CONVERTIBLE LOAN AGREEMENT
between
PheMex Establishment, Xxxxxxxxx 8,
X.X. Xxx 000, Xx-0000 Xxxxx
(hereinafter referred to as "Lender")
and
Solv-Ex Corporation, 000 Xxxxxxxxx X.X.
Xxxxx 000, Xxxxxxxxxxx, Xxx Xxxxxx 00000
(hereinafter referred to as "Solv-Ex.")
INDEX
Preamble
Article Page
1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 4
2 LOAN AMOUNT AND USE OF FUNDS . . . . . . . . . . . . . . . 8
3 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 REPRESENTATIONS AND WARRANTEES . . . . . . . . . . . . . . 10
5 DRAW DOWN NOTICE AND DISBURSEMENT PROCEDURE . . . . . . . 16
6 CONVERSION AND SHARE CERTIFICATES . . . . . . . . . . . . 17
7 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 20
8 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9 REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . 28
10 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 29
11 DELAYED PAYMENTS . . . . . . . . . . . . . . . . . . . . . 30
12 SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 31
13 PROTECTION OF ENVIRONMENT . . . . . . . . . . . . . . . . 32
14 OTHER OBLIGATIONS OF SOLV-EX . . . . . . . . . . . . . . . 33
15 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 36
16 COSTS, CHARGES AND EXPENSES . . . . . . . . . . . . . . . 37
17 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 37
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 41
PREAMBLE
A. WHEREAS the Lender is a company incorporated in 1995 under Liechtenstein
law with its registered office in Liechtenstein; and
B. WHEREAS Solv-Ex is a company incorporated in New Mexico with one class of
approximately 23'000'000 Common Shares outstanding which are quoted and
publicly traded on the NASDAQ Small Cap Market with a total of 30'000'000
of Common Shares authorized; and
C. WHEREAS Solv-Ex was formed in 1980 to develop a second generation
technology to efficiently extract oil from sands with small units and to
co-produce metal and mineral products from fine clays which were in the
past considered as waste tailings; and
D. WHEREAS Solv-Ex holds the Bituminous Lease near Fort Xxxxxx and the
management of Solv-Ex has decided to exploit the Bituminous Lease to
apply its technology and expertise for construction and operation of a
production facility to initially produce 14'000 barrels of oil and a
substantial amount of Alumina per day; and
E. WHEREAS Solv-Ex has successfully completed a significant amount of
research, development and pilot plant work to develop its process which
is protected by various patents to extract and upgrade oil from oil sands
and to market the oil under the registered trademark "PCO"; and
F. WHEREAS pursuant to the terms and conditions of an Offshore Distribution
and Sale Agreement dated March 21, 1996, the Lender has exercised its
rights to provide a loan to Solv-Ex in the amount of USD 33'000'000 for
the construction of a plant to extract and to upgrade the oil from the
oil sands to be mined from the Lease, thereby allowing Solv-Ex to
commence the construction of the Project; and
G. WHEREAS Solv-Ex will secure the Loan in the amount of USD 33'000'000 by
delivering 1'016'000 restricted Common Shares in Solv-Ex with a share
transfer form duly signed by Solv-Ex as a collateral to the Lender and by
consenting that the Lender may sell said shares if Solv-Ex is in an
unremediable default at his discretion; and
H. WHEREAS Solv-Ex and the Lender shall agree that the Loan of USD shall be
granted at a fixed interest rate of 12% per annum and that the Lender may
charge the first annual interest payable of USD 3'960'000 of the
Principal and whereas the interest in the second and the third year of
the Loan shall be paid on a quarterly basis in four equal installments of
USD 990'000 on April 30, July 31, September 30 and December 31 of the
respective year, and
I. WHEREAS Solv-Ex and the Lender shall agree that the Principal of USD
33'000'000 shall be convertible into shares in Solv-Ex in whole or in
part at the option of the Lender on a conversion price of USD 32.50 per
share at any time until the Principal and all interest shall be repaid in
full by Solv-Ex to the Lender, and
J. WHEREAS Solv-Ex shall only be permitted to spend USD 26'400'000 of USD
33'000'000 on the financing of the construction of the oil sands co-
production facility on the Bitumount Lease to commence with the oil
production under the trademark PCO in early 1997 to generate 14'000
barrels of oil per calendar day as well as a substantial amount of
alumina;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the Lender and Solv-Ex hereby agree as follows:
Article 1
DEFINITIONS:
In the context of this Agreement the following terms shall mean:
"Agreement" shall mean this Convertible Loan Agreement.
"Appendices" shall mean Annexes to this Agreement, which shall form an
integral part of this Agreement.
"Business Day" shall mean each day which banks and foreign exchange markets
are open for business in such places contemplated for the transactions
required by this Agreement.
"Commitment" shall mean USD 33'000'000 (thirty three million).
"Common Shares" shall mean fully paid and non assessable Common Shares in
Solv-Ex, including the Common Shares issued or to be issued hereunder.
