RE: Encouraging.......Try this one dated Oct 24 2006
DM_TOR/232943-00002/2061020.2A
NEWS RELEASE
Fareport Capital Inc. Announces Changes to Proposed Financing
and Debt Restructuring
October 24, 2006 - TORONTO, Ontario - Further to the news release of September 25, 2006,
in which Fareport Capital Inc. (TSX-V: CAB) (“Fareport”) announced that it proposed to
restructure its affairs, settle outstanding litigation, complete a conversion of substantially all of
its current debt obligations, a consolidation of its issued and outstanding common shares, the
creation of a new class of preference shares and a private placement financing of its common
shares (the “Restructuring”), all subject to shareholder and regulatory approval. While Fareport
still proposes to complete the above restructuring, the terms on which it will occur have been
substantially altered.
Fareport now proposes to enter into a financing transaction with arm’s length investors (the
“Investors”) whereby the Investors will make a $2,080,000 commitment to acquire new common
shares of Fareport. Specifically, the Investors will first advance to Fareport $200,000 by way of
an unsecured subordinated loan bearing interest at 12% per annum, evidenced by a promissory
note, to be used as working capital (the “Advance”), which Advance will be credited towards a
subsequent private placement of $2,080,000 worth of Fareport common shares, subject to
Fareport entering into debt settlement agreements with Fareport’s creditors. The agreements will
provide for a cash payment by Fareport of approximately $1,075,000 in the aggregate to be
allocated amongst the creditors. The balance of Fareport’s debt, being approximately $2,100,000
(the “Debt Balance”), will be sold by the creditors to BG Capital Management Corp. (“BG”), an
arm’s-length third party, at a significant discount to face value for an aggregate of $460,000.
Fareport then proposes to complete a 100:1 share consolidation, followed by the issuance of
1,300,000 post-consolidation common shares to the Investors at a price of $1.60 per common
share (for aggregate cash proceeds of $2,080,000, including the Advance) (the “Private
Placement”). Fareport will pay a commission/financing fee of $46,000 to BG (10% of the
$460,000 paid for the Debt Balance). The Debt Balance will be converted into 1,680,000
common shares, which is equal to 50% of Fareport’s issued and outstanding common share
capital following the completion of the transactions described herein.
As a result of the above transactions, BG would become the controlling shareholder of Fareport.
The terms of the transaction have been set out in a binding commitment letter and term sheet
with BG (the “Commitment Letter”), which, it is anticipated, will be superceded by definitive
detailed documentation.
In order to complete these transactions, the outstanding litigation must be settled and prior
shareholder approval of (a) the consolidation of Fareport’s common shares on a one hundred
“old” common shares for one “new” common share basis (the “Share Consolidation”), (b) the
change of Fareport’s name, (c) the terms of conversion of the Debt Balance, and (d) the issuance
of Common Shares from treasury. Prior TSX Venture Exchange approval is also required to
complete the above transactions. The Company covenants to hold a special meeting of its
shareholders to approve these matters within 75 days of the Advance closing. These transactions
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DM_TOR/232943-00002/2061020.2A
are also subject to BG being satisfied with its due diligence investigations of Fareport, acting
reasonably, such condition to be satisfied or waived by November 17, 2006.
Also, Fareport wishes to provide an update with regards to its compliance with Ontario
Securities Commission (the “OSC”) Policy 57-603. In addition to the foregoing, and further to
the press release of September 22, 2006, Fareport is up-to-date with respect to its financial
statements and management reporting. The temporary management and insider cease trade order
(the “MCTO”) imposed pursuant to OSC Policy 57-603 continues to be in effect. The MCTO
prohibits present and certain past directors, officers and insiders of Fareport from trading in
securities of Fareport. A partial revocation of the MCTO to permit the settlement of a portion of
the Debt Balance with certain former management and Insiders of Fareport will be sought by
Fareport.
Fareport will continue to provide updates on these and related matters in accordance with OSC
Policy 57-603.
Fareport Capital currently operates the Crown Taxi and Olympic Taxi brokerages and dispatch
operations in the city of Toronto. The Crown Taxi division dispatches to over 300 vehicles. In
addition, through its Crown Transportation and Trax Shuttle Services divisions, the Company
also offers charter transportation services.
For further information please contact Lou Elmaleh, Chief Executive Officer at (416) 750-1167
ext. 400.
Neither the TSX Venture Exchange, nor any other Regulatory Authority has approved or disapproved of the contents
of this news release. Fareport cannot guarantee that any forward-looking statements contained in this news release
will materialize. Nor is it possible for Fareport to commit itself to updating information about risks and other
factors pertaining to its business that might appear in this or any other public disclosure documents.