EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
AMONG:
THE SHAREHOLDERS OF PETROGEN, INC.
AND:
PETROGEN, INC.
AND:
HADRO RESOURCES, INC.
PETROGEN, INC.
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx, X.X.X., 00000
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made and dated for reference effective
as at October 11, 2002 (the "EFFECTIVE Date") as fully executed on this _____
day of January, 2003.
AMONG:
THE UNDERSIGNED SHAREHOLDERS OF PETROGEN, INC., each having an address
for notice and delivery located at 0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx, X.X.X., 00000 (each such shareholder being hereinafter
singularly referred to as a "VENDOR" and collectively referred to as
the "VENDORS" as the context so requires");
OF THE FIRST PART
AND:
PETROGEN, INC., a company incorporated under the laws of the State of
Colorado, U.S.A., and having an address for notice and delivery located
at 0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx, X.X.X., 00000
(the "COMPANY");
OF THE SECOND PART
AND:
HADRO RESOURCES, INC., a company incorporated under the laws of the
State of Nevada, U.S.A., and having an address for notice and delivery
located at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx, X.X.X.,
00000
(the "PURCHASER");
OF THE THIRD PART
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(the Vendors, the Company and the Purchaser being hereinafter
singularly also referred to as a "PARTY" and collectively referred to
as the "PARTIES" as the context so requires).
WHEREAS:
A. The Company is a body corporate subsisting under and registered
pursuant to the laws of the State of Colorado, U.S.A.;
B. The Company is presently engaged in the business of oil and gas
development and production (collectively, the "COMPANY'S BUSINESS");
C. The Vendors are the legal and beneficial owners of all of the
11,807,000 presently issued and outstanding common shares in the capital of the
Company (each a "PURCHASED SHARE"); the particulars of the registered and
beneficial ownership of such Purchased Shares being set forth in Schedule "B"
which is attached hereto and which forms a material part hereof;
D. In accordance with the terms and conditions of that certain
"Agreement In Principle" dated for reference October 11, 2002 (the "AGREEMENT IN
PRINCIPLE"), as entered into between the Company and the Purchaser, the Company
and the Purchaser therein agreed to use their best efforts to initiate, complete
and enter into a formal agreement whereby the Vendors would sell all of the
Purchased Shares to the Purchaser upon the general terms and conditions as set
forth therein; a copy of which Agreement In Principle being attached hereto as
Schedule "A" and which forms a material part hereof, and the terms and
conditions of the Agreement In Principle setting forth the Parties general
intentions herein; and
E. The Parties hereto have agreed to enter into this agreement (the
"AGREEMENT") which formalizes and replaces, in its entirety, the Agreement In
Principle, as contemplated and required by the terms of the Agreement In
Principle, and which clarifies their respective duties and obligations in
connection with the purchase by the Purchaser from the Vendors of all of the
Purchased Shares together with the further development of the Company's Business
as a consequence thereof;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual promises, covenants and agreements herein contained, THE PARTIES HERETO
COVENANT AND AGREE WITH EACH OTHER as follows:
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ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(a) "AFFILIATE" and "ASSOCIATE" have the meanings ascribed to them
under the COMPANY ACT of the Province of British Columbia,
R.S.B.C. 1996, as amended from time to time;
(b) "AGREEMENT" means this "Share Exchange Agreement" as entered
into among the Vendors, the Company and the Purchaser herein,
together with any amendments thereto and any Schedules as
attached thereto;
(c) "AGREEMENT IN PRINCIPLE" has the meaning ascribed to it in
recital "D." hereinabove; a copy of which Agreement In
Principle being attached hereto as Schedule "A" and forming a
material part hereof;
(d) "ARBITRATION ACT" means the COMMERCIAL ARBITRATION ACT of the
Province of British Columbia, R.S.B.C. 1996, as amended from
time to time, as set forth in Article "14" hereinbelow;
(e) "ATTORNEY" has the meaning ascribed to it in section "12.3"
hereinbelow;
(f) "BOARD OF DIRECTORS" means, as applicable, the respective
Board of Directors of each of the Parties hereto as duly
constituted from time to time;
(g) "BUSINESS DAY" means any day during which Canadian Chartered
Banks are open for business in the City of Vancouver, Province
of British Columbia;
(h) "BUSINESS DOCUMENTATION" means any and all records and other
factual data and information relating to the Company's
Business interests and assets and including, without
limitation, all plans, agreements and records which are in the
possession or control of any of the Vendors or the Company in
that respect;
(i) "CLOSING" has the meaning ascribed to it in section "7.1"
hereinbelow;
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(j) "CLOSING DATE" has the meaning ascribed to it in section "7.1"
hereinbelow;
(k) "COMMISSION" means the United States Securities and Exchange
Commission;
(l) "COMPANY" means Petrogen, Inc., a company incorporated under
the laws of the State of Colorado, U.S.A., or any successor
company, however formed, whether as a result of merger,
amalgamation or other action;
(m) "COMPANY'S ASSETS" means all assets, contracts, equipment,
goodwill, inventory, Company's Property interests and
Intellectual Property of the Company and including, without
limitation, all of the property interests, assets, contracts,
equipment, goodwill and inventory which are listed and
described in Schedules "E" through "J" which are attached
hereto and which form a material part hereof;
(n) "COMPANY'S BUSINESS" has the meaning ascribed to it in recital
"B." hereinabove;
(o) "COMPANY'S FINANCIAL STATEMENTS" has the meaning ascribed to
it in section "3.3" hereinbelow; a copy of which Company's
Financial Statements being set forth in Schedule "D" which is
attached hereto and which forms a material part hereof;
(p) "COMPANY'S OPTIONS" has the meaning ascribed to it in section
"3.3" hereinbelow;
(q) "COMPANY'S PROPERTY" means the mineral interests described in
Schedule "E" which is attached hereto and the interests of the
Company, the registered owner and Petrogen Ltd. therein, and
any other claim or property interests of the registered owner,
the Company and Petrogen Ltd. incorporated into the Company's
Property by the terms of this Agreement;
(r) "COMPANY'S WARRANTS" has the meaning ascribed to it in section
"3.3" hereinbelow;
(s) "CONFIDENTIAL INFORMATION" has the meaning ascribed to it in
section "11.1" hereinbelow;
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(t) "CONSOLIDATION" has the meaning ascribed to it in section
"2.2" hereinbelow;
(u) "CONSULTING SERVICES AGREEMENT" has the meaning ascribed to it
in section "4.1" hereinbelow; the proposed form of which being
attached hereto as Schedule "O" and forming a material part
hereof;
(v) "DAX" means the Frankfurt Stock Exchange, together with its
respective successors and permitted assigns as the context so
requires;
(w) "DEFAULTING PARTY" and "NON-DEFAULTING PARTY" have the
meanings ascribed to them in section "15.1" hereinbelow;
(x) "DISCHARGES" has the meaning ascribed to it in section "5.4"
hereinbelow;
(y) "DRILLING AND OPERATING AGREEMENT" has the meaning ascribed to
it in section "3.3" hereinbelow; a copy of said form of
proposed Drilling and Operating Agreement being attached
hereto as Schedule "P" and forming a material part hereof;
(z) "EFFECTIVE DATE" has the meaning ascribed to it on the front
page of this Agreement;
(aa) "ELECTION FORM" has the meaning ascribed to it in section
"5.5" hereinbelow;
(ab) "EQUITY INTEREST" has the meaning ascribed to it in section
"5.5" hereinbelow;
(ac) "EQUITY INTEREST DOCUMENTATION" has the meaning ascribed to it
in section "5.5" hereinbelow;
(ad) "EXECUTION DATE" means the actual date of the complete
execution of this Agreement and any amendment thereto by all
Parties hereto as set forth on the front page hereof;
(ae) "EXPLORATION AND DEVELOPMENT EXPENDITURES" means all costs,
expenses, charges, obligations and liabilities of whatever
kind or nature expended, funded or incurred directly or
indirectly by the Operator and including, without limiting the
generality of the foregoing, by any joint venture partner of
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the Company, on or in respect of the Company's Properties and
in connection with the exploration and development of the
Company's Properties for the purpose of determining the
existence of resources on the Company's Property during the
term of the Drilling and Operating Agreement and including,
without limiting the generality of the foregoing, all monies
expended in maintaining the Company's Property in good
standing by the doing and filing of assessment work and by
making the tenure payments within the time periods in which
such tenure payments are required to be made, and by
expending, funding or incurring all on-site Company's Property
costs and including, without limiting the generality of the
foregoing, the costs of prospecting, claim staking, Company's
Property payments, taxes, mapping, surveying, permitting,
geophysical, geochemical and geological surveys, sampling,
assaying, trenching, drilling, geochemical analyses, road
building, drill site preparation, drafting, report writing,
consultants, metallurgical testing, mining, metallurgical and
economic studios, feasibility studies, reclamation and all
other project expenditures, together with the supervision and
management of all work done for the benefit of the Company's
Property; provided, however, that the Operator's
administrative expenses shall not exceed ten percent (10%) of
the exploration and development expenses incurred directly or
indirectly on the Company's Property; the exact particulars of
which being detailed in the form of proposed Drilling and
Operating Agreement being set forth in Schedule "P" which is
attached hereto;
(af) "FINANCING" has the meaning ascribed to it in section "5.6"
hereinbelow;
(ag) "ICI" means Investor Communications International, Inc., a
company incorporated under the laws of the State of
Washington, U.S.A., or any successor company, however formed,
whether as a result of merger, amalgamation or other action;
(ah) "INCOME TAX ACT" means the INCOME TAX ACT of Canada, R.S.C.