"Current Assets" shall mean the aggregate of Solv-Ex's cash, marketable
securities, trade and other receivables realizable within one year,
inventories and prepaid expenses which are to be charged to income within one
year.
"Current Liabilities" shall mean the aggregate of all liabilities of Solv-Ex
falling due on demand or within one year, including dividends to be disbursed
and the portion of long-term debt falling due within one year, but excluding
liabilities for property, plant and equipment to the extent of the amount of
funds therefore excluded from the calculation of Current Assets.
"Current Ratio" shall mean the result obtained by dividing Current Assets by
Current Liabilities.
"Debt" shall mean the aggregate of all obligations of Solv-Ex then outstanding
for the payment or repayment of money, also including:
- any amounts payable by Solv-Ex under leases or similar arrangements with
respect to vehicles, plant and equipment over their respective periods;
- any credit to Solv-Ex from a supplier of goods or under any instalment
purchase or other similar arrangement; and
- the aggregate amount at that time outstanding liabilities and obligations
of third parties to the extent that they are guaranteed by Solv-Ex.
"Drawdown Date" shall mean the date upon which the Commitment is made
available to Solv-Ex.
"Equity" shall mean shareholders' equity, effectuated in accordance with the
GAAP of the United States certified by the Auditors and approved by Solv-Ex.
"Exercise Price" shall mean USD 32.50 for each Common Share in Solv-Ex which
are held in escrow by the Escrow Agent on behalf of Solv-Ex and the Lender.
"Expiry Date" shall mean April 15, 1999, 4 pm.
"GAAP" shall mean the American Generally Accepted Accounting Principles,
consistently applied.
"Interest Payment Date" shall mean on the same day as the Drawdown was
presented in each year. Should this date not fall on a Business Day, the
Interest Payment Date will be the first Business Day thereafter.
"Interest Rate" shall mean 12% per annum on the Principal of USD 33'000'000
throughout the Loan Period calculated from the Drawdown Date.
"Interest Period" shall mean the period from, and including, the day of
disbursement and ending on the day immediately and including, subsequent
Interest Payment Dates and ending on the day immediately before the Interest
Payment Dates thereafter.
"Interest Payment Date" shall mean that the interest for the first year of USD
3'960'000 shall be paid in advance and may be deducted from the Principal of
USD 33'000'000 by the Lender and whereas the interest in the second and the
third year of the Loan shall be paid on a quarterly basis in four equal
instalment of USD 990'000 on April 30, July 31, September 30 and December 31.
"Loan" shall mean the funds made available to Solv-Ex under this Agreement and
any portion thereof.
"Net Worth" shall mean the difference between net assets and net liabilities.
"Pledge over Shares" shall mean that the 1'016'000 Common Shares which will be
granted by Solv-Ex as a collateral to the Lender shall, with all dividends and
bonuses and all rights and benefits attached, thereon constitute a continuing
security to the Lender for the Repayment of the principal and all interest on
the Loan.
"Principal" shall mean USD 33'000'000.
"Project" shall mean the investment as set out in the Business Plan of Solv-Ex
which describes a plant to extract 14'000 barrels of oil to be upgraded into
marketable heavy crude oil and whose estimated cost shall amount to USD
125'000'000.
"Project Completion Date" shall mean September 30, 1997.
"Repayment Date" shall mean the date prior to which the Lender converts the
Principal or the repayment of USD 33'000'000 on April 30, 1999 into shares in
Solv-Ex.
"Right of Conversion" shall mean the right of the Lender to convert a part or
all of USD 33'000'000 into 1'016'000 Common Shares in Solv-Ex which are held
by the Lender by submitting a written statement that he is converting the Loan
into 1'016'000 Common Shares in Solv-Ex and by sending the certificate of
1'016'000 of the Common Shares in Solv-Ex for reregistration to the transfer
agent of Solv-Ex in order that a new certificate shall be issued to an entity
to be identified by the Lender.
"Security Documents" shall mean the transfer form duly executed by Solv-Ex
that the certificate of 1'016'000 shares of Common Shares in Solv-Ex may be
transferred and are to be reregistered by the transfer agent of Solv-Ex.
"Securities Exchange Act" shall mean the Securities Exchange Act of the United
States of 1934.
"Securities and Exchange Commission" shall mean the Securities and Exchange
Commission of the United States.
"USD and US Dollars" shall mean the lawful currency of the United States of
America.
Article 2
LOAN AMOUNT AND USE OF FUNDS
The Lender undertakes to provide Solv-Ex with a loan of USD 33'000'000 (thirty
three million United States Dollars) and Solv-Ex shall accept this Loan on the
following terms and conditions. The Lender will disburse 26'400'000 to Solv-
Ex. Solv-Ex hereby approves that the commission of 7% of Fiba Nordic
Securities (UK) Ltd., the cost for setting up this Loan Agreement of 1% and
the interest for the first year may be deducted and paid by the Lender
directly.
