SOLITARIO EXPLORATION & ROYALTY CORP. (TSE:SLR) Files An 8-K Entry into a Material Definitive Agreement

SOLITARIO EXPLORATION & ROYALTY CORP. (TSE:SLR) Files An 8-K Entry into a Material Definitive Agreement

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Item 1.01 Entry into a Material Definitive Agreement

On April 26, 2017, Solitario Exploration Royalty Corp.
(Solitario) and Zazu Metals Corporation entered into an
arrangement agreement (the Arrangement Agreement) to which
Solitario will acquire all of the issued and outstanding common
shares of Zazu. The principal asset of Zazu is the Lik deposit in
Alaska, USA.

Arrangement Agreement

The acquisition is structured as a Plan of Arrangement (the
Arrangement) under the Canada Business Corporations Act (British
Columbia) and is subject to approval by the Ontario Superior
Court of Justice (the Court).Under the terms of the Agreement,
each issued and outstanding Zazu common share will be converted
into the right to receive 0.3572 of a share of common stock of
Solitario (the Exchange Ratio). Following the completion of the
Arrangement, it is expected that the current shareholders of Zazu
will own approximately 34% of Solitarios issued and outstanding
common stock, and current Solitario shareholders are expected to
hold the remaining 66%. As part of the Arrangement, existing Zazu
option holders will receive options to purchase Solitario common
stock, with each current Zazu option converted at the Exchange
Ratio and existing price of the Zazu options adjusted for the
Exchange Ratio (the Exchange Options). Issuance of the Exchange
Options will be conditioned on the completion of the Arrangement
and Solitario shareholder approval of any requisite amendments of
the 2013 Solitario Exploration Royalty Corp. Omnibus Stock and
Incentive Plan. All Exchange Options will be fully vested on
grant and have an expiration date of no more than 18 months from
the date of grant.

The Arrangement was unanimously approved by the board of
directors of both Solitario and Zazu.

The Arrangement will be carried out by way of a court-approved
plan of arrangement and will require the approval by Zazu
Shareholders. Zazu directors, officers and certain significant
shareholders representing a total of approximately 47% of the
issued and outstanding Zazu common shares have entered into
voting and support agreements with Solitario agreeing to vote in
favor of the Arrangement.

The Arrangement also requires the approval by Solitario
shareholders of the issuance of Solitarios common stock to Zazu
shareholders. Solitario directors, officers and certain
significant shareholders representing approximately 7% of the
issued and outstanding shares of Solitario common stock have
entered into voting and support agreements with Solitario
agreeing to vote in favor of the Arrangement.

The Arrangement Agreement includes customary provisions,
including with respect to non-solicitation, a right granted to
Solitario to match superior proposals and fiduciary-out
provisions, as well as representations, covenants and conditions
which are customary for transactions of this nature. In addition,
Zazu and Solitario have each agreed to pay a termination fee in
the amount of US$0.75 million to the other party upon the
occurrence of certain termination events, including if Zazus
Board of Directors accepts, approves, recommends, or enters into
a legally binding agreement that constitutes a Superior Proposal
or an Acquisition Proposal (as defined in the Arrangement
Agreement).

Completion of the Arrangement is subject to a number of
conditions, including, but not limited to (i) Toronto Stock
Exchange and TSX Venture Exchange acceptance; (ii) approvals by
both Solitarios shareholders and Zazus shareholders; (iii)
approval for listing by the NYSE-MKT of the Solitario common
shares issuable to Zazu shareholders; (iv) approval for listing
by the NYSE-MKT of Solitario common shares to be made available
for potential issuance for Exchange Options; and (v) receipt of a
final order from the Court. There can be no assurance that the
Arrangement will be completed as proposed or at all. None of the
NYSE MKT, the Toronto Stock Exchange nor the TSX Venture Exchange
have passed upon the merits of the proposed Arrangement.

The Arrangement Agreement has been included to provide investors
and shareholders with information regarding its terms. It is not
intended to provide any other factual information about
Solitario. The representations, warranties and covenants
contained in the Arrangement Agreement were made only for
purposes of that agreement and as of specific dates, were solely
for the benefit of the parties to the Arrangement Agreement, may
be subject to limitations agreed upon by the contracting parties,
including being qualified by confidential disclosures made for
the purposes of allocating contractual risk between the parties
to the Arrangement 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. Shareholders are not third-party
beneficiaries under the Arrangement Agreement and should not rely
on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of
facts or condition of Solitario or Zazu or any of their
respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties
and covenants may change after the date of the Arrangement
Agreement, which subsequent information may or may not be fully
reflected in the Companys public disclosures.

Convertible Debenture Financing

Concurrent with the signing of the Arrangement Agreement,
Solitario agreed to provide Zazu interim debt financing through a
secured convertible debenture issued by Zazu in the principal
amount of US$1.5 million (the Debenture). The Debenture is
subject to approval of the TSX Venture Exchange. The Debenture is
secured by way of a general security and pledge agreement and
bears interest at a rate of 5% per annum. If the Arrangement
Agreement is terminated prior to the effective date of the
Arrangement, all principal amounts outstanding and any interest
payable under the Debenture will become payable two years
following the issuance of the Debenture. In certain
circumstances, the Debenture is convertible at the option of
Solitario into Zazu common shares at a price of US$0.22 per Zazu
Share. Completion of the interim financing is not contingent on
completion of the Arrangement. The funds from the Debenture will
be used by Zazu for general corporate purposes prior to the
completion of the Arrangement.