1985, as amended, together with the RULES and Regulations to
the Income Tax Act;
(ai) "INDEMNIFIED PARTY" and "INDEMNIFIED PARTIES" have the
meanings ascribed to them in section "16.1" hereinbelow;
(aj) "INITIAL DUE DILIGENCE" has the meaning ascribed to it in
section "6.1" hereinbelow;
(ak) "INTELLECTUAL PROPERTY" means, with respect to the Company,
all right and interest to all patents, patents pending,
inventions, know-how, any operating or identifying name or
registered or unregistered trademarks and tradenames, all
computer programs, licensed end-user software, source codes,
products and applications (and related documentation and
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materials) and other works of authorship (including notes,
reports, other documents and materials, magnetic, electronic,
sound or video recordings and any other work in which
copyright or similar right may subsist) and all copyrights
(registered or unregistered) therein, industrial designs
(registered or unregistered), franchises, licenses,
authorities, restrictive covenants or other industrial or
intellectual property used in or pertaining to the Company and
including, without limitation, the items described in Schedule
"F" which is attached hereto and which forms a material part
hereof, and all lists of customers, documents, records,
correspondence and other information pertaining to the
Company;
(al) "LOAN" has the meaning ascribed to it in section "5.1"
hereinbelow;
(am) "LOAN AGREEMENT" has the meaning ascribed to it in section
"5.1" hereinbelow; a copy of said form of proposed Loan
Agreement being attached hereto as Schedule "N" and forming a
material part hereof;
(an) "OPERATOR" has the meaning ascribed to it in section "3.3"
hereinbelow and means, initially, Petrogen Ltd., together with
that person, company or companies acting as such pursuant to
the terms and conditions of this Agreement and any Drilling
and Operating Agreement;
(ao) "OPTIONS" has the meaning ascribed to it in section "4.1"
hereinbelow;
(ap) "OTCBB" means the NASD Over-the-Counter Bulletin Board,
together with its respective successors and permitted assigns
as the context so requires;
(aq) "OUTSTANDING INDEBTEDNESS" has the meaning ascribed to it in
section "5.5" hereinbelow;
(ar) "PARTIES" or "PARTY" means, respectively, the Vendors, the
Company and the Purchaser hereto, as the case may be, together
with their respective successors and permitted assigns as the
context so requires;
(as) "PERSON" or "PERSONS" means an individual, corporation,
partnership, party, trust, fund, association and any other
organized group of persons and the personal or other legal
representative of a person to whom the context can apply
according to law;
(at) "PETROGEN LTD." means Petrogen International Ltd., a company
incorporated under the laws of the State of Colorado, U.S.A.,
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and a company being an affiliate of the Company, or any
successor company, however formed, whether as a result of
merger, amalgamation or other action;
(au) "POOLING AGREEMENT" has the meaning ascribed to it in section
"2.5" hereinbelow; a copy of said form of proposed Pooling
Agreement being attached hereto as Schedule "C" and forming a
material part hereof;
(av) "POWER OF ATTORNEY" has the meaning ascribed to it in section
"12.3" hereinbelow;
(aw) "PRINCIPAL SUM" has the meaning ascribed to it in section
"5.1" hereinbelow;
(ax) "PRIVATE PLACEMENT" has the meaning ascribed to it in section
"4.1" hereinbelow;
(ay) "PURCHASED SHARE" has the meaning ascribed to it in recital
"C." hereinabove; the particulars of the registered and
beneficial ownership of such Purchased Shares being set forth
in Schedule "B" which is attached hereto;
(az) "PURCHASE PRICE" has the meaning ascribed to it in section
"2.2" hereinbelow;
(ba) "PURCHASER" means Hadro Resources, Inc., a company
incorporated pursuant to the laws of the State of Nevada,
U.S.A., or any successor company, however formed, whether as a
result of merger, amalgamation or other action;
(bb) "PURCHASER'S FINANCIAL STATEMENTS" has the meaning ascribed to
it in section "4.1" hereinbelow; a copy of which Purchaser's
Financial Statements being set forth in Schedule "K" which is
attached hereto and which forms a material part hereof;
(bc) "PURCHASER'S OPTIONS" has the meaning ascribed to it in
section "3.3" hereinbelow;
(bd) "PURCHASER'S WARRANTS" has the meaning ascribed to it in
section "3.3" hereinbelow;
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(be) "RATIFICATION" has the meaning ascribed to it in section "6.1"
hereinbelow;
(bf) "REDEMPTION AMOUNT" has the meaning ascribed to it in section
"5.4" hereinbelow;
(bg) "REDEMPTION DATE" has the meaning ascribed to it in section
"5.4" hereinbelow;
(bh) "REDEMPTION NOTICE" has the meaning ascribed to it in section
"5.4" hereinbelow;
(bi) "REGISTRATION STATEMENT", "REGULATION D", "REGULATION S",
"RULE 144", "RULE 501", "RULE 506", "U.S. PERSON" and "FORM
S-8" have the meanings ascribed to them in the Securities Act;
(bj) "REGULATION S CERTIFICATE" and "ACCREDITED INVESTOR
CERTIFICATE" have the meanings ascribed to them in section
"4.1" hereinbelow; the proposed forms of which being attached
hereto as Schedule "Q" and forming a material part hereof;
(bk) "REGULATORY APPROVAL" means the acceptance for filing, if
required, of the transactions contemplated by this Agreement
by the Regulatory Authorities;
(bl) "REGULATORY AUTHORITY" and "REGULATORY AUTHORITIES" means,
either singularly or collectively as the context so requires,
the OTCBB, the DAX and/or such other regulatory agencies who
have or who may have jurisdiction over the affairs of the
Company, the Purchaser and/or the Vendors herein and
including, without limitation, and where applicable, all
applicable securities commissions and again including, without
limitation, the Commission, and all other regulatory
authorities from whom any such authorization, approval or
other action is required to be obtained or to be made in
connection with the transactions contemplated by this
Agreement;
(bm) "RESIDUAL INTEREST" has the meaning ascribed to it in section
"3.3" hereinbelow; the exact particulars of which being
detailed in the form of proposed Operator's Agreement being
set forth in Schedule "P" which is attached hereto;
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(bn) "REVERSE TAKEOVER" means that transaction or series of
transactions pursuant to which the Purchaser will acquire all
of the Purchased Shares of the Company from the Vendors in
exchange for the issuance from treasury by the Purchaser of
the Shares and all matters necessarily ancillary thereto;
(bo) "RIGHT OF ELECTION" has the meaning ascribed to it in section
"5.5" hereinbelow;
(bp) "SECURITIES" has the meaning ascribed to it in section "3.3"
hereinbelow; the particulars of which outstanding Securities
being set forth in Schedule "B" which is attached hereto;
(bq) "SECURITIES ACT" means the United States SECURITIES ACT OF
1933, as amended, and all the RULES and REGULATIONS
promulgated under the United States SECURITIES ACT OF 1933;
and "1934 ACT" means the United States SECURITIES EXCHANGE ACT
OF 1934, as amended, and all the RULES and REGULATIONS
promulgated under the United States SECURITIES EXCHANGE ACT OF
1934;
(br) "SECURITY" has the meaning ascribed to it in section "5.1"
hereinbelow;
(bs) "SHARE" has the meaning ascribed to it in section "2.2"
hereinbelow;
(bt) "SUBJECT REMOVAL DATE" has the meaning ascribed to it in
section "6.1" hereinbelow;
(bu) "SUBSIDIARY" means any company or companies of which more than
fifty percent (50%) of the outstanding shares carrying votes
at all times (provided that the ownership of such shares
confers the right at all times to elect at least a majority of
the board of directors of such company or companies) are for
the time being owned by or held for a company and/or any other
company in like relation to the company, and includes any
company in like relation to the subsidiary;
(bv) "TRANSFER AGENT" means the Purchaser's existing registrar and
transfer agent for its common shares, Global Securities
Transfer Inc., of Suite 141, 000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxx,
Xxxxxxxx, X.X.X., 00000, a company incorporated pursuant to
the laws of the State of Colorado, U.S.A., or any successor
company, however formed, whether as a result of merger,
amalgamation or other action;
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(bw) "TRANSFER DOCUMENTS" has the meaning ascribed to it in section
"8.2" hereinbelow; and
(bx) "VENDOR" and "VENDORS" means individually and collectively, as
the context so requires, each and every shareholder of the
Company who has executed this Agreement as a Party hereto.
1.2 SCHEDULES. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following shall
represent the Schedules which are attached to this Agreement and which form a
material part hereof:
SCHEDULE DESCRIPTION
Schedule "A" Agreement In Principle;
Schedule "B": Purchased Shares, Vendors and Securities;
Schedule "C": Pooling Agreement;
Schedule "D": Company's Financial Statements;
Schedule "E": Company's Property;
Schedule "F": Company's Intellectual Property;
Schedule "G": Company's Lease;
Schedule "H": Company's Contracts of Employment;
Schedule "I": Company's Material Contracts;
Schedule "J": Company's List of Bank Accounts etc.;
Schedule "K": Purchaser's Financial Statements;
Schedule "L": Purchaser's Material Contracts;
Schedule "M": Purchaser's List of Bank Accounts etc.;
Schedule "N": Loan Agreement;
Schedule "O": Consulting Services Agreement;
Schedule "P": Drilling and Operating Agreement; and
Schedule "Q": Vendor Certificates.
1.3 INTERPRETATION. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires,:
(a) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not
to any particular Article, section or other subdivision of
this Agreement;
(b) any reference to an entity shall include and shall be deemed
to be a reference to any entity that is a permitted successor
to such entity; and
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(c) words in the singular include the plural and words in the
masculine gender include the feminine and neuter genders, and
VICE VERSA.
ARTICLE 2
PURCHASE AND SALE OF THE PURCHASED SHARES
2.1 PURCHASE AND SALE. Subject to the terms and conditions hereof and based
upon the representations, warranties and covenants contained in Articles "3",
"4" and "5" hereinbelow and the prior satisfaction of the conditions precedent
which are set forth in Article "7" hereinbelow, the Vendors hereby agree to
assign, sell and transfer at the Closing Date (as hereinafter determined) all of
their respective rights, entitlement and interest in and to all of the Purchased
Shares to the Purchaser and the Purchaser hereby agrees to purchase all of the
Purchased Shares from the Vendors on the terms and subject to the conditions
contained in this Agreement.
2.2 PURCHASE PRICE. The total purchase price (collectively, the "PURCHASE
PRICE") for all of the Purchased Shares will be satisfied by way of the issuance
and delivery by the Purchaser to the Vendors, in accordance with section "2.3"
hereinbelow, of an aggregate of 7,000,000 restricted and consolidated (assuming
the prior completion by the Purchaser of one new for 20 old share capital
consolidation (the "CONSOLIDATION")) common shares in the capital of the
Purchaser (each a "SHARE") within five business days of the Closing (as
hereinafter determined) of this Agreement.
2.3 PRO-RATA ENTITLEMENT. The Purchaser will issue the Shares to the
Vendors pro rata in accordance with the each Vendor's respective Purchased Share
shareholding in and to the Company and outstanding as at the Closing Date and as
set forth in Schedule "B" which is attached hereto; with all fractions greater
than or equal to one-half being rounded up and all fractions less than one-half
being rounded down.
2.4 RESALE RESTRICTIONS AND LEGENDING OF SHARE CERTIFICATES. The Vendors
hereby initially acknowledge and agree that the Purchaser makes no
representations as to any resale or other restriction affecting the Shares and
that it is presently contemplated that the Shares will be issued by the
Purchaser to each of the Vendors in reliance upon the registration and
prospectus exemptions contained in certain sections of the United States
SECURITIES ACT of 1933 (the "SECURITIES ACT") or "REGULATION S" promulgated
under the Securities Act which will impose a trading restriction in the United
States on the Shares for a period of at least 12 months from the Closing Date
(as hereinafter determined). In addition, the Vendors hereby also acknowledge
and agree that the within obligation of the Purchaser to issue the Shares
pursuant to sections "2.2" and "2.3" hereinabove will be subject to the
Purchaser being satisfied that an exemption from applicable registration and
prospectus requirements is available under the Securities Act and all applicable
securities laws, in respect of each particular Vendor and related Purchased
Share and Share, and the Purchaser shall be relieved of any obligation
whatsoever to purchase any Purchased Share of any Vendor and to issue Shares in
respect of any such Vendor where the Purchaser reasonably determines that a
suitable exemption is not available to it.
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The Vendors hereby also acknowledge and understand that neither the
sale of the Shares which the Vendors are acquiring nor any of the Shares
themselves have been registered under the Securities Act or any state securities
laws, and, furthermore, that the Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. The Vendors also acknowledge and understand that the
certificates representing the Shares will be stamped with the following legend
(or substantially equivalent language) restricting transfer in the following
manner:
"The transfer of the securities represented by this certificate is
prohibited except in accordance with the provisions of Regulation S
promulgated under the United States Securities Act of 1933, as amended
(the "Securities Act"), pursuant to registration under the Act or
pursuant to an available exemption from registration. In addition,
hedging transactions involving such securities may not be conducted
unless in compliance with the Securities Act.".
or
"The securities represented by this certificate have not been
registered under the United States Securities Act of 1933, as amended,
or the laws of any state, and have been issued pursuant to an exemption
from registration pertaining to such securities and pursuant to a
representation by the security holder named hereon that said securities
have been acquired for purposes of investment and not for purposes of
distribution. These securities may not be offered, sold, transferred,
pledged or hypothecated in the absence of registration, or the
availability of an exemption from such registration. Furthermore, no
offer, sale, transfer, pledge or hypothecation is to take place without
the prior written approval of counsel to the company being affixed to
this certificate. The stock transfer agent has been ordered to
effectuate transfers only in accordance with the above instructions.";
and the Vendors hereby consent to the Company making a notation on its records
or giving instructions to any Transfer Agent (as hereinafter determined) of the
Shares in order to implement the restrictions on transfer set forth and
described hereinabove.
The Vendors also acknowledge and understand that:
(a) the Shares are restricted securities within the meaning of
"RULE 144" promulgated under the Securities Act;
(b) the exemption from registration under Rule 144 will not be
available in any event for at least one year from the date of
issuance of the Shares to the Vendors, and even then will not
be available unless (i) a public trading market then exists
for the common stock of the Company, (ii) adequate information
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concerning the Company is then available to the public and
(iii) other terms and conditions of Rule 144 are complied
with; and
(c) any sale of the Shares may be made by the Vendors only in
limited amounts in accordance with such terms and conditions.
The Vendors finally acknowledge and understand that, without in anyway
limiting the acknowledgements and understandings as set forth hereinabove, the
Vendors agrees that the Vendors shall in no event make any disposition of all or
any portion of the Shares which the Vendors are acquiring hereunder unless and
until:
(a) there is then in effect a "REGISTRATION STATEMENT" under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with said Registration
Statement; or
(b) (i) the Vendors shall have notified the Company of the
proposed disposition and shall have furnished the Company with
a detailed statement of the circumstances surrounding the
proposed disposition, (ii) the Vendors shall have furnished
the Company with an opinion of the Vendors' own counsel to the
effect that such disposition will not require registration of
any such Shares under the Securities Act and (iii) such
opinion of the Vendors' counsel shall have been concurred in
by counsel for the Company and the Company shall have advised
the Vendors of such concurrence.
2.5 POOLING REQUIREMENTS. The Vendors hereby also acknowledge and agree
that all Shares, when issued, will have a statutory hold period of at least 12
months from the Closing Date (as hereinafter determined) in accordance with the
Securities Act and all applicable securities laws. In addition, the Vendors also
acknowledge and agree that all of the Shares will be subject to release to the
Vendors in accordance with the terms and conditions of a certain "POOLING
AGREEMENT" which will be entered into at or subsequent to the Closing Date among
each of Vendors, the Purchaser and the Transfer Agent, acting as trustee under
the Pooling Agreement; a copy of form of which proposed Pooling Agreement being
attached hereto as Schedule "C" and forming a material part hereof. In this
regard the Vendors acknowledge and understand that the purpose of such Pooling
Agreement is to keep an orderly market and aid the Purchaser in providing a
stable market and price for the Purchaser's trading shares.
2.6 OTHER SECURITIES. If and to the extent that any Vendor has any
absolute, contingent, optional, pre-emptive or other right to acquire any
securities in the capital of the Company, it is hereby acknowledged and agreed
by any such Vendor that such Vendor shall be conclusively deemed, as and from
the Closing, to have transferred the same to the Purchaser to the fullest extent
permitted by law, and to otherwise hold the same in trust for and at the
discretion of the Purchaser.