Article 3
INTEREST
3.1 Solv-Ex shall pay interest at the rate of 12% p.a. (twelve per cent per
annum) on loan balances outstanding after the signing of this Agreement.
3.2 Interest will be owed from the day of disbursement of the Loan and is
debited until the day immediately before repayments are credited to the
Lender's account.
3.3 Interest for the first year of USD 3'960'000 shall be paid in advance and
may be deducted from the Principal of USD 33'000'000 by the Lender, in
the second and the third year the interest shall be paid on a quarterly
basis in four equal installments of USD 990'000 on April 30, July 31,
September 30 and December 31. For the purpose of calculating interest
payable, a year shall comprise 360 days and a month shall comprise 30
days. Interest payable in respect of each calendar day shall be
calculated by dividing annual interest due by 360.
3.4 Interest shall be payable by Solv-Ex without deduction or retention of
any present or future tax liabilities, charges or official payments
whatsoever, except where such deduction or retention is prescribed by law
in such cases, Solv-Ex shall make an additional payment to the effect to
fully compensate the deducted or retained amount.
Article 4
REPRESENTATIONS AND WARRANTEES
4.1 Solv-Ex is a corporation duly incorporated and in good standing under the
laws of the jurisdiction of New Mexico, is duly authorized to transact
business in each jurisdiction in which its business is conducted, and is
duly authorized and empowered by its corporate bodies to complete the
transactions herein. Solv-Ex hereby assures that all corporate action
required on its part to complete the transactions herein contemplated
have been duly and effectively taken.
4.2 Solv-Ex has by proper corporate action authorized and reserved the number
of unissued shares of Common Stock of the Company required for the
conversion of the Debt into Common Shares in Solv-Ex. This Convertible
Loan Agreement will be a valid and enforceable obligation of Solv-Ex and
Solv-Ex warrantees that it is in accordance with its Corporate Charter,
Bylaws, or any other agreement entered by Solv-Ex and that the terms of
this Agreement do not violate any provision of Law.
4.3 Solv-Ex has furnished to the Lender Financial Statements of 1993, 1994,
1995 and other disclosure information contained in the documents referred
to hereinafter. Solv-Ex hereby represents and warrants that the Annual
Financial Statements which were established by consistently applying the
GAAP and the documents hereinafter referred to are true, complete and
accurate as at the date thereof:
(a) Annual report on Form 10-K for the year ending June 30, 1995;
(b) Quarterly reports on Form 10-Q for the quarters ending September 30,
1995 and December 31, 1995;
(c) Current reports on Form 8-K and press releases dated subsequent to
June 30, 1995;
(d) Business Plan describing the Project and containing certain forward-
looking information which is subject to the qualifications stated
therein.
4.4 Solv-Ex hereby warrants, that there has been no material adverse change
in the condition, financial or otherwise, of the Company and its
subsidiaries taken as a whole since December 31, 1995.
4.5 Solv-Ex hereby warrants, directly or indirectly through related parties,
that it has good title, free and clear of all liens and encumbrances to
all material real estate, plants, fixed property and to all other
properties and assets reflected on Solv-Ex's financial statements other
than as disposed of in the ordinary course of business since the date of
such financial statements.
4.6 Further Solv-Ex warrantees that it is not in material default under any
indenture, mortgage, deed of trust, agreement or other instrument to
which it is a party or by which it may be bound. Neither the execution
and delivery of this Agreement or any instrument or document to be
delivered under this Agreement, the completion of the transactions
contemplated herein or therein, nor compliance with the provisions hereof
and thereof, will: violate any law, regulation, order, or decree; nor
will they conflict with, or result in the breach of, or constitute a
default under, any indenture, mortgage, deed of trust, agreement, or
other instrument to which Solv-Ex is a party or by which it is bound; nor
will they result in the creation or imposition of any lien, charge, or
encumbrance upon any of the Company's property thereunder, or violate any
provision of the Company's Articles, Certificate of Incorporation, or
Bylaws.
4.7 Solv-Ex holds valid leases covering the use or occupancy of all property
or assets used in its respective businesses and none of said leases is in
default. Solv-Ex warrantees that it shall not encumber or dispose in any
kind of the Bituminous Lease 7276120T05 without the previous written
consent of the Lender. The Lender shall only withhold such a consent
with proper cause if Solv-Ex wants to encumber said lease to set up the
rest financing to finalize the Project.
4.8 Solv-Ex warrantees that it is not a party to any agreement or instrument
or subject to any corporate restriction (including any restriction set
forth in its Articles or Certificate of Incorporation) materially and
adversely affecting its operations, business, properties, or financial
conditions.
4.9 Solv-Ex possesses all the material trademarks, trade names, copyrights,
patents, licenses, permits (including those for environmental compliance)
or rights, adequate for the conduct of its respective business, in
particular, extraction of minerals and other resources in the United
States and any other country, as now conducted and presently proposed to
be conducted, without conflict with the rights or claimed rights of
others.
