discussed with White & Case the benefits of engaging an independent financial advisor to assess the fairness, from a financial point of view, of a transaction with First Majestic if the Gatos Special Committee and Board would ultimately determine to approve such a transaction, and various potential financial advisors that might be engaged for such purpose. The Gatos Special Committee approved the engagement of its own independent financial advisor to provide the Gatos Special Committee with such a fairness opinion. The Committee authorized Ms. Stairs to work with Gatos’ management to seek to engage GenCap because of the Gatos Special Committee’s belief that GenCap would be free of conflicts, had strong familiarity with the precious metals industry and familiarity with Gatos, all of which would facilitate independence, efficiency and the proper assessment of relevant information in a timely manner.

On August 27, 2024, White & Case delivered to Bennett Jones a revised draft of the exclusivity agreement originally proposed by First Majestic and later that day Gatos and First Majestic entered into this exclusivity agreement which provided First Majestic with an exclusive period of negotiation and confirmatory diligence until September 9, 2024.

From August 27, 2024 until August 30, 2024, members of Gatos’ senior management team including Mr. Andres, Mr. Scott and Mr. Chad Yuhasz, Gatos’ Vice President of Exploration and Technical Services, together with select senior management team members from the Cerro Los Gatos mine, conducted site visits at First Majestic’s Santa Elena and San Dimas mines, with members of the First Majestic senior management team in attendance including the Chief Operating Officer, Vice-President, Corporate Development & Investor Relations, Vice-President, Exploration & Technical Services, Vice-President, Operations and Vice-President, Human Resources. During such site visits the respective management teams discussed various matters regarding each of the sites including capital and operating expenditures, operations, production, continuous improvement, environmental, community, industrial relations, security, mineral reserves and resources, exploration potential, reserve reconciliation and other technical matters. During the site visits the management teams also discussed the exploration potential and corporate plan related to other First Majestic assets including La Encantada, Jerritt Canyon and the Mexican assets currently on care and maintenance.

Additionally, from August 27, 2024 until the execution of the Merger Agreement on September 5, 2024, First Majestic, Gatos, White & Case and Bennett Jones, exchanged numerous drafts and engaged in numerous discussions and negotiations concerning the terms of the Merger Agreement. During the course of these negotiations, significant areas of discussion involved the treatment of fractional shares, the level of effort required from First Majestic to obtain Mexican antitrust approval, third party consents required in connection with the Transaction, the amount of the termination fees payable by each party in connection with the termination of the Transaction and the circumstances under which such fees would be payable, conditions to closing and certain representations related to the due diligence materials delivered by First Majestic and informational covenants

 

 

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related to tax matters. During this period, the management teams of Gatos and First Majestic, supported by their respective legal and financial advisors, engaged in numerous discussions to prepare for a potential announcement of a transaction including by preparing a communications plan, relevant regulatory filings and related preparatory work.

On August 28, 2024, the Gatos Special Committee engaged GenCap to act as its independent financial advisor.

On August 28, 2024, Mr. Bodley called representatives of Electrum to inform them that negotiations with First Majestic were proceeding and that, as previously discussed, Electrum would soon be asked to consider and execute a customary voting and support agreement. Following that call, Mr. Bodley delivered to representatives of Electrum a proposed draft of the Electrum Support Agreement and Electrum’s and First Majestic’s counsels exchanged further drafts over the succeeding days.

On August 28, 2024, the First Majestic Board contacted TD Securities to act as independent financial advisor to the First Majestic Board in connection with the Transaction and engaged TD Securities effective as of that date.

On August 30, 2024, the Gatos Special Committee met with members of the Gatos management team and representatives of White & Case also in attendance, during which members of the Gatos management team provided an update to the Gatos Special Committee of their due diligence findings arising out of the site visits. The Gatos Special Committee discussed with the Gatos management team the due diligence conducted on First Majestic, including in relation to First Majestic’s operating performance, exploration potential, union relationships and potential tax issues. Later that day, Gatos management delivered to First Majestic and Bennett Jones a draft of the voting agreement to be entered into by Electrum.

On August 31, 2024, representatives of Electrum met with representatives of First Majestic to discuss the Electrum Support Agreement, potential lock-up arrangements, board nominations and potential liquidity requirements. Between August 31, 2024, and September 3, 2024, representatives of First Majestic, Bennett Jones and representatives of Electrum’s legal counsel negotiated and finalized the Electrum Support Agreement. Additionally, representatives of Electrum verbally informed First Majestic that Electrum would defer any further discussion of lock up arrangements and other aspects of its potential ownership interest in First Majestic until after a merger agreement was signed.

On September 1, 2024, the Gatos Special Committee met with representatives of management, GenCap, BofA Securities and White & Case also in attendance. Gatos Management provided an update on the status of negotiations with First Majestic and due diligence investigations, including with respect to First Majestic’s producing and non-producing assets and site visits that took place the previous week. Gatos Management also noted that First Majestic had requested, and Gatos’ management had arranged, a telephone call on September 2, 2024, among Gatos, representatives of First Majestic and Dowa to discuss the potential Transaction with First Majestic and to introduce First Majestic and Dowa. The Gatos management team provided the Gatos Special Committee with financial analyses of First Majestic, including certain financial projections. Without BofA Securities present, representatives of GenCap then provided the Gatos Special Committee with an update regarding its ongoing financial analyses of Gatos and First Majestic and the potential Transaction. Without GenCap present, representatives of BofA Securities then provided an overview of their financial analyses of the proposed Transaction. The Gatos Special Committee engaged in further discussion regarding the August 9 Proposal including with respect to certain tax-related representations and covenants, First Majestic’s requirement that the closing be conditioned on the absence of any claim by Dowa that its consent to the Transaction would be necessary under the joint venture agreement and the potential addition of members to the First Majestic Board.

On September 2, 2024, the Gatos Board held a special meeting with management in attendance as well as White & Case and BofA Securities. Gatos Management updated the Gatos Board regarding the status of negotiations and management’s operational and legal due diligence of First Majestic. Gatos Management and BofA Securities provided an overview of the financial analyses of the proposed transaction versus continued operation of Gatos on a stand-alone basis. Ms. Stairs summarized the work that the Gatos Special Committee had undertaken since the prior Gatos Special Committee report to the Gatos Board. Ms. Stairs also discussed with the Gatos Board, the Gatos Special Committee’s retention of GenCap.

 

 

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On September 2, 2024, representatives of Gatos, including Mr. Andres, White & Case and BofA Securities, had a telephone call with representatives of First Majestic, including Mr. Neumeyer, Bennett Jones and National Bank Financial, to discuss outstanding issues in the Merger Agreement, including treatment of fractional shares, certain representations and covenants regarding tax matters and the possible addition of a member to the First Majestic Board.

On September 2, 2024, TD Securities met with the non-executive directors of First Majestic to discuss the Transaction and provide a progress report regarding the delivery of their fairness opinion.

On September 3, 2024, representatives of Bennett Jones provided representatives of White & Case with a draft of the D&O Support Agreement to be entered into with directors and certain officers of Gatos based on the Electrum Support Agreement. Over the course of September 3, 2024, and September 4, 2024, representatives of Bennett Jones and White & Case negotiated and finalized the form of the D&O Support Agreements.

On September 3, 2024, Dowa delivered to Gatos Dowa’s acknowledgment that certain rights set forth in the joint venture agreement with Dowa would not be triggered by a change of control of Gatos. Between September 3, 2024 and September 4, 2024, First Majestic and Gatos, supported by their legal advisors, finalized their due diligence and completed negotiation of the proposed terms of the Merger Agreement and other Transaction documents with a view to seeking final approval from their respective boards of directors. Over the course of this period, the parties exchanged various drafts of the Merger Agreement.

On September 4, 2024, the Gatos Special Committee met, with members of Gatos senior management and representatives of BofA Securities, GenCap and White & Case also in attendance. A representative of White & Case discussed the fiduciary duties of the members of the Gatos Special Committee. A representative of White & Case reviewed the key legal terms of the Merger Agreement to be entered into with First Majestic and the D&O Support Agreements. Without BofA Securities present, representatives of GenCap presented the Gatos Special Committee with its financial analysis of the proposed transaction followed by its oral opinion, confirmed by delivery of a written opinion dated September 4, 2024, to the effect that, based upon and subject to the assumptions, qualifications, limitations and other matters considered by GenCap in connection with the preparation of its opinion, as of such date, the proposed transaction was fair, from a financial point of view, to Gatos Stockholders. After discussion, the Gatos Special Committee determined (i) that the transactions contemplated by the Merger Agreement were advisable and in the best interests of Gatos and its stockholders and (ii) to recommend, that the Gatos Board approve and adopt the Merger Agreement.

Following the meeting of the Gatos Special Committee, on September 4, 2024, the Gatos Board met, with members of Gatos management and representatives of White & Case and BofA Securities also in attendance to review and potentially approve the execution of the Merger Agreement and the other transactions contemplated thereby. Representatives of White & Case reviewed with the directors their fiduciary duties in the context of the Transaction with First Majestic and the legal terms of the Merger Agreement and D&O Support Agreement. At the request of the Gatos Board, representatives of BofA Securities then presented BofA Securities’ financial analysis of the Exchange Ratio and delivered to the Gatos Board an oral opinion, which was subsequently confirmed by delivery of a written opinion dated September 4, 2024 to the effect that as of the date of the opinion and based upon and subject to the various assumptions and limitations described in its opinion, the Exchange Ratio provided for in the Merger was fair, from a financial point of view, to the Gatos Stockholders (other than First Majestic and its affiliates).

Ms. Stairs summarized the work that the Gatos Special Committee had undertaken since the prior Gatos Special Committee report to the Gatos Board and presented the recommendations of the Gatos Special Committee.

After weighing all of the benefits and risks associated with the Merger Agreement and careful consideration of the information presented by management and its legal and financial advisors, and the recommendation of the Gatos Special Committee, the Gatos Board unanimously resolved, among other things, that the transactions contemplated by the Merger Agreement was advisable, and in the best interests of Gatos and its stockholders, and to approve and adopt the Merger Agreement and the transactions contemplated thereby and execute and deliver the Merger Agreement.

 

 

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Also on September 4, 2024, non-executive directors of the First Majestic Board met with TD Securities and received the oral opinion of TD Securities that as of such date, and subject to the assumptions, limitations and qualifications set out in their opinion, the consideration to be paid by First Majestic under the Transaction was fair, from a financial point of view, to First Majestic.

Immediately following the meeting with TD Securities, on September 4, 2024, the First Majestic Board met to consider the final transaction terms of the proposed transaction with Gatos. The First Majestic Board received an updated presentation from National Bank Financial, who provided its oral opinion that, as of such date, and subject to the assumptions, limitations, qualifications and other matters set out in their opinion, the Exchange Ratio to be paid by First Majestic under the Transaction was fair, from a financial point of view, to First Majestic. The First Majestic Board received advice from Bennett Jones and Dorsey as to the Merger Agreement and the material changes from the version discussed at the July 24, 2024 board meeting. Bennett Jones and First Majestic’s Mexican counsel provided updated due diligence reports to the First Majestic Board. Following these presentations, the First Majestic Board unanimously determined that, considering all of the benefits and risks associated with the Merger Agreement and after due consideration of the information presented by management and its legal and financial advisors, the Transaction is in the best interests of First Majestic and is fair to First Majestic and authorized the execution and delivery of the Merger Agreement and the Voting Support Agreements and unanimously recommended that the First Majestic Shareholders vote in favour of the resolution approving the First Majestic Share Issuance.

The Merger Agreement and other transaction documents between Gatos and First Majestic were executed early on September 5, 2024. Before the opening of market on September 5, 2024, Gatos and First Majestic issued a press release announcing the Transaction and held a joint investor call later that day.

Board of Directors and Management of First Majestic after the Transaction

Board of Directors

As of the date of this Management Information Circular, it is anticipated that, upon completion of the Transaction, all current members of the First Majestic Board will continue to serve as directors of the combined company.

Under the Merger Agreement, subject to First Majestic’s corporate governance standards, including First Majestic’s satisfactory completion of its customary screening and evaluation procedures for directors, First Majestic has agreed to consider for appointment one director, mutually agreeable to Gatos and First Majestic, to be appointed as a director on the First Majestic Board.

Management

Following the Effective Time, First Majestic will acquire control of Gatos, and the members of First Majestic’s executive management team following the Effective Time will remain the same unless communicated otherwise in due course.

Information about the current directors and senior management of First Majestic can be found under the section below entitled “Management of First Majestic.”

Board of Directors and Management of Surviving Corporation after the Transaction

Board of Directors

Upon completion of the Transaction, all the current directors of Merger Sub, will serve as directors of the Surviving Corporation to hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

Management

Upon completion of the Transaction, all the current officers of Merger Sub will be the officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

 

 

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First Majestic’s Reasons for the Transaction

The purpose of the Transaction is for First Majestic to indirectly acquire Gatos’ 70% joint venture interest in the Cerro Los Gatos Mine in Chihuahua state, Mexico. In reaching its decision to approve the Transaction and its recommendation that the First Majestic Shareholders VOTE FOR the Share Issuance Resolution, the First Majestic Board considered and relied upon a number of factors, including, among others, the following:

 

•

Diversified portfolio of precious metal assets in Mexico: The Transaction aligns with First Majestic’s overall strategy by consolidating three world-class producing silver mining districts in Mexico by adding Gatos’ interest in the Cerro Los Gatos Mine to First Majestic’s existing mining portfolio, including the San Dimas and Santa Elena mines.

 

•

Enhance production profile with strong margins: Near-term precious metal production from the Cerro Los Gatos Mine is expected to meaningfully improve overall production by the combined company, and the consolidated mines are expected to have a combined annual production of 30-32 million ounces of silver-equivalent in 2025, including 15-16 million ounces of silver and is expected to lower First Majestic’s average all-in sustaining costs to $18.00- $20.00 per silver-equivalent ounce.

 

•

Bolsters free cash flow generation potential: The addition of Gatos’ interest in Cerro Los Gatos Mine is expected to result in an immediate contribution of annual free cash flow of approximately $70 million to the combined company in 2025 which management of First Majestic anticipates will result in greater access to capital to fund further development and production.

 

•

Leverages a highly experienced combined team with strong track record: The combined company will be led by a team with over 20 years of experience operating in Mexico and one which emphasizes socially responsible mining, community engagement and value creation. The combined company will leverage the First Majestic management team and the First Majestic Board’s demonstrated experience in financing, acquiring, building and operating underground to optimize revenue for all shareholders.

 

•

Maintains peer-leading exposure to silver: The combined company will derive over 50% of pro forma revenue from silver as compared to other intermediate silver producing peers which derive an average of approximately 30% revenue from silver.

 

•

Creates a 350,000 hectare highly prospective land package which has yielded a history of exploration success and economic discoveries: The addition of Gatos’ interest in the Cerro Los Gatos Mine will contribute mineral rights covering approximately 103,000 hectares of unencumbered land with significant new discovery potential, in addition to First Majestic’s existing package of mineral rights covering approximately 245,000 hectares across San Dimas, Santa Elena and other First Majestic properties that has been previously relied on for their production capabilities. The overall result is the creation of a 350,000 hectare highly prospective package of mineral rights that has a history of exploration success and economic discoveries.

 

•

Receipt of expert advice and fairness opinions: The First Majestic Board retained and received advice from experienced and qualified financial and legal advisors to assist in evaluating, negotiating and recommending the terms of the Transaction and the Merger Agreement. In addition, National Bank Financial and TD Securities have provided fairness opinions to First Majestic and the First Majestic Board (respectively) to the effect that, as of September 4, 2024, and subject to the assumptions, limitations, qualifications and other matters stated in such opinions, the Exchange Ratio in the case of National Bank Financial, and the consideration to be paid under the Transaction in the case of TD Securities, is fair, in each case from a financial point of view, to First Majestic.

 

•

Strengthened company balance sheet and enhanced capital markets profile: The combined company will benefit from a capital structure that provides enhanced trading liquidity that First Majestic believes is well-positioned to deliver increased shareholder value, with pro forma market capitalization approaching $3 billion and average daily trading liquidity of approximately $49 million, based on current trading volume. The improved capital markets profile is expected to appeal to a broader institutional shareholder base and increase research coverage.

 

•

Realizes and capitalizes on meaningful synergies: The combined company is expected to capitalize on financial and operational synergies, including corporate cost savings, supply chain and procurement efficiencies, cross-

 

 

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pollination of expertise, and acceleration and optimization of internal projects and exploration programs, all of which is expected to deliver meaningful value creation for all shareholders.

 

•

Current conditions of the parties were considered: The respective financial condition, results of operations, businesses, plans and prospects of First Majestic and Gatos and current industry, economic, market and regulatory conditions were considered.