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2.7 STANDSTILL PROVISIONS. In consideration of the Parties' within
agreement to purchase and sell the Purchased Shares and to enter into the terms
and conditions of this Agreement, each of the Parties hereby undertake for
themselves, and for each of their respective agents and advisors, that they will
not until the earlier of the Closing Date (as hereinafter determined) or the
termination of this Agreement approach or consider any other potential
purchasers, or make, invite, entertain or accept any offer or proposal for the
proposed sale of any interest in and to any of the Purchased Shares or the
assets or the respective business interests of the Company or the Purchaser, as
the case may, or, for that matter, disclose any of the terms of this Agreement,
without the Parties' prior written consent. In this regard each of the Parties
hereby acknowledges that the foregoing restrictions are important to the
respective businesses of the Parties and that a breach by either of the Parties
of any of the covenants herein contained would result in irreparable harm and
significant damage to each affected Party that would not be adequately
compensated for by monetary award. Accordingly, the Parties hereby agree that,
in the event of any such breach, in addition to being entitled as a matter of
right to apply to a Court of competent equitable jurisdiction for relief by way
of restraining order, injunction, decree or otherwise as may be appropriate to
ensure compliance with the provisions hereof, any such Party will also be liable
to the other Parties, as liquidated damages, for an amount equal to the amount
received and earned by such Party as a result of and with respect to any such
breach. The Parties hereby also acknowledge and agree that if any of the
aforesaid restrictions, activities, obligations or periods are considered by a
Court of competent jurisdiction as being unreasonable, they agree that said
Court shall have authority to limit such restrictions, activities or periods as
the Court deems proper in the circumstances.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
BY EACH OF THE VENDORS AND THE COMPANY
3.1 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS BY EACH OF THE
VENDORS AND THE COMPANY. In order to induce the Purchaser to enter into and
consummate this Agreement, each of the Vendors and the Company hereby represents
to, warrants to and covenants with the Purchaser, with the intent that the
Purchaser will rely thereon in entering into this Agreement and in concluding
the transactions contemplated herein, that, to the best of the knowledge,
information and belief of each of the Vendors and the Company, after having made
due inquiry:
(a) if a corporation, it is duly incorporated under the laws of
its respective jurisdiction of incorporation and is validly
existing and in good standing with respect to all statutory
filings required by the applicable corporate laws;
(b) it is qualified to do business in those jurisdictions where it
is necessary to fulfill its obligations under this Agreement
and it has the full power and authority to enter into this
Agreement and any agreement or instrument referred to or
contemplated by this Agreement;
-16-
(c) it has the requisite power, authority and capacity to own and
use all of its respective business assets and to carry on its
respective business as presently conducted by it and to
fulfill its respective obligations under this Agreement;
(d) the execution and delivery of this Agreement and the
agreements contemplated hereby have been duly authorized by
all necessary action, corporate or otherwise, on its
respective part;
(e) there are no other consents, approvals or conditions precedent
to the performance of this Agreement which have not been
obtained;
(f) this Agreement constitutes a legal, valid and binding
obligation of it enforceable against it in accordance with its
terms, except as enforcement may be limited by laws of general
application affecting the rights of creditors;
(g) no proceedings are pending for, and it is unaware of, any
basis for the institution of any proceedings leading to its
respective dissolution or winding up, or the placing of it in
bankruptcy or subject to any other laws governing the affairs
of insolvent companies or persons;
(h) the making of this Agreement and the completion of the
transactions contemplated hereby and the performance of and
compliance with the terms hereof does not and will not:
(i) if a corporation, conflict with or result in a breach
of or violate any of the terms, conditions or
provisions of its respective constating documents;
(ii) conflict with or result in a breach of or violate any
of the terms, conditions or provisions of any law,
judgment, order, injunction, decree, regulation or
ruling of any Court or governmental authority,
domestic or foreign, to which it is subject, or
constitute or result in a default under any
agreement, contract or commitment to which it is a
party;
(iii) give to any party the right of termination,
cancellation or acceleration in or with respect to
any agreement, contract or commitment to which it is
a party;
-17-
(iv) give to any government or governmental authority, or
any municipality or any subdivision thereof,
including any governmental department, commission,
bureau, board or administration agency, any right of
termination, cancellation or suspension of, or
constitute a breach of or result in a default under,
any permit, license, control or authority issued to
it which is necessary or desirable in connection with
the conduct and operations of its respective business
and the ownership or leasing of its respective
business assets; or
(v) constitute a default by it, or any event which, with
the giving of notice or lapse of time or both, might
constitute an event of default, under any agreement,
contract, indenture or other instrument relating to
any indebtedness of it which would give any party to
that agreement, contract, indenture or other
instrument the right to accelerate the maturity for
the payment of any amount payable under that
agreement, contract, indenture or other instrument;
and
(i) neither this Agreement nor any other document, certificate or
statement furnished to the Purchaser by or on behalf of any of
the Vendors or the Company in connection with the transactions
contemplated hereby knowingly or negligently contains any
untrue or incomplete statement of material fact or omits to
state a material fact necessary in order to make the
statements therein not misleading which would likely affect
the decision of the Purchaser to enter into this Agreement.
3.2 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE VENDORS RESPECTING
THE PURCHASED SHARES AND THE SHARES. In order to induce the Purchaser to enter
into and consummate this Agreement, each of the Vendors hereby also represents
to, warrants to and covenants with the Purchaser, with the intent that the
Purchaser will also rely thereon in entering into this Agreement and in
concluding the transactions contemplated herein, that, to the best of the
knowledge, information and belief of each of the Vendors, after having made due
inquiry:
(a) save and except as set forth in Schedule "B" which is attached
hereto, the Vendors have good and marketable title to and are
the legal and beneficial owner of all of the Purchased Shares,
and the Purchased Shares are fully paid and non-assessable and
are free and clear of liens, charges, encumbrances, pledges,
mortgages, hypothecations and adverse claims of any and all
nature whatsoever and including, without limitation, options,
pre-emptive rights and other rights of acquisition in favour
of any person, whether conditional or absolute;
(b) the Vendors have the power and capacity to own and dispose of
the Purchased Shares, and the Purchased Shares are not subject
to any voting or similar arrangement;
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(c) there are no actions, suits, proceedings or investigations
(whether or not purportedly against or on behalf of any of the
Vendors or the Company), pending or threatened, which may
affect, without limitation, the rights of any Vendor to
transfer any of the Purchased Shares to the Purchaser at law
or in equity, or before or by any federal, state, provincial,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and,
without limiting the generality of the foregoing, there are no
claims or potential claims under any relevant family relations
legislation or other equivalent legislation affecting the
Purchased Shares. In addition, the Vendors are not now aware
of any existing ground on which any such action, suit or
proceeding might be commenced with any reasonable likelihood
of success;
(d) save and except as set forth in Schedule "B" which is attached
hereto, no other person, firm or corporation has any
agreement, option or right capable of becoming an agreement
for the purchase of any of the Purchased Shares;
(e) the Vendors acknowledge that the Shares will be issued, and
reserved for issuance where applicable, under certain
exemptions from the registration and prospectus filing
requirements otherwise applicable under the Securities Act and
all applicable securities laws, and that, as a result, the
Vendors may be restricted from using most of the remedies that
would otherwise be available to the Vendors, the Vendors will
not receive information that would otherwise be required to be
provided to the Vendors and the Purchaser is relieved from
certain obligations that would otherwise apply to the
Purchaser, in either case, under applicable securities
legislation;
(f) the Vendors realize that the sale of the Purchased Shares in
exchange for the Shares will be a highly speculative
investment and that the each Vendor is able, without impairing
that Vendor's financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on the
Vendor's investment. The Vendors have such knowledge and
experience in financial and business matters that the Vendors
are capable of evaluating the merits and risks of the
prospective investment;
(g) the Vendors have not received, nor have any of the Vendors
requested or do any of the Vendors require to receive, any
offering memorandum or a similar document describing the
business and affairs of the Purchaser in order to assist the
Vendors in entering into this Agreement and in consummating
the transactions contemplated herein;
-19-
(h) if the Vendor is a "U.S. PERSON", as that term is defined in
Regulation S, then the Vendor certifies that:
(i) the Vendor qualifies as an "accredited investor" as
that term is defined under Rule 501 of Regulation D
promulgated under the Securities Act, as amended;
(ii) the Vendor is receiving the Shares solely for the
Vendor's own account for investment and not with a
view to or for sale or distribution of the Shares or
any portion thereof and not with any present
intention of selling, offering to sell or otherwise
disposing of or distributing the Shares or any
portion thereof in any transaction other than a
transaction exempt from registration under the
Securities Act;
(iii) the entire legal and beneficial interest in the
Shares the Vendor is receiving is being acquired for,
and will be held for the account of, the Vendor only
and neither in whole nor in part for any other
person;
(iv) the Vendor understands that: (A) neither the sale of
the Shares which the Vendor is receiving nor the
Shares themselves have been registered under the
Securities Act or any state securities laws, and the
Shares must be held indefinitely unless subsequently
registered under the Securities Act or an exemption
from such registration is available; and (B) the
share certificate representing the Shares will be
stamped with the following legend (or substantially
equivalent language) restricting transfer:
"The securities represented by this certificate have
not been registered under the United States
Securities Act of 1933, as amended, or the laws of
any state, and have been issued pursuant to an
exemption from registration pertaining to such
securities and pursuant to a representation by the
security holder named hereon that said securities
have been acquired for purposes of investment and not
for purposes of distribution. These securities may
not be offered, sold, transferred, pledged or
hypothecated in the absence of registration, or the
availability of an exemption from such registration.
Furthermore, no offer, sale, transfer, pledge or
hypothecation is to take place without the prior
written approval of counsel to the company being
affixed to this certificate. The stock transfer agent
has been ordered to effectuate transfers only in
accordance with the above instructions."; and
-20-
and each such U.S. Person Vendor will complete and provide the
Purchaser and the Company with an executed copy of the
attached form of "Accredited Investor Certificate"; which is
attached hereto with Schedule "Q" and which forms a material
hereof; contemporaneously with such Vendor's execution of this
Agreement;
(i) if the Vendor is not a U.S. Person,as defined in Regulation S,
then the Vendor certifies that:
(i) the Vendor is not a U.S. Person (as defined in Rule
902 of Regulation S under the Securities Act, which
definition includes, but is not limited to, any
natural person resident in the United States, any
corporation or partnership incorporated or organized
under the laws of the United States or any estate or
trust of which any executor, administrator or trustee
is a U.S. Person);
(ii) the Vendor is not acquiring any of the Shares for the
account or benefit of any U.S. Person or for
offering, resale or delivery for the account or
benefit of any U.S. Person or for the account of any
person in any jurisdiction other than the
jurisdiction set out in the name and address of the
Vendor as stated in Schedule "B" which is attached
hereto;
(iii) the Vendor was not offered any Shares in the United
States and was outside the United States at the time
of execution and delivery of this Agreement by the
Vendor;
(iv) the Vendor understands that the Shares have not been
registered under the Securities Act and any
applicable securities laws;
(v) the Vendor agrees to resell the Shares only in
accordance with the provisions of Regulation S,
pursuant to a registration under the Securities Act,
or pursuant to an available exemption from such
registration, and that hedging transactions involving
the Shares may not be conducted unless in compliance
with the Securities Act; and
(vi) the Vendor understands that any certificate
representing the Shares will bear a legend setting
forth the foregoing restrictions; and
and each such non-U.S. Person Vendor will complete and provide
the Purchaser and the Company with an executed copy of the
attached form of "Regulation S Certificate"; which is also
attached hereto with Schedule "Q" and which forms a material
-21-
hereof; contemporaneously with such Vendor's execution of this
Agreement; and
(j) the Vendors are not aware of any fact or circumstance which
has not been disclosed to the Purchaser which should be
disclosed in order to prevent the representations and
warranties contained in this section from being misleading or
which would likely affect the decision of the Purchaser to
enter into this Agreement.
3.3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY EACH OF THE VENDORS AND
THE COMPANY RESPECTING THE COMPANY AND THE COMPANY'S PROPERTY. In order to
induce the Purchaser to enter into and consummate this Agreement, each of the
Vendors and the Company hereby also represents to, warrants to and covenants
with the Purchaser, with the intent that the Purchaser will also rely thereon in
entering into this Agreement and in concluding the transactions contemplated
herein, that, to the best of the knowledge, information and belief of each of
the Vendors and the Company, after having made due inquiry:
(a) the Company owns and possesses and has good and marketable
title to and possession of all of the Company's Business
interests and the Company's Assets free and clear of all
actual or threatened liens, charges, options, encumbrances,
voting agreements, voting trusts, demands, limitations and
restrictions of any nature whatsoever; save and except for
those actual or threatened liens, charges, encumbrances,
demands, limitations and restrictions which are listed in
Schedule "D" which is attached hereto and which forms a
material part hereof;
(b) the Company's Business interests at the Closing Date (as
hereinafter determined) will be comprised of a one hundred
percent (100%) registered and beneficial working interest in
and to all of the Company's Assets and the Company's Property
at that time which, subject to the following, shall be free
and clear of all actual or threatened liens, charges, options,
encumbrances, voting agreements, voting trusts, demands,
limitations and restrictions of any nature whatsoever, with
the Company's affiliated company, Petrogen International Ltd.