4.10 Solv-Ex hereby warrantees that there is no litigation, legal or
administrative proceedings, investigation or other action of any nature
pending or, to its knowledge, threatened against or affecting it which
involves the possibility of any judgment or liability not fully covered
by insurance or which may materially and adversely affect any of the
assets of Solv-Ex or its respective rights to carry on business as now
conducted. Solv-Ex has disclosed to the Lender certain documents
regarding an ongoing investigation of the Securities and Exchange
Commission about the trading or issuance of Common Shares in Solv-Ex.
4.11 No action of, or filing with, any governmental or public body or
authority is required to authorize, or is otherwise required, in
connection with the execution, delivery, and performance of this
Agreement or any instrument or document to be delivered pursuant to the
Agreement, except that the filing with respect to the capital structure
must be reported to the Securities and Exchange Commission of the United
States and Nasdaq immediately after having executed this Agreement.
Solv-Ex shall document the Lender with a certified copy of its filing of
this Agreement to the Lender within five business days after compilation
of such filing.
4.12 All federal, state and other tax returns and reports of Solv-Ex required
by United States law to be filed, have been duly filed and all federal,
state and other taxes, assessments, fees and other governmental charges
(other than those presently payable without penalty) imposed upon Solv-Ex
or the properties or assets of Solv-Ex which are due and payable have
been paid.
4.13 Neither Solv-Ex nor any agent acting on its behalf has offered the common
stock underlying this Convertible Loan Agreement to any person or persons
other than the Lender.
4.14 Solv-Ex shall inform the Lender promptly and in writing of any change in
the aforementioned representations.
Article 5
DRAW DOWN NOTICE AND DISBURSEMENT PROCEDURE
5.1 The Loan of USD 33'000'000 will be disbursed in one payment of USD
26'400'000 as described in Article 2 of this Agreement upon presentation
of a draw down notice by Solv-Ex. The Commitment shall be made available
to Solv-Ex in one amount five days after the presentation of a Drawdown
Notice to an account specified by the Lender.
5.2 A drawdown notice shall only be valid if it corresponds to the contents
of Appendix 2 of this Agreement and its submission to the Lender
represents the last condition precedent to disbursement.
Article 6
CONVERSION AND SHARE CERTIFICATES
6.1 The Principal shall be convertible at the option of the Lender into
Common Shares of Solv-Ex based on an exercise price of USD 32.50 per
share at any time until the termination of this Agreement.
6.2 Solv-Ex warrants that by proper action of its Board of Directors it has
appropriated and reserved the number of the now authorized and unissued
shares in Solv-Ex's Common Stock to allow the conversion of the
Convertible Debt of USD 33'000'000 upon a written statement into
1'016'000 Common Shares in Solv-Ex. Solv-Ex shall irrevocably instruct
its transfer agent to reregister the certificate of 1'016'000 of the
Common Shares in Solv-Ex to issue and send a new certificate to an entity
to be identified by the Lender within seven business days after having
received the certificate provided as a collateral for this Loan of
1'016'000 Common Shares in Solv-Ex for exchange.
6.3 Whenever Solv-Ex will issue shares of its common stock for no
consideration (such as in the case of a stock split or stock dividend) or
whenever Solv-Ex will reclassify the shares into a smaller number of
shares (such as in the case of a reverse stock split) then, upon such
issue or reclassification, the conversion price shall be reduced (or
increased in the case of a reverse stock split or similar actions which
result in a lesser number of shares outstanding) by multiplying the
conversion price immediately prior to the transaction requiring the
adjustment by a fraction of which the numerator shall be the number of
Common Shares outstanding immediately prior to such transaction and the
denominator shall be the total number of Common Shares outstanding
immediately after such transaction. For the purpose of this provision,
the Common Shares outstanding shall include shares held by Solv-Ex if
such dividend, distribution, combination or subdivision is made with
respect to, or affects, such shares. The certificate of any firm of
independent public accountants of recognized standing selected by the
Board of Directors of Solv-Ex shall be conclusive evidence of the
correctness of any computation made.
6.4 If Solv-Ex shall consolidate or merge with or into any other corporation
or shall sell all or substantially all of its property as an entirety,
lawful provision shall be made a part of the terms of such transaction
that the Lender may then or thereafter, upon exercise thereof, receive in
lieu of each Common Share issuable to them upon such exercise and with
the same protection against dilution (all as herein provided) the same
kind and amount of stock (and other securities and assets, if any) as may
be issuable or distributable upon such transaction with respect to each
outstanding Common Share, and after such transaction the conversion
rights of the Lender shall be merely to receive upon exercise thereof
such stock (and other securities and assets, if any). Upon the
conversion of the Convertible Debt, Solv-Ex shall not issue a fractional
share but shall issue the largest number of full shares obtainable upon
such conversion and no account shall be taken of any right in respect of
a fractional share.