 

•

Likelihood of the Transaction being completed: The likelihood of the Transaction being completed is considered by the First Majestic Board to be high, in light of the absence of significant closing conditions outside the control of First Majestic (other than the requisite approvals of COFECE, the First Majestic Shareholders and the Gatos Stockholders). All directors and certain executive officers of Gatos, as well as Electrum, which owns approximately 32% of the issued and outstanding Gatos Common Stock, have entered into Support Agreements with First Majestic pursuant to which they have agreed to vote their respective shares in favour of the Transaction at the meeting of Gatos Stockholders.

 

•

Terms of Merger Agreement: The Merger Agreement includes customary business covenants and deal protection mechanisms including a customary non-solicit provision and restrictions on changes of recommendation by the Gatos Board. If the Merger Agreement is terminated by First Majestic or Gatos in certain circumstances, a termination fee of $28.0 million may be payable by Gatos.

In the course of its deliberations the First Majestic Board also considered various potential uncertainties, risks and adverse factors associated with the Transaction, including, among other things:

 

•

Impact of dilution: As a result of the issuance of the First Majestic Common Shares in connection with the Transaction, First Majestic Shareholders will experience a significant degree of dilution in their ownership of First Majestic which could adversely impact the market price of the First Majestic Common Shares.

 

•

Failure to realize benefits: First Majestic may not realize the benefits of the Transaction as currently anticipated due to challenges associated with integrating the properties, operations and personnel of First Majestic and Gatos and may be subject to significant operating risks associated with its expanded operations and portfolio of projects.

 

•

Joint venture interest: Gatos’ interest in the Cerro Los Gatos Mine is held through a joint venture and accordingly First Majestic will not acquire complete ownership or control of the Cerro Los Gatos Mine. Following completion of the Transaction, First Majestic’s interest in the Cerro Los Gatos Mine will be subject to all of the risks associated with a joint venture including potential disagreements with joint venture partners on the joint venture’s future developments, the inability to exert total control over certain strategic decisions made in respect of joint venture properties, the inability of joint venture partners to meet obligations to the joint venture or third parties, and potential litigation between joint venture partners regarding joint venture matters.

 

•

Restrictions on First Majestic business: The terms of the Merger Agreement place certain restrictions on the conduct of First Majestic’s business prior to completion of the Merger, which may delay or prevent First Majestic from undertaking business opportunities that may arise prior to completion of the Merger.

 

•

Conditions to completion: The completion of the Transaction is subject to several conditions that must be satisfied or waived, including Gatos Stockholder Approval, First Majestic Shareholder Approval, obtaining COFECE approval, and satisfaction of governmental or regulatory conditions, including TSX and NYSE approvals.

 

•

Termination Fee: If the Merger Agreement is terminated by First Majestic or Gatos in certain circumstances, a termination fee of $46.0 million may be payable by First Majestic.

Consideration of Alternatives

The First Majestic Board regularly considers business and strategic opportunities with the objective of maximizing shareholder value in a manner consistent with the best interests of the company. Prior to entering into the Merger Agreement, extensive due diligence of Gatos and its business and properties was completed. The First Majestic Board carefully considered current industry, economic and market conditions and outlooks, including commodity

 

 

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prices and their expectations of future mining prospects and related businesses in Mexico, as well as the impact of the Transaction on First Majestic. The First Majestic Board examined First Majestic’s ability to realize the benefits of the Transaction, which depends in part on successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as on First Majestic’s ability to realize the anticipated growth opportunities and synergies, efficiencies and cost savings from integrating the business of Gatos. The First Majestic Board, with the assistance of financial and legal advisors, assessed the alternatives reasonably available to First Majestic, including not entering into any acquisitions. While acknowledging the risks that are associated with the Transaction, the First Majestic Board determined that the addition of Gatos’ interest in the Cerro Los Gatos Mine represents the best available prospect for maximizing shareholder value.

After consideration of the factors summarized in this section, the First Majestic Board determined that, overall, the potential benefits of the Transaction outweighed the potential risks and that the Transaction is in the best interests of First Majestic and its stakeholders.

The foregoing discussion of factors considered by the First Majestic Board is not intended to be exhaustive and may not include all the factors considered by the First Majestic Board. In view of the wide variety of factors considered in connection with its evaluation of the Transaction and the complexity of these matters, the First Majestic Board did not attempt to quantify, rank or otherwise assign any relative or specific weights to the factors that it considered in reaching its determination to approve the Merger Agreement and the Transaction and to recommend that First Majestic Shareholders vote in favour of the Share Issuance Resolution. In addition, individual members of the First Majestic Board may have given differing weights to different factors. The First Majestic Board conducted an overall review of the factors described above and other material factors, including through discussions with, and inquiry of, First Majestic’s management and outside legal, financial and tax advisors.

The foregoing description of First Majestic’s consideration of the factors supporting the Transaction includes information which is forward-looking in nature. This information should be read in light of the factors discussed in the section entitled “Information Contained in this Management Information Circular – Cautionary Statement Regarding Forward-Looking Statements,” on page 2.

Recommendation of the First Majestic Board

At a meeting on September 4, 2024, duly called and held, and after due consideration and extensive consultation with First Majestic’s management and outside legal advisors and with financial advisors to both First Majestic and the First Majestic Board, including the receipt of fairness opinions from National Bank Financial and TD Securities, the First Majestic Board unanimously approved the Merger Agreement and the Transaction (and related matters) and determined that the Transaction, the terms of which are substantially as set forth in the Merger Agreement is in the best interests of First Majestic and its stakeholders. The First Majestic Board also unanimously authorized that the Share Issuance Resolution be submitted to the First Majestic Shareholders for approval and recommended that the First Majestic Shareholders vote in favour of the Share Issuance Resolution.

The First Majestic Board unanimously recommends that First Majestic Shareholders vote FOR the Share Issuance Resolution. For further information regarding First Majestic’s reasons for the Transaction, see “The Transaction – First Majestic’s Reasons for the Transaction”.

National Bank Financial Fairness Opinion

First Majestic retained National Bank Financial under an engagement agreement dated April 29, 2024 to provide financial advisory services in connection with the Transaction. As part of its engagement, National Bank Financial was requested to provide First Majestic with its opinion as to the fairness of the Exchange Ratio, from a financial point of view, to First Majestic.

The National Bank Financial Fairness Opinion stated that, based upon and subject to the assumptions, limitations, qualifications, and other matters stated therein, National Bank Financial was of the opinion that, as of September 4, 2024, the Exchange Ratio was fair, from a financial point of view, to First Majestic.

 

 

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The Transaction

 

The full text of the National Bank Financial Fairness Opinion attached as “Appendix C – National Bank Financial Fairness Opinion”, sets forth, among other things, details regarding the independence of National Bank Financial, the credentials of National Bank Financial, the scope of National Bank Financials’ review in connection with the National Bank Financial Fairness Opinion, and certain assumptions made and limitations to National Bank Financial’s review in connection with the National Bank Financial Fairness Opinion.

The National Bank Financial Fairness Opinion is not a recommendation as to how the First Majestic Shareholders should vote on the Share Issuance Resolution or any other matter. The National Bank Financial Fairness Opinion was one of a number of factors taken into consideration by the First Majestic Board in making its unanimous determination that it is in the best interests of First Majestic to enter into the Merger Agreement and to recommend that First Majestic Shareholders vote in favour of the Share Issuance Resolution. In evaluating the Transaction, the First Majestic Board considered, among other things, the advice and financial analyses provided by National Bank Financial referred to above, in addition to the National Bank Financial Fairness Opinion. In assessing the National Bank Financial Fairness Opinion, the First Majestic Board took into account that a substantial portion of the fees payable to National Bank Financial for its services are contingent upon the Closing, subject to the obligation of First Majestic to make an earlier payment to National Bank Financial in certain circumstances.

National Bank Financial was not asked to prepare and did not prepare a formal valuation of First Majestic, Gatos, or any of their securities or assets and the National Bank Financial Fairness Opinion should not be construed as such.

National Bank Financial acts as a trader and dealer, in major financial markets and, as such, may have had and may in the future have positions in the securities of one or more of First Majestic or Gatos and, from time to time, may have executed or may execute transactions on behalf of one or more such companies and clients from whom it received or may receive compensation. As an investment dealer, National Bank Financial conducts research on securities and may, in the ordinary course of business, provide research reports and investment advice to its clients on investment matters, including with respect to First Majestic or Gatos.

Under the terms of National Bank Financial’s engagement agreement, First Majestic agreed to pay National Bank Financial an opinion fee (payable regardless of completion of the Transaction or the conclusions of the opinion) and a success fee (against which the opinion fee will be credited) due and payable upon Closing. First Majestic has also agreed to reimburse National Bank Financial for certain out-of-pocket expenses and to indemnify First Majestic against certain liabilities that may arise in connection with its engagement.

The National Bank Financial Fairness Opinion was provided to the First Majestic Board for its use only in considering the Transaction and may not be referred to, summarized, circulated, publicized or reproduced or disclosed to or used or relied upon by any party without National Bank Financial’s prior written consent, which has been obtained for the purposes of the inclusion of the Fairness Opinion in this Circular and is attached as “Appendix D – Consent of National Bank Financial”, and does not constitute a recommendation as to how the First Majestic Shareholders should vote on the Share Issuance Resolution. National Bank Financial expresses no view as to, and the National Bank Financial Fairness Opinion does not address, the underlying business decision of First Majestic to effect the Transaction or the relative merits of the Transaction as compared to any strategic alternatives that may be available to First Majestic; nor does it address any legal, tax or accounting matters.

The First Majestic Board urges the First Majestic Shareholders to read the National Bank Financial Fairness Opinion in its entirety. Any summary of the National Bank Financial Fairness Opinion herein is qualified in its entirety by reference to the full text of the National Bank Financial Fairness Opinion as set out in “Appendix C – National Bank Financial Fairness Opinion”.

TD Securities Fairness Opinion

The First Majestic Board retained TD Securities under an engagement agreement effective August 28, 2024, to provide the First Majestic Board with its opinion as to the fairness to First Majestic from a financial point of view, of the consideration to be paid pursuant to the Transaction by First Majestic.

 

 

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The Transaction

 

The TD Securities Fairness Opinion stated that, based upon and subject to the assumptions, limitations, qualifications, and other matters stated therein, TD Securities was of the opinion that, as of September 4, 2024, the consideration to be paid pursuant to the Transaction was fair, from a financial point of view, to First Majestic.

The full text of the TD Securities Fairness Opinion attached as “Appendix E – TD Securities Fairness Opinion”, sets forth, among other things, the credentials of TD Securities, TD Securities’ relationship with interested parties, the scope of review, assumptions made, and limitations and qualifications on the review undertaken in connection with the TD Securities Fairness Opinion.

The TD Securities Fairness Opinion is not a recommendation as to how the First Majestic Shareholders should vote on the Share Issuance Resolution or any other matter. The TD Securities Fairness Opinion was one of a number of factors taken into consideration by the First Majestic Board in making its unanimous determination that it is in the best interests of First Majestic to enter into the Merger Agreement and to recommend that First Majestic Shareholders vote in favour of the Share Issuance Resolution.

TD Securities was not asked to prepare and did not prepare a formal valuation of First Majestic, Gatos, or any of their securities or assets and the TD Securities Fairness Opinion should not be construed as such.

TD Securities acts as a trader and dealer, in major financial markets and, as such, may have had and may in the future have positions in the securities of one or more of First Majestic, Gatos, or any of their respective associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of one or more such parties for which TD Securities received or may receive compensation. As an investment dealer, TD Securities conducts research on securities and may, in the ordinary course of business, provide research reports and investment advice to clients on investment matters, including with respect to one or more of First Majestic, Gatos, or any of their respective associates or affiliates or the Transaction.

TD Securities is being compensated by First Majestic for providing the TD Securities Fairness Opinion but will not receive a success fee payable on Closing. First Majestic has also agreed to reimburse TD Securities for certain out-of-pocket expenses and to indemnify First Majestic against certain liabilities that may arise in connection with its engagement.

The TD Securities Fairness Opinion was provided to the First Majestic Board for its use only in considering the Transaction and may not be used or relied upon by any person for any other purpose without TD Securities’ prior written consent, which has been obtained for the purposes of the inclusion of the TD Securities Fairness Opinion in this Circular and is attached as “Appendix F – Consent of TD Securities”, and does not constitute a recommendation as to how the First Majestic Shareholders should vote on the Share Issuance Resolution. TD Securities expresses no view as to, and the TD Securities Fairness Opinion does not address, the underlying business decision of First Majestic to effect the Transaction or the relative merits of the Transaction as compared to any strategic alternatives that may be available to First Majestic; nor does it address any legal or regulatory matters.

The First Majestic Board urges the First Majestic Shareholders to read the TD Securities Fairness Opinion in its entirety. Any summary of the TD Securities Fairness Opinion herein is qualified in its entirety by reference to the full text of the TD Securities Fairness Opinion as set out in “Appendix E – TD Securities Financial Fairness Opinion”.

Listing of First Majestic Common Shares

It is a condition to the completion of the Merger that the First Majestic Common Shares issuable under the Merger Agreement are approved for listing on the NYSE, subject to official notice of issuance, and conditionally approved or authorized for listing on the TSX, subject only to customary listing conditions. The applications to both the TSX and NYSE have been made. Listing will be subject to First Majestic fulfilling all the applicable listing requirements of the NYSE and the TSX.

 

 

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The Transaction

 

The TSX will generally not require further approval of the First Majestic Shareholders for the issuance of up to an additional 47,500,000 First Majestic Common Shares to Gatos Stockholders, such number being 25% of the number of First Majestic Common Shares authorized by the Share Issuance Resolution for the Transaction.

Delisting and Deregistration of Gatos Common Stock

If the Transaction is completed, Gatos Common Stock will be delisted from the NYSE and the TSX and deregistered under the U.S. Exchange Act, and Gatos will cease to be a “reporting issuer” under applicable Canadian securities laws. As a result, Gatos will no longer be required to file periodic reports with the SEC or Canadian securities regulators with respect to Gatos Common Stock.

Gatos has agreed to cooperate with First Majestic and use its reasonable best efforts to take, or cause to be taken, all actions reasonably necessary, proper or advisable under applicable laws and rules and policies of the NYSE, the TSX and the SEC to delist the Gatos Common Stock from the NYSE and the TSX and to terminate its registration under the U.S. Exchange Act as promptly as practicable after the Effective Time.

Gatos Executive Matters

Gatos’ directors and executive officers have interests in the Transaction which may include, among others, the treatment of outstanding Gatos Equity Awards under the Merger Agreement, the potential payment of severance benefits and acceleration of outstanding Gatos Equity Awards upon certain terminations of employment, retention awards and rights to ongoing indemnification and insurance coverage.

Change of Control Agreements

Each executive officer of Gatos (other than Mr. Huerta) has entered into an employment agreement providing for certain enhancements to such executive officer’s severance payments and benefits if such executive is terminated in connection with a change in control of Gatos, as described below.

If there is a change in control and (a) within one year following the change in control the executive officer’s employment is terminated without cause or the executive officer voluntarily terminates his employment for good reason or (b) within six months (or three months in the case of Mr. Yuhasz only) preceding the change in control the executive officer’s employment was terminated without cause and such termination occurred in anticipation of such change in control, the executive officer is entitled to (i) a lump sum payment in an amount equal to the sum of (x) 24 months of such executive’s base salary plus (y) a prorated annual bonus for the year in which the termination occurs, assuming target levels of achievement, and (z) for Messrs. Andres, Scott, van Niekerk, and Bodley, an amount equal to two (2) times the executive’s target annual bonus for the year of termination, and (ii) if the executive officer timely elects continuation coverage, Gatos payment of monthly premiums for his benefits, such that the executive pays active employee rates for coverage for him and his eligible dependents, during the 12 month period following the date of termination, subject to the executive officer’s continued eligibility for coverage.

In addition, for Mr. Andres, the 200,000 options granted at the commencement of his employment, which are fully vested, would be exercisable for a period of one year from the date of termination, and the 150,000 options granted at the date of the commencement of his employment, which are fully vested, would, together with all other vested options remain exercisable until the earlier of (x) the date that is 180 calendar days following termination of employment or (y) the expiration of the original option.

Mr. Huerta’s employment agreement does not include benefits for termination events in connection with a change in control, although he is entitled to receive certain severance benefits if he is terminated without cause. In addition, each other executive officer is also entitled to certain lesser severance benefits than those described above upon a termination without cause or for good reason. In each case, receipt of severance payments and benefits are conditioned on the applicable executive executing a general release of claims in favor of Gatos.

 

 

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The Transaction

 

Indemnification and Insurance

Pursuant to the terms of the Merger Agreement, Gatos’s directors and executive officers will be entitled to certain ongoing indemnification and coverage for a period of six years following the Effective Time under directors’ and officers’ liability insurance policies from the Surviving Corporation.