("PETROGEN LTD."), retaining, at all times, a ten percent
(10%) carried interest in and to such Company's Property
comprising the Company's Business at the Closing Date together
with the right, as operator (the "OPERATOR") in respect of
each of the Company's Property interests, to charge an
administrative fee of ten percent (10%) for all Exploration
and Development Expenditures incurred in connection therewith
(collectively, the "RESIDUAL INTEREST"); the exact details of
which Residual Interest and the Operator's responsibilities in
maintaining the Company's Property interests being set forth
in the terms and conditions of a certain "DRILLING AND
OPERATING AGREEMENT" which will be entered at or subsequent to
the Closing Date between the Purchaser and Petrogen Ltd.; a
copy of form of which proposed Drilling and Operating
Agreement being attached hereto as Schedule "P" and forming a
material part hereof;
-22-
(c) as at the Closing Date (as hereinafter determined) the Company
will be the registered and/or beneficial owner of an undivided
one hundred percent (100%) interest in and to the Company's
Property interests free and clear of all liens, charges and
claims of others, and the Company and the Operator have and
will have free and unimpeded right of access to the Company's
Property and have and will have use of the Company's
Property's surface for the herein purposes;
(d) as at the Closing Date (as hereinafter determined) the Company
will hold the right to explore and develop the Company's
Property interests;
(e) the mineral interests comprising the Company's Property have
been duly and validly located and recorded in a good and
minerlike manner pursuant to the laws of the jurisdiction(s)
in which the Company's Property interests exist;
(f) there is no adverse claim or challenge against or to the
ownership of or title to any of the mineral interests
comprising the Company's Property interests or which may
impede their development, nor to the best of the knowledge,
information and belief of the Company, after having made due
inquiry, is there any basis for any potential claim or
challenge, save and except for any and all potential national
land claims which may exist from time to time in connection
with the Company's Property interests, and there are no
outstanding agreements or options to acquire or purchase the
Company's Property interests or any portion thereof and, to
the best of the knowledge, information and belief of the
Company, after having made due inquiry, no persons have any
royalty, net profits or other interests whatsoever in
production from any of the Company's Property interests save
and except for the Residual Interest to Petrogen Ltd. as
contemplated herein;
(g) the Company holds all licenses and permits required for the
conduct in the ordinary course of the operations of the
Company's Business and for the uses to which the Company's
Assets have been put and are in good standing, and such
conduct and uses are in compliance with all laws, zoning and
other by-laws, building and other restrictions, rules,
regulations and ordinances applicable to the Company and to
the Company's Business and the Company's Assets, and neither
the execution and delivery of this Agreement nor the
completion of the transactions contemplated hereby will give
any person the right to terminate or cancel any said license
or permit or affect such compliance;
-23-
(h) the presently authorized and issued share capital of the
Company is as described in Schedule "B" which is attached
hereto and which forms a material part hereof, and there are,
other than the present incentive stock options, convertible
equity instruments and share purchase warrants to acquire
certain common shares in and to the Company (collectively, the
"SECURITIES") which are listed in Schedule "B", at present no
other shares in the capital of the Company issued or allotted
or agreed to be issued or allotted to any person. In addition,
at Closing the issued share capital of the Company, together
with the names and the number, class and kind of shares of the
Company held by the Vendors, will be as set out in Schedule
"B";
(i) the Purchased Shares are validly issued and outstanding and
fully paid and non-assessable in the capital of the Company
and, save and except as set forth in Schedule "B" which is
attached hereto, the Purchased Shares are free and clear of
all actual or threatened liens, charges, options,
encumbrances, voting agreements, voting trusts, demands,
limitations and restrictions of any nature whatsoever;
(j) save and except as set forth in Schedule "B" which is attached
hereto, no other person, firm or corporation has any
agreement, option or right capable of becoming an agreement
for the purchase of any of the Purchased Shares or any
unissued shares in the capital of the Company, and at Closing
(as hereinafter determined) it is presently contemplated that
each of the presently issued and outstanding incentive stock
option Securities (collectively, the "COMPANY'S OPTIONS") and
share purchase warrant Securities (collectively, the
"COMPANY'S WARRANTS") outstanding in and to the Company will
be exchanged, on the same exercise terms and conditions, for
an equal number of incentive stock options (collectively, the
"PURCHASER'S OPTIONS") and share purchase warrants
(collectively, the "PURCHASER'S WARRANTS") in and to the
resulting Purchaser on a post-Consolidation basis in
consideration, in part, of the ongoing involvement of the
existing Company's Optionholders and Warrantholders in and to
the resulting Purchaser company and in exchange for the agreed
upon cancellation by said Company's Optionholders and
Warrantholders of all of the then issued and outstanding
Company's Options and Company's Warrants as a consequence
thereof;
(k) there are no actions, suits, proceedings or investigations
(whether or not purportedly against or on behalf of any of the
Vendors or the Company), pending or threatened, which may
affect, without limitation, the rights of any of the Vendors
to transfer the Purchased Shares to the Purchaser at law or in
equity, or before or by any federal, state, provincial,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and,
without limiting the generality of the foregoing, there are no
claims or potential claims under any relevant family relations
legislation or other equivalent legislation affecting any of
the Purchased Shares. In addition, the Vendors and the Company
are not now aware of any existing ground on which any such
-24-
action, suit or proceeding might be commenced with any
reasonable likelihood of success;
(l) from October 11, 2002 (that being the reference date of the
Agreement In Principle) to and up to and including the Closing
Date (as hereinafter determined) the Company has not committed
to making and until the Closing Date will not make or commit
itself, without the written consent of the Purchaser, to:
(i) redeem or acquire any shares in its share capital;
(ii) declare or pay any dividend;
(iii) make any reduction in or otherwise make any payment
on account of its paid-up capital; or
(iv) effect any subdivision , consolidation or
reclassification of its share capital;
(m) save and except for the proposed Residual Interest to Petrogen
Ltd. as contemplated herein, from October 11, 2002 to and up
to and including the Closing Date (as hereinafter determined)
the Company has not committed to making and until the Closing
Date will not make or commit itself, without the written
consent of the Purchaser, to:
(i) acquire or have the use of any property from a
person, corporation or entity with whom it was not
dealing with at arm's length; or
(ii) dispose of anything to a person, corporation or
entity with whom it was not dealing with at arm's
length for proceeds less than the fair market value
thereof;
(n) from October 11, 2002 to and up to and including the Closing
Date (as hereinafter determined) the Company has not committed
to making and until the Closing Date will not make or commit
itself, without the written consent of the Purchaser, to
provide any person, firm or corporation with any agreement,
option or right, consensual or arising by law, present or
future, contingent or absolute, or capable of becoming an
agreement, option or right:
-25-
(i) other than as set forth in Schedule "B" which is
attached hereto, to require it to issue any further
or other shares in its share capital, or any other
security convertible or exchangeable into shares in
its share capital, or to convert or exchange any
securities into or for shares in its share capital;
(ii) for the issue and allotment of any of the authorized
but unissued shares in its share capital;
(iii) to require it to purchase, redeem or otherwise
acquire any of the issued and outstanding shares in
its share capital; or
(iv) to purchase or otherwise acquire any shares in its
share capital;
(o) save and except for those matters which are listed in Schedule
"D" which is attached hereto and in particular, however,
without limitation, except for liabilities which are
disclosed, reflected or adequately provided for in the
Company's financial statements (collectively, the "COMPANY'S
FINANCIAL STATEMENTS") under generally accepted accounting
principles; a copy of which Company's Financial Statements
being attached hereto as Schedule "D" and forming a material
part hereof; there are no other material liabilities,
contingent or otherwise, existing on the Execution Date hereof
in respect of which the Company may be liable on or after the
completion of the transactions contemplated by this Agreement
other than:
(i) liabilities disclosed or referred to in this
Agreement; and
(ii) liabilities incurred in the ordinary course of
business, none of which are materially adverse to the
Company's Business, operations, affairs or financial
conditions of the Company;
(p) no dividend or other distribution by the Company has been
made, declared or authorized since its incorporation, and from
October 11, 2002 to and up to and including the Closing Date
(as hereinafter determined) the Company has not committed to
making and until the Closing Date will not make or commit
itself, without the written consent of the Purchaser, to
confer upon, or pay to or to the benefit of, any entity, any
benefit having monetary value, any bonus or any salary
increases except in the normal course of its business;
(q) save and except as set forth in Schedule "D" which is attached
hereto, there is no basis for and there are no actions, suits,
judgments, investigations or proceedings outstanding or
pending or, to the best of the knowledge, information and
-26-
belief of the Company, after having made due inquiry,
threatened against or affecting the Company at law or in
equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau or agency;
(r) the Company is not in breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which it
is subject or which apply to it;
(s) the Company is not a party to any collective agreement with
any labour union or other association of employees, and there
is no pending application for certification of any of the
Company's employees as a collective bargaining unit. In
addition, and to the best of the knowledge, information and
belief of the Company, after having made due inquiry, the
Company is not presently a party to any complaint, grievance,
arbitration or other labour matter referred to any board or
labour authority;
(t) there are no pension, profit sharing, group insurance or
similar plans or other deferred compensation plans affecting
the Company or any of its directors, officers or employees;
(u) the Company has not experienced, nor are the Vendors and the
Company aware of, any occurrence or event which has had, or
might reasonably be expected to have, a materially adverse
affect on the Company's Business, the Company's Assets or on
the results of the Company's operations;
(v) the Company holds or have applied for all permits, licenses,
consents and authorities issuable by any federal, state,
regional or municipal government or agency thereof which are
necessary or desirable in connection with its operations;
(w) from October 11, 2002 to and up to and including the Closing
Date (as hereinafter determined) there has been prepared and
will be prepared and filed on a timely basis all federal and
state income tax returns, elections and designations, and all
other governmental returns, notices and reports of which the
Company has, or ought reasonably to have had, knowledge
required to be or reasonably capable of being filed up to and
including the Closing Date, with respect to the operations of
the Company, and no such returns, elections, designations,
notices or reports contain or will contain any material
misstatement or omit any material statement that should have
been included, and each such return, election, designation,
notice or report, including accompanying schedules and
statements, is and will be true, correct and complete in all
material respects;
-27-
(x) the Company has been assessed for all federal, state and
municipal income tax for all years to and including its most
recent taxation year, and from October 11, 2002 to and up to
and including the Closing Date (as hereinafter determined) the
Company will have paid in full or accrued in accounts all
amounts (including, but not limited to, sales, use and
consumption taxes and taxes measured on income and all
installments of taxes) due and payable to all federal, state
and municipal taxation authorities up to and including the
Closing Date;
(y) save and except as set forth in Schedule "D" which is attached
hereto, there is not now, and there will not be by the Closing
Date (as hereinafter determined), any proceeding, claim or, to
the best of the knowledge, information and belief of the
Vendors and the Company, after having made due inquiry, any
investigation by any federal, state or municipal taxation
authority, or any matters under discussion or dispute with
such taxation authorities, in respect of taxes, governmental
charges, assessments or reassessments in connection with the
Company, and the Vendors and the Company are not aware of any
contingent tax liabilities or any grounds that could result in
an assessment, reassessment, charge or potentially adverse
determination by any federal, state or municipal taxation
authority as against the Company;
(z) the Company is not, nor until or at the Closing Date (as
hereinafter determined) will it be, in breach of any provision
or condition of, nor has it done or omitted to do anything
that, with or without the giving of notice or lapse or both,
would constitute a breach of any provision or condition of, or
give rise to any right to terminate or cancel or accelerate
the maturity of any payment under, any deed of trust,
contract, certificate, consent, permit, license or other
instrument to which it is a party, by which it is bound or
from which it derives benefit, any judgment, decree, order,
rule or regulation of any Court or governmental authority to
which it is subject, or any statute or regulation applicable
to it, to an extent that, in the aggregate, has a material
adverse affect on it;
(aa) adequate provision has been made and will be made for taxes
payable by the Company for the current period for which a tax
return is not yet required to be filed and, to the best of the
knowledge, information and belief of the Vendors and the
Company, after having made due inquiry, there are no
contingent tax liabilities of the Company or any grounds which
would prompt a re-assessment of the Company and including,
without limitation, the aggressive treatment of income and
expenses in the filing of earlier tax returns by the Company;
(ab) all amounts required to be withheld for taxes by the Company
from payments made to any present or former shareholder,
officer, director, non-resident creditor, employee, associate
or consultant has been withheld and paid on a timely basis to
-28-
the property governmental body pursuant to applicable
legislation;