The foregoing description of the Agreement and the Debenture is
not a complete description of all the parties rights and
obligations under the Agreement or the Debenture.The above
description is qualified in its entirety by reference to the
Agreement, which is filed as Exhibit 2.1 hereto and the
Debenture, which is filed as Exhibit 4.1 hereto, both of which
are incorporated herein by reference.

Item 3.02 Unregistered Sales of Equity Securities

As described in Item 1.01 of this Current Report, Solitario has
agreed in the Arrangement Agreement that, if the Arrangement
becomes effective and its acquisition of the issued and
outstanding common shares of Zazu is thereby completed, the
Company will issue 0.3572 of a share of the Companys common stock
for each issued and outstanding common share of Zazu, or
approximately 19,788,183 shares of Solitarios common stock. If
issued, such shares will represent approximately 4% of the total
number of shares of common stock of the Company.

Section 3(a)(10) of the Securities Act of 1933, as amended (the
Securities Act), exempts from the registration requirements under
that Act the issuance of securities which have been approved,
after a hearing upon the fairness of the terms and conditions on
which all persons to whom it is proposed the securities will be
issued shall have the right to appear, by any court expressly
authorized by law to grant such approval. Under the Arrangement
Agreement, Zazu will submit the Arrangement to the Court for
interim order permitting notice to all persons to which the
shares of Solitarios common stock will potentially be issuable.
Following the requisite approval by the Zazu shareholders and a
hearing at which such persons will have the right to appear, Zazu
will seek a final order from the Court as to the fairness of the
Arrangement. Such final order is a condition to the consummation
of the Arrangement and the issuance of the Solitarios shares of
common stock. Solitario therefore anticipates that, if the
Arrangement becomes effective under the terms and conditions
described in the Arrangement (including the receipt of such final
order from the Court), the issuance of the approximately
19,788,183shares of Solitarios common stock to the Zazu
shareholders will be exempt from the registration requirements
under the Securities Act to Section 3(a)(10) thereof.

Item 9.01.Financial Statements and Exhibits.

(d)List of Exhibits

Exhibit

Number

Description
2.1 Arrangement Agreement and Plan of Arrangement dated April 26,
2017, among Solitario Exploration Royalty Corp. and Zazu
Metals Corporation
4.1 Convertible Secured $1.5 million Debenture Agreement dated
April 26, 2017 between Solitario Exploration Royalty Corp.
and Zazu Metals Corporation

Additional Information About the
Arrangement

In connection with the Arrangement, Solitario intends to seek
approval from its shareholders at a meeting of shareholders to,
among other things, issue shares of its common stock to the
shareholders of Zazu to effect the Arrangement, as required by
the rules of the NYSE MKT and the Toronto Stock Exchange.
Solitario intends to file a preliminary proxy statement and a
definitive proxy statement with the SEC to seek such approval.
SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT
WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT MATERIALS FILED
WITH THE SEC CAREFULLY IN THEIR ENTIRETY BEFORE MAKING ANY VOTING
OR INVESTMENT DECISION WITH RESPECT TO THE ARRANGEMENT BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE ARRANGEMENT AND
THE PARTIES THERETO.

The definitive proxy statement will be mailed to Solitarios
shareholders seeking, among other things, their approval to issue
shares to effect the Arrangement. Solitarios shareholders may
also obtain a copy of the definitive proxy statement free of
charge once it is available by directing a request to: Solitario
Exploration Royalty Corp. Attn: Corporate Secretary, 4251 Kipling
St. Suite 390, Wheat Ridge, CO 80033, (303) 534-1030.

Solitario and its respective directors, executive officers and
other members of management, under SEC rules, may be deemed to be
participants in the solicitation of proxies in connection with
the Arrangement. Information regarding the names, affiliations
and interests of certain of Solitarios executive officers and
directors in the solicitation will be available in the
preliminary proxy statement and definitive proxy statement
relating to the Arrangement to be filed with the SEC. Information
about Solitarios executive officers and directors is also
available in Solitarios Annual Report on Form 10-K, as amended,
for the year ended December 31, 2016.


About SOLITARIO EXPLORATION & ROYALTY CORP. (TSE:SLR)

Solitario Exploration & Royalty Corp. is an exploration-stage company. The Company focuses on the acquisition of precious and base metal properties with exploration potential, and the purchase of royalty interests. The Company acquires and holds a portfolio of exploration properties for sale, joint venture, or to create a royalty prior to the establishment of proven and probable reserves. The Company operates through mineral exploration segment. The Company conducts exploration activities in Peru and Mexico. The Company’s joint ventures and strategic alliance properties include Bongara Zinc Project (Peru), Chambara Zinc Property (Peru), Newmont Alliance and the La Promesa Project (Peru). The Company’s royalty properties include Yanacocha Royalty Property (Peru), and Norcan and Aconchi Copper Properties (Mexico). The Company’s owned property is Canta Colorado Gold Property (Peru).

SOLITARIO EXPLORATION & ROYALTY CORP. (TSE:SLR) Recent Trading Information

SOLITARIO EXPLORATION & ROYALTY CORP. (TSE:SLR) closed its last trading session 00.00 at 1.02 with 77,400 shares trading hands.

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