Gatos Stock and Equity Awards held by Gatos’s directors and executive officers

Gatos Stock

Each outstanding share of Gatos Common Stock held by Gatos’ directors and executive officers will be converted into the right to receive a number of First Majestic common shares based on the exchange ratio. As of November 25, 2024, all of the Gatos directors and executive officers, as a group, owned 466,576 shares of Gatos Common Stock.

Gatos Options

Each outstanding and unexercised Gatos option (whether vested or unvested) held by Gatos’ directors and executive officers will automatically be exchanged for an option to acquire a number of First Majestic common shares determined based on the exchange ratio, on the same terms and conditions as were applicable under such Gatos option immediately prior to the effective time of the Merger. As of November 25, 2024, all of the Gatos directors and executive officers, as a group, owned 2,704,257 Gatos options.

Gatos DSUs

Each outstanding Gatos DSU held by Gatos’ non-employee directors will fully vest at the effective time of the Merger and will settle in a number of First Majestic common shares determined based on the exchange ratio within 30 days of the closing date of the Merger. As of November 25, 2024, all of the Gatos directors owned 305,313 Gatos DSUs.

Gatos PSUs

Each outstanding Gatos PSU held by Gatos’ executive officers (which only includes Messrs. Andres and Huerta), all of which were granted on December 17, 2021 are scheduled to vest following a three-year performance period based on the TSR of Gatos relative to a peer group over a three-year performance period beginning on December 17, 2021 and ending on December 17, 2024 and will settle for shares of Gatos Common Stock which will receive the same Merger consideration as other Gatos Stockholders for each share of Gatos Common Stock that they hold at the effective time of the Merger. As of November 25, 2024, all of the Gatos executive officers, as a group, owned 52,194 Gatos PSUs (assuming above target performance at 173% payout for the 77th percentile relative TSR versus constituents of the GDXJ).

Gatos RSUs

Each outstanding Gatos RSU held by Gatos’ executive officers will, to the extent provided in the applicable award agreement, fully vest at the effective time of the Merger and will settle in a number of First Majestic common shares determined based on the exchange ratio within 30 days of the closing date of the Merger. As of November 25, 2024, all of the Gatos directors and executive officers, as a group, owned 778,605 Gatos RSUs.

The foregoing amounts do not include additional grants to Gatos’ non-employee directors pursuant to its current director compensation policy, which are expected to be granted under the Gatos LTIP prior to the effective time of the Merger, with a fair market value of $90,000, consisting of 50% Gatos options and 50% Gatos DSUs which shall be fully vested at the time of grant and will be treated in accordance with the outstanding equity awards as described above. In addition, the foregoing amounts do not include any equity awards which Gatos may make to its employees, including executive officers, under the Gatos LTIP no later than January 31, 2025, that are consistent with Gatos’ past practices.

 

 

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The Transaction

 

Accounting Treatment of the Transaction

First Majestic prepares its financial statements in accordance with IFRS. The Transaction is not within the scope of IFRS 3, Business Combinations (“IFRS 3”) because Gatos does not meet the definition of a business in accordance with IFRS 3. First Majestic will account for the Transaction as an asset acquisition.

The unaudited pro forma financial information presented in this Management Information Circular has been derived from the audited historical financial statements of First Majestic and Gatos as at and for the fiscal years ended December 31, 2023, and the nine month period ended September 30, 2024. The unaudited pro forma condensed combined statement of financial position as at September 30, 2024 presents the financial positions of First Majestic and Gatos giving pro forma effect to the Transaction as if the Transaction occurred on September 30, 2024. The unaudited pro forma condensed combined statement of earnings (loss) for the year ended December 31, 2023, and for the nine months ended September 30, 2024, present the results of operations of First Majestic and Gatos giving pro forma effect to the Transaction as if the Transaction occurred on January 1, 2023.

Regulatory Approvals Required for the Transaction

Subject to the terms and conditions of the Merger Agreement, First Majestic and Gatos have agreed to use their reasonable best efforts to make the appropriate filings under Mexico’s Federal Economic Competition Law (Ley Federal de Competencia Económica) (“Mexico’s Antitrust Law”) as soon as reasonably practicable and no later than 20 business days after the execution of the Merger Agreement and take, or cause to be taken, all actions that are necessary, proper or advisable to consummate the transactions contemplated by the Merger Agreement as promptly as practicable.

First Majestic and Gatos have agreed not to, and to cause their respective affiliates not to, take or cause to be taken any action that could reasonably be expected to: (i) impose any delay in the obtaining of, or increase the risk of not obtaining, any consents of any governmental entity necessary to consummate the transactions contemplated by the Merger Agreement or the expiration or termination of any applicable waiting period; (ii) increase the risk of any governmental entity entering an order prohibiting the consummation of the transactions contemplated by the Merger Agreement; (iii) increase the risk of not being able to remove any such order on appeal or otherwise; (iv) materially delay or prevent the consummation of the transactions contemplated by the Merger Agreement; or (v) cause any of the parties’ representations, warranties or covenants in the Merger Agreement to become inaccurate or to be breached in any material respect or result in the failure of any condition to closing.

First Majestic has agreed to, and to cause its affiliates to, use reasonable best efforts to avoid or eliminate any legal impediments to the transactions contemplated by the Merger Agreement closing as soon as reasonably possible, including taking all actions requested or necessary to resolve any objections asserted by any governmental entity, except to the extent that such actions would reasonably be expected, individually or in the aggregate, to have a material adverse effect on the business, results of operations or financial condition of First Majestic, its subsidiaries, or Gatos and its subsidiaries, taken as a whole, which includes the divestiture of certain material properties of First Majestic.

Pursuant to Mexico’s Antitrust Law, consummation of the transactions contemplated by the Merger Agreement requires the approval of COFECE, an autonomous constitutional entity responsible for enforcing Mexico’s Antitrust Law, including reviewing and authorizing transactions, when applicable.

Notifications of the Transaction were submitted to COFECE on October 2, 2024. On October 15, 2024, COFECE issued a first request for information (“RFI”) to the parties. The parties submitted their response to the first RFI on October 30, 2024. On November 14, 2024, COFECE acknowledged that the first RFI had been duly fulfilled as from the date of the parties’ response. The statutory period for COFECE to issue a second RFI has expired.

COFECE has a statutory 60 business day review period to issue a decision, which commenced on October 30, 2024 and, provided no extensions are issued by COFECE, will end on February 10, 2025. COFECE has the

 

 

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The Transaction

 

authority to issue new RFIs to the parties or to third parties, but the applicable 60 business day review period will continue to run from October 30, 2024.

If COFECE identifies competition concerns to the parties, the parties will have the opportunity, at any point after the initial notification is submitted and before the review process has been completed, to offer conditions on which approval by COFECE will be contingent, provided that under the terms of the Merger Agreement, First Majestic is not obligated to agree to any conditions requiring the mandatory divesture of certain of First Majestic’s material properties. If such conditions are offered, the term for COFECE to issue a resolution will be restarted. If COFECE does not issue a resolution within the relevant review period (including any extension, if applicable) the Transaction will be deemed approved. Failure to obtain clearance from COFECE precludes the parties from closing the Transaction in Mexico.

First Majestic and Gatos are not currently aware of any material consents or other filings that are required prior to the combination of First Majestic and Gatos, other than those described in this Management Information Circular.

Although First Majestic and Gatos believe that they will receive the required authorizations and approvals described herein, there can be no assurance as to the timing of these consents and approvals, First Majestic’s or Gatos’ ultimate ability to obtain such consents or approvals (or any additional consents or approvals that may otherwise become necessary), or the conditions or limitations that such approvals may contain or impose.

For more information see the sections of this Management Information Circular entitled “The Merger Agreement – Conditions to the Completion of the Merger” and “The Transaction – Regulatory Approvals Required for the Transaction,” on pages 91 and 70, respectively.

Shareholder/Stockholder Approvals

First Majestic Shareholder Approval

The Merger is conditional upon, among other things more fully described elsewhere in this Management Information Circular, the approval of the Share Issuance Resolution by the affirmative vote of a simple majority of the votes cast thereon either in person or by proxy at the First Majestic Special Meeting.

At the First Majestic Special Meeting, First Majestic Shareholders will be asked to consider the Share Issuance Resolution, the full text of which is set out in “Appendix A – Resolution to be Approved at the First Majestic Special Meeting” to this Management Information Circular, subject to such amendments, variations or additions as may be approved at the First Majestic Special Meeting, approving the issuance of First Majestic Common Shares in connection with the Transaction. Approval of the Share Issuance Resolution requires the affirmative vote of a simple majority of the votes cast in respect of the resolution by First Majestic Shareholders present in person or represented by proxy at the First Majestic Special Meeting. If the Share Issuance Resolution does not receive the requisite approval, First Majestic and Gatos will not proceed with the Transaction.

See “General Information for the First Majestic Special Meeting – Share Issuance Resolution”.

Gatos Stockholder Approval

The approval by Gatos Stockholders of the Gatos Merger Proposal is required by section 251 of the DGCL and is a condition to the Closing.

Approval of the Gatos Merger Proposal requires the affirmative vote of at least a majority of the shares of Gatos Common Stock outstanding as of the close of business on the record date for the Gatos Special Meeting and entitled to vote on the Gatos Merger Proposal (assuming a quorum is present). If the Gatos Merger Proposal does not receive the requisite approval, First Majestic and Gatos will not proceed with the Transaction.

Obtaining the Gatos Stockholder Approval is a condition to the respective obligations of each party to effect the Transaction. At the Gatos Special Meeting, which will be held in a virtual-only meeting format on January 14,

 

 

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The Transaction

 

2025 at 10:00 a.m. (Pacific Time), Gatos Stockholders will be asked to approve, among other things, the Gatos Merger Proposal. The Gatos Board has unanimously recommended that Gatos Stockholders vote to adopt the Merger Agreement by voting for the Gatos Merger Proposal.

The affirmative vote of the holders of at least a majority of the outstanding shares of Gatos Common Stock in favour of the Gatos Merger Proposal is the only vote of holders of securities of Gatos that is required to approve the Merger Agreement and the transactions contemplated thereby.

At a special meeting of the Gatos Board held on September 4, 2024, the Gatos Board unanimously: (i) determined that the transactions contemplated by the Merger Agreement are advisable and in the best interests of Gatos and its stockholders and approved and adopted the Merger Agreement and the transactions contemplated thereby, (ii) authorized and approved the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby, including the Merger, and (iii) recommended that Gatos’ stockholders vote in favour of the adoption of the Merger Agreement and the approval of the Merger.

In connection with the Transaction and Gatos Special Meeting, First Majestic and Gatos have filed with the SEC the Proxy Statement/Prospectus.

 

 

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THE MERGER AGREEMENT

 

 

The summary of the material provisions of the Merger Agreement below and elsewhere in this Management Information Circular is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached to this Management Information Circular as “Appendix B – Merger Agreement”. Capitalized terms used in this summary and not otherwise defined herein, have the meanings given to such terms in the Merger Agreement. This summary does not purport to be complete and may not provide all of the information about the Merger Agreement that might be important to you. You are urged to read the Merger Agreement carefully and in its entirety because it is the legal document that governs the transactions described in this Management Information Circular.

Explanatory Note Regarding the Merger Agreement

The Merger Agreement and the summary of its terms in this Management Information Circular are included to provide you with information about the terms and conditions of the Merger Agreement. Neither the Merger Agreement nor the summary of its material terms included in this section is intended to provide any factual information about First Majestic or Gatos or any of their respective Subsidiaries or Affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement, were made as of the specific dates therein, were made solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by certain matters contained in confidential disclosures that First Majestic and Gatos delivered to each other in connection with the Merger Agreement and certain matters contained in certain reports publicly filed with the SEC and on SEDAR+ (all of which disclosures were not included in the Merger Agreement attached to this Management Information Circular as “Appendix B – Merger Agreement”, and were made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors). Investors are not third-party beneficiaries under the Merger Agreement except for the limited purposes expressly set forth therein and should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective Subsidiaries or Affiliates. Moreover, information concerning the subject matter of representations and warranties, which do not purport to be accurate as of the date of this Management Information Circular, may have changed since the date of the Merger Agreement, which subsequent information may or may not be fully reflected in First Majestic’s or Gatos’ public disclosures. Accordingly, the representations and warranties and other provisions in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts about First Majestic or Gatos at the time they were made or otherwise.

Accordingly, the representations, warranties and other provisions of the Merger Agreement should not be read alone, but instead should be read together with the information provided elsewhere in this Management Information Circular, the documents incorporated by reference into this Management Information Circular and reports, statements and filings that Gatos files with the SEC and First Majestic files on SEDAR+ from time to time. For more information, see the section entitled “Additional Information” on page 116 and “Appendix G – Information Concerning Gatos Silver, Ltd.”.

Structure and Effects of the Merger; Governance

The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth therein, at the Effective Time, Merger Sub will be merged with and into Gatos, the separate corporate existence of Merger Sub will cease, and Gatos will survive the Merger as a wholly-owned Subsidiary of First Majestic.

At the Effective Time, (i) the Certificate of Incorporation of Gatos will be amended and restated in its entirety to be in the form of the Certificate of Incorporation attached to the Merger Agreement as Exhibit B, a copy of which is attached to this Management Information Circular as “Appendix B – Merger Agreement”, and (ii) the by-laws of Gatos will be amended and restated to conform to the by-laws of Merger Sub as in effect immediately prior to the Effective Time, and as such will be the by-laws of the Surviving Corporation until thereafter changed or amended.

 

 

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The Merger Agreement

 

The directors and officers of Merger Sub immediately prior to the Effective Time will become the directors and officers of the Surviving Corporation.

Prior to the Effective Time, subject to First Majestic’s corporate governance standards, including First Majestic’s satisfactory completion of its customary screening and evaluation procedures for directors, First Majestic shall consider for appointment to the First Majestic Board, in accordance with First Majestic’s governing documents, one individual mutually agreeable to Gatos and First Majestic, effective immediately following the Effective Time, to serve until the next annual meeting of First Majestic Shareholders.

Closing and Effectiveness of the Merger

Unless another date is agreed to in writing by First Majestic and Gatos, the Closing of the Merger will take place by exchange of signature pages by email on the date which is the later of (i) January 15, 2025; and (ii) the third business day after the satisfaction or, to the extent permitted by law, waiver of all of the closing conditions set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by law, waiver of those conditions).

The Merger will become effective when the certificate of Merger has been duly filed with the Secretary of State of the State of Delaware, or such other time as agreed by the parties to be specified in such certificate of Merger. The date and time at which the Merger becomes effective is referred to as the “Effective Time”. At the Effective Time, all of the rights, privileges, immunities, powers, purposes, property and assets of each of Merger Sub and Gatos will vest in the Surviving Corporation, and all liabilities, obligations and penalties of each of Merger Sub and Gatos shall be assumed by the Surviving Corporation.

Effect of the Merger on Gatos Common Stock; Merger Consideration

At the Effective Time, by virtue of the Merger and without any action on the part of Gatos, First Majestic or holders of any securities of Gatos or of Merger Sub, upon the terms and subject to the conditions set forth in the Merger Agreement, each share of Gatos Common Stock which is issued and outstanding immediately prior to the Effective Time, will be automatically converted into the right to receive 2.55 validly issued, fully paid and non-assessable First Majestic Common Shares, subject to the description below regarding fractional shares and dividends or distributions (other than shares of Gatos Common Stock owned by Gatos (including treasury stock), First Majestic, Merger Sub or by any of their respective wholly-owned Subsidiaries (the ”Excluded Shares”), which Excluded Shares shall be cancelled and shall cease to exist and for which no consideration shall be delivered in exchange therefor).

The Exchange Ratio will be adjusted appropriately, without duplication, to reflect the effect of any stock split, reverse stock split, stock dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to the Gatos Common Stock or First Majestic Common Shares outstanding at any time between the date of the Merger Agreement and immediately prior to the Effective Time to give First Majestic and the Gatos Stockholders the same economic effect as contemplated by the Merger Agreement.

Treatment of Gatos’ Equity Awards

The Merger Agreement specifies the treatment of outstanding Gatos Equity Awards in connection with the Merger, which will be treated as follows, as of the Effective Time:

 

•

Each outstanding and unexercised Gatos Option to purchase shares of Gatos Common Stock (whether vested or unvested) will automatically be exchanged for an option to acquire First Majestic Common Shares on the same terms and conditions as were applicable under such Gatos Option immediately prior to the Effective Time of the Merger with respect to the number of First Majestic Common Shares underlying each such new First Majestic Option (rounded down to the nearest whole number) determined by multiplying (i) the number of shares of Gatos Common Stock subject to such Gatos Option immediately prior to the Effective Time of the Merger by (ii) the Exchange Ratio. The exercise price applicable to any such Gatos Option at and after the Effective Time of the Merger will be an amount (rounded up to the nearest whole cent) equal to (i) the exercise price applicable to such Gatos Option immediately prior to the Effective Time of the Merger divided by (ii) the Exchange Ratio.