(ac) the Company has not filed with the Minister of National
Revenue any agreement or form pursuant to subsection "125(3)"
of the Income Tax Act for its current taxation year and the
Company has never carried on business as a member of a
partnership;
(ad) Schedule "E" which is attached hereto and which forms a
material part hereof contains an accurate and complete
description of all of the Company's Property interests;
(ae) Schedule "F" which is attached hereto and which forms a
material part hereof contains an accurate and complete
description of all of the Company's Intellectual Property, and
the Intellectual Property does not infringe the rights of any
other person;
(af) the Company does not have and does not use any service xxxx,
tradename or trademark except as disclosed as part of the
Company's Intellectual Property;
(ag) the Company has good and marketable title to all of its
Company's Property interests, Intellectual Property, Company's
Business, Company's Assets, properties, interests in
properties, real and personal, including those reflected in
the Company's Financial Statements or which have been acquired
since the date of the latest Company's Financial Statements
(except for those which have been transferred, sold or
otherwise disposed of in the ordinary or normal course of
business), free and clear of all encumbrances, and none of the
Company's properties or the Company's Assets is in the
possession of or under the control of any other person;
(ah) the Company has no equipment, other than the personal property
or fixtures in the possession or custody of the Company which,
as of the date hereof, is leased or is held under license or
similar arrangement;
(ai) except for the real property leases and the contracts of
employment which are set forth in Schedules "G" and "H",
respectively, which are attached hereto and which form a
material part hereof, the Company is not party to or bound by
any other material contract, whether oral or written, other
than the contracts and agreements as set forth in Schedule "I"
which is attached hereto and which forms a material part
hereof;
(aj) as to the contracts listed in Schedule "I" which is attached
hereto:
-29-
(i) each such contract is in full force and effect and
unamended;
(ii) no material default exists in respect thereof on the
part of either the Company or any other party
thereto;
(iii) each such contract does not involve a Vendor or any
non-arm's length party except where described; and
(iv) none of the Vendors is aware of any intention on the
part of any other party thereto to terminate or
materially alter any such contract;
(ak) the Company has no consulting or employment agreements,
whether written or otherwise, except for those which are set
forth in Schedule "I" which is attached hereto;
(al) Schedule "J" which is attached hereto and which forms a
material part hereof is a true and complete list showing the
name of each bank, trust company or similar institution in
which the Company has accounts or safety deposit boxes, the
identification numbers of each such account or safe deposit
box, the names of all persons authorized to draw therefrom or
to have access thereto and the number of signatories required
on each account. In addition, Schedule "J" also includes a
list of all non-bank account numbers, codes and business
numbers used by the Company for the purposes of remitting tax,
dues, assessments and other fees;
(am) the Company maintains, and has maintained, insurance in force
against loss on the Company's Assets, against such risks, in
such amounts and to such limits, as is in accordance with
prudent business practices prevailing in its line of business
and having regard to the location, age and character of its
properties and the Company's Assets, and has complied fully
with all requirements of such insurance, including the prompt
giving of any notice of any claim or possible claim
thereunder, and all such insurance has been and is with
insurers which the Company believes to be responsible;
(an) the Company utilizes no product warranties, guarantees or
product return policies;
(ao) the most recently completed and consolidated
management-prepared Company's Financial Statements as at
September 30, 2002 are true and correct in every respect and
present fairly the financial position of the Company as at its
-30-
most recently completed financial period and the results of
its operations for the period then ended in accordance with
generally accepted accounting principles on a basis
consistently applied; a copy of said Company's Financial
Statements being attached hereto as Schedule "D";
(ap) the Company's Financial Statements and the books and records
of the Company are true and correct in every material respect,
were prepared in accordance with generally accepted accounting
principles and fairly reflect the Company's Business,
property, the Company's Assets and the financial position of
the Company as at the date of the Company's Financial
Statements and any such books and records and the results of
the operations for the period then ended, and there have been
no adverse changes in the Company's Business or affairs of the
Company since the date of the Company's Financial Statements
and any such books and records;
(aq) since September 30, 2002:
(i) there has not been any material adverse change in the
financial position or condition of the Company or any
damage, loss or other change in circumstances
materially affecting the Company's Business or
properties or the Company's right or capacity to
carry on business;
(ii) the Company has not waived or surrendered any right
of material value;
(iii) the Company has not discharged or satisfied or paid
any lien or encumbrance or obligation or liability
other than current liabilities in the ordinary course
of business; and
(iv) the Company's Business has been carried on in the
ordinary course;
(ar) save and except for those matters which are listed in Schedule
"D" which is attached hereto, there are no liabilities,
contingent or otherwise, of the Company not disclosed or
reflected in the Company's Financial Statements, except those
incurred in the ordinary course of business of the Company
since September 30, 2002;
(as) save and except for any outstanding advances, salaries, wages
and/or employment-related expenses which are set forth in the
Company's Financial Statements, the Company is not indebted to
any Vendor or to any affiliate or associate of the Company or
of any Vendor;
-31-
(at) save and except as set forth in the Company's Financial
Statements, no payments of any kind have been made or
authorized by or on behalf of the Company to or on behalf of
any of the Vendors or to or on behalf of any directors,
officers, shareholders or employees of the Company or under
any management agreements with the Company other than in the
ordinary course of business;
(au) except as otherwise provided for herein, the Vendors and the
Company have not retained, employed or introduced any broker,
finder or other person who would be entitled to a brokerage
commission or finder's fee arising out of the transactions
contemplated hereby;
(av) save and except for those matters which are listed in Schedule
"H" which is attached hereto, the Company does not have any
contracts, agreements, undertakings or arrangements, whether
oral, written or implied, with employees, lessees, licensees,
managers, accountants, suppliers, agents, distributors,
directors, officers, lawyers or others which cannot be
terminated, without penalty, on no more than 12 month's
notice;
(aw) save and except as set forth in the Company's Financial
Statements, neither the Vendors, nor any directors, officers
or employees of the Company, are now indebted or under
obligation to the Company on any account whatsoever other than
in the ordinary course of business;
(ax) all material transactions of the Company and including,
without limitation, all directors' and shareholders'
resolutions, have been promptly and properly recorded or filed
in or with its books and records;
(ay) the Vendors and the Company have the full authority and
capacity required to enter into this Agreement and to perform
their respective obligations hereunder;
(az) the present directors and officers of the Company are as
follows:
NAME POSITION
Xxxxx X. Xxxxxxxx President, Chief Executive Officer and a director;and
Xxx X. Xxxxxxxx Secretary, Chief Financial Officer and a director;
-32-
(ba) prior to the Subject Removal Date (as hereinafter determined)
the Company will have obtained all authorizations and
approvals or waivers that may be necessary or desirable in
connection with the transactions contemplated in this
Agreement, and other actions by, and have made all filings
with, any and all Regulatory Authorities, if applicable, from
whom any such authorization, approval or other action is
required to be obtained or to be made in connection with the
transactions contemplated herein, and all such authorizations,
approvals and other actions will be in full force and effect,
and all such filings will have been accepted by the Company
which will be in compliance with, and have not committed any
breach of, any securities laws, regulations or policies of any
Regulatory Authority to which the Company may be subject;
(bb) the Company has not committed to making and until the Closing
Date (as hereinafter determined) will not make or commit
itself, without the written consent of the Purchaser, to:
(i) guarantee, or agree to guarantee, any indebtedness or
other obligation of any person or corporation;
(ii) other than the payment of ordinary course
obligations, make any single operating or capital
expenditures in excess of U.S. $50,000.00; or
(iii) waive or surrender any right of material value;
(bc) until the Closing Date (as hereinafter determined) the Company
will:
(i) maintain its Company's Business and assets in a
manner consistent with and in compliance with
applicable law; and
(ii) not enter into any material transaction or assume or
incur any material liability outside the normal
course of its business;
(bd) save and except for the proposed Residual Interest to Petrogen
Ltd. as contemplated herein, the Company has not committed to
making and until the Closing Date (as hereinafter determined)
will not make or commit itself, without the written consent of
the Purchaser, to:
-33-
(i) declare or pay any dividend, or make any distribution
of its properties or assets to its shareholders, or
purchase or retire any of its shares;
(ii) sell all or any part of its Company's Business or
assets or agree to do or perform any act or enter
into any transaction or negotiation which could
reasonably be expected to interfere with this
Agreement or which would render inaccurate any of the
representations, warranties and covenants set forth
in this Agreement; or
(iii) merge, amalgamate or consolidate into or with any
entity, or enter into any other corporate
reorganization;
provided, however, that the provisions hereof shall not
preclude the Company, pending the Closing (as hereinafter
determined) or the termination of this Agreement, whichever
shall first occur, from carrying on its business in the normal
course thereof;
(be) the Company will, for a period of at least five business days
prior to the Closing Date (as hereinafter determined), during
normal business hours:
(i) make available for inspection by the solicitors,
auditors and representatives of the Purchaser, at
such location as is appropriate, all of the Company's
books, records, contracts, documents, correspondence
and other written materials, and afford such persons
every reasonable opportunity to make copies thereof
and take extracts therefrom at the sole cost of the
Purchaser; provided such persons do not unduly
interfere in the operations of the Company;
(ii) authorize and permit such persons at the risk and the
sole cost of the Purchaser, and only if such persons
do not unduly interfere in the operations of the
Company, to attend at all of its respective places of
business and operations to observe the conduct of its
business and operations, inspect its properties and
assets and make physical counts of its inventories,
shipments and deliveries; and
(iii) require the Company's management personnel to respond
to all reasonable inquiries concerning the Company's
Business and assets or the conduct of its business
relating to its liabilities and obligations;
-34-
(bf) the Vendors and the Company will give to the Purchaser, within
at least five business days prior to the Closing Date (as
hereinafter determined), by written notice, particulars of:
(i) each occurrence within the Vendors' and the Company's
knowledge after the Execution Date of this Agreement
that, if it had occurred before the Execution Date,
would have been contrary to any of the Vendors' or
the Company's respective representations or
warranties contained herein; and
(ii) each occurrence or omission within the Vendors' and
the Company's knowledge after the Execution Date that
constitutes a breach of any of the Vendors' or the
Company's respective covenants contained in this
Agreement;
(bg) each of the attached Schedules contains all material
information for each particular Schedule listed therein and
there are no omissions of material information by the Company;
(bh) neither this Agreement nor any other document, certificate or
statement furnished to the Purchaser by or on behalf of any of
the Vendors or the Company in connection with the transactions
contemplated hereby knowingly or negligently contains any
untrue or incomplete statement of material fact or omits to
state a material fact necessary in order to make the
statements therein not misleading; and
(bi) it is not aware of any fact or circumstance which has not been
disclosed to the Purchaser which should be disclosed in order
to prevent the representations, warranties and covenants
contained in this section from being misleading or which would
likely affect the decision of the Purchaser to enter into this
Agreement.
3.4 CONTINUITY OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS BY EACH OF
THE VENDORS AND THE COMPANY. The representations, warranties and covenants by
each of the Vendors and the Company contained in this Article, or in any
certificates or documents delivered pursuant to the provisions of this Agreement
or in connection with the transactions contemplated hereby, will be true at and
as of the Closing Date (as hereinafter determined) as though such
representations, warranties and covenants were made at and as of such time.
Notwithstanding any investigations or inquiries made by the Purchaser or by the
Purchaser's professional advisors prior to the Closing Date, or the waiver of
any condition by the Purchaser, the representations, warranties and covenants of
each of the Vendors and the Company contained in this Article shall survive the
Closing Date and shall continue in full force and effect for a period of three
calendar years from the Closing Date; provided, however, that the Vendors and
the Company shall not be responsible for the breach of any representation,
warranty or covenant of either of the Vendors or the Company contained herein
-35-
caused by any act or omission of the Purchaser prior to the Execution Date
hereof of which the Vendors and the Company were unaware or as a result of any
action taken by the Purchaser after the Execution Date. In the event that any of
the said representations, warranties or covenants are found by a Court of
competent jurisdiction to be incorrect and such incorrectness results in any
loss or damage sustained directly or indirectly by the Purchaser, then the
Vendors and/or the Company, as the case may be, will, in accordance with the
provisions of Article "17" hereinbelow, pay the amount of such loss or damage to
the Purchaser within 30 calendar days of receiving notice of judgment therefore;
provided that the Purchaser will not be entitled to make any claim unless the
loss or damage suffered may exceed the amount of U.S. $1,000.00.