Article 7
COVENANTS
7.1 Solv-Ex will duly and punctually pay the principal and interest on the
dates and in the manner provided in this Loan Agreement.
7.2 Solv-Ex will provide to the Lender financial and other material
information concerning operations, especially all information and
documents regarding the Investigation with the Securities and Exchange
Commission and any other investigating governmental authorities to which
it has access or to which it will have access.
(a) as soon as practicable, two copies of each annual and interim
financial and other report or communication sent by the Company to
its shareholders or filed with the Securities and Exchange
Commission;
(b) as soon as practicable, two copies of every press release and every
material news item and article in respect of the corporate affairs
of the Company which is released for publication by the Company; and
(c) such additional non-confidential and readily available documents and
information with respect to Solv-Ex and its business affairs and the
business affairs of any Subsidiaries as the Lender may request from
time to time in writing.
7.3 Solv-Ex will pay promptly and discharge all taxes lawfully levied or
imposed, pay when due all lawful claims for liabilities which if unpaid
would by law be a lien or charge upon the property of Solv-Ex or lead to
the suspension of the business of Solv-Ex; provided, however, that
nothing herein shall require it to make any such payment or compliance so
long as it is in good faith and by appropriate proceedings diligently
conducts contests of its obligation to do so, if such reserve as shall be
required by Generally Accepted Accounting Principles shall have been made
therefore, and if such contest will not result in the forfeiture or loss
of any property of Solv-Ex.
7.4 Solv-Ex will maintain insurance with financially sound and reputable
insurers, with respect to its properties and business against such
casualties and contingencies, and in such types and amounts as may be
required by the Lender from time to time. Schedules of all insurance of
Solv-Ex and each Subsidiary will be submitted to the Lender within 30
days after signing of this Agreement. Such schedules will contain a
description of the risks covered, the amounts of insurance carried on
each risk, the name of the insurer and the cost of such insurance to
Solv-Ex. Solv-Ex shall be obliged to insure the production plant
reflecting its cost.
7.5 Solv-Ex will, at all times, keep, and will cause each of its subsidiaries
to keep true and complete books and records in connection with its assets
and operations, in accordance with GAAP.
7.6 Solv-Ex will maintain in good repair, working order and condition all
properties used and useful in the business of Solv-Ex and make all such
repairs, renewals, replacements, additions and improvements thereto as
may be needed and appropriate.
7.7 Solv-Ex will maintain its status as a reporting company and will continue
to file reports as required by Sections 12 and 13 of the Securities
Exchange Act of 1934. Solv-Ex will furnish to the Lender a copy of any
report filed with the Securities and Exchange Commission pursuant to said
Sections within 5 business days after filing such reports with the
Securities Exchange Commission. Solv-Ex undertakes to furnish the Lender
with all the relevant information and documents regarding all
communications with the Securities and Exchange Commission.
7.8 Solv-Ex shall maintain the following ratios and tangible net worth:
(a) Current assets divided by current liabilities (as reflected in the
financial statements contained in any report filed with the
Securities and Exchange Commission) shall not be less than 1.2.
(b) Net Worth (shareholders' equity) divided by total indebtedness (not
including contingent indebtedness) (as reflected in the financial
statements contained in any report filed with the Securities and
Exchange Commission) shall not be less than 1.
(c) Tangible Net Worth (shareholders' equity) as reflected in the
financial statements contained in any report filed with the
Securities Exchange Commission shall not be less than USD 5,000,000.
7.9 Solv-Ex shall conduct, directly or indirectly through any subsidiary,
only those businesses and activities in which Solv-Ex is presently
actively engaged, or which are disclosed in the Business Plan referred to
in Section 4.2(d) hereof.
7.10 Solv-Ex will promptly furnish on request of the Lender such information
as may be reasonably necessary to determine whether (a) it is complying
with its covenants and agreements contained in the Loan Agreement, (b) an
event of default has occurred hereunder at any time.
7.11 Solv-Ex will permit, at such reasonable times as will not unreasonably
interfere with the conduct of the business, the Lender or any of the
Lender officers, employees or designated representatives to visit and
inspect any property of Solv-Ex and make available for inspection or
copying to any such officer, employee or designated representative any of
Solv-Ex's books and records. A designated officer of Solv-Ex will
discuss with the Lender, or any of the Lender's officers, employees or
designated representatives, any of the affairs, finances and accounts at
such reasonable times and as often as the Lender may reasonably request.
7.12 No default exists with respect to any indebtedness of Solv-Ex or its
subsidiaries for borrowed money or any agreement or indenture relating
thereto.
7.13 Solv-Ex shall make full and timely payment of the principal and interest
and duly comply with all terms and covenants contained pursuant to this
Agreement.
7.14 Solv-Ex shall, at its own expense, upon Lender's request, duly execute
and deliver to the Lender all further instruments and do, and cause to be
done, all further acts necessary and proper, in the Lender's opinion, to
carry out more efficiently the provisions and purposes of this Agreement.