 

 

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The Merger Agreement

 

•

Each outstanding Gatos DSU, which are all fully vested on the grant date, will settle for a number of First Majestic Common Shares (rounded down to the nearest whole number) determined by multiplying (i) the number of shares of Gatos Common Stock subject to such Gatos DSUs immediately prior to the Effective Time of the Merger by (ii) the Exchange Ratio.

 

•

Each outstanding Gatos PSU, all of which were all granted on December 17, 2021, are scheduled to vest following a three-year performance period based on the total shareholder return of Gatos relative to a peer group over a three-year performance period beginning on December 17, 2021 and ending on December 17, 2024 and will settle for shares of Gatos Common Stock which will receive the same Merger Consideration as other Gatos Stockholders for each share of Gatos Common Stock that they hold at the Effective Time of the Merger.

 

•

Each outstanding Gatos RSU will, to the extent provided in the applicable award agreement, vest in full immediately prior to the Effective Time of the Merger in accordance with its terms and will settle for a number of First Majestic Common Shares (rounded down to the nearest whole number) determined by multiplying (i) the number of shares of Gatos Common Stock subject to such Gatos RSUs immediately prior to the Effective Time of the Merger by (ii) the Exchange Ratio.

As soon as practicable after the Effective Time, First Majestic will file with the SEC a registration statement on Form S-8 (or other applicable form) with respect to the First Majestic Common Shares subjected to the Gatos Options that were exchanged for options to acquire First Majestic Common Shares, and use reasonable best efforts to maintain the effectiveness of such registration statement for so long as such options remain outstanding.

In addition, First Majestic will assume all rights and obligations in respect of the Gatos LTIP but does not intend to grant stock awards thereunder following the Effective Time.

Fractional Shares

No fractional First Majestic Common Shares will be issued in connection with the Merger and no certificate or other evidence representing fractional First Majestic Common Shares will be issued upon the surrender for exchange of shares of Gatos Common Stock. Each Gatos Stockholder who would otherwise have been entitled to receive a fraction of a First Majestic Common Share (after aggregating all Gatos Common Stock held by such Gatos Stockholder) will receive, in lieu of any such fractional First Majestic Common Share, cash (without interest) in an amount equal to the product of (i) such fractional part of a First Majestic Common Share (rounded to the nearest one thousandth when expressed in decimal form) and (ii) the VWAP of First Majestic Common Shares for a five trading day period, starting with the opening of trading on the sixth trading day prior to the Closing Date and ending with the closing of trading on the second to last trading day prior to the Closing Date, as reported by Bloomberg L.P., or if not reported therein, in another authoritative source mutually selected by First Majestic and Gatos (the ”fractional share consideration”).

Payment for Gatos Common Stock

Prior to the Effective Time, First Majestic or Merger Sub will designate a bank or trust company reasonably acceptable to Gatos to act as the Exchange Agent in connection with the Merger for the payment of the Merger Consideration in accordance with the Merger Agreement. At or prior to the Effective Time, First Majestic, on behalf of Merger Sub, will deposit or cause to be deposited with the Exchange Agent in trust for the sole benefit of the holders of Gatos Common Stock an exchange fund consisting of (i) evidence of First Majestic Common Shares issuable in book entry form equal to the aggregate Merger Consideration (excluding any fractional share consideration) and (ii) cash in immediately available funds in an amount sufficient to pay the aggregate fractional share consideration and, from time to time when payable, any dividends or distributions that might be payable in accordance with the Merger Agreement (the ”Exchange Fund”). If the Exchange Fund is insufficient to pay the aggregate fractional share consideration and any applicable dividends or distributions, First Majestic, on behalf of Merger Sub, will promptly deposit or cause to be deposited additional funds with the Exchange Agent in the amount required to make such payment.

 

 

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As soon as reasonably practicable following the Effective Time, and in no event later than the fifth business day after such time, First Majestic will cause the Exchange Agent to mail to each holder of record of a valid certificate that immediately prior to the Effective Time represented outstanding Gatos Common Stock or of non-certificated shares of Gatos Common Stock represented by book entry, in each case, whose shares were converted into the right to receive the Merger Consideration (i) a letter of transmittal; and (ii) instructions for surrendering book entry shares or certificates in exchange for payment of the Merger Consideration. Upon surrender of a certificate or book entry share for cancellation to the Exchange Agent and an executed letter of transmittal, the holder of such a certificate or book entry share is entitled to receive in exchange of such certificate or book entry share (i) the applicable Merger Consideration, (ii) any fractional share consideration and (iii) any cash amounts the holder has the right to receive in respect of dividends or distributions on First Majestic Common Shares for each share of Gatos Common Stock formerly represented by the certificate or book entry share. Each holder of record of Gatos Common Stock shall, upon surrender to the Exchange Agent of such certificated or book entry shares, together with such duly executed letter of transmittal and such other documents as may reasonably be required by the Exchange Agent pursuant to such instructions, be entitled to receive in exchange therefor the Merger Consideration as described above, subject to the terms and conditions set forth in the Merger Agreement.

In the case of any certificate that has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate has been lost, stolen or destroyed and, if required by First Majestic or the Exchange Agent, the posting by such holder of an indemnity or a bond in an amount determined by First Majestic or the Exchange Agent to be reasonably necessary to indemnify the Exchange Agent and the Surviving Corporation against any claim that may be made with respect to such certificate, the Exchange Agent will issue in exchange therefor the Merger Consideration as described above (together with any cash in lieu of fractional shares of First Majestic Common Shares which would otherwise be issuable in respect of such shares of Gatos Common Stock and any dividends, if applicable, without interest) payable with respect to the shares of Gatos Common Stock represented by such lost, stolen or destroyed certificate.

At the Effective Time, the stock transfer books of Gatos will be closed and thereafter no further transfers of shares of Gatos Common Stock outstanding may be registered and all shares of Gatos Common Stock will no longer be outstanding and will automatically be cancelled and cease to exist. From and after the Effective Time, each holder of Gatos Common Stock will cease to have any rights with respect thereto, except the right to receive the Merger Consideration as described above, including the right to receive cash in lieu of fractional First Majestic Common Shares which would otherwise be issuable in respect of such shares of Gatos Common Stock, together with any dividends, if applicable, without interest.

At any time following the date 12 months after the Effective Time, the Surviving Corporation will be entitled to require the Exchange Agent to deliver to First Majestic any Merger Consideration (including any interest received with respect thereto) remaining in the exchange fund that has not been disbursed and thereafter holders of certificated or book entry shares shall be entitled to look only to the Surviving Corporation and First Majestic (subject to abandoned property, escheat or other similar laws) with respect to the applicable Merger Consideration, payable upon surrender of their certificated or book entry shares, without any interest thereon.

Withholding Rights

Each of First Majestic and the Surviving Corporation will be entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold (each of First Majestic, the Surviving Corporation or the Exchange Agent, a “Withholding Agent”), from any amounts otherwise payable pursuant to the Merger Agreement to any person such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code or any provision of applicable tax law. In the event that any such deduction or withholding is required, (i) the applicable Withholding Agent will provide notice to such person as soon as reasonably practicable, (ii) the parties agree to cooperate in good faith to minimize the amount of any deduction or withholding, (iii) the applicable Withholding Agent may deduct the required amount of deduction or withholding from any cash consideration payable to such person and use such amount to satisfy the required deduction or withholding, and (iv) the person and the applicable Withholding Agent may make any other arrangement to fund the deduction or withholding obligation as are mutually satisfactory. Any amounts so withheld will be treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction and withholding was made.

 

 

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Representations and Warranties

The Merger Agreement contains representations and warranties made by Gatos to First Majestic, solely for the benefit of First Majestic, and by First Majestic and Merger Sub to Gatos, solely for the benefit of Gatos. Certain of the representations and warranties in the Merger Agreement are subject to important exceptions and qualifications, including (i) materiality or “Material Adverse Effect” qualifications (that is, they will not be deemed to be inaccurate or incorrect unless their failure to be true or correct is material or would result in a “Material Adverse Effect” (as defined below) on the party making such representation or warranty) and (ii) knowledge qualifications, which means that those representations and warranties would not be deemed untrue, inaccurate or incorrect as a result of matters of which certain officers of the party making the representation or warranty did not have actual knowledge. Furthermore, each of the representations and warranties is subject to the qualifications set forth in the disclosure letter delivered to First Majestic by Gatos, in the case of representations and warranties made by Gatos, or the disclosure letter delivered to Gatos by First Majestic, in the case of representations and warranties made by First Majestic and Merger Sub (with each letter referred to as the delivering party’s disclosure letter), as well as certain of their respective public filings.

The representations and warranties made by Gatos to First Majestic, and by First Majestic and Merger Sub to Gatos, under the Merger Agreement relate to, among other things:

 

•

company organization, valid existence, good standing, qualification to do business and the effectiveness of organizational documents;

 

•

capitalization and ownership of subsidiaries;

 

•

requisite corporate power and authority to enter into the transactions contemplated by the Merger Agreement, due execution, the valid and binding nature of the Merger Agreement and board resolutions;

 

•

required consents and approvals from governmental entities;

 

•

absence of violations of material contracts, organizational documents and applicable law;

 

•

accuracy and completeness of SEC or SEDAR+ filings, as applicable;

 

•

accuracy of historic financial statements;

 

•

internal controls and disclosure controls and procedures relating to financial reporting;

 

•

the absence of undisclosed liabilities;

 

•

compliance with laws;

 

•

possession of, and compliance with, permits and authorizations necessary for the conduct of such party’s business;

 

•

compliance with applicable environmental laws or regulations relating to hazardous materials (meaning those substances defined as hazardous, toxic, waste, pollutant or contaminant) and the absence of outstanding orders relating to compliance with environmental laws;

 

•

employee benefit plans;

 

•

conduct of business in the ordinary course and the absence of a Material Adverse Effect (as defined below), in each case since December 31, 2023, through the date of the Merger Agreement;

 

•

the absence of investigations or reviews pending by a governmental entity or claims, complaints, litigations, actions, petitions, suits, arbitrations, mediations or similar legal proceedings pending that would reasonably be expected to have a Material Adverse Effect (as defined below) or challenge or seek to delay the Merger;

 

•

tax matters;

 

•

labor and employment matters;

 

•

Intellectual Property;

 

 

 

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real property, tangible property and leased property;

 

•

mineral reserves;

 

•

receipt of opinion from the party’s financial advisor;

 

•

material contracts;

 

•

insurance;

 

•

brokers and transaction-related fees and expenses;

 

•

compliance with U.S. foreign corrupt practices act and certain similar laws and anti-corruption policies and regulations;

 

•

that Gatos or First Majestic, as applicable, or their respective Subsidiaries are not sanctioned persons and compliance with applicable sanctions laws;

 

•

Affiliate transactions;

 

•

thresholds under the Hart-Scott Rodino Act (in the case of Gatos);

 

•

the absence of ownership by First Majestic and its Subsidiaries of Gatos Common Stock;

 

•

the activities of Merger Sub (in the case of First Majestic); and

 

•

an acknowledgment that the only representations and warranties are those set forth in the Merger Agreement.

For purposes of the Merger Agreement, “Material Adverse Effect”, when used in reference to First Majestic or Gatos, means any change, effect, development, circumstance, condition, state of facts, event or occurrence that (i) has a Material Adverse Effect on the business, results of operations or financial condition of Gatos or First Majestic, as the case may be, and their respective Subsidiaries, taken as a whole, or (ii) that prevents or materially delays the consummation of the transactions contemplated by the Merger Agreement from occurring on or before the Outside Date; provided, however, that in the case of clause (i), no change, effect, development, circumstance, condition, state of facts, event or occurrence to the extent resulting or arising from the following, either alone or in combination, shall be deemed to constitute a “Material Adverse Effect” or shall be taken into account when determining whether a “Material Adverse Effect” exists or has occurred or is reasonably likely to exist or occur except, in the case of the first six items below, to the extent Gatos and its Subsidiaries, taken as a whole, or First Majestic and its Subsidiaries, taken as a whole, as applicable, are disproportionately impacted thereby relative to other entities operating in the same industry or industries and the same jurisdiction, in which case the incremental disproportionate impact may be taken into account in determining whether there has been a “Material Adverse Effect,” and only to the extent otherwise permitted by the Merger Agreement:

 

•

changes in general United States, Mexico, Canada or global economic conditions;

 

•

conditions (or changes therein) in any industry or industries in which Gatos or First Majestic, as applicable, operates (including any change, on a current or forward basis, in the price of silver or changes in commodity prices or general market prices affecting the mining industry generally);

 

•

general legal, tax, economic, political or regulatory conditions (or changes therein), including any changes affecting financial, credit or capital market conditions or changes in interest or exchange rates and any such conditions related to a government shutdown, federal debt ceiling or banking or credit crisis;

 

•

any change or prospective changes occurring after the date of the Merger Agreement in laws or U.S. GAAP or IFRS, as applicable, or the interpretation or enforcement thereof;

 

•

any adoption, implementation, promulgation, repeal, modification, amendment, reinterpretation, change or proposal of any applicable Law of and by any Governmental Entity occurring after the date of the Merger Agreement (including with respect to taxes);

 

•

(A) any hurricane, tornado, earthquake, flood, fire, explosion, weather-related event, natural or man-made disaster, act of God or other force majeure events or occurrences, (B) epidemics, pandemics or disease

 

 

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outbreaks (including COVID-19) or the worsening thereof or applicable laws (or the interpretation thereof) adopted in response thereto, or (C) (1) any outbreak or escalation or worsening of hostilities, acts of war (whether or not declared), military actions, cyber-attacks, data breaches, acts of insurrection, political unrest, riots or any act of sabotage or terrorism (foreign or domestic) or (2) the geopolitical dispute between the Russian Federation and Ukraine and any evolution or worsening thereof, including, the response of any Governmental Entities thereto;

 

•

compliance with the express terms of the Merger Agreement or any other agreement entered into in connection therewith and any action taken or omitted to be taken by Gatos or First Majestic, as applicable, and its Subsidiaries at the express written direction or request of or with the express prior written consent of the other party;

 

•

changes in the price of Gatos Common Stock or First Majestic Common Shares, as applicable, in each case in and of itself (it being understood that the changes, effects, developments, circumstances, conditions, state of facts, events or occurrences giving rise or contributing to such changes that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account);

 

•

any failure by Gatos or First Majestic, as applicable, to meet any internal or published projections, estimates or expectations of the revenue, earnings or other financial performance or results of operations for any period, in and of itself, of Gatos or First Majestic, as applicable, or any failure by Gatos or First Majestic, as applicable, to meet its internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (it being understood that the changes, effects, developments, circumstances, conditions, state of facts, events or occurrences giving rise or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account);

 

•

the negotiation, public announcement or pendency of the transactions contemplated by the Merger Agreement, including the impact of any of the foregoing on the relationships, contractual or otherwise, of Gatos or First Majestic, as applicable, with customers, suppliers, service providers, employees, Governmental Entities, stockholders, joint venture partners or any other persons having a relationship with Gatos or First Majestic, as applicable, and including any resulting litigation (including any claims of breach of fiduciary duty or disclosure claims); or

 

•

any reduction in the credit rating of Gatos or First Majestic, as applicable, or their respective Subsidiaries, as applicable, in and of itself (it being understood that the changes, effects, developments, circumstances, conditions, state of facts, events or occurrences giving rise or contributing to such reduction that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account).

Conduct of Business Pending the Merger

Each of First Majestic and Gatos has agreed to certain covenants in the Merger Agreement regarding the conduct of their respective businesses during the time from and after the date of the Merger Agreement and prior to the earlier of the Effective Time and the termination of the Merger Agreement (the ”Interim Period”). During the Interim Period, except (i) as set forth in the applicable party’s disclosure letter, (ii) as expressly contemplated or permitted by the Merger Agreement, (iii) as required by applicable law or any governmental entity, (iv) actions intended to protect the life, property or the environment or comply with public health requirements or (v) as consented to in writing by the other party (which consent will not be unreasonably withheld, delayed or conditioned), each of First Majestic and Gatos will, and will cause their respective Subsidiaries to, use commercially reasonable efforts to (A) conduct its business in the ordinary course of business in all material respects and (B) preserve intact its and their present business organizations, keep available the services of its and their executive officers and maintain satisfactory relationships with persons having material business relations with First Majestic or Gatos, as applicable.

