GLOBALTEX INDUSTRIES INC.
#000 - 000 XXXXXXX XXXXXX
XXXXXXXXX, X.X. X0X 0X0
TELEPHONE: (000) 000-0000
FAX: (000) 000-0000
May 30, 2002
XXXX XXXXX
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxx, XX, X.X.X. 00000
Dear Sir:
Debt Settlement Agreement
We write to you in connection with the following loan agreements between
Globaltex Industries Inc. (the "Borrower") and yourself (the "Lender"):
(a) loan agreement dated August 24, 2001 pursuant to which you advanced US
$1,150,000 to the Borrower (the "August 2001 Loan Agreement");
(b) loan agreement dated September 7, 2001 pursuant to which you advanced
CAD $372,000 to the Borrower (the "September 2001 Loan Agreement"); and
(c) loan agreement dated September 18, 2000 (as amended September 7, 2001)
pursuant to which you advanced CAD $400,000 to the Borrower (the "September
2000 Loan Agreement").
(collectively, the "Loan Agreements")
We understand that the total amount presently outstanding under the Loan
Agreements (the "Loans") is approximately CAD $1,350,778. Except as otherwise
expressly provided, all references to amounts of money in this letter agreement
(the "Agreement") mean lawful currency of Canada. Amounts in this Agreement
expressed in United States Dollars will be converted to Canadian Dollars at the
US$/CAD$ rate of 1.5346.
Settlement Offer
We hereby offer to settle the total amount owing under the Loan Agreements for
Common shares in the capital of the Borrower ("Shares") at deemed issue price
of CAD $0.55 per Share on the terms and conditions set out in this Agreement.
References to this Agreement include Schedule A to this Agreement, and this
Agreement is made subject to the terms, conditions, representations and
warranties set out in Schedule A. The number of Shares to be issued to you
will be approximately 2,455,960, subject to adjustment based on the amount of
principal and interest owing as at the effective date of the Closing.
Security
The obligations of the Borrower arising under the August 2001 Loan Agreement
and the September 2001 Loan Agreement are secured by a pledge by the Borrower
of all of the issued and outstanding shares of its wholly owned subsidiary,
Falls Mountain Coal Inc., pursuant to pledge agreements dated August 24, 2001
and September 10, 2001 (collectively, the "Pledge Agreements"). Commensurate
with the Closing, the shares of Falls Mountain Coal Inc. will be released to
the Borrower and the Pledge Agreements will terminate.
Regulatory Approvals
This Agreement is subject to the Borrower obtaining all necessary regulatory
approvals (including, but not limited to the acceptance of the TSX Venture
Exchange (the "Exchange") and any conditions on such acceptance as may be
imposed by the Exchange) to permit the Closing to proceed. Upon your
acceptance of this Agreement, the Borrower will proceed expeditiously and
use all of its commercially reasonable efforts to secure all such regulatory
approvals.
Extension of Due Date for the Loans
While the Borrower will seek to secure Exchange acceptance of this Agreement
without a need for shareholder approval, the Exchange may require that the
Borrower seek shareholder approval before the transactions contemplated by this
Agreement can proceed. If the Exchange requires the Borrower to obtain
shareholder approval before the transactions contemplated by this Agreement can
proceed, the due dates of the Loans will be extended, without further action on
the part of either Party, to be the first to occur of that day which is ten
Business Days following the day on which the Borrower receives a letter from
the Exchange evidencing the final acceptance of this Agreement by the Exchange
and October 31, 2002.
If the foregoing correctly states your understanding of our agreement, please
sign and return two originally signed copies of this Agreement to the Borrower.
Yours truly,
GLOBALTEX INDUSTRIES INC.
Per: "Xxxx Xxxxxx"
Xxxx Xxxxxx,
President and Chief Executive Officer
ACCEPTED AND AGREED TO as of the date first written above.
"Xxxx Xxxxx"
Xxxx Xxxxx
Exhibit A
Additional Terms, Conditions, Representations and Warranties
1. INTERPRETATION
1.1 Definitions
In addition to those terms defined in the main body of this Agreement, in this
Agreement:
(a) "1933 Act" means the United States Securities Act of 1933, as amended;
(b) "Agreement" means this letter agreement including any recitals and Exhibits
to this agreement, as amended, supplemented or restated from time to time;
(c) "BC Securities Act" means the British Columbia Securities Act and the rules
and regulations thereto;
(d) "Business Day" means a day other than a Saturday, Sunday or statutory
holiday in British Columbia;
(e) "Closing" has the meaning given to it in Section 2.3;
(f) "Notice" means any notice, approval, election, demand, direction, consent,
designation, request, agreement, instrument, certificate or other communication
required or permitted to be given or made under this Agreement;
(g) "Parties" means the parties to this Agreement and "Party" means any one of
them;
(h) "Permitted Action" means any suit, action, or other proceeding in any way
related to or arising out of this Agreement commenced in the courts of British
Columbia and all courts having appellate jurisdiction over those courts, by any
Party against any other Party;
(i) "Person" means any natural person, sole proprietorship, partnership,
corporation, trust, joint venture, any governmental authority or any
incorporated or unincorporated entity or association of any nature; and
(j) "Subscription Funds" has the meaning given to it in Section 2.1.