7.15 Solv-Ex undertakes with the Lender as from the date hereof and for so
long as any amounts are owned by Solv-Ex to the Lender hereunder that it
will and shall procure that:
(a) Solv-Ex shall not make any advances except in the ordinary course of
business or make any loan other than to a subsidiary (if any)
without the previous written consent of the Lender. The Lender
shall only withhold such approval with proper cause.
(b) Solv-Ex shall not raise a Loan except with the previous written
consent of the Lender. The Lender approves by consenting to a
further debt financing of Solv-Ex to finalize the Project that his
claim shall be subordinated thereto. The Lender approves by
consenting to a further debt financing of Solv-Ex to finalize the
Project that his claim shall be subordinated thereto. The Lender
shall only withhold such approval with proper cause.
(c) Solv-Ex or its subsidiaries shall not, without the previous written
consent of the Lender, incur or secure by way of any of its assets
any indebtedness; the Lender may not withhold such approval
unreasonably.
(d) Solv-Ex shall not directly or indirectly purchase, acquire, redeem
or retire any shares of its Common Shares outstanding other than to
accept shares in payment of the exercise price for stock options
granted by Solv-Ex in accordance with the terms of such options.
(e) Solv-Ex shall not pay any dividends in any fiscal year, including
the current year (other than dividends payable solely in its shares)
except with the written consent of Lender. The Lender may only
withhold such approval with proper cause.
(f) Solv-Ex shall not consolidate or merge with, or purchase, all or a
substantial part of the assets of any corporation, firm, association
or enterprise, or sell, lease or otherwise transfer any assets or
other than in the normal course of its business, except that this
restriction shall not prevent any subsidiary of Solv-Ex (now
existing or hereafter formed) from liquidation into or merger with
Solv-Ex or with another subsidiary provided that in any merger
involving Solv-Ex, Solv-Ex shall be the surviving corporation. This
restriction shall not be deemed to preclude Solv-Ex for entering
into a joint venture or similar arrangement to obtain financing of
the Project provided it has received the previous written consent of
the Lender. Such consent shall not be withheld without proper
cause.
Article 8
FEES
Solv-Ex shall pay a one time commitment fee on the aggregate Loan of 1%
p.a., after signing of this Agreement and it hereby approves that USD
330'000 are charged by the Lender on the disbursement of the Loan.
Article 9
REPAYMENT
9.1 Solv-Ex shall repay the Loan of USD 33'000'000 in one instalment on April
15, 1999, if the Lender has not previously exercised his right to convert
the Principal into shares in Solv-Ex at the Exercise Price.
9.2 Provided that the Lender has made use of his Right of Conversion no
repayment shall become due under this Agreement.
Article 10
PAYMENTS
10.1 Payment obligations of Solv-Ex arising from this Agreement are satisfied
only if and in so far as, after deduction of all costs and expenses, the
respective amounts are credited not later than 9:00 a.m. local time on
their due dates to the Lender's bank account in United States Dollars
which shall be nominated to Solv-Ex not later than 7 days prior to the
respective obligation falling due.
10.2 The setting off of counterclaims against the Lender's claims arising from
this Agreement as well as Solv-Ex's right to withhold payments shall not
be permitted. This shall not apply to the setting off of Solv-Ex's
claims that are undisputed or that have been adjudicated upon without
recourse.
10.3 In so far as Solv-Ex's payments do not satisfy all due obligations, the
Lender may determine to which obligations they shall be applied.
10.4 Should Solv-Ex be compelled by legal regulations to make lesser payments
than are due or payments in a currency other than that contracted, it
shall be obliged to make further payments until the contracted sum has
been reached and, in the case of payment in a currency not specified in
this Agreement, shall be obliged to pay the difference between the
contracted amount and the equivalent in United States Dollars of the
amount paid converted at the same time.
Article 11
DELAYED PAYMENTS
11.1 For repayments which are not made on their due dates, additional interest
of 5% p.a., calculated from such due date to the date of payment, shall
be payable. The payment has to be effected on the next Interest Payment
Date.
11.2 In the event that interest due to the Lender is not paid, Solv-Ex shall
be obliged to make a penalty payment to the Lender. By way of penalty
payment, Solv-Ex shall pay the Lender an amount equalling interest on the
delayed payments for the period of their delay at a rate being five
percentage points above the interest agreed.
Article 12
SECURITY
12.1 Solv-Ex assures that its assets as specified in the afore-mentioned
financial statements which form Appendix 3 hereto are not pledged by any
other charges than those mentioned in such financial statements provided
to the Lender.
12.2 Solv-Ex shall not pledge its assets or part thereof without the Lender's
prior consent in writing. The Lender may not withhold such consent
unreasonably.
12.3 Solv-Ex shall provide certificates of 1,016,000 Common Shares in Solv-Ex
as a collateral of the Loan of the Lender. The Lender and Solv-Ex hereby
agree that the 1,016,000 Common Shares in Solv-Ex may be sold by the
Lender in accordance with the applicable laws if Solv-Ex will not remove
the occurrence of a default within 30 days and Solv-Ex hereby approves
that the Lender may compensate the returns of such sale against the
principal and the interest due.