During the Interim Period, except (i) as set forth in the applicable party’s disclosure letter, (ii) as expressly contemplated or permitted by the Merger Agreement, (iii) as required by applicable Law or any Governmental Entity, (iv) actions intended to protect the life, property or the environment or comply with public health requirements or (v) as consented to in writing by the other party (which consent will not be unreasonably withheld,

 

 

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conditioned or delayed), each of Gatos and First Majestic will not, and will not permit any of their respective Subsidiaries to:

 

•

declare, set aside, authorize or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock (whether in cash, assets, shares or other securities of Gatos or any of its Subsidiaries or First Majestic or any of its Subsidiaries, as applicable), except dividends and distributions paid or made by a Gatos Subsidiary to Gatos or another wholly-owned Gatos Subsidiary or by a First Majestic Subsidiary to First Majestic or to another wholly-owned Subsidiary of First Majestic, as applicable, and except, in the case of First Majestic, First Majestic’s regular quarterly dividends paid consistent with past practice and in accordance with First Majestic’s publicly announced dividend policy as of the date of the Merger Agreement;

 

•

split, combine, reduce or reclassify any of its issued or unissued capital stock or amend the terms of any of its or its Subsidiaries’ securities, except for any such transaction by a wholly-owned Subsidiary which remains a wholly-owned Subsidiary after consummation of such transaction;

 

•

in the case of Gatos, except (A) pursuant to any Gatos benefit plan, collective bargaining agreement, or contract by and between any employee, individual independent contractor, or other individual non-employee service provider of Gatos or any Gatos Subsidiary in effect as of the date of the Merger Agreement or (B) in the ordinary course of business consistent with past practice, (1) materially increase the level of, or accelerate the timing of payment, vesting, or funding of, compensation or benefits to any officer-level employee, (2) materially modify or amend or terminate any material Gatos benefit plan, or establish or adopt any material plan, program, policy or practice that would be a Gatos benefit plan if in effect on the date of the Merger Agreement, (3) hire or engage, or terminate (other than for cause) any officer-level employee (provided, that Gatos or any Gatos Subsidiary may hire an employee as a replacement for a previously terminated employee), or (4) enter into, negotiate, materially amend, or terminate any collective bargaining agreement (or any agreement or arrangement that would be a collective bargaining agreement if in effect on the date of the Merger Agreement);

 

•

make any material change in financial accounting policies, principles, practices or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by U.S. GAAP (in the case of Gatos) or IFRS (in the case of First Majestic), applicable Law, or policies of the SEC, NYSE or TSX;

 

•

acquire (by merger, consolidation, acquisition of stock or assets or otherwise) directly or indirectly, in one transaction or in a series of related transactions, any person, or, other than investments required by existing contracts to which it or its Subsidiaries are bound, make any investment or agree to make any investment, directly or indirectly, in one transaction or in a series of related transactions, either by purchase of shares or securities, contributions of capital (other than to wholly-owned subsidiaries), property, transfer or purchase of any property or assets of any other person, other than such investments in securities in the ordinary course of business;

 

•

enter into any new material line of business;

 

•

amend the governing documents of Gatos or First Majestic or permit any Subsidiary to adopt any amendments to its governing documents;

 

•

issue, deliver, grant, sell, pledge, dispose of or encumber, or authorize the issuance, delivery, grant, sale, pledge, disposition or encumbrance of, any shares in its capital stock, voting securities or other equity interest in it or any of its Subsidiaries or any securities convertible into or exchangeable for any such shares, voting securities or equity interest, or any rights, warrants or options to acquire any such shares in its capital stock, voting securities or equity interest or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units or take any action to cause to be exercisable or settled any otherwise unexercisable or unsettled equity award (except as otherwise required by the express terms of any equity award outstanding on the date of the Merger Agreement), other than (A) issuances of shares of Gatos Common Stock or First Majestic Common Shares, as applicable, in respect of the vesting or settlement of equity awards outstanding on the date of the Merger Agreement and in accordance with their respective present terms or (B) transactions between Gatos and a wholly-owned Subsidiary of Gatos, or between wholly-owned Subsidiaries of Gatos, or between First Majestic and a wholly-owned Subsidiary of First Majestic or between wholly-owned Subsidiaries of First Majestic, as applicable;

 

 

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directly or indirectly, purchase, redeem or otherwise acquire, including pursuant to existing share repurchase programs, any shares in its capital or any rights, warrants or options to acquire any such shares in its capital, or establish any new repurchase programs with respect to any such shares, except for (A) acquisitions of shares of Gatos Common Stock or First Majestic Common Shares, as applicable, tendered by holders of equity awards in order to satisfy obligations to pay the exercise price and/or tax withholding obligations with respect thereto, (B) the acquisition of its equity awards, respectively, in connection with the forfeiture of such awards and (C) transactions between Gatos and a wholly-owned Subsidiary of Gatos, or between wholly-owned Subsidiaries of Gatos, or between First Majestic and a wholly-owned Subsidiary of First Majestic or between wholly-owned Subsidiaries of First Majestic, as applicable;

 

•

incur or assume any indebtedness for borrowed money except for (A) any indebtedness for borrowed money among it and its wholly-owned Subsidiaries or among wholly-owned Subsidiaries, (B) indebtedness for borrowed money incurred to replace, renew, extend, refinance or refund any existing indebtedness for borrowed money of it or its Subsidiaries, in each case in an amount not to exceed the amount of the indebtedness replaced, renewed, extended, refinanced or refunded, (C) guarantees by Gatos or First Majestic of indebtedness for borrowed money of its respective wholly-owned Subsidiaries or guarantees by wholly-owned Subsidiaries of indebtedness for borrowed money of Gatos or First Majestic, as applicable, or any wholly-owned Subsidiary of Gatos or First Majestic, as applicable, (D) indebtedness incurred under the Gatos Credit Agreement (in the case of Gatos and its Subsidiaries) and (E) indebtedness incurred in the ordinary course of business in an aggregate amount not to exceed $5,000,000, in the case of Gatos and its Subsidiaries, and $10,000,000, in the case of First Majestic and its Subsidiaries;

 

•

make any loans to any other person, except for (A) loans among Gatos and a wholly-owned Subsidiary of Gatos, or between wholly-owned Subsidiaries of Gatos, or among First Majestic and a wholly-owned Subsidiary of First Majestic or between wholly-owned Subsidiaries of First Majestic, as applicable and (B) extensions of credit to customers in the ordinary course of business;

 

•

sell, lease (as lessor), license, transfer or otherwise dispose of, or subject to any lien (other than permitted liens), any properties or assets of its and its Subsidiaries that are material to Gatos or First Majestic and their respective Subsidiaries, as applicable, taken as a whole (including, without limitation, any mining rights of Gatos or First Majestic, as applicable), other than Gatos or First Majestic Intellectual Property, as applicable, except (A) sale and dispositions of raw materials, obsolete or surplus equipment, mine output and other inventories in the ordinary course of business, (B) encumbrances and liens that are incurred in connection with indebtedness permitted to be incurred, (C) for transactions among Gatos and a wholly-owned Subsidiary of Gatos, or among wholly-owned Subsidiaries of Gatos, or between First Majestic and a wholly-owned Subsidiary of First Majestic or between wholly-owned Subsidiaries of First Majestic, as applicable, and (D) for sales of assets that do not exceed, in the aggregate, a fair market value of $5,000,000, in the case of Gatos and its Subsidiaries, and $10,000,000, in the case of First Majestic and its Subsidiaries;

 

•

(A) sell, license, sublicense, covenant not to assert, allow to lapse, fail to maintain, transfer, or otherwise abandon or dispose of, or subject to any lien (other than permitted liens), any Gatos or First Majestic Intellectual Property, as applicable, that is material to it and its Subsidiaries’ respective business, taken as a whole, except for non-exclusive licenses granted in the ordinary course of business (1) to customers or (2) to vendors or service providers for use for the benefit of it or its Subsidiaries; or (B) disclose to any third parties any trade secrets or material confidential information of it or its Subsidiaries, except pursuant to reasonable protective confidentiality agreements;

 

•

compromise or settle any action against it or its Subsidiaries other than with respect to transaction litigation, or any action related to tax, other than the compromise or settlement of actions made (A) in the case of Gatos and its Subsidiaries, in the ordinary course of business or (B) in the case of Gatos and First Majestic and their respective Subsidiaries, that: (1) would not result in liability in excess of $10,000,000 in the aggregate, in the case of Gatos, and $20,000,000 in the aggregate, in the case of First Majestic, or such greater amount reserved therefor or reflected in the Gatos SEC documents or First Majestic SEDAR+ documents (excluding any amounts that insurance companies have agreed to pay under existing insurance policies), as applicable, (2) contains a full release of it or its applicable Subsidiaries and (3) does not involve an admission of criminal wrongdoing or impose any material injunctive or other non-monetary remedy or a material restriction on it and its Subsidiaries (other than customary release, confidentiality and non-disparagement obligations);

 

 

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make or change any material tax election, change any tax accounting period for purposes of a material tax or material method of tax accounting, file any material amended tax return, settle or compromise any audit or proceeding relating to material taxes or agree to an extension or waiver of the statute of limitations with respect to a material amount of taxes, enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of U.S. state or local, or non-U.S. Law) with respect to any material tax, enter into any tax sharing, tax allocation, tax indemnification or similar agreement (other than (1) any agreements entered into in the ordinary course of business that are not primarily related to taxes or (2) any such agreement to which it or any of its Subsidiaries are the only counterparties), make a written request for a material tax ruling to any Governmental Entity or surrender any right to claim a material tax refund, except in each case with respect to any such actions taken in the ordinary course of business, or that are not reasonably expected to materially increase its and its Subsidiaries’ tax liabilities;

 

•

make any new capital expenditure or expenditures in excess of $3,000,000 individually or $5,000,000 in the aggregate, in the case of Gatos, and $6,000,000 individually or $10,000,000 in the aggregate, in the case of First Majestic, that are not consistent with Gatos’ or First Majestic’s respective budget plan provided to the other party prior to the execution of the Merger Agreement or Gatos’ or First Majestic’s 2025 budget plan, as applicable;

 

•

except in the ordinary course of business, (A) enter into any contract that would, if entered into prior to the date of the Merger Agreement, be a “material contract” as defined in the Merger Agreement with respect to Gatos and its Subsidiaries or First Majestic and its Subsidiaries, as appliable, or (B) materially modify, materially amend or terminate or fail to renew any “material contract” as defined in the Merger Agreement with respect to Gatos and its Subsidiaries or First Majestic and its Subsidiaries, as appliable;

 

•

authorize, recommend, propose or announce an intention to adopt or effect a plan of complete or partial liquidation, dissolution, consolidation, restructuring, recapitalization, re-domiciliation or other reorganization other than transactions involving only immaterial wholly-owned Subsidiaries or file a petition in bankruptcy;

 

•

materially reduce the amount of insurance coverage or fail to use commercially reasonable efforts to renew any material existing insurance policies;

 

•

in the case of Gatos, amend or otherwise modify in any material respect any engagement letter between Gatos and any financial advisor described in the Gatos disclosure letter or enter into a new engagement letter with any such financial advisor; or

 

•

agree, in writing or otherwise, to take any of the foregoing actions.

Agreement Not to Solicit Other Offers

During the Interim Period, each of Gatos and First Majestic have agreed not to, and to cause its Subsidiaries and its and their respective officers and not to, and will instruct and use its reasonable best efforts to cause its and its Subsidiaries’ other representatives not to, directly or indirectly:

 

•

solicit, initiate, knowingly encourage or knowingly facilitate any Competing Proposal (as defined below) or any inquiry, proposal or offer which would reasonably be expected to lead to a Competing Proposal;

 

•

participate in or engage in any negotiations or discussions (other than to state that they are not permitted to have discussions) regarding, or furnish to any person (other than First Majestic, Merger Sub and their representatives, in the case of Gatos, and Gatos and its representatives, in the case of First Majestic) any non-public information relating to it or its Subsidiaries in connection with any Competing Proposal or any inquiry, proposal or offer which would reasonably be expected to lead to a Competing Proposal; or

 

•

waive, terminate, modify or release any person from any provision of any “standstill” or similar agreement or obligation, except in the event, in the case of Gatos, the Gatos Board (acting upon the recommendation of the Gatos Special Committee) or the Gatos Special Committee, and in the case of First Majestic, the First Majestic Board, determines in good faith after consultation with its outside legal counsel that the failure to take such action would reasonably be expected to be inconsistent with the fiduciary duties of the members of its board of directors or, in the case of Gatos, the Gatos Special Committee under applicable Law.

 

 

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Notwithstanding these limitations, the Merger Agreement provides that if, at any time prior to obtaining the approval of its stockholders, Gatos or First Majestic receives a bona fide, unsolicited Competing Proposal from any person that did not result from a material breach of such party’s non-solicitation obligations, which such party’s board of directors or, in the case of Gatos, the Gatos Special Committee determines in good faith after consultation with outside legal and financial advisors, constitutes or would reasonably be expected to lead to or result in a Superior Proposal (as defined below), then Gatos or First Majestic, as applicable, may:

 

•

furnish non-public information regarding, and/or provide access to the business, properties, assets, books or records of, it and its Subsidiaries to the person making such Competing Proposal and such person’s representatives if, and only if, prior to so furnishing such information, it receives from such person an acceptable confidentiality agreement as contemplated by the Merger Agreement (provided that it also provides the other party any such information that is provided to such person that was not previously provided to the other party within 48 hours of providing to such person); and

 

•

engage in discussions or negotiations with such person regarding the Competing Proposal.

A “Competing Proposal” means with respect to a party, other than a party to the Merger Agreement or its Affiliates, whether or not in writing, any inquiry, proposal or offer from, or public expression of intention by, any person or “group” (as defined in the Section 13(d) of the U.S. Exchange Act and the rules promulgated thereunder) of persons relating to (i) any acquisition or purchase (or any lease, royalty, agreement, joint venture, long-term supply agreement or other arrangement having the same economic effect as an acquisition or purchase), direct or indirect, through one or more transactions of (A) twenty percent (20%) or more of the consolidated assets of such party and its Subsidiaries taken as a whole (based on the most recent consolidated financial statements of such party filed with the SEC or SEDAR+, as the case may be), or (B) twenty percent (20%) or more of any class of equity or voting securities (and/or securities convertible into, or exchangeable or exercisable for such voting or equity securities) of such party or twenty percent (20%) or more of any class of equity or voting securities (and/or securities convertible into, or exchangeable or exercisable for such voting or equity securities) of one or more Subsidiaries of such party whose assets, individually or in the aggregate, constitute twenty percent (20%) or more of the consolidated assets of such party and its Subsidiaries taken as a whole (based on the most recent consolidated financial statements of such party filed with the SEC or SEDAR+, as the case may be), (ii) any take-over bid, tender offer or exchange offer that, if consummated, would result in such person or group owning (A) twenty percent (20%) or more of any class of equity or voting securities (and/or securities convertible into, or exchangeable or exercisable for such voting or equity securities) of such party or twenty percent (20%) or (B) more of any class of equity or voting securities (and/or securities convertible into, or exchangeable or exercisable for such voting or equity securities) of one or more Subsidiaries of such party whose assets, individually or in the aggregate, constitute twenty percent (20%) or more of the consolidated assets of such party and its Subsidiaries taken as a whole (based on the most recent consolidated financial statements of such party filed with the SEC or SEDAR+, as the case may be), or (iii) a plan of arrangement, Merger, amalgamation, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the issuance, acquisition or conversion of, or the disposition of, (A) twenty percent (20%) or more of any class of equity or voting securities (and/or securities convertible into, or exchangeable or exercisable for such voting or equity securities) of such party or twenty percent (20%) or (B) more of any class of equity or voting securities (and/or securities convertible into, or exchangeable or exercisable for such voting or equity securities) of one or more Subsidiaries of such party whose assets, individually or in the aggregate, constitute twenty percent (20%) or more of the consolidated assets of such party and its Subsidiaries taken as a whole (based on the most recent consolidated financial statements of such party filed with the SEC or SEDAR+, as the case may be).

A “Superior Proposal” means any bona fide, written Competing Proposal (with references to 20% being deemed to be replaced with references to 50%) not solicited in breach of the non-solicitation obligations set forth in the Merger Agreement, which such party’s board of directors or, in the case of Gatos, the Gatos Special Committee determines in good faith after consultation with outside legal and financial advisors to be (i) more favourable from a financial point of view to their respective shareholders than the Merger, taking into account all relevant factors (including any adjustment to the terms and conditions proposed by the other party in response to such proposal) and (ii) reasonably capable of being completed as proposed on a timely basis, in the case of each of clauses (i)

 

 

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and (ii), taking into account the certainty and timing of closing, financing arrangements, the identity of the party making the proposal and such other legal, financial, regulatory and other aspects of such proposal as such party’s board of directors or, in the case of Gatos, the Gatos Special Committee deems in good faith relevant.

The Merger Agreement also requires each party to (i) notify the other party in writing promptly, and in no event later than 24 hours, after receipt of any Competing Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to a Competing Proposal and indicate the identity of the person making the Competing Proposal and the material terms (including price) and conditions of any such Competing Proposal, and (ii) keep the other party reasonably informed of the status and material terms and conditions (including any amendments or proposed amendments to such material terms or conditions) of any such Competing Proposal.