ARTICLE 4
WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE PURCHASER
4.1 WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE PURCHASER. In order to
induce the Vendors and the Company to enter into and consummate this Agreement,
the Purchaser hereby warrants to, represents to and covenants with each of the
Vendors and the Company, with the intent that each of the Vendors and the
Company will rely thereon in entering into this Agreement and in concluding the
transactions contemplated herein, that, to the best of the knowledge,
information and belief of the Purchaser, after having made due inquiry:
(a) the Purchaser is a corporation duly incorporated under the
laws of the State of Nevada, U.S.A., is validly existing and
is in good standing with respect to all statutory filings
required by the applicable corporate laws;
(b) the Purchaser's subsidiaries, if any, are corporations duly
incorporated under the laws of their respective jurisdictions
of incorporation, are validly existing and are in good
standing with respect to all statutory filings required by the
applicable corporate laws;
(c) the Purchaser and each of the Purchaser's subsidiaries, if
any, have the requisite power, authority and capacity to own
and use all of their respective business assets and to carry
on their respective businesses as presently conducted by them;
(d) the Purchaser is qualified to do business in those
jurisdictions where it is necessary to fulfill its obligations
under this Agreement, and it has the full power and authority
to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement;
-36-
(e) the execution and delivery of this Agreement and the
agreements contemplated hereby has been duly authorized by all
necessary corporate action on its part;
(f) there are no other consents, approvals or conditions precedent
to the performance of this Agreement which have not been
obtained;
(g) this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms, except as enforcement may be
limited by laws of general application affecting the rights of
creditors;
(h) no proceedings are pending for, and the Purchaser is unaware
of, any basis for the institution of any proceedings leading
to the dissolution or winding up of the Purchaser, or of any
of the Purchaser's subsidiaries, if any, or the placing of the
Purchaser or any of the Purchaser's subsidiaries, if any, in
bankruptcy or subject to any other laws governing the affairs
of insolvent companies;
(i) the Purchaser and each of the Purchaser's subsidiaries, if
any, own and possess and have good and marketable title to and
possession of all of their respective business assets free and
clear of all actual or threatened liens, charges, options,
encumbrances, voting agreements, voting trusts, demands,
limitations and restrictions of any nature whatsoever, save
and except for those actual or threatened liens, charges,
encumbrances, demands, limitations and restrictions which are
listed in Schedule "K" which is attached hereto and which
forms a material part hereof;
(j) the Purchaser and each of the Purchaser's subsidiaries, if
any, hold all licenses and permits required for the conduct in
the ordinary course of the operations of their businesses and
for the uses to which their respective business assets have
been put and are in good standing, and such conduct and uses
are in compliance with all laws, zoning and other by-laws,
building and other restrictions, rules, regulations and
ordinances applicable to the Purchaser, to any of the
Purchaser's subsidiaries, if any, and their respective
businesses and assets, and neither the execution and delivery
of this Agreement nor the completion of the transactions
contemplated hereby will give any person the right to
terminate or cancel any said license or permit or affect such
compliance;
(k) the authorized capital of the Purchaser consists of
100,000,000 common shares without par value of which,
according to the records of the Purchaser, and after the
completion of its proposed Consolidation, an aggregate of
2,078,251 consolidated common shares of the Purchaser will be
issued and outstanding as fully paid and non-assessable as at
-37-
the Closing Date (as hereinafter determined), and there are at
present no other shares in the capital of the Purchaser issued
or allotted or agreed to be issued or allotted to any person,
save and except for certain shares of the Purchaser which have
been allotted and reserved for issuance by the Purchaser
pursuant to the terms of certain outstanding stock options
which have been approved by the directors of the Purchaser;
the details of which allotted and reserved shares of the
Purchaser being set forth in Schedule "K" which is attached
hereto;
(l) all of the issued and outstanding shares of the Purchaser are
listed and posted for trading on each of the NASD
Over-the-Counter Bulletin Board (the "OTCBB") and the
Frankfurt Stock Exchange ("DAX"), and the Purchaser is not in
material default of any of its listing requirements of the
OTCBB, the DAX or any rules or policies of the United States
Securities and Exchange Commission (the "COMMISSION");
(m) all registration statements, reports and proxy statements
filed by the Purchaser with the Commission, and all
registration statements, reports and proxy statements required
to be filed by the Purchaser with the Commission, have been
filed by the Purchaser under the United States SECURITIES ACT
of 1934 (the "1934 ACT"), were filed in all material respects
in accordance with the requirements of the 1934 Act and the
rules and regulations thereunder and no such registration
statements, reports or proxy statements contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading;
(n) the Purchaser will allot and issue the Shares on the Closing
Date in accordance with sections "2.2" and "2.3" hereinbelow
as fully paid and non-assessable in the capital of the
Purchaser, free and clear of all actual or threatened liens,
charges, options, encumbrances, voting agreements, voting
trusts, demands, limitations and restrictions of any nature
whatsoever, other than hold periods or other restrictions
imposed under applicable securities legislation and the
restrictions imposed under the Pooling Agreement;
(o) save and except for the prior completion of its proposed
Consolidation, from October 11, 2002 (that being the reference
date of the Agreement In Principle) to and up to and including
the Closing Date (as hereinafter determined) the Purchaser and
each of the Purchaser's subsidiaries, if any, have not
committed to making and until the Closing Date will not make
or commit themselves, without the written consent of the
Company, to:
(i) redeem or acquire any shares in their respective
share capitals;
-38-
(ii) declare or pay any dividend;
(iii) make any reduction in or otherwise make any payment
on account of their respective paid-up capitals; or
(iv) effect any subdivision , consolidation or
reclassification of any of their respective share
capitals;
(p) from October 11, 2002 to and up to and including the Closing
Date (as hereinafter determined) the Purchaser and each of the
Purchaser's subsidiaries, if any, have not committed to making
and until the Closing Date will not make or commit themselves,
without the written consent of the Company, to:
(i) acquire or have the use of any property from a
person, corporation or entity with whom they were not
dealing with at arm's length; or
(ii) dispose of anything to a person, corporation or
entity with whom they were not dealing with at arm's
length for proceeds less than the fair market value
thereof;
(q) save and except as set forth in Schedule "K" which is attached
hereto, from October 11, 2002 to and up to and including the
Closing Date (as hereinafter determined) the Purchaser and
each of the Purchaser's subsidiaries, if any, have not
committed to making and until the Closing Date will not make
or commit themselves, without the written consent of the
Company, to provide any person, firm or corporation with any
agreement, option or right, consensual or arising by law,
present or future, contingent or absolute, or capable of
becoming an agreement, option or right:
(i) to require them to issue any further or other shares
in their respective share capitals, or any other
security convertible or exchangeable into shares in
their respective share capitals, or to convert or
exchange any securities into or for shares in their
respective share capitals;
(ii) for the issue and allotment of any of the authorized
but unissued shares in their respective share
capitals;
-39-
(iii) to require them to purchase, redeem or otherwise
acquire any of the issued and outstanding shares in
their respective share capitals; or
(iv) to purchase or otherwise acquire any shares in their
respective share capitals;
(r) the Purchaser is not aware of any court order which restricts
or prevents the issuance by the Purchaser of any shares from
treasury;
(s) save and except for those matters which are listed in Schedule
"K" which is attached hereto, there are no material
liabilities, contingent or otherwise, existing on the
Execution Date hereof in respect of which the Purchaser or any
of the Purchaser's subsidiaries, if any, may be liable on or
after the completion of the transactions contemplated by this
Agreement other than:
(i) liabilities disclosed or referred to in this
Agreement; and
(ii) liabilities incurred in the ordinary course of
business, none of which are materially adverse to the
respective businesses, operations, affairs or
financial conditions of the Purchaser or of any of
the Purchaser's subsidiaries, if any;
(t) no dividend or other distribution by the Purchaser or any of
the Purchaser's subsidiaries, if any, has been made, declared
or authorized since their respective incorporations, and from
October 11, 2002 to and up to and including the Closing Date
(as hereinafter determined) the Purchaser and each of the
Purchaser's subsidiaries, if any, have not committed to making
and until the Closing Date will not make or commit themselves,
without the written consent of the Company, to confer upon, or
pay to or to the benefit of, any entity, any benefit having
monetary value, any bonus or any salary increases except in
the normal course of their respective businesses;
(u) there is no basis for and there are no actions, suits,
judgments, investigations or proceedings outstanding or
pending or, to the best of the knowledge, information and
belief of the Purchaser, after making due inquiry, threatened
against or affecting the Purchaser or any of the Purchaser's
subsidiaries, if any, at law or in equity or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau or agency;
-40-
(v) the Purchaser and each of the Purchaser's subsidiaries, if
any, are not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which they are
subject or which apply to them;
(w) the Purchaser and each of the Purchaser's subsidiaries, if
any, are not a party to any collective agreement with any
labour union or other association of employees, and there is
no pending application for certification of any of the
Purchaser's or any of the Purchaser's subsidiaries' employees
as a collective bargaining unit. In addition, and to the best
of the knowledge, information and belief of the Purchaser,
after having made due inquiry, the Purchaser and each of the
Purchaser's subsidiaries, if any, is not presently a party to
any complaint, grievance, arbitration or other labour matter
referred to any board or labour authority;
(x) there are no pension, profit sharing, group insurance or
similar plans or other deferred compensation plans affecting
the Purchaser, any of the Purchaser's subsidiaries, if any, or
any of their respective directors, officers or employees;
(y) the Purchaser and each of the Purchaser's subsidiaries, if
any, have not experienced, nor is the Purchaser aware of, any
occurrence or event which has had, or might reasonably be
expected to have, a materially adverse affect on the
Purchaser's or any of the Purchaser's subsidiaries', if any,
respective businesses or on the results of their respective
operations;
(z) the Purchaser and each of the Purchaser's subsidiaries, if
any, hold or have applied for all permits, licenses, consents
and authorities issuable by any federal, state, regional or
municipal government or agency thereof which are necessary or
desirable in connection with their respective operations;
(aa) from October 11, 2002 to and up to and including the Closing
Date (as hereinafter determined) there has been and there will
be prepared and filed on a timely basis all federal and state
income tax returns, elections and designations, and all other
governmental returns, notices and reports of which the
Purchaser had, or ought reasonably to have had, knowledge
required to be or reasonably capable of being filed up to the
Closing Date, with respect to the operations of the Purchaser
and each of the Purchaser's subsidiaries, if any, and no such
returns, elections, designations, notices or reports contain
or will contain any material misstatement or omit any material
statement that should have been included, and each such
return, election, designation, notice or report, including
accompanying schedules and statements, is and will be true,
correct and complete in all material respects;
-41-
(ab) the Purchaser and each of the Purchaser's subsidiaries, if
any, have been assessed for all federal, state and municipal
income tax for all years to and including their most recent
respective taxation years, and at the Closing Date (as
hereinafter determined) the Purchaser and each of the
Purchaser's subsidiaries, if any, will have paid in full or
accrued in accounts all amounts (including but not limited to
sales, use and consumption taxes and taxes measured on income
and all installments of taxes) due and payable to all federal,
state and municipal taxation authorities up to the Closing
Date;
(ac) there is not now, and there will not be by the Closing Date
(as hereinafter determined), any proceeding, claim or, to the
best of the knowledge, information and belief of the
Purchaser, after making due inquiry, any investigation by any
federal, state or municipal taxation authority, or any matters
under discussion or dispute with such taxation authorities, in
respect of taxes, governmental charges, assessments or
reassessments in connection with the Purchaser or any of the
Purchaser's subsidiaries, if any, and the Purchaser is not
aware of any contingent tax liabilities or any grounds that
could result in an assessment, reassessment, charge or
potentially adverse determination by any federal, state or
municipal taxation authority as against the Purchaser or any
of the Purchaser's subsidiaries, if any;
(ad) the Purchaser and each of the Purchaser's subsidiaries, if
any, are not in breach of any provision or condition of, nor
have they done or omitted anything that, with or without the
giving of notice or lapse or both, would constitute a breach
of any provision or condition of, or give rise to any right to
terminate or cancel or accelerate the maturity of any payment
under, any deed of trust, contract, certificate, consent,
permit, license or other instrument to which either of them is
a party, by which either of them is bound or from which either
of them derives benefit, any judgment, decree, order, rule or
regulation of any court or governmental authority to which
either of them is subject, or any statute or regulation
applicable to either of them, to an extent that, in the
aggregate, has a material adverse affect on either of them;
(ae) adequate provision has been made and will be made for taxes
payable by the Purchaser and each of the Purchaser's
subsidiaries, if any, for the current period for which a tax
return is not yet required to be filed and, to the best of the
knowledge, information and belief of the Purchaser, after
having made due inquiry, there are no contingent tax
liabilities of the Purchaser or of any of the Purchaser's
subsidiaries, if any, or any grounds which would prompt a
re-assessment of the Purchaser or any of the Purchaser's
subsidiaries, if any, and including, without limiting the
generality of the foregoing, the aggressive treatment of
income and expenses in the filing of earlier tax returns by
the Purchaser or by any of the Purchaser's subsidiaries, if
any;
-42-
(af) the most recently completed audited and unaudited consolidated
financial statements of the Purchaser as at June 30, 2002 and
September 30, 2002, respectively (collectively, the
"PURCHASER'S FINANCIAL STATEMENTS"), are true and correct in
every respect and presently fairly the financial position of
the Purchaser as at its most recently completed financial
period and the results of its operations for the period then
ended in accordance with generally accepted accounting
principles on a basis consistently applied; a copy of said
Purchaser's Financial Statements being attached hereto as
Schedule "K" and forming a material part hereof;
(ag) the Purchaser's Financial Statements and the books and records
of the Purchaser and each of the Purchaser's subsidiaries, if
any, are true and correct in every material respect, were
prepared in accordance with generally accepted accounting
principles and fairly reflect the respective businesses,
property, assets and financial positions of the Purchaser and
each of the Purchaser's subsidiaries, if any, as at the date
of the Purchaser's Financial Statements and any such books and
records and the results of their respective operations for the
periods then ended, and there have been no adverse changes in
the respective businesses or affairs of the Purchaser and each
of the Purchaser's subsidiaries since the date of the
Purchaser's Financial Statements and any such books and
records;
(ah) the Purchaser has good and marketable title to all of its
assets, properties and interests in properties, real and
personal, including those reflected in the Purchaser's
Financial Statements or which have been acquired since the
date of the latest Purchaser's Financial Statements (except
for those which have been transferred, sold or otherwise
disposed of in the ordinary or normal course of business),
free and clear of all encumbrances, and none of the
Purchaser's assets or properties is in the possession of or
under the control of any other person;
(ai) the Purchaser has no equipment, other than the personal
property or fixtures in the possession or custody of the
Purchaser which, as of the date hereof, is leased or is held
under license or similar arrangement;
(aj) except for the real property leases and the contracts of
employment which are set forth in Schedule "L" which is
attached hereto and which forms a material part hereof, the
Purchaser is not party to or bound by any other material
contract, whether oral or written, other than the contracts
and agreements as set forth in Schedule "L";
(ak) as to the contracts listed in Schedule "L" which is attached
hereto:
(i) each such contract is in full force and effect and
unamended;
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(ii) no material default exists in respect thereof on the
part of either the Purchaser or any other party
thereto;
(iii) each such contract does not involve any non-arm's
length party except where described; and
(iv) the Purchaser is not aware of any intention on the
part of any other party thereto to terminate or
materially alter any such contract;
(al) the Purchaser has no consulting or employment agreements,
whether written or otherwise, except for those which are set
forth in Schedule "L" which is attached hereto;
(am) Schedule "M" which is attached hereto and which forms a
material part hereof is a true and complete list showing the
name of each bank, trust company or similar institution in
which the Purchaser has accounts or safety deposit boxes, the
identification numbers of each such account or safe deposit
box, the names of all persons authorized to draw therefrom or
to have access thereto and the number of signatories required