12.4 At the Lender's request, Solv-Ex shall, at any time during the
effectiveness of this Agreement, create and register in favour of the
Lender securities over such of its assets as the Lender will specify to
cover the balance then outstanding of the Loan plus interest and other
claims as stipulated in this Agreement. If the Lender has asked for more
security, Solv-Ex shall have the right to prepay the Loan in one
installment to the Lender within 30 days after such request was received.
Article 13
PROTECTION OF ENVIRONMENT
Solv-Ex undertakes to put in place at any time measures necessary to ensure
environmental protection and occupational health and safety in accordance with
the specific Environmental Regulations of the Province of Alberta and Canada
in particular to ensure that
a) the special protection measures mentioned in the Project Description are
properly implemented and maintained;
b) plans as set out in the Project Description are developed and implemented
for the environmental improvement of the existing installations;
c) the necessary measures are promptly taken to protect against
environmental dangers which arise or become known at a later date;
d) the Lender receives annual reports on the performance of Solv-Ex's plant
concerning environmental protection on occupational health and safety and
containing such detailed information as set out in the Project
Description;
e) the Lender is notified forthwith of unusual events concerning the
environment or occupational health and safety and special measures taken.
Article 14
OTHER OBLIGATIONS OF SOLV-EX
14.1 Solv-Ex undertakes:
a) to implement the Project in strict conformity with the Project
Description, to carry out its business activities in general in
accordance with accepted principles of care, prudence and commercial
practice as well as in conformity with commercial, financial and
technical standards in force, and to retain sufficient qualified
personnel;
b) to obtain all consents, permissions, approvals, licenses and
authorizations from, among others, authorities, shareholders and
creditors, and, where necessary to keep them in force and to renew them
as required by the applicable laws, statutes, regulations and agreements
in order to fulfill this Agreement and not to breach the terms of such
consents, permissions, approvals, licenses and authorizations;
c) to provide the Lender at any time upon request with any information about
itself and its business activities and to provide copies of requested
documents and papers (including correspondence, contracts, minutes of
meetings);
d) to permit access for the Lender's authorized representatives to its
business and works premises at any time during normal working hours as
well as inspection and examination of its financial records and all
business papers and documents, if Solv-Ex does not comply with an
obligation under this Agreement;
e) to ensure that its obligations under this Agreement are always given at
least equal treatment to those of other creditors as set out in the
Project Description with respect to their fulfillment and security, in
particular not to undertake early repayment of other loan or credit
liabilities without the prior written consent of the Lender;
f) to sign a Registration Rights Agreement if the Lender will have used his
right to convert this Loan into 1,016,000 Common Shares in Solv-Ex.
Provided, however, that no such Registration Right Agreement shall be
required the Lender shall receive a legal opinion of a legal counsel
admitted to practice in the United States paid by Solv-Ex that the shares
are otherwise marketable in an equal manner in the United States under
Regulation S promulgated under the Securities Act of 1933 within 90 days
following transfer of the Common Shares of the Lender or another
exception for registration requirements to be available under said act.
14.2 If Solv-Ex decides to market the technology in Europe Solv-Ex shall
provide the exclusive right to the Lender to market the technology used
within the Project in Europe. Solv-Ex shall provide a complete list of
all patents and a full description of the technology used to the Lender
within 30 days after the signing of this Agreement.
Article 15
CONDITIONS PRECEDENT
15.1 The obligation of the Lender to make the Loan available is conditional
upon the Lender having received in form and substance satisfactory to
itself and its legal advisers;
a) Execution of this Agreement and all Appendices hereto;
b) Delivery of a Certificate of 1,016,000 Common Shares in Solv-Ex as
well as a Stock Transfer form, duly executed by Solv-Ex as a
Collateral to the Lender;
c) Drawdown Notice of Solv-Ex.
15.2 Solv-Ex shall deliver the Certificate of 1,016,000 Common Shares in Solv-
Ex as well as a Stock Transfer form, duly executed by Solv-Ex to the
Lender on April 15, 1996. The Lender shall duly sign this Agreement on
April 18, 1996.
Article 16
COSTS, CHARGES AND EXPENSES
Solv-Ex shall bear the costs, taxes, fees and other charges and expenses
incurred in connection with the conclusion and implementation of this
Agreement, and the Registration Right Agreement, in particular those with
respect to the issue, the creation, registration, enforcement and, if
necessary, the cancellation of securities, with the disbursement of the Loan,
the transfer and remittance of all payments to be made under this Agreement
and with pursuance and enforcement of rights in connection with this
Agreement.