2. SUBSCRIPTION
2.1 Number of Units
Subject to the terms and conditions of this Agreement, the Lender hereby
irrevocably subscribes for 2,455,960 Shares at a deemed price of $0.55 per
Share for a total subscription price of $1,350,778 (the "Subscription Funds"),
subject to adjustment based on the amount of principal and interest owing under
the Loan Agreements as at the effective date of the Closing.
2.2 Subscription and Payment of Subscription Funds
Prior to the Closing, the Borrower, the Lender will deliver to the Borrower's
solicitors, Bull, Housser & Xxxxxx, #3000 - 1055 W. Georgia Street, Vancouver,
British Columbia, Canada V6E 3R3, the Subscription Funds. The delivery of the
Subscription Funds will be effected by the Lender:
(a) surrendering to the Borrower for cancellation of the original promissory
notes issued by the Borrower to the Lender pursuant to the Loan Agreements and
dated September 18, 2000, August 24, 2001 and September 7, 2001 (the
"Promissory Notes"); and
(b) returning to the Borrower the original share certificates No. 3 and No. 4
representing a total of 12 Common shares in the capital of Falls Mountain Coal
Inc., a wholly-owned subsidiary of the Borrower (the "Falls Mountain Shares").
The Promissory Notes and the Falls Mountain Shares will be held in trust by
Bull, Housser & Xxxxxx pending the Closing. In the event the Borrower does not
receive the requisite Exchange acceptance to close the subject transaction by
October 31, 2002, the Promissory Notes and the Falls Mountain Shares will be
returned to the Lender.
2.3 Closing
The closing of the transactions contemplated hereby (the "Closing") will be
completed at the Vancouver offices of Bull, Housser & Xxxxxx at 10:00 a.m.
(Vancouver time) by the tenth Business Day after the date on which the Borrower
receives a letter from the Exchange evidencing the final acceptance of such
transactions by the Exchange. At the Closing, the Borrower will deliver to
Bull, Housser & Xxxxxx certificates representing the number of Shares
subscribed determined according to Section 2.1 above for delivery to the
Lender, and Bull, Housser & Xxxxxx will deliver the Promissory Notes and the
Falls Mountain Shares to the Borrower. Commensurate upon completion of the
Closing and without any further action by or notice to the Parties, the Loan
Agreement and the Pledge Agreements will terminate and the Loans will be
deemed to have been fully and finally satisfied.
3. REPRESENTATIONS AND WARRANTIES
3.1 Lender's Representations and Warranties
The Lender represents and warrants to the Borrower that:
(a) the Lender is a director of the Borrower and is acquiring the Shares to
settle a genuine debt owing to the Lender by the Borrower;
(f) the Lender has been independently advised as to the applicable hold periods
and trading restrictions imposed on the Shares under the BC Securities Act and
under the securities legislation applicable in the jurisdiction in which he
resides;
(g) no person has made any written or oral representation to the Lender:
(1) that any person will resell or repurchase the Shares;
(2) relating to the future value or price of the Shares; or
(3) any person will refund the purchase price of the Shares.
3.2 Borrower's Representations and Warranties
The Borrower represents and warrants to the Lender that:
(a) the Borrower is a corporation incorporated and validly existing under the
laws of the British Columbia and is in good standing;
(b) the Borrower has the corporate capacity and authority to execute and
deliver this Agreement and to observe and perform its obligations hereunder;
(c) the Borrower has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement, and, upon acceptance by
the Borrower, this Agreement will constitute a legal, valid and binding
contract of the Borrower, enforceable against the Borrower in accordance with
its terms;
(d) subject to receipt by the Borrower of the Subscription Funds, the Shares
delivered at the Closing will be validly issued, fully paid and non-assessable,
free and clear of all liens, charges and encumbrances.
4. SUBSCRIBER'S ACKNOWLEDGEMENT AND AGREEMENT
The Lender acknowledges and agrees that, other than as expressed in this
Agreement, his decision to acquire Shares pursuant to this Agreement has not
been induced by any representations or warranties by or on behalf of the
Borrower or his knowledge of any information about the affairs of the Borrower
that is not generally known to the public save knowledge of this particular
transaction.
