Globex

TSX-listed Globex is proposing a spin-off to its shareholders by way of butterfly reorganization of CIM, a newly-incorporated subsidiary that is proposed to be listed on the TSX-V and that will hold various mining and exploration properties in the Chibougamu mining camp.

Butterfly steps

The butterfly reorganization is implemented through the following steps occurring under a Quebec plan of arrangement:

• Globex common shares of dissenters are purchased for cancellation for their fair value
• Each Globex common share is exchanged for one Globex voting new common share and one Globex voting Butterfly Share
• Each Globex Butterfly Share is transferred to CIM in exchange for one CIM common share –except that holders of fewer than 100 Globex common shares receive a cash payment based on the immediate post-arrangement trading price of CIM common shares
• Each option on a Globex common share is exchanged for one option on a Globex new common share and one option on a CIM common share (with the exercise price on the first option being allocated to the exercise price for the 2nd and 3rd option based on the relative trading prices of the Globex new common shares and the CIM common shares for the 1st five trading days following completion of the plan of arrangement)
• Globex calculates the net fair market value of each of its three types of property (with its only investment property being marketable securities)
• Globex transfers the Chibougamu mining camp properties, along with net cash and marketable securities, to CIM - such that CIM receives the "Butterfly Proportion" of each type of property, namely, the fair market value of the transferred mining properties as a proportion of the net fair market value of all the business property of Globex calculated using the consolidated look-through approach – which proportion in turn is equal to the fair market value of the Globex Butterfly Shares divided by the aggregate fair market value of the Globex Butterfly Shares and the Globex new common shares. In consideration, CIM issues 5M redeemable retractable shares (bearing one vote per share) to Globex (with s. 85(1) elections being made and with such shares having a dollar specified amount for purposes of ITA s. 191(4)). The Chibougamu mining camp properties also are transferred subject to a 3% gross metal royalty in favour of Globex.
• CIM redeems the preference shares held by Globex through the issue of a demand promissory note
• Globex redeems the Globex Butterfly Shares through the issue of a demand promissory note
• Each promissory note is satisfied by the holder of the note transferring it to the obligor in satisfaction of the obligations on the other note owing by it

Implementation of the plan of arrangement is contingent inter alia on a favourable butterfly ruling having been obtained by Globex.

Canadian tax consequences

The exchange of (old) Globex shares for new common and Globex Butterfly Shares will occur on a rollover basis under s. 86; and the exchange of Globex Butterfly Shares for CIM common shares will occur on a rollover basis under s. 85.1 (unless the exchanging shareholder elects to include any portion of the gain or loss otherwise determined in computing income). (Capital gain or loss treatment will result where odd lots are disposed of for cash.)

Deemed dividend treatment will apply to dissenting shareholders (subject to the application of s. 55(2).)

Non-resident shareholders may not hold their shares as taxable Canadian property.