Article 17
EVENTS OF DEFAULT
17.1 Each of the following events shall be an Event of Default:
a) any principal of, or interest on, the Loan or any other amount due
under this Agreement is not paid upon the due date for payment
thereof;
b) there is a material (in the sole opinion of the Lender) default on
the part of Solv-Ex under any of the provisions of this Agreement
(other than a) above) which (if in the sole opinion of the Lender it
would be capable of being remedied) is not remedied within 30 days
after notice to Solv-Ex requesting action to remedy such default;
c) any representation made by Solv-Ex in this Agreement or any notice,
certificate, or written statement delivered or made pursuant hereto
proves to be misleading or materially incorrect or inaccurate when
made;
d) the Lender's funding is declared due for repayment prior to the
stated maturity thereof as a result of the occurrence of an event of
default under the Loan Agreement;
e) a distress or other execution is levied upon or against any
substantial part of the property of Solv-Ex and is not discharged
within 30 days, unless such distress or execution is contested in
good faith by Solv-Ex in appropriate proceedings diligently pursued
which protect Solv-Ex's interest in such property;
f) an order of a competent court or an event analogous thereto shall be
made, or any effective resolution shall be passed, with a view to
the bankruptcy, composition proceedings, liquidation or winding-up
of Solv-Ex;
g) Solv-Ex is unable or admits its inability in writing to pay its
lawful debts as they mature, or makes a general assignment for the
benefit of its creditors;
h) Solv-Ex ceases or threatens to cease to carry on its business or
dispose or threatens to dispose of a substantial part of its
business, properties or assets or of any portion of the Lender's
share holding to any acquiror other than the Lender, or the same are
seized or appropriated for any reason;
i) the Articles of Incorporation and/or Bylaws (if any) of Solv-Ex are
modified in any material way (in the sole opinion of the Lender)
without the prior consent in writing from the Lender;
j) any license, consent, permission or approval required in connection
with the implementation, maintenance and performance of this
Agreement is revoked, terminated or modified in a manner
unacceptable to the Lender;
k) two or more of the 5 key employees of Solv-Ex should resign their
positions during the Loan Period and their positions are not filled
by persons of a comparable competence acceptable to the Lender (such
approval must not be withheld unreasonably) within 3 months of the
date of the relevant resignation;
l) a material adverse change occurs in the financing condition of Solv-
Ex, by way of the operation, equity or result of Solv-Ex
deteriorating to such extent that more than 50% of Solv-Ex's Equity
has been lost at any time during the Loan Period and provided that
the earnings of Solv-Ex at that time, in the reasonable opinion of
the Lenders and Solv-Ex's auditors, make it unlikely that such
equity will be regained within a period of six months.
17.2 Upon the occurrence of any Event of Default referred to in this Clause
and so long as such Event of Default continues, the Lender may, and in
case of default as set forth in Subclause d) of this Agreement, shall
accelerate the Loan and the Lender shall forthwith notify Solv-Ex in
writing that the entire amount of the Loan outstanding together with
interest and all other amounts outstanding under this Agreement shall
become immediately due and payable, and failing full repayment of all
amounts then outstanding to the Lender the Certificate of 1,016,000 of
Common Shares in Solv-Ex may be sold by the Lender at his discretion and
compensated towards the Principal of Solv-Ex.
Article 18
MISCELLANEOUS
18.1 All communications in connection with this Agreement shall be sent in
writing in English to the following addresses:
SOLV-EX Corporation
000 Xxxxxxxxx XX, Xxxxx 000
Xxxxxxxxxxx
Xxx Xxxxxx 00000
Phemex Est.
Xxxxxxxxx 8
Xxxxxxxx 000
XX-0000 Xxxxx
Each party hereto undertakes to notify the other party of any change of
address.
18.2 Solv-Ex shall not assign or transfer, pledge or mortgage any rights under
this Agreement.
18.3 Any modification or amendment of this Agreement must be in writing.
18.4 Should any of the provisions of this Agreement be void for whatsoever
reason, the validity of the remaining provisions shall thereby not be
affected. In such case the parties to this Agreement shall, without any
delay, replace the ineffective provision by a legally effective one which
in its consequences shall approximate the ineffective provision as
closely as possible.
18.5 In case the Lender does not exercise any right to which it is entitled
under this Agreement, such an omission shall not be considered to
constitute a waiver of such right.
18.6 This Agreement shall be effective upon the date first above written and
shall remain binding as long as any amount is due to the Lender.
18.7 This Agreement shall be governed by, and construed in acceptance with,
the laws of the United Kingdom.
18.8 Exclusive jurisdiction in connection with this Agreement lies with the
competent courts of the City of London. Notwithstanding anything to the
contrary, the Lender may have recourse to any competent court or a court
of arbitration established in accordance with the rules and regulations
of the International Chamber of Commerce, Paris, whose award shall be
final and binding.
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized
representatives, have caused this Agreement to be signed in their respective
names as of the day and year first above written.
The LENDER: Phemex Est.
[signature illegible]
SOLV-Ex Corporation
/s/ Xxxxxxx Xxxxxxxx