5. PROVISIONS RESPECTING U.S. SECURITIES LAWS
The Lender warrants, represents, agrees and acknowledges as follows:
(a) the Shares issuable under this Agreement have not been and will not be
registered under the 1933 Act, or the applicable securities laws of any state
of the United States and therefore may not be offered or sold by the Lender,
directly or indirectly, in the United States without registration under United
States federal and state securities laws except pursuant to an applicable
exemption from the registration requirements of the 1933 Act and applicable
state securities laws;
(b) the Lender:
(1) understands and agrees that the Shares are being offered to the Lender
directly by the Borrower on a private placement basis in the United States
pursuant to Rule 506 of Regulation D under the 1933 Act;
(2) is an accredited investor as defined in Rule 501 of Regulation D under the
1933 Act and satisfies one or more of the categories indicated below
(Please place an "X"'s on the each of the lines below that applies to the
Lender.):
____ Category 1. An organization described in Section 501(c)(3) of the United
States Internal Revenue Code, a corporation, a Massachusetts
or similar business trust or partnership, not formed for the
specific purpose of acquiring the Shares, with total assets in
excess of US $5,000,000;
__X_ Category 2. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the date hereof exceeds US
$1,000,000;
____ Category 3. A natural person who had an individual income in
excess of US $200,000 in each of the two most recent years or joint income
with that person's spouse in excess of US $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the current
year;
____ Category 4. A trust that (a) has total assets in excess of US
$5,000,000,
(b) was not formed for the specific purpose of acquiring the Shares and (c) is
directed in its purchases of securities by a person who has such knowledge and
experience in financial and business matters that he/she is capable of
evaluating the merits and risks of an investment in the Shares;
____ Category 5. An investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act;
____ Category 6. A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;
____ Category 7. A private business development company as defined in
Section 202(a)(22) of the Investment Advisors Acts of 1940; or
____ Category 8. An entity in which all of the equity owners satisfy
the requirements of one or more of the foregoing categories.
; and
(3) is acquiring the Shares for the Lender's own account as a bona fide
investment and not with a view to any resale, distribution or other
disposition of the Shares.
6. LEGENDS
The Lender understands and acknowledges that upon the original issuance
thereof, and until such time as the same is no longer required under applicable
requirements of the 1933 Act or applicable state securities laws, certificates
representing the Shares, and all certificates issued in exchange therefor or in
substitution thereof, will bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), THESE SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT IF
APPLICABLE, (C) INSIDE THE UNITED STATES (i) PURSUANT TO THE EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER, IF APPLICABLE AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS OR (ii) PURSUANT TO ANOTHER APPLICABLE EXEMPTION
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, AS
EVIDENCED BY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM
ACCEPTABLE TO THE COMPANY.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE
"GOOD DELIVERY", MAY BE OBTAINED FROM PACIFIC CORPORATE TRUST
COMPANY. UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO PACIFIC CORPORATE TRUST
COMPANY AND THE COMPANY TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT."
In addition to the foregoing legend, the Lender acknowledges and agrees that
the certificates representing the Shares will bear legends in the forms
required under the BC Securities Act and any other applicable securities
legislation, and the policies of the Exchange.
7. OTHER RESTRICTIONS ON TRANSFER
Without in any way limiting their representations set forth above, the Lender
further agrees that he will in no event make any disposition of all or any
portion of the Shares unless:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement;
(b) The sale is to the Borrower; or
(c) (1) Lender will have notified the Borrower of the proposed disposition and
will have furnished the Borrower with a reasonably detailed statement of the
circumstances surrounding the proposed disposition; (2) Lender will have
furnished the Borrower with an opinion of his or her counsel to the effect that
such disposition will not require registration under the 1933 Act; and (3) such
opinion will be in form and substance reasonably acceptable to counsel for the
Borrower and the Borrower will have advised Lender of such acceptance.
8. TERMINATION
If the Lender fails to execute and deliver this Agreement by May ?, 2002, then
this Agreement will terminate, the Lender will have no obligation to proceed
with the acquisition of the Shares and the commensurate settlement of the
Loans, and the Borrower will immediately direct its solicitors to return the
Promissory Notes and the Falls Mountain Shares to the Lender.
9. GENERAL
9.1 Assignment
No Party will assign this Agreement, or any part of this Agreement, without the
consent of the other Party. Any purported assignment without the such consent
is not binding or enforceable against any Party. This Agreement enures to the
benefit of and binds the Parties and their respective heirs, executors,
administrators, successors and permitted assigns.
