Tha latest news from GMd
GMD RESOURCE CORP.
1407 - 675 West Hastings Street
Vancouver, British Columbia V6B 1N2
Tel: (604) 488-1111
Fax: (604) 488- 1145
March 31, 1998 Symbol: GMD
In a news release dated February 5, 1998 the Company announced that there were irregularities in the granting of non arms length loans by GMD to LMX Resources Ltd. ("LMX") in the amount of $2,057,441 ("LMX Loan") and by GMD to Farrell Financial Ltd., a private company owned by Don Farrell, the former president of GMD in the amount of $903,588 ("Farrell Loan"). The Farrell Loan has been paid down to $822,781.42.
Regarding the LMX Loan, GMD has signed an agreement dated March 27, 1998 with Don Farrell and Farrell Financial Ltd. and Variety Investments Ltd. (two private companies owned by Don Farrell) (collectively "Farrell"). Farrell has purchased the LMX Loan of $2,057,441 from GMD. The LMX Loan purchase agreement, subject to the acceptance of the Vancouver Stock Exchange, provides that as long as Farrell is not in default, GMD will not seek recovery of the $2,057,441 from LMX and contains purchase terms as follows:
Initial payment on June 1, 1998 of interest accruing on the LMX Loan from September 30, 1996 to May 31, 1998, estimated to be $123,935.92 at the Bank of Montreal's prime rate plus 2% per annum.
Minimum monthly payments with interest for the months of July, 1998 to October, 1999. The minimum monthly amount in 1998 is $50,000 and in 1999 is $100,000.
There will be four lump sum payments of $200,000 on the last day of each of March, June and September, 1999. A final payment of $157,441 will be made on November 30, 1999.
To encourage early payment, the principal amount of $2,057,441 was discounted:
Discounted Amount Discount Payment date
$1,500,000 November 30, 1998
$1,600,000 March 31, 1999
$1,700,000 August 31, 1999.
No discounts are allowed after August 31, 1999.
All payments made on account of the Principal Amount prior to the above three Discount Payment Dates are credited to the Discounted Amount.
LMX owes $327,965.51 to Farrell Financial Ltd. which is being settled by the issue of shares: $215,829.05 by the issue of 1,269,583 shares at a price of $.17 per share and $112,136.46 by the issue of 448,546 shares at $.25 per share subject to Exchange acceptance. Farrell has agreed that 100% of the proceeds of sale of these LMX shares will be paid directly to GMD until the terms of the LMX Loan agreement are met.
In the event of default by Farrell, the LMX Loan is automatically assigned back to GMD and GMD will retain all rights under the law and the agreements to recover the LMX Loan from both LMX and Farrell.
The Company also signed an amending agreement to the February 4, 1998 agreement regarding the repayment of the Farrell loan:
That the shares held pursuant to the February Agreement shall continue to be pledged as security until the LMX Loan is purchased according to the LMX Loan agreement.
For each of the months of March to June, 1998 inclusive, the first $25,000 in sale proceeds must be paid to GMD. The next $12,500 shall be paid to Farrell. Any proceeds of sale above $37,500 shall be paid to GMD as to 90% and to Farrell as to 10%.
If a balloon payment of at least $200,000 is paid by April 15, 1998, the balloon payment shall be credited firstly, to the minimum monthly payments of $25,000 for the months of April and May, 1998, and the balance to the final payment of the principal amount on June 30, 1998 which has been reduced to $703,885. The balance of the Farrell Loan, $200,000 must be paid by September 30, 1998. Interest shall continue to be paid for the months of July - September on the outstanding $200,000.
The Company intends to use these funds and others raised in previously announced private placements to first cover ongoing expenses, secondly to settle outstanding obligations and thirdly to advance the Royce Group diamond project. The Company has been in contact with all suppliers and some have elected to continue to provide services despite the recent events. This has enabled the Company to progress with both the Discovery and Royce Group projects albeit at a slower pace than had been planned.
Last week the Company filed a statement of defence in response to the writ and statement of claims filed against the Company by Peter Hawley.
GMD Resource Corp.
Per:
_________________
Dr. DAVID WEBB |