on each account. In addition, Schedule "M" also includes a
list of all non-bank account numbers, codes and business
numbers used by the Purchaser for the purposes of remitting
tax, dues, assessments and other fees;
(an) the Purchaser maintains, and has maintained, insurance in
force against loss on the Purchaser's assets and properties,
against such risks, in such amounts and to such limits, as is
in accordance with prudent business practices prevailing in
its line of business and having regard to the location, age
and character of its assets and properties, and has complied
fully with all requirements of such insurance, including the
prompt giving of any notice of any claim or possible claim
thereunder, and all such insurance has been and is with
insurers which the Purchaser believes to be responsible;
(ao) the Purchaser utilizes no product warranties, guarantees or
product return policies;
(ap) since September 30, 2002:
(i) there has not been any material adverse change in the
financial position or condition of the Purchaser, or
of any of the Purchaser's subsidiaries, if any, or
any damage, loss or other change in circumstances
-44-
materially affecting the respective businesses or
properties of the Purchaser and each of the
Purchaser's subsidiaries, if any, or their right or
capacity to carry on business;
(ii) the Purchaser and each of the Purchaser's
subsidiaries, if any, have not waived or surrendered
any right of material value;
(iii) the Purchaser and each of the Purchaser's
subsidiaries, if any, have not discharged or
satisfied or paid any lien or encumbrance or
obligation or liability other than current
liabilities in the ordinary course of business; and
(iv) the respective businesses of the Purchaser and each
of the Purchaser's subsidiaries, if any, have been
carried on in the ordinary course;
(aq) save and except for those matters which are listed in Schedule
"K" which is attached hereto, there are no liabilities,
contingent or otherwise, of the Purchaser or of any of the
Purchaser's subsidiaries, if any, not disclosed or reflected
in the Purchaser's Financial Statements, except those incurred
in the ordinary course of business of the Purchaser and each
of the Purchaser's subsidiaries, if any, since September 30,
2002;
(ar) no payments of any kind have been made or authorized by or on
behalf of the Purchaser or any of the Purchaser's
subsidiaries, if any, to or on behalf of directors, officers,
shareholders or employees of the Purchaser or any of the
Purchaser's subsidiaries, if any, or under any management
agreements with the Purchaser or any of the Purchaser's
subsidiaries, if any, other than in the ordinary course of
business;
(as) save and except for the proposed issuance of common shares of
the Company as a finder's fee in conjunction with the
successful completion of the within Reverse Takeover, and
except for any finder's fees or commissions which may be
payable or issuable by the Purchaser in conjunction with the
completion of its proposed Private Placement (as hereinafter
determined) as set forth hereinbelow, the Purchaser and each
of the Purchaser's subsidiaries, if any, have not retained,
employed or introduced any other broker, finder or other
person who would be entitled to a brokerage commission or
finder's fee arising out of the transactions contemplated
hereby;
(at) the Purchaser and each of the Purchaser's subsidiaries, if
any, do not have any contracts, agreements, undertakings or
arrangements, whether oral, written or implied, with
employees, lessees, licensees, managers, accountants,
-45-
suppliers, agents, distributors, directors, officers, lawyers
or others which cannot be terminated, without penalty, on no
more than three month's notice;
(au) none of directors, officers or employees of the Purchaser or
any of the Purchaser's subsidiaries, if any, are now indebted
or under obligation to the Purchaser or to any of the
Purchaser's subsidiaries, if any, on any account whatsoever,
other than in the ordinary course of business;
(av) all material transactions of the Purchaser and each of the
Purchaser's subsidiaries, if any, and including, without
limitation, all directors' and shareholders' resolutions, have
been promptly and properly recorded or filed in or with their
respective books and records;
(aw) the present (and presently proposed at Closing (as hereinafter
determined)) directors and officers of the Purchaser are and
will be as follows:
NAME POSITION
Xxxxx Xxxxxx President and sole director;
(ax) the Purchaser and each of the Purchaser's subsidiaries, if
any, have good and marketable title to all of their respective
properties, if any, and assets, and such properties, if any,
and assets are not subject to any mortgage, pledge, deed of
trust, lien, conditional sale agreement, encumbrance or
charge;
(ay) prior to the Subject Removal Date (as hereinafter determined)
the Purchaser and each of the Purchaser's subsidiaries, if
any, will have obtained all authorizations, approvals, or
waivers that may be necessary or desirable in connection with
the transactions contemplated in this Agreement, and other
actions by, and have made all filings with, any and all
Regulatory Authorities required to be made in connection with
the transactions contemplated herein, and all such
authorizations, approvals and other actions will be in full
force and effect, and all such filings will have been accepted
by the Purchaser and the Purchaser's subsidiaries, if any,
which will be in compliance with, and have not committed any
breach of, any securities laws, regulations or policies of any
Regulatory Authority to which the Purchaser or any of the
Purchaser's subsidiaries, if any, may be subject;
(az) the Purchaser and each of the Purchaser's subsidiaries, if
any, have not committed to making and until the Closing Date
(as hereinafter determined) will not make or commit
themselves, without the written consent of the Company, to:
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(i) guarantee, or agree to guarantee, any indebtedness or
other obligation of any person or corporation;
(ii) other than the payment of ordinary course
obligations, make any operating or capital
expenditures in excess of U.S. $10,000.00; or
(iii) waive or surrender any right of material value;
(ba) until the Closing Date (as hereinafter determined) the
Purchaser and each of the Purchaser's subsidiaries, if any,
will:
(i) maintain their respective assets in a manner
consistent with and in compliance with applicable
law; and
(ii) not enter into any material transaction or assume or
incur any material liability outside the normal
course of their respective businesses;
(bb) the Purchaser and each of the Purchaser's subsidiaries, if
any, have not committed to making and until the Closing Date
(as hereinafter determined) will not make or commit
themselves, without the written consent of the Company, to:
(i) declare or pay any dividend, or make any distribution
of their respective properties or assets to their
respective shareholders, or purchase or retire any of
their respective shares;
(ii) sell all or any part of their respective assets or
agree to do or perform any act or enter into any
transaction or negotiation which could reasonably be
expected to interfere with this Agreement or which
would render inaccurate any of the representations,
warranties and covenants set forth in this Agreement;
or
(iii) merge, amalgamate or consolidate into or with any
entity, or enter into any other corporate
reorganization;
-47-
provided, however, that the provisions hereof shall not
preclude the Purchaser and each of the Purchaser's
subsidiaries, if any, pending the Closing (as hereinafter
determined) or the termination of this Agreement, whichever
shall first occur, from carrying on their respective
businesses in the normal course thereof;
(bc) the Purchaser will, for a period of at least five business
days prior to the Closing Date (as hereinafter determined),
during normal business hours:
(i) make available for inspection by the respective
solicitors, auditors and representatives of the
Company, at such location as is appropriate, all of
the Purchaser's and each of the Purchaser's
subsidiaries', if any, books, records, contracts,
documents, correspondence and other written
materials, and afford such persons every reasonable
opportunity to make copies thereof and take extracts
therefrom at the sole cost of the Company; provided
such persons do not unduly interfere in the
respective operations of the Purchaser or any of the
Purchaser's subsidiaries, if any;
(ii) authorize and permit such persons at the risk and the
sole cost of the Company, and only if such persons do
not unduly interfere in the respective operations of
the Purchaser and each of the Purchaser's
subsidiaries, if any, to attend at all of their
respective places of business and operations to
observe the conduct of their respective businesses
and operations, inspect their respective properties
and assets and make physical counts of their
respective inventories, shipments and deliveries; and
(iii) require the Purchaser's and each of the Purchaser's
subsidiaries', if any, respective management
personnel to respond to all reasonable inquiries
concerning the Purchaser's and each of the
Purchaser's subsidiaries', if any, respective
business assets or the conduct of their respective
businesses relating to their respective liabilities
and obligations;
(bd) the Purchaser will give to the Company, within at least five
business days prior to the Closing Date (as hereinafter
determined), by written notice, particulars of:
(i) each occurrence within the Purchaser's knowledge
after the Execution Date of this Agreement that, if
it had occurred before the Execution Date, would have
been contrary to any of the Purchaser's
representations or warranties contained herein; and
-48-
(ii) each occurrence or omission within the Purchaser's
knowledge after the Execution Date that constitutes a
breach of any of the Purchaser's covenants contained
in this Agreement;
(be) the shares in the capital of the Purchaser are not subject to
or affected by any actual or, to the knowledge of the
Purchaser, pending or threatened cease trading, compliance or
denial of use of exemptions orders of, or action,
investigation or proceeding by or before, any securities
regulatory authority, Court, administrative agency or other
tribunal;
(bf) the making of this Agreement and the completion of the
transactions contemplated hereby and the performance of and
compliance with the terms hereof does not and will not:
(i) conflict with or result in a breach of or violate any
of the terms, conditions or provisions of the
constating documents of the Purchaser or of any of
the Purchaser's subsidiaries, if any;
(ii) conflict with or result in a breach of or violate any
of the terms, conditions or provisions of any law,
judgment, order, injunction, decree, regulation or
ruling of any Court or governmental authority,
domestic or foreign, to which the Purchaser or any of
the Purchaser's subsidiaries, if any, is subject, or
constitute or result in a default under any
agreement, contract or commitment to which either the
Purchaser or any of the Purchaser's subsidiaries, if
any, is a party;
(iii) give to any party the right of termination,
cancellation or acceleration in or with respect to
any agreement, contract or commitment to which either
the Purchaser or any of the Purchaser's subsidiaries,
if any, is a party;
(iv) give to any government or governmental authority, or
any municipality or any subdivision thereof,
including any governmental department, commission,
bureau, board or administration agency, any right of
termination, cancellation or suspension of, or
constitute a breach of or result in a default under,
any permit, license, control or authority issued to
the Purchaser or to any of the Purchaser's
subsidiaries, if any, which is necessary or desirable
in connection with the conduct and operations of
their respective businesses and the ownership or
leasing of their respective business assets; or
-49-
(v) constitute a default by the Purchaser or any of the
Purchaser's subsidiaries, if any, or any event which,
with the giving of notice or lapse of time or both,
might constitute an event of default, under any
agreement, contract, indenture or other instrument
relating to any indebtedness of the Purchaser or of
any of the Purchaser's subsidiaries, if any, which
would give any party to that agreement, contract,
indenture or other instrument the right to accelerate
the maturity for the payment of any amount payable
under that agreement, contract, indenture or other
instrument;
(bg) the Purchaser will appoint the directors of the Company as
directors of the Purchaser and the incumbent directors shall
resign as directors of the Purchaser, together with the
appointment of not less than three nominees of the Company as
Executive Officers of the Purchaser, at Closing (as
hereinafter determined); such appointees or nominees to be
determined prior to Closing, and in the Company's sole and
absolute discretion;
(bh) the Purchaser's present accounts payable, which are estimated
at approximately U.S. $50,000 as at September 30, 2002, will
not, except for the costs incurred by the Purchaser in
completing the within Reverse Takeover, increase by more than
ten percent (10%) by the Closing Date (as hereinafter
determined), and the Purchaser may make payments to decrease
the accounts payable before the Closing Date;
(bi) the Purchaser has been provided with certain advances by
parties associated with the Purchaser, approximating U.S.
$800,000 as at September 30, 2002, to which the Purchaser has
agreed to repay those advances and accrued interest by way of
the issuance of certain common shares of the Purchaser prior
to the Closing Date (as hereinafter determined); and except
for certain further advances by parties associated with the
Purchaser for costs incurred by the Purchaser in the normal
course of business and in completing the within Reverse
Takeover, there will not be any further advances outstanding
at the Closing Date;
(bj) the Purchaser will raise on or before December 31, 2002 an
initial common share private placement funding for the
Purchaser, under "RULE 506" or "REGULATION S" under the
Securities Act, of a minimum of U.S. $500,000.00 and a maximum
of up to U.S. $1,000,000.00, and at a subscription price of
not less than U.S. $1.00 per restricted common share
(collectively, the "PRIVATE PLACEMENT"), with an understanding
to utilize its reasonably commercial efforts to raise not less
than U.S. $250,000.00 of the Private Placement within 60
calendar days from the acceptance date of the Agreement In
Principle by the Company and the Purchaser and with a further
understanding to utilize its reasonably commercial efforts to
raise not less than an initial U.S. $100,000.00 of the Private
Placement within 15 calendar days from the acceptance date of
the Agreement In Principle by the Company and the Purchaser;
-50-
(bk) the Purchaser will sell prior to and/or commensurate with the
Closing (as hereinafter determined) hereunder its entire
right, entitlement and interest in and to its wholly-owned
subsidiary, Oakhills Energy, Inc., to Tristar, a present
creditor of the Purchaser, for in consideration of the
foregiveness by Tristar of its present indebtedness from the
Purchaser in the approximate amount of U.S. $100,000 together
with the delivery by Tristar to the Purchaser of a general
release in conjunction with the completion of the same
(collectively, the "SUBSIDIARY SALE");
(bl) the Purchaser will file, with the prior written consent of the
Company, a "FORM S-8" registration statement for a stock
option plan in the estimated amount of not less than 2,000,000
post-Consolidation common shares of the Purchaser, at an
exercise price of not less than U.S. $0.50 per
post-Consolidation common share (collectively, the "OPTIONS");
and in such amounts and with such optionees as may be
determined by management for the Purchaser and the Company,
acting reasonably, prior to the Closing Date (as hereinafter
determined), and as may be acceptable with the appropriate
Regulatory Authorities; it being acknowledged and agreed that
an aggregate of 2,000,000 of such Options will be exchanged as
Purchaser's Options for the Company's Options, on the same
exercise terms and conditions, for an equal number of
incentive stock options in and to the resulting Purchaser on a
post-Consolidation basis, in consideration of the ongoing
involvement of the existing Company's Optionholders in and to
the resulting Purchaser company and in exchange for the agreed
upon cancellation by said Company's Optionholders of all of
the then issued and outstanding Company's Options as a
consequence thereof; and it being further acknowledged and
agreed that, subject to applicable securities laws, any common
shares which may arise from the exercise of any such
Purchaser's Options subsequent to the Closing Date will be
held in pool and either (i) sold jointly and pro rata with any
other Option common shares deposited therein or (ii)
restricted as to sale in such maximum daily amounts as may be
determined in accordance with the sole and absolute discretion
and direction of such nominee or nominees as may be mutually
agreed upon in writing, from time to time, by each of the
Purchaser and the Company at or subsequent to the Closing
Date;
(bm) the Purchaser will exchange all existing Company's Warrants,
on the same exercise terms and conditions, for an equal number
of Purchaser's Warrants in and to the resulting Purchaser on a
post-Consolidation basis in consideration, in part, of the
ongoing involvement of the existing Company's Warrantholders
in and to the resulting Purchaser company and in exchange for
the agreed upon cancellation by said Company's Warrantholders
of all of the then issued and outstanding Company's Warrants
as a consequence thereof;
-51-
(bn) the Purchaser will use its commercially reasonable efforts
prior to and/or commensurate with the Closing (as hereinafter
determined) hereunder to enter into a proposed "CONSULTING
SERVICES AGREEMENT" with ICI; a copy of form of which proposed
Consulting Services Agreement being attached hereto as
Schedule "O" and forming a material part hereof; whereby ICI
shall conduct certain consulting services for the Purchaser as
contemplated therein;
(bo) the Purchaser will have acquired the necessary approval of its
shareholders, if required, to change the name of the Purchaser
to "Petrogen Corp.", or to such other name as the Company's
Board of Directors may determine at Closing (as hereinafter
determined), together with the appointment of the existing
directors of the Company to the resulting Board of Directors
of the Purchaser and the appointment of up to three nominees
of the Company as Executive Officers of the Purchaser at
Closing; such appointees or nominees to be determined prior to
Closing, and in the Company's sole and absolute discretion;
and at Closing the Purchaser shall be in the process of
preparing or filing the necessary documentation with all
Regulatory Authorities to effect the same and which shall
include, without limitation, obtaining a new trading symbol
and CUSIP number for the resulting Purchaser;
(bp) neither this Agreement nor any other document, certificate or
statement furnished to any of the Vendors or the Company by or
on behalf of the Purchaser in connection with the transactions
contemplated hereby knowingly or negligently contains any
untrue or incomplete statement of material fact or omits to
state a material fact necessary in order to make the
statements therein not misleading; and
(bq) it is not aware of any fact or circumstance which has not been
disclosed to the Vendors and the Company which should be
disclosed in order to prevent the representations, warranties
and covenants contained in this section from being misleading
or which would likely affect the decision of the Vendors and
the Company to enter into this Agreement.