Each of Gatos and First Majestic is promptly required to cease, and cause its Subsidiaries and its and their respective directors and officers to cease, and instruct and use its reasonable best efforts to cause its and its Subsidiaries’ other representatives to cease, any and all existing discussions or negotiations with any third parties (including provision of or access to any non-public information to any third parties) conducted before entering into the Merger Agreement with respect to any Competing Proposal. Each of Gatos and First Majestic are required to promptly terminate access by any other person and its representatives to any physical or electronic data room, in each case, relating to or in connection with, any Competing Proposal, and request any person that has executed a confidentiality or non-disclosure agreement at any time within the 12 month period immediately prior to the date of the Merger Agreement to return or destroy all confidential information in the possession of such person and its representatives.

Change of Recommendation

During the Interim Period, except as otherwise specifically provided for in the non-solicitation provisions set forth in the Merger Agreement, neither party’s board of directors nor any committee thereof may:

 

•

approve, recommend or declare advisable any Competing Proposal or propose publicly to do so;

 

•

fail to include (i) in the case of the Gatos Board, its recommendation to the Gatos Stockholders to adopt the Merger Agreement (the “Gatos Board Recommendation”) in the Proxy Statement/Prospectus or (ii) in the case of the First Majestic Board, its recommendation to the First Majestic Shareholders to approve the Share Issuance Resolution in connection with the Merger (the “First Majestic Board Recommendation”) in this Management Information Circular;

 

•

withdraw or withhold (or modify, qualify or amend in any manner adverse to the other party), or propose publicly to withdraw or withhold (or modify, qualify or amend in any manner adverse to the other party) the Gatos Board Recommendation or First Majestic Board Recommendations, as applicable;

 

•

in the case of a Gatos Competing Proposal that is structured as a tender offer or exchange offer pursuant to Rule 14d-2 under the U.S. Exchange Act for outstanding shares of Gatos Common Stock (other than by First Majestic or an Affiliate of First Majestic), fail to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against acceptance of such tender offer or exchange offer by the Gatos Stockholders on or prior to the earlier of (i) three business days prior to the date of the Gatos Special Meeting and (ii) 10 business days after commencement of such tender offer or exchange offer;

 

•

fail to reaffirm the Gatos Board Recommendation or First Majestic Board Recommendation, as applicable, within five business days after the other party so requests in writing (or such fewer number of days as remains prior to the date that is three business days prior to the Gatos Special Meeting) (other than, in the case of Gatos, a Competing Proposal pursuant to the immediately preceding bullet); or

 

•

approve or enter into any letter of intent or other contract relating to any Competing Proposal, other than an acceptable confidentiality agreement.

The taking of any of the actions set forth in the first five bullets above will constitute a “Change of Recommendation”.

 

 

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Prior to the receipt of the Gatos Stockholder Approval, in the case of Gatos, or the First Majestic Shareholder Approval, in the case of First Majestic, the Gatos Board (acting upon the recommendation of the Gatos Special Committee) or Gatos Special Committee or First Majestic Board, as applicable may:

 

•

make a Change of Recommendation following receipt of a Competing Proposal that did not result from a material breach of the non-solicitation obligations set forth in the Merger Agreement, and which the Gatos Board (acting upon the recommendation of the Gatos Special Committee) or Gatos Special Committee or First Majestic Board determines in good faith after consultation with outside legal and financial advisors is or is reasonably likely to lead to a Superior Proposal (or continues to be a Superior Proposal following the notice of change period); or

 

•

make a Change of Recommendation in response to the occurrence of an intervening event;

provided, in the case of each of the foregoing bullets, if and only if, the Gatos Board (acting upon the recommendation of the Gatos Special Committee) or Gatos Special Committee or First Majestic Board has determined in good faith, after consultation with outside legal counsel, that the failure to take such action would reasonably be expected to be inconsistent with the fiduciary duties of the members of the Gatos Board or Gatos Special Committee or First Majestic Board, as applicable, under applicable Law.

No party is permitted to make a Change of Recommendation pursuant to the foregoing unless:

 

•

such party has provided the other party with four business days’ prior written notice (or, in the case of such notice in respect of a material amendment to Superior Proposal for which it previously provided such a notice, two business days’ prior written notice) advising the other party that its board of directors or, in the case of Gatos, the Gatos Special Committee intends to take such action and contemporaneously provided to the other party (A) in the case of a Superior Proposal, the identity of the person making the Superior Proposal and the material terms and conditions of such Superior Proposal and, if available, a copy of any proposed agreements for such Superior Proposal, or (B) in the case of an Intervening Event (as defined below), a description in reasonable detail of such Intervening Event; and

 

•

during such initial four business day period (or, if applicable, any subsequent two business day period) and ending at 11:59 p.m. (New York City time) on such fourth (4th) business day following delivery of the relevant notice (or, if applicable, second (2nd) business day), (A) such party negotiates with the other party and its representatives in good faith to enable the other party to determine whether to propose revisions to the terms of the Merger Agreement or any other agreement related to the transactions such that, in the case of a Superior Proposal, such Competing Proposal would no longer constitute a Superior Proposal or, in the case of an Intervening Event, the failure to make such Change of Recommendation in response to such Intervening Event would no longer be expected to be inconsistent with the fiduciary duties of the members of its board of directors or, in the case of, the Gatos Special Committee under applicable Law, and (B) such party considers in good faith any proposal by the other party to amend the terms and conditions of the Merger Agreement or any other agreement related to the transactions such that, in the case of a Superior Proposal, such Competing Proposal would no longer constitute a Superior Proposal or, in the case of an Intervening Event, the failure to make such Change of Recommendation in response to such Intervening Event would no longer be expected to be inconsistent with the fiduciary duties of the members of its board of directors or, in the case of Gatos, the Gatos Special Committee under applicable Law.

None of the foregoing will prohibit Gatos or First Majestic from disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the U.S. Exchange Act (or directors’ circular required by Canadian Securities Laws), or from issuing a “stop, look and listen” communication or similar communication of the type contemplated by Rule 14d-9(f) under the U.S. Exchange Act; provided, that the foregoing does not permit either party’s board of directors or, in the case of Gatos, the Gatos Special Committee to recommend to its stockholders to tender any securities in connection with any tender offer or exchange offer that is a Competing Proposal or otherwise make a Change of Recommendation except in compliance with the terms of the Merger Agreement.

As further described in the section below entitled “The Merger Agreement – Expenses and Termination Fee” if (i) First Majestic terminates the Merger Agreement due to the Gatos Board or Gatos Special Committee making a

 

 

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Change of Recommendation, or if Gatos terminates the Merger Agreement to enter into a definitive agreement providing for a Superior Proposal, Gatos will be required to pay First Majestic a termination payment of $28.0 million in cash and (ii) if Gatos terminates the Merger Agreement due to the First Majestic Board making a Change of Recommendation or if First Majestic terminates the Merger Agreement to enter into a definitive agreement providing for a Superior Proposal, First Majestic will be required to pay Gatos a termination payment of $46.0 million in cash.

For purposes of the Merger Agreement, an “Intervening Event” means, with respect to either party, any material event, fact, circumstance, effect, development or occurrence that was not known to, or reasonably foreseeable by, such party’s board of directors or, in the case of Gatos, the Gatos Special Committee as of the date of the Merger Agreement or, if known, the material consequences of which were not known or reasonably foreseeable as of the date of the Merger Agreement; provided that none of the following events, changes or developments will constitute an Intervening Event:

 

•

the receipt, existence or terms of any Competing Proposal;

 

•

changes in the market price or trading volume of such party’s stock or the fact that such party meets or exceeds (or fails to meet or exceed) internal or published estimates, projections, forecasts or predictions for any period; provided, further that the exceptions contained in the foregoing proviso shall not apply to the underlying causes giving rise to, or contributing to, such event, change or development or prevent any of such underlying causes from being taken into account in determining whether an Intervening Event has occurred;

 

•

changes after the date hereof in general United States, Mexico, Canada or global economic conditions or conditions (or changes therein) in any industry or industries in which either party operates (including any change (on a current or forward basis) in the price of silver or changes in commodity prices or general market prices affecting the mining industry generally); or

 

•

changes after the date hereof affecting financial, credit or capital market conditions or changes in interest or exchange rates.

Preparation of the Form F-4, the Proxy Statement/Prospectus and First Majestic Circular; Gatos Special Meeting and First Majestic Special Meeting

Gatos will, in accordance with applicable law and its governing documents, establish a record date for, duly call, and give notice of the Gatos Special Meeting as promptly as practicable and mail the Proxy Statement/Prospectus to its stockholders entitled to vote at the Gatos Special Meeting as soon as practicable after the Form F-4 is declared effective by the SEC (or such later date as the parties shall agree). Unless the Gatos Board or the Gatos Special Committee has made a Change of Recommendation in compliance with the provisions of the Merger Agreement, Gatos shall, through the Gatos Board (acting upon the recommendation of the Gatos Special Committee), make the Gatos Board Recommendation, include such recommendation in the Proxy Statement/Prospectus and solicit and use its reasonable best efforts to obtain the Gatos Stockholder Approval. Gatos has the right, following consultation with First Majestic, to make (and, if so requested by First Majestic, shall be required to make) one or more successive postponements or adjournments of the Gatos Special Meeting of not more than 15 days individually if (i) on a date for which the Gatos Special Meeting is scheduled, (A) there are insufficient shares of Gatos Common Stock represented to constitute a quorum necessary to conduct the business of such meeting or (B) Gatos has not received proxies representing a sufficient number of shares of Gatos Common Stock to obtain the Gatos Stockholder Approval, whether or not a quorum is present, or (ii) such adjournment or postponement is required by applicable law, including to the extent the Gatos Board has determined in good faith after consultation with outside counsel that such adjournment or postponement is required under applicable law to ensure that any required supplement or amendment to the Proxy Statement/Prospectus or the Form F-4 is provided or made available to Gatos Stockholders or to permit dissemination of information which is material to stockholders voting at the Gatos Special Meeting and to give Gatos Stockholders sufficient time to evaluate any such supplement or amendment or other information. The Gatos Special Meeting will not be postponed or adjourned pursuant to clause (i) of the foregoing sentence to a date that is in the aggregate more than 30 days after the date on which the Gatos Special Meeting was originally scheduled. Without the prior written consent of First Majestic, the adoption of the Merger Agreement shall be the only matter

 

 

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(other than matters of procedure and matters required by applicable Law to be voted on by Gatos’ Stockholders in connection with the authorization of the Merger Agreement) that Gatos shall propose to be acted on by the Gatos Stockholders at the Gatos Special Meeting.

First Majestic will, in accordance with applicable Law and its governing documents, establish a record date for, duly call, and give notice of the First Majestic Special Meeting as promptly as practicable and send the First Majestic Management Information Circular to the First Majestic Shareholders entitled to vote at the First Majestic Special Meeting and hold the First Majestic Special Meeting as soon as practicable after the Form F-4 is declared effective by the SEC (or such later date as the parties shall agree). Unless the First Majestic Board has made a Change of Recommendation in compliance with the provisions of the Merger Agreement, First Majestic shall, through the First Majestic Board make the First Majestic Board Recommendation, include such recommendation in the Management Information Circular and solicit and use its reasonable best efforts to obtain the First Majestic Shareholder Approval. First Majestic has the right, following consultation with Gatos, to make (and, if so requested by Gatos, shall be required to make) one or more successive postponements or adjournments of the First Majestic Special Meeting of not more than 15 days individually if (i) on a date for which the First Majestic Special Meeting is scheduled, (A) there are insufficient First Majestic Common Shares represented to constitute a quorum necessary to conduct the business of such meeting or (B) First Majestic has not received proxies representing a sufficient number of First Majestic Common Shares to obtain the First Majestic Shareholder Approval, whether or not a quorum is present, or (ii) such adjournment or postponement is required by applicable Law, including to the extent the First Majestic Board has determined in good faith after consultation with outside counsel that such adjournment or postponement is required under applicable Law to ensure that any required supplement or amendment to the First Majestic Management Information Circular is provided or made available to First Majestic Shareholders or to permit dissemination of information which is material to shareholders voting at the First Majestic Special Meeting and to give First Majestic Shareholders sufficient time to evaluate any such supplement or amendment or other information. The First Majestic Special Meeting will not be postponed or adjourned pursuant to clause (i) of the foregoing sentence to a date that is in the aggregate more than 30 days after the date on which the First Majestic Special Meeting was originally scheduled. Without the prior written consent of Gatos, the issuance of the First Majestic Common Shares shall be the only matter (other than matters of procedure and matters required by applicable Law to be voted on by First Majestic’s Stockholders in connection with the authorization of the Merger Agreement) that First Majestic shall propose to be acted on by the First Majestic Shareholders at the First Majestic Special Meeting.

Unless the Merger Agreement has been terminated in accordance with its terms, (i) the Gatos Special Meeting shall be convened and the Merger Agreement shall be submitted for authorization by the stockholders of Gatos at the Gatos Special Meeting (notwithstanding any Change of Recommendation permitted by the Merger Agreement) and (ii) the First Majestic Special Meeting shall be convened and the issuance of the First Majestic Common Shares shall be submitted for approval by the First Majestic Shareholders at the First Majestic Special Meeting.

Gatos and First Majestic will use their respective reasonable best efforts to hold the Gatos Special Meeting and the First Majestic Special Meeting as closely together in time as practicable and on the same date and as soon as reasonably practicable after the date of the Merger Agreement.

Reasonable Best Efforts

Subject to certain exceptions and qualifications described in the Merger Agreement, each party will use its reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, and assist and cooperate with the other party in doing, all things necessary, proper or advisable to consummate the Merger and the other transactions contemplated by the Merger Agreement as promptly as practicable after the date of the Merger Agreement, including taking all actions necessary to cause the applicable conditions to closing to be satisfied and executing and delivering any additional instruments necessary to consummate the Merger and the other transactions contemplated by the Merger Agreement.

Each party will (i) use its reasonable best efforts to make the appropriate filings under Mexico’s Antitrust Law as soon as reasonably practicable but in no event later than 20 business days after the date of the Merger

 

 

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Agreement, (ii) cooperate and consult with each other in connection with any filing or submission and in connection with any investigation or other inquiry, (iii) promptly inform the other party of any material communication given by the Antitrust Division of COFECE or other Governmental Entity, and any material communication received or given in connection with any proceeding by a private party, under any antitrust law; (iv) permit the other party a reasonable opportunity to review in advance of any material communication that it gives to, and consult with each other in advance of any meeting with, COFECE or other Governmental Entity, or in the case of any proceeding by a private party under antitrust law, such private party and (v) to the extent permitted by any applicable Governmental Entity or other person, give the other party a reasonable opportunity to attend and participate in any in-person meetings with COFECE or other Governmental Entity or other person with respect to the transactions contemplated by the Merger Agreement.

Each of First Majestic and Gatos will not, and will cause their respective Affiliates not to, except as permitted by or provided for in the Merger Agreement, without the prior written consent of the other party, take or cause to be taken any action that could reasonably be expected to: (i) impose any delay in the obtaining of, or increase the risk of not obtaining, any required governmental consents contemplated by the Merger or the expiration or termination of any applicable waiting period; (ii) increase the risk of any Governmental Entity entering an order prohibiting the transactions contemplated by the Merger Agreement; (iii) increase the risk of not being able to remove any such order on appeal or otherwise; (iv) materially delay or prevent the consummation of the transactions contemplated by the Merger Agreement; or (v) cause any of the representations or warranties of First Majestic and Merger Sub or Gatos, respectively, to become inaccurate in any material respect or any of the covenants of First Majestic and Merger Sub or Gatos, respectively, to be breached in any material respect or result in the failure to be satisfied of any of the conditions to closing.

First Majestic will, and will cause its Affiliates to, use their reasonable best efforts to avoid or eliminate each and every impediment under applicable Law so as to enable the consummation of the transactions contemplated by the Merger Agreement to occur as soon as reasonably possible (and in any event no later than the Outside Date), including taking all actions requested by any Governmental Entity or necessary to resolve any objections that may be asserted by any Governmental Entity with respect to the transactions contemplated by the Merger Agreement, except to the extent that such action or actions would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the business, results of operations or financial condition of First Majestic, the First Majestic Subsidiaries, Gatos and the Gatos Subsidiaries, taken as a whole. Neither First Majestic nor the First Majestic Subsidiaries shall be obligated or required to take any action to directly or indirectly dispose of any interest in the San Dimas Silver/Gold Mine, Santa Elena Silver/Gold Mine or La Encantada Silver Mine.