9.2 Notice
Any Notices provided for herein will be governed by Section 9.3 of the August
2001 Loan Agreement.
9.3 Further Assurances
Before and after the Closing, each Party will promptly execute and deliver all
further documents and take all further action reasonably necessary or
appropriate to give effect to the provisions and intent of this Agreement and
to complete the transactions contemplated by this Agreement. In particular and
without limiting the generality of the foregoing, if required by applicable
securities legislation, policy of the Exchange, policy or order of a securities
commission or other regulatory authority, the Lender will execute, deliver,
file and otherwise assist the Borrower in filing, any reports, undertakings and
other documents with respect to the issuance of the Shares.
9.4 Counterparts
This Agreement may be executed and delivered in any number of counterparts with
the same effect as if all Parties had all signed and delivered the same
document and all counterparts will be construed together to be an original and
will constitute one and the same agreement.
9.5 Delivery by Fax
Any Party may deliver an executed copy of this Agreement by fax but that Party
will promptly dispatch by delivery in person to the other Party an originally
executed copy of this Agreement.
9.6 Amendments
No amendment, supplement, restatement or termination of any provision of this
Agreement is binding unless it is in writing and signed by each Person that is
a Party at the time of the amendment, supplement, restatement or termination.
9.7 Submission to Jurisdiction
Each of the Parties irrevocably submits to the jurisdiction of the courts of
British Columbia in any Permitted Action and each Party waives, and will not
assert by way of motion, as a defence, or otherwise, in any Permitted Action,
any claim that:
(a) that Party is not subject to the jurisdiction of the courts of British
Columbia;
(b) the Permitted Action is brought in an inconvenient forum;
(c) the venue of the Permitted Action is improper, or
(d) any subject matter of the Permitted Action may not be enforced in or by the
courts of British Columbia.
In any suit or action brought to obtain a judgment for the recognition or
enforcement of any final judgment rendered in a Permitted Action, no Party will
seek any review with respect to the merits of any Permitted Action, whether or
not that Party appears in or defends the Permitted Action.
9.8 Headings
The division of this Agreement into Sections and the insertion of headings are
for convenience only and do not form a part of this Agreement and will not be
used to interpret, define or limit the scope, extent or intent of this
Agreement.
9.9 Section and Schedule References
Unless otherwise specified, references in this Agreement to "Sections" and
"Exhibits" are to Sections of, and Exhibits to, this Agreement
9.10 Number and Gender
Unless otherwise specified, words importing the singular include the plural and
vice versa and words importing gender include all genders.
9.11 Business Day
If under this Agreement any payment or calculation is to be made, or any other
action is to be taken, on or as of a day which is not a Business Day, the
payment or calculation is to be made, or that other action is to be taken, on
or as of the next day that is a Business Day.
9.12 Governing Law
This Agreement and each of the documents contemplated by or delivered under or
in connection with this Agreement are governed exclusively by, and are to be
enforced, construed and interpreted exclusively in accordance with, the laws of
British Columbia and the laws of Canada applicable in British Columbia which
will be deemed to be the proper law of the Agreement.
9.13 Severability
Each provision of this Agreement is several. If any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction,
the illegality, invalidity or unenforceability of that provision will not
affect:
(a) the legality, validity or enforceability of the remaining provisions of
this Agreement, or
(b) the legality, validity or enforceability of that provision in any other
jurisdiction except that if:
(c) on the reasonable construction of this Agreement as a whole, the
applicability of the other provision presumes the validity and enforceability
of the particular provision, the other provision will be deemed also to be
invalid or unenforceable, and
(d) as a result of the determination by a court of competent jurisdiction that
any part of this Agreement is unenforceable or invalid and, as a result of this
Section 1.11, the basic intentions of the Parties in this Agreement are
entirely frustrated, the Parties will use all reasonable efforts to amend,
supplement or otherwise vary this Agreement to confirm their mutual intention
in entering into this Agreement.
9.14 Time of Essence
Time is of the essence of this Agreement.
9.15 Confidentiality
Each the Parties to this Agreement will keep strictly confidential the
existence of this Agreement and the subject matter hereof and will not make any
public disclosure thereof, whether by way of press release or otherwise,
without the prior written consent of the others, except as may be required by
any securities commission or stock exchange having jurisdiction or as may be
required to comply with applicable securities legislation. All press releases
and other public disclosure will be mutually coordinated and any party required
to make disclosure as aforesaid will, to the extent possible, give the other
parties advance notice thereof together with a copy or other particulars of the
disclosure intended to be made.
9.16 Entire Agreement
This Agreement and all documents contemplated by or delivered under or in
connection with this Agreement, constitute the entire agreement between the
Parties with respect to the subject matter of this Agreement and supersede all
prior agreements, negotiations, discussions, undertakings, representations,
warranties and understandings, whether written or oral, express or implied,
statutory or otherwise.