Indemnification; Exculpation and Insurance

For not less than six years from and after the Effective Time, First Majestic will cause the Surviving Corporation to indemnify and hold harmless all past and present directors, officers and employees of Gatos and its Subsidiaries, and each director, officer, member, trustee or fiduciary of another person (but only to the extent that such director, officer, member, trustee or fiduciary is or was serving in such capacity at the request of Gatos) (the ”Indemnified Parties”) against any costs or expenses, judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with, arising out of or otherwise related to any actual or threatened action or investigation in connection with, arising out of or otherwise related to any acts or omissions occurring or alleged to have occurred at or prior to the Effective Time in connection with such Indemnified Party’s service as an officer, director or employee of Gatos or any of its Subsidiaries or of any persons serving at the request thereof, to the fullest extent permitted by law and provided pursuant to Gatos’ or its Subsidiaries’ governing documents or any indemnification or similar agreements in existence on the date of the Merger Agreement.

All rights to indemnification, exculpation and advancement in existence on the date of the Merger Agreement will survive the Merger and remain in effect for six years following the completion of the Merger and no such rights may be amended, modified or repealed in any manner that would adversely affect the rights or protections thereunder of any such Indemnified Party.

 

 

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First Majestic will cause the Surviving Corporation to maintain, for an aggregate period of not less than six years from the Effective Time, the current directors’ and officers’ liability insurance policy maintained by Gatos or a tail policy with respect to claims arising from facts or events occurring at or prior to the Effective Time; however, the Surviving Corporation shall not be required to expend more than 400% of the last annual premium for such policy.

Certain United States Tax Matters

First Majestic and Gatos intend that, for U.S. federal, and applicable state and local, income tax purposes, (i) the Merger qualifies as a “reorganization” under Section 368(a) of the Code to which each of First Majestic, Merger Sub, and Gatos are parties under Section 368(b) of the Code and (ii) the Merger will not result in the recognition of gain under Section 367(a)(1) of the Code (other than for any stockholder that would be a “five-percent transferee shareholder” (within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii)) of First Majestic following the Merger that does not enter into a five-year gain recognition agreement as provided under Treasury Regulations Section 1.367(a)-8 (a “GRA”)) (clauses (i) and (ii) are referred to in the Merger Agreement as the ”Intended Tax Treatment”). The Merger Agreement is intended to be, and is adopted as, a plan of reorganization for purposes of Sections 354, 361 and 368 of the Code and within the meaning of Treasury Regulations Section 1.368-2(g). The Merger will be reported by the parties for all applicable tax purposes in accordance with the Intended Tax Treatment, unless otherwise required by applicable Law or a Governmental Entity as a result of a “determination” within the meaning of Section 1313(a) of the Code.

The obligation of Gatos to complete the Merger is conditioned upon the receipt of an opinion, dated as of the Closing Date, from White & Case LLP (or other legal counsel selected by Gatos), to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. This opinion will be based on representations, warranties and covenants contained in representation letters provided by First Majestic and Gatos and on customary factual assumptions, all of which must be consistent with the state of existing facts as of the Effective Time of the Merger.

First Majestic and the Surviving Corporation have agreed to provide any information in the possession of First Majestic or the Surviving Corporation or otherwise reasonably ascertainable or obtainable which is reasonably requested by a Gatos Stockholder that has entered into a GRA with respect to the Merger and notified First Majestic in writing that it has entered into the GRA in order to comply with the filing requirements applicable to such GRA. First Majestic and the Surviving Corporation have agreed to use commercially reasonable efforts to inform any such Gatos Stockholder of the occurrence of any material events that would reasonably be expected to affect any such Gatos Stockholder’s GRA.

Employee Benefits Matters

For at least one year following the Closing Date, First Majestic has agreed to provide each individual who is employed by Gatos or its Subsidiaries as of immediately prior to the Effective Time of the Merger (for so long as such individual is employed by Gatos or its Subsidiaries during such one year period) (the ”Continuing Employees”) with the following: (i) a base salary or wage rate level and cash incentive opportunities at least equal to the base salary or hourly wage level and cash incentive opportunities to which they were entitled immediately prior to the completion of the Merger and (ii) other benefits, perquisites and terms and conditions of employment that are substantially similar and no less favourable than such employees were entitled to receive immediately prior to the completion of the Merger, but in no cases, any less generous than required pursuant to applicable Law.

First Majestic, or one of its Affiliates, shall (i) cause any pre-existing conditions or limitations and eligibility waiting periods under any group health plans in which Continuing Employees are eligible to participate immediately following the Closing Date (including any Gatos benefit plans or group health plans of First Majestic or any of its Affiliates (the ”First Majestic Benefit Plans”)) to be waived with respect to Continuing Employees and their eligible dependents, (ii) give each Continuing Employee credit for the plan year in which the Closing occurs towards applicable deductibles and annual out-of-pocket limits for medical expenses incurred prior to the Closing

 

 

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for which payment has been made under any group health plans in which Continuing Employees are eligible to participate immediately following the Closing Date and (iii) to the extent that it would not result in a duplication of benefits and to the extent that such service was recognized under a similar employee benefit plan, give each Continuing Employee service credit for such Continuing Employee’s employment with Gatos and its Subsidiaries for purposes of vesting, benefit accrual and eligibility to participate under each applicable First Majestic Benefit Plan, as if such service had been performed with First Majestic or one of its Affiliates or predecessors.

First Majestic will permit, or cause its Affiliates to permit, the Continuing Employees to use all vacation, sick leave and other paid personal time that such Continuing Employees have accrued, but have not used, as of immediately prior to the Closing in accordance with the terms of vacation, sick leave and paid personal time programs that are not less favourable to the Continuing Employees than those in effect immediately prior to the Closing Date. First Majestic will recognize and assume, or shall cause to be recognized and assumed, all liabilities with respect to accrued but unused vacation, sick leave and paid personal time for all Continuing Employees.

The Merger Agreement provides that nothing contained therein shall (i) confer upon any Continuing Employee any rights or remedies, including any right to employment or continued employment for any period or terms of employment, (ii) be interpreted to prevent or restrict First Majestic or any of its Affiliates from modifying or terminating the employment or terms of employment of any Continuing Employee, including the amendment or termination of any employee benefit or compensation plan, program or arrangement, after the Closing Date or (iii) be treated as an amendment or other modification of any Gatos benefit plan or other employee benefit plan or arrangement.

Other Covenants and Agreements

The Merger Agreement contains certain other covenants and agreements, including covenants and agreements requiring, among other things and subject to certain exceptions and qualifications described in the Merger Agreement:

 

•

each party providing reasonable access to such party’s properties, offices, books, contracts and records, furnishing reasonably promptly to the other party information concerning its business, properties and personnel as such other party may reasonably request in connection with the consummation of the transactions contemplated by the Merger Agreement and cooperating in connection with such access and disclosure obligations;

 

•

each party agreeing to hold any non-public information in confidence in accordance with the terms of the confidentiality agreement between the parties;

 

•

each party to provide one another with prompt notice (i) of any written notice from any party to a material contract of such party, (ii) of any written notice from any Governmental Entity in connection with the transactions contemplated by the Merger Agreement and (iii) upon becoming aware of the occurrence of any fact, change, effect, development, circumstance, condition, state of facts, event or occurrence that would cause or result in any of the conditions to the Merger not being satisfied or the failure by such party to comply with, in any material respect, any covenant or agreement to be complied with by such party under the Merger Agreement;

 

•

Gatos to reasonably consult with First Majestic regarding the 2025 budget for Gatos and its Subsidiaries, including by providing a substantially final draft of such 2025 budget, in each case to the extent permitted by applicable Law;

 

•

mutual consent and review rights over any press release or other public announcement with respect to the Merger, subject to certain exceptions;

 

•

First Majestic to, as promptly as reasonably practicable, inform Gatos of any material communication received by First Majestic, its Subsidiaries or their respective legal counsel, accountants or other representatives in connection with certain tax matters from the Servicio de Administracion Tributaria and promptly inform Gatos of any material developments with respect to such tax matters;

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 90

The Merger Agreement

 

•

each party to (i) provide prompt written notice of any legal proceeding related to the Merger, (ii) allow the other party to participate (but not control) in the defense of such legal proceeding and (iii) not offer or agree to settle any legal proceeding without the other party’s prior written consent;

 

•

Gatos to reasonably cooperate with First Majestic and to use its reasonable best efforts to take all actions reasonably necessary, proper or advisable under applicable Laws and rules and policies of the NYSE and TSX to enable the delisting by the Surviving Corporation of the Gatos Common Stock from the NYSE and TSX as promptly as practicable after the Effective Time and the deregistration of the Gatos Common Stock under the U.S. Exchange Act as promptly as practicable after the Effective Time; and

 

•

First Majestic to take all action necessary to cause the First Majestic Common Shares to be issued in the Merger to be approved for listing on the NYSE and TSX prior to the Effective Time and Gatos to reasonably cooperate with First Majestic in the preparation of the materials to be submitted to the NYSE and TSX and the resolution of any comments received.

Nothing contained in the Merger Agreement shall give either Gatos or First Majestic, directly or indirectly, the right to control or direct the business or operations of the other party prior to the Effective Time and, prior to the Effective Time, each party shall exercise, consistent with the terms and conditions of the Merger Agreement, complete control and supervision over it and its subsidiaries’ respective business and operations.

Conditions to the Completion of the Merger

The respective obligations of each party to effect the Merger will be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any and all of which may be waived in writing in whole or in part by the relevant party to the extent permitted by law:

Conditions to the Obligations of Both Parties

 

•

the affirmative vote of the holders of at least a majority of the outstanding shares of Gatos Common Stock entitled to vote on the authorization of the Merger Agreement at the Gatos Special Meeting in favour of such authorization;

 

•

the approval of the issuance of the First Majestic Common Shares as Merger Consideration by simple majority of the votes cast by holders of First Majestic Common Shares present in person or by proxy at the First Majestic Special Meeting and entitled to vote at the First Majestic Special Meeting;

 

•

the effectiveness of the Form F-4 in accordance with the provisions of the U.S. Securities Act and the absence of any stop order suspending the effectiveness of the Form F-4 or proceeding to that effect shall have been commenced or threatened in writing by the SEC unless subsequently withdrawn;

 

•

the absence of any rule, regulation or other law or order entered, enacted, promulgated, enforced or issued by any Governmental Entity of competent jurisdiction which prevents, prohibits or makes illegal the consummation of the transactions contemplated by the Merger Agreement;

 

•

all required approvals or clearances pursuant to Mexico’s Antitrust Law having been received; and

 

•

the First Majestic Common Shares to be issued as Merger Consideration having been approved for listing on the NYSE, subject to official notice of issuance, and conditionally approved or authorized for listing on the TSX (subject only to customary listing conditions).

Conditions to the Obligations of First Majestic and Merger Sub

 

•

certain representations and warranties of Gatos relating to the absence of a Gatos Material Adverse Effect from December 31, 2023, through the date of the Merger Agreement being true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date;

 

•

certain representations and warranties of Gatos relating to its capitalization being true and correct in all respects, except for any de minimis inaccuracies, as of the date of the Merger Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case, as of such date);

 

 

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The Merger Agreement

 

•

certain representations and warranties of Gatos relating to qualification, organization, subsidiaries, certain rights with respect to the shares of capital stock, corporate authority relative to the Merger Agreement, and finders and brokers (without giving effect to any qualification as to materiality or Gatos Material Adverse Effect contained therein) being true and correct in all material respects as of the date of the Merger Agreement and the Closing Date (except to the extent expressly made as of an earlier date, in which case, as of such date);

 

•

each of the other representations and warranties of Gatos set forth in the Merger Agreement (without giving effect to any qualification as to materiality or Gatos Material Adverse Effect contained therein) being true and correct as of the date of the Merger Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case, as of such date), except where any failures of any such representations and warranties to be true and correct has not had, and would not reasonably be expected to have, individually or in the aggregate, a Gatos Material Adverse Effect;

 

•

Gatos having performed or complied in all material respects with the obligations, covenants and agreements required to be performed or complied with by it under the Merger Agreement at or prior to the Effective Time;

 

•

First Majestic having received a certificate signed on behalf of Gatos by a duly authorized executive officer of Gatos certifying that the conditions set forth in the bullets directly above have been satisfied; and

 

•

since the date of the Merger Agreement until the Effective Time, there having not occurred any change, effect, development, circumstance, condition, state of facts, event or occurrence that has had, or is reasonably likely to have, a Gatos Material Adverse Effect.

Conditions to the Obligations of Gatos

 

•

certain representations and warranties of First Majestic relating to the absence of a First Majestic Material Adverse Effect from December 31, 2023, through the date of the Merger Agreement being true and correct in all respects as of the date of the Merger Agreement and the Closing Date;

 

•

certain representations and warranties of First Majestic and Merger Sub relating to its capitalization being true and correct in all respects, except for any de minimis inaccuracies, as of the date of the Merger Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case, as of such date);

 

•

certain representations and warranties of First Majestic relating to qualification, organization, subsidiaries, certain rights with respect to the shares of capital stock, corporate authority relative to the Merger Agreement, and finders and brokers (without giving effect to any qualification as to materiality or First Majestic Material Adverse Effect contained therein) being true and correct in all material respects as of the date of the Merger Agreement and the Closing Date (except to the extent expressly made as of an earlier date, in which case, as of such date);

 

•

each of the other representations and warranties of First Majestic and Merger Sub set forth in the Merger Agreement (without giving effect to any qualification as to materiality or First Majestic Material Adverse Effect contained therein) being true and correct as of the date of the Merger Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case, as of such date), except where any failures of any such representations and warranties to be true and correct has not had, and would not reasonably be expected to have, individually or in the aggregate, a First Majestic Material Adverse Effect;

 

•

First Majestic and Merger Sub having performed or complied in all material respects with the obligations, covenants and agreements required to be performed or complied with by them under the Merger Agreement at or prior to the Effective Time;

 

•

Gatos having received a certificate signed on behalf of First Majestic by a duly authorized executive officer of First Majestic certifying that the conditions set forth in the bullets directly above have been satisfied;

 

•

Gatos having received an opinion from White & Case (or other legal counsel selected by Gatos), in form and substance reasonably satisfactory to Gatos, dated as of the Closing Date, to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Merger qualifies as a tax-deferred “reorganization” within the meaning of Section 368(a) of the Code; and

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 92

The Merger Agreement

 

•

since the date of the Merger Agreement until the Effective Time, there having not occurred any change, effect, development, circumstance, condition, state of facts, event or occurrence that has had, or is reasonably likely to have a First Majestic Material Adverse Effect.

Frustration of Closing Conditions

None of the parties may rely, as a basis for not consummating the Merger, on the failure of any condition set forth above to be satisfied if such failure was caused by such party’s material failure to comply with any provision of the Merger Agreement.

Termination of the Merger Agreement

The Merger Agreement may be terminated and the Merger and the other transactions may be abandoned at any time prior to the Effective Time, whether (except as expressly set forth below) before or after the Gatos Stockholder Approval or First Majestic Shareholder Approval, under the following circumstances:

 

•

by mutual written consent of First Majestic and Gatos;

 

•

by either First Majestic or Gatos, if there has been a breach by Gatos, in the case of a termination by First Majestic, or if there has been a breach by First Majestic or Merger Sub, in the case of a termination by Gatos, of any representation, warranty, covenant or agreement set forth in the Merger Agreement, which breach would result in certain conditions to consummation of the Merger not being satisfied (and such breach is not curable prior to the Outside Date or, if curable prior to the Outside Date, has not been cured within the earlier of (i) 45 days after the receipt of written notice from the non-breaching party or (ii) one business day before the Outside Date); provided that the Merger Agreement may not be terminated pursuant to this provision by any party if such party is then in material breach of any representation, warranty, covenant or agreement in the Merger Agreement;

 

•

by either First Majestic or Gatos, if the Closing has not occurred by 5:00 p.m., Eastern time, on April 30, 2025 (such date, as may be extended pursuant to the following proviso, the ”Outside Date”); provided, that in the event that on such date all of the conditions to closing have been satisfied or waived other than the conditions set forth in the provisions related to the absence of adverse laws or orders to the extent related to antitrust clearances, so long as such condition remains capable of being satisfied, the termination date will automatically be extended to 5:00 p.m. (Eastern time) on May 31, 2025; provided that the right to terminate the Merger Agreement pursuant to this provision shall not be available to any party whose breach of any representation, warranty, covenant or agreement in the Merger Agreement has been the cause of, or resulted in, the closing not occurring prior to the Outside Date;

 

•

by First Majestic, if, at any time prior to the receipt of the Gatos Stockholder Approval, the Gatos Board or any committee thereof has made a Gatos Change of Recommendation;

 

•

by Gatos, if, at any time prior to the receipt of the First Majestic Shareholder Approval, the First Majestic Board or any committee thereof has made a First Majestic Change of Recommendation;

 

•

by either Gatos or First Majestic if there is any rule, regulation or other law or order entered, enacted, promulgated, enforced or issued by any Governmental Entity of competent jurisdiction which prevents, prohibits or makes illegal the consummation of the transactions contemplated by the Merger Agreement and the adverse law or order has become final and non-appealable; provided that the right to terminate the Merger Agreement pursuant to this provision shall not be available to a party whose action or failure to act has been the primary cause of, or primarily resulted in, the action or event described in this provision occurring;

 

•

by either Gatos or First Majestic, if the Gatos Stockholder Approval has not been obtained at the Gatos Special Meeting or at any adjournment or postponement thereof, in each case at which a vote on such approval was taken; provided that the right to terminate the Merger Agreement pursuant to this provision shall not be available to any party where the failure to obtain such Gatos Stockholder Approval shall have been caused by a material breach by such party of the Merger Agreement;

 

•

by either First Majestic or Gatos, if the First Majestic Shareholder Approval has not been obtained at the First Majestic Special Meeting or at any adjournment or postponement thereof, in each case at which a vote on such

 

 

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The Merger Agreement

 

approval was taken; provided that the right to terminate the Merger Agreement pursuant to this provision shall not be available to any party where the failure to obtain such First Majestic Shareholder Approval shall have been caused by a material breach by such party of the Merger Agreement;

 

•

by Gatos, if, at any time prior to the receipt of the Gatos Stockholder Approval, the Gatos Board or the Gatos Special Committee has (i) effected a Gatos Change of Recommendation in accordance with the obligations set forth in the Merger Agreement in order to accept a Gatos Superior Proposal, (ii) entered into an acquisition agreement with respect to such Gatos Superior Proposal concurrently with the termination of the Merger Agreement, and (iii) paid the Gatos termination fee of $28.0 million to First Majestic in accordance with the terms of the Merger Agreement; and

 

•

by First Majestic, if, at any time prior to the receipt of the First Majestic Shareholder Approval, the First Majestic Board has (i) effected a First Majestic Change of Recommendation in accordance with the obligations set forth in the Merger Agreement in order to accept a First Majestic Superior Proposal, (ii) entered into an acquisition agreement with respect to such First Majestic Superior Proposal concurrently with the termination of the agreement and (iii) paid the First Majestic termination fee of $46.0 million to Gatos in accordance with the terms of the Merger Agreement.

Effect of Termination

If the Merger Agreement is terminated in accordance with its terms the Merger Agreement will become null and void and there will be no liability on the part of First Majestic, Gatos or Merger Sub, or any of their respective Subsidiaries, except under certain provisions of the Merger Agreement that will survive such termination, including, among others, certain provisions relating to the Merger, confidentiality, the confidentiality agreement, effect of termination, expenses, remedies and governing law; provided that no party shall be relieved from liability for its willful breach of its representations, warranties, covenants or agreements set forth in the Merger Agreement prior to such termination or for fraud (including the loss to the Gatos Stockholders of the benefits of the transactions contemplated by the Merger Agreement, including the loss of the premium offered to the Gatos Stockholders).

Expenses and Termination Fee

All fees and expenses incurred in connection with the Merger, the Merger Agreement and the other transactions will be paid by the party incurring such expenses, whether or not the Merger is consummated, except that (i) transfer taxes are borne by the Surviving Corporation and (ii) each of First Majestic and Gatos will bear and pay one-half the costs and expenses (other than the fees and expenses of each party’s attorneys and accountants, which will be borne by the party incurring such expenses) incurred by the parties in connection with (A) the filing, printing and mailing of the Form F-4, the First Majestic Management Information Circular and the Proxy Statement/Prospectus (including fees payable to the SEC or NYSE or TSX associated with filing such documents) and (B) payments required to be made to a Governmental Entity for the appropriate filings under Mexico’s Antitrust Law.

Gatos Termination Fee

Gatos will be obligated to pay a termination fee of $28.0 million in cash to First Majestic if:

 

•

the Merger Agreement is terminated by Gatos in order to enter into a Superior Proposal;

 

•

(i) the Merger Agreement is terminated in a manner set forth in any of the below provisions and (ii) concurrently or within 12 months after such termination Gatos consummates a Competing Proposal or enters into a definitive agreement providing for a Competing Proposal and later consummates such transaction (provided that, for purposes of this bullet, references to 20% in the definition of First Majestic Competing Proposal shall be deemed to be 50%):

 

•

(A) the Merger Agreement is terminated by First Majestic as a result of a terminable breach by Gatos and (B) a Gatos Competing Proposal has been publicly announced or otherwise received by the Gatos Board or the Gatos Special Committee prior to the time of the event giving rise to such termination right;

 

 

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The Merger Agreement

 

•

(A) the Merger Agreement is terminated by First Majestic or Gatos because the Merger is not completed by the Outside Date, (B) a Gatos Competing Proposal has been publicly announced or otherwise received by the Gatos Board or the Gatos Special Committee prior to the Outside Date and (C) (x) the First Majestic Shareholder Approval has been obtained (but not yet revoked), (y) the Gatos Stockholder Approval has not been obtained and (z) all other conditions set forth in the conditions to obligations of Gatos were satisfied or capable of being satisfied prior to such termination; or

 

•

(A) the Merger Agreement is terminated by First Majestic or Gatos because the Gatos Stockholder Approval is not obtained and (B) a Gatos Competing Proposal has been publicly announced at least two business days prior to the date of the Gatos Special Meeting; or

 

•

the Merger Agreement is terminated (i) by First Majestic or Gatos because the Gatos Stockholder Approval is not obtained following any time when First Majestic is entitled to terminate the Merger Agreement due to a Gatos Change of Recommendation or (ii) by First Majestic due to a Gatos Change of Recommendation.

First Majestic Termination Fee

First Majestic will be obligated to pay a termination fee of $46.0 million in cash to Gatos if:

 

•

the Merger Agreement is terminated by First Majestic in order to enter into a Superior Proposal;

 

•

(i) the Merger Agreement is terminated in a manner set forth in any of the below provisions and (ii) concurrently or within 12 months after such termination First Majestic consummates a Competing Proposal or enters into a definitive agreement providing for a Competing Proposal and later consummates such transaction (provided that, for purposes of this bullet, references to 20% in the definition of First Majestic Competing Proposal shall be deemed to be 50%):

 

•

(A) the Merger Agreement is terminated by Gatos as a result of a terminable breach by First Majestic and (B) a First Majestic Competing Proposal has been publicly announced or otherwise received by the First Majestic Board prior to the time of the event giving rise to such termination right;

 

•

(A) the Merger Agreement is terminated by First Majestic or Gatos because the Merger is not completed by the Outside Date, (B) a First Majestic Competing Proposal has been publicly announced or otherwise received by the First Majestic Board prior to the Outside Date and (C) (x) the Gatos Stockholder Approval has been obtained (but not yet revoked), (y) the First Majestic Shareholder Approval has not been obtained and (z) all other conditions set forth in the conditions to obligations of First Majestic were satisfied or capable of being satisfied prior to such termination; or

 

•

(A) the Merger Agreement is terminated by First Majestic or Gatos because the First Majestic Shareholder Approval is not obtained and (B) a First Majestic Competing Proposal has been publicly announced at least two business days prior to the date of the First Majestic Special Meeting; or

 

•

the Merger Agreement is terminated (i) by First Majestic or Gatos because the First Majestic Shareholder Approval is not obtained following any time when Gatos is entitled to terminate the Merger Agreement due to a First Majestic Change of Recommendation or (ii) by Gatos due to a First Majestic Change of Recommendation.

In no event shall either party be obligated to pay the termination fee on more than one occasion.

Amendment, Modification and Waiver

Amendment or Modification

Subject to compliance with applicable Law, the Merger Agreement may be amended, modified and supplemented by mutual agreement of the parties thereto in writing at any time before or after receipt of the requisite stockholder approvals; provided that after receipt of requisite stockholder approval, any amendment, modification, supplement or waiver of the Merger Agreement that requires the approval by Gatos Stockholders or First Majestic Shareholders, as applicable, under applicable Law, will be subject to such approval.

 

 

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The Merger Agreement

 

Waiver

At any time prior to the completion of the Merger, a party may, in writing, (i) extend the time for performance of any obligation or act of the other party, (ii) waive any inaccuracy in a representation or warranty of the other party or (iii) waive compliance by the other party with any of the agreements or conditions for the benefit of such party contained in the Merger Agreement. Any agreement on the part of First Majestic or Gatos to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of First Majestic or Gatos, as applicable. Any delay in exercising any right under the Merger Agreement will not constitute a waiver of such right.

Enforcement; Remedies

The parties to the Merger Agreement agreed that irreparable injury will occur in the event that any of the provision of the Merger Agreement is not performed in accordance with its specific terms or is otherwise breached and that prior to the termination of the Merger Agreement pursuant to the terms thereof, each party is entitled to an injunction or injunctions to prevent or remedy any breaches or threatened breaches of the Merger Agreement by any other party, to a decree or order of specific performance to specifically enforce the terms and provisions of the Merger Agreement (including the parties’ obligation to consummate the Merger) and to any further equitable relief, without any obligation to obtain, furnish, post or provide any bond or other security in respect thereof. Each party further waives any objection to any such remedy on the basis that there is an adequate remedy at law or that an award of such remedy is not an appropriate remedy for any reason at law or equity.

Governing Law

The Merger Agreement is governed, construed and enforced in accordance with the laws of the State of Delaware (without giving effect to conflicts of law principles that would result in the application of law of any other state).

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 96

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

 

The following unaudited pro forma condensed combined financial information (the ”Unaudited Pro Forma Financial Information”) has been prepared based on the historical audited and unaudited consolidated financial statements of First Majestic and Gatos, as indicated below, adjusted to give effect to the Transaction as if it had been consummated at said dates below. The following unaudited pro forma financial information has been prepared in accordance with Article 11 of Regulation S-X to depict the accounting for the Transaction (“Transaction Accounting Adjustments”), which reflects the application of the accounting in accordance with IFRS, including adjustments to align Gatos’ historical accounting policies under U.S. GAAP (as defined below) to First Majestic’s significant accounting policies under IFRS, as further discussed below.

The following unaudited pro forma condensed combined statements of financial position as at September 30, 2024 (the “Unaudited Pro Forma Statement of Financial Position”), assume the Transaction occurred on September 30, 2024. The unaudited pro forma condensed combined statements of earnings (loss) for the nine months ended September 30, 2024, and for the year ended December 31, 2023 (together, the “Unaudited Pro Forma Statements of Loss”) assumes that the Transaction occurred on January 1, 2023.

The Unaudited Pro Forma Financial Information has been presented for illustrative purposes only and is not intended to be indicative of the combined entity’s financial condition or results of operations that would have actually occurred had the Transaction occurred on the dates indicated. Further, the Unaudited Pro Forma Financial Information also may not be useful in predicting the future financial condition and results of operations of the combined entity. The actual financial position and results of operations of the combined entity may differ from the pro forma amounts reflected herein due to a variety of factors.

The Unaudited Pro Forma Financial Information was derived from and should be read in conjunction with:

 

•

The accompanying notes to the Unaudited Pro Forma Financial Information;

 

•

The audited consolidated financial statements and the accompanying notes of First Majestic as at and for the year ended December 31, 2023, filed as Exhibit 99.2 to First Majestic’s Annual Report on Form 40-F filed with the SEC on April 2, 2024, and incorporated by reference in this Management Information Circular;

 

•

The unaudited condensed interim consolidated financial statements and the accompanying notes of First Majestic as at and for the nine months ended September 30, 2024, included as Exhibit 99.1 to First Majestic’s Form 6-K filed with the SEC on November 7, 2024, and incorporated by reference in this Management Information Circular;

 

•

The audited consolidated financial statements and the accompanying notes of Gatos as at and for the year ended December 31, 2023, included in Gatos’ Annual Report on Form 10-K, as amended by the Annual Report on Form 10-K/A filed with the SEC on May 6, 2024, and incorporated by reference in this Management Information Circular; and

 

•

The unaudited condensed interim consolidated financial statements and the accompanying notes of Gatos as at and for the nine months ended September 30, 2024, included in Gatos’ Form 10-Q filed with the SEC on November 12, 2024, and incorporated by reference in this Management Information Circular.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 97

Unaudited Pro Forma Condensed Combined Financial Information

 

Description of the Transaction

On September 5, 2024, First Majestic and Gatos entered into the Merger Agreement pursuant to which First Majestic will acquire all of the issued and outstanding shares of Gatos Common Stock. Gatos is a silver producer with a 70% interest in the Los Gatos Joint Venture, which owns the producing Cerro Los Gatos underground silver mine in Chihuahua, Mexico.

Under the terms of the Merger Agreement, Gatos Stockholders will receive 2.55 common shares of First Majestic for each share of Gatos Common Stock held.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 98

Unaudited Pro Forma Condensed Combined Financial Information

 

Unaudited Pro Forma Condensed Combined Statement of Financial Position

As at September 30, 2024

(in thousands of US dollars)

 

		First Majestic				Gatos (Note 2)				Transaction Accounting Adjustments				Notes		Pro Forma Combined
Current Assets
Cash and cash equivalents			154,730				116,732				(24,103	)		4(d)			247,359
Trade and other receivables			18,080				292				—						18,372
Value added taxes receivable			41,044				647				—						41,691
Income tax receivables			—				—				—						—
Inventories			68,268				—				—						68,268
Other financial assets			63,994				10				—						64,004
Prepaid expenses and other			9,478				558				—						10,036
Total Current Assets			355,594				118,239				(24,103	)					449,730
Non-Current Assets
Investment in affiliates							285,454				771,829			4(a)			1,057,283
Mining interests			1,028,578				—				—						1,028,578
Property, plant and equipment			383,591				—				—						383,591
Right-of-use assets			22,480				348				—						22,828
Deposits on non-current assets			6,511				—				—						6,511
Non-current restricted cash			103,866				—				—						103,866
Non-current value added taxes receivable			11,098				—				—						11,098
Deferred tax assets			65,777				222				—						65,999
Total Assets			1,977,495				404,263				747,726						3,129,484
Current Liabilities
Trade and other payables			92,266				11,546				—						103,812
Unearned revenue			782				—				—						782
Current portion of debt facilities			607				—				—						607
Current portion of lease liabilities			15,840				132				—						15,972
Income tax payable			7,875				548				—						8,423
Total Current Liabilities			117,370				12,226				—						129,596
Non-Current Liabilities
Debt facilities			206,190				—				—						206,190
Lease liabilities			10,884				187				—						11,071
Decommissioning liabilities			158,239				—				—						158,239
Other liabilities			6,025				—				—						6,025
Non-current income tax payable			20,323				—				—						20,323
Deferred tax liabilities			81,154				—				—						81,154
Total Liabilities			600,185				12,413				—						612,598
Equity
Share capital			1,976,695				556,167				583,409			4(b)			3,116,271
Equity reserves			102,745				—				—						102,745
Accumulated deficit			(702,130	)			(164,317	)			164,317			4(b)			(702,130	)
Total Equity			1,377,310				391,850				747,726						2,516,886
Total Liabilities and Equity			1,977,495				404,263				747,726						3,129,484

See the accompanying notes to the unaudited pro forma condensed combined financial information.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 99

Unaudited Pro Forma Condensed Combined Financial Information

 

Unaudited Pro Forma Condensed Combined Statement of Earnings (Loss)

For the Nine Months Ended September 30, 2024

(in thousands of US dollars)

 

		First Majestic				Gatos (Note 2)				Transaction Accounting Adjustments				Notes				Pro Forma Combined
Revenue			388,267				—				—								388,267
Mine operating costs							—				—								—
Cost of sales			255,279				—				—								255,279
Cost of sales – standby costs			—				—				—								—
Depletion, depreciation and amortization			89,325				—				—								89,325
			344,604				—				—								344,604
Mine operating earnings			43,663				—				—								43,663
General and administrative expenses			28,186				25,500				—								53,686
Share-based payments			10,895				—				3,853				4(e)				14,748
Mine holding costs			18,173				—				—								18,173
Foreign exchange loss			15,824				—				—								15,824
Operating loss			(29,415	)			(25,500	)			(3,853	)							(58,768	)
Investment and other income			4,086				7,788				—								11,874
Equity income in affiliates							39,985				(53,458	)			4(c)				(13,473	)
Finance costs			(21,277	)			—				—								(21,277	)
(Loss) gain before income taxes			(46,606	)			22,273				(57,311	)							(81,644	)
Income taxes
Current income tax expense			16,707				701				—								17,408
Deferred income tax expense			25,094				—				—								25,094
			41,801				701				—								42,502
Net (loss) gain for the period			(88,407	)			21,572				(57,311	)							(124,146	)
Loss per common share
Basic			(0.30	)															(0.26	)
Diluted			(0.30	)															(0.26	)
Weighted average shares outstanding
Basic			293,440,674																473,559,748
Diluted			293,440,674																473,559,748

See the accompanying notes to the unaudited pro forma condensed combined financial information.

 

 

MANAGEMENT INFORMATION CIRCULAR		Page 100