4.2 CONTINUITY OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE
PURCHASER. The representations, warranties and covenants of the Purchaser
contained in this Article, or in any certificates or documents delivered
pursuant to the provisions of this Agreement or in connection with the
transactions contemplated hereby, will be true at and as of the Closing Date (as
hereinafter determined) as though such representations, warranties and covenants
were made at and as of such time. Notwithstanding any investigations or
inquiries made by either of the Vendors or the Company, or by the Vendors' or
the Company's respective professional advisors prior to the Closing Date, or the
waiver of any condition by either of the Vendors or the Company, the
representations, warranties and covenants of the Purchaser contained in this
Article shall survive the Closing Date and shall continue in full force and
effect for a period of three calendar years from the Closing Date; provided,
however, that the Purchaser shall not be responsible for the breach of any
-52-
representation, warranty or covenant of the Purchaser contained herein caused by
any act or omission of either of the Vendors or the Company prior to the
Execution Date hereof of which the Purchaser was unaware or as a result of any
action taken by either of the Vendors or the Company after the Execution Date.
In the event that any of the said representations, warranties or covenants are
found by a Court of competent jurisdiction to be incorrect and such
incorrectness results in any loss or damage sustained directly or indirectly by
either of the Vendors and/or the Company, then the Purchaser will, in accordance
with the provisions of Article "16" hereinbelow, pay the amount of such loss or
damage to either of the Vendors and/or the Company, as the case may be, within
30 calendar days of receiving notice of judgment therefore; provided that the
Vendors and the Company will not be entitled to make any claim unless the loss
or damage suffered may exceed the amount of U.S. $1,000.00.
ARTICLE 5
INTERIM SECURED LOAN AND SECURITY THEREFORE
5.1 INTERIM SECURED LOAN FROM THE PURCHASER TO THE COMPANY. It is hereby
acknowledged and agreed by the Parties hereto that, in conjunction with and as a
condition to the entering into of the Agreement In Principle and this Agreement
by the Parties hereto, the Purchaser has heretofore agreed, in accordance with
the specific terms and conditions of that certain form of proposed "Secured and
Convertible Loan Agreement" (the "LOAN AGREEMENT") in this matter, to be entered
into between the Purchaser and the Company concurrently with the execution of
this Agreement; a copy of the form of said proposed Loan Agreement being
attached hereto as Schedule "N" and forming a material part hereof; to advance
by way of a loan or loans to the Company (collectively, the "LOAN") the
aggregate principal sum of up to U.S. $250,000.00 (the "PRINCIPAL SUM") within
five business days of the due and complete closing of a minimum of U.S.
$250,000.00 of the proposed Private Placement financing as set forth in section
"4.1" hereinabove.
In this regard, and in accordance with the terms and conditions of the
proposed Loan Agreement, any such Principal Sum Loan amount will bear interest
accruing thereon at the rate of ten percent (10%) per annum, compounded
semi-annually and not in advance (the "INTEREST") prior to maturity, and any
such Principal Sum and Interest will be secured, contemporaneously with the
advancement of any funds under any such Loan, by way of a senior fixed and
floating charge on all of the assets of the Company (collectively, the
"SECURITY"). In this regard it is hereby also acknowledged and agreed by the
Parties hereto that, upon the completion of the within Reverse Takeover, it is
intended, subject to the Purchaser's prior receipt of appropriate accounting and
legal advice, that the Loan will simply be forgiven, or become an inter-company
account as the situation may require.
5.2 COVENANTS OF THE COMPANY IN CONNECTION WITH ANY LOAN. In order to
induce the Purchaser to provide any such Loan under the Loan Agreement as
contemplated by section "5.1" hereinabove, the Company hereby covenants with the
Purchaser, with the intent that the Purchaser will rely thereon in providing any
such Loan and in concluding the transactions contemplated thereby, that:
-53-
(a) the Company will use any such Principal Sum monies which may
be advanced by the Purchaser by way of Loan for the sole
purpose of advancing the ongoing development, marketing and
maintenance of the Company's Business interests and the
Company's Assets; and
(b) any such Principal Sum will be advanced by the Purchaser to
the Company subject to the fulfillment and/or the continuing
fulfillment of at least the following Security conditions to
the sole and absolute satisfaction and discretion of the
Purchaser:
(i) the execution by the Company of formal Loan
documentation in form and substance satisfactory to
the Purchaser and its counsel, acting reasonably; and
(ii) the granting and delivery by the Company to the
Purchaser of such Security documentation (and
including, without limitation, promissory notes and
security instruments) as may be required by the
Purchaser and its counsel, acting reasonably, in
order to evidence the Loan, together with and all
other supporting documents required under any such
Security documentation.
5.3 REPAYMENT OF THE PRINCIPAL SUM PORTION OF THE LOAN.Subject to the prior
application of the provisions provided for in section "3.5" of the proposed Loan
Agreement and as set forth hereinbelow, it is hereby acknowledged and agreed by
the Parties hereto that, in accordance with the section "3.4" of the proposed
Loan Agreement, the Company will covenant to repay to the Purchaser, as required
under the terms of the proposed Loan Agreement, all Principal Sum monies which
are advanced by the Purchaser to the Company under the proposed Loan Agreement,
together with all outstanding Interest accrued thereon, at or before 5:00 p.m.
(Vancouver time) on the day which is 90 calendar days from the earlier of one
year from the execution date of the Loan Agreement and the date upon which the
Purchaser's proposed purchase of all of the issued and outstanding shares of the
Company under the terms and conditions of this Agreement terminates for any
reason whatsoever (herein and therein the "FINAL PRINCIPAL SUM PAYMENT DATE");
failing which the Purchaser may immediately realize upon any of the Security
which has been provided by the Company to the Purchaser in accordance with the
terms of the proposed Loan Agreement.
5.4 PREPAYMENT AND REDEMPTION OF THE LOAN. It is hereby acknowledged and
agreed by the Parties hereto that, in accordance with section "3.5" of the
proposed Loan Agreement, the Company may prepay and redeem any portion of the
Principal Sum portion of the Loan in whole or in part at any time prior to the
Final Principal Sum Payment Date (herein and therein the "RIGHT OF REDEMPTION")
and in the manner as set forth immediately hereinbelow by providing the
Purchaser with not less than 30 calendar days' prior written notice (herein and
therein the "REDEMPTION NOTICE") of its Right of Redemption intention to redeem
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and repay all or any portion of the Principal Sum and any Interest accrued
thereon which would be due and owing by the Company to the Purchaser at the end
of such 30-day period (herein and therein, collectively, the "REDEMPTION
AMOUNT") (such day at the end of such 30-day period being the "REDEMPTION DATE"
and, for clarity, such Redemption Date would be the date to which such Principal
Sum and Interest would be calculated and due and payable to the Purchaser at the
close of business, in Vancouver, British Columbia, on such Redemption Date). In
order to provide such Redemption Notice it is hereby also acknowledged and
agreed that the Company will be required, at the date of its delivery to the
Purchaser of the Redemption Notice, to provide to the Purchaser's solicitors, or
to such other mutually agreeable holder (herein and therein the "ESCROW
HOLDER"), a certified cheque or bank draft representing the entire Redemption
Amount and made payable to the Purchaser in funds of the United States of
America, or funds by way of wire transfer to such designation as may be directed
by the Purchaser in its sole and absolute discretion, in the amount of any such
Redemption Amount. Thereupon, and should the proposed Redemption Amount in fact
represent all of the Principal Sum and any Interest accrued thereon which would
be due and owing by the Company to the Purchaser under the proposed Loan
Agreement at the Redemption Date, then the Purchaser will be required to provide
to the Escrow Holder, and as soon as reasonably possible after its receipt of
the Redemption Notice, all such registerable discharges as may be necessary to
relieve the Company of any obligation to the Purchaser under each of the
proposed Loan Agreement and each and every other Security instrument already
provided by the Company to the Purchaser under the terms and conditions of the
proposed Loan Agreement (herein and therein, collectively, the "DISCHARGES"). In
this regard, and on the second business day subsequent to the Redemption Date,
the Escrow Holder, if applicable, shall deliver to the Purchaser the Redemption
Amount and, only if also applicable, to the Company the Discharges, and, unless
otherwise directed in writing by each of the Purchaser and the Company, to the
Purchaser's and the Company's respective addresses for notice and delivery as
set forth on the front page of the proposed Loan Agreement. Notwithstanding the
Company's prior exercise of its Right of Redemption and/or the Purchaser's prior
exercise of its Right of Election as provided for in the proposed Loan Agreement
and as set forth herein, and notwithstanding the prior repayment to the
Purchaser by the Company of all or any portion of the entire Redemption Amount
and/or the prior conversion by the Purchaser of all or any portion of the entire
Outstanding Indebtedness (as hereinafter determined) for any Equity Interest (as
hereinafter determined) as also provided for in the proposed Loan Agreement and
as set forth herein, no such action or actions will, in any manner, and unless
this Agreement is otherwise terminated for any reason whatsoever prior to the
Closing thereof, affect the within obligation of each of the Vendors, the
Company and the Purchaser to complete the proposed purchase and sale of the
Purchased Shares as contemplated by the terms and conditions of this Agreement.
5.5 RIGHT TO CONVERT ANY OUTSTANDING INDEBTEDNESS TO EQUITY OF THE COMPANY.
Subject to the Company's prior Right of Redemption as set forth in Article "3"
of the proposed Loan Agreement, at any time after the Final Principal Sum
Payment Date as set forth hereinabove, should either this Agreement terminate
for any reason whatsoever prior to the Closing (as hereinafter determined)
thereof or should the Final Principal Sum Payment Date be otherwise determined
at any time subsequent to the advance of any Loan under the proposed Loan
Agreement, then the Purchaser will have, in addition to all of the rights and
Security specifically provided for in the proposed Loan Agreement, the sole and
exclusive right and option, in its sole and absolute discretion, to elect (the
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"RIGHT OF ELECTION") to convert the entire Principal Sum, Interest or any other
sum outstanding under any Loan from the Purchaser to the Company as contemplated
by the proposed Loan Agreement (herein and therein, collectively, the
"OUTSTANDING INDEBTEDNESS") to a participating and voting interest in and to the
Company which is then equivalent to that percentage which is equivalent to five
percent (5%) multiplied by the fraction which has, as its numerator, the
Outstanding Indebtedness, and which has, as its denominator, U.S. $250,000.00,
of the resulting issued and outstanding participating and voting common shares
of the Company at that time (the "EQUITY INTEREST"). In this regard, and should
the Purchaser exercise its Right of Election to convert the entire Outstanding
Indebtedness outstanding into the Equity Interest in and to the Company as set
forth immediately hereinabove then it is also hereby acknowledged and agreed
that the Company will, at all times, maintain such Equity Interest percentage
ownership position of the Purchaser in and to the Company with no dilution
whatsoever unless otherwise consented to in writing by the Purchaser. In this
regard it is hereby acknowledged and agreed by the Parties hereto that the
Purchaser's Right of Election may only be exercised by the Purchaser's surrender
of the proposed Loan Agreement and the delivery to the Escrow Holder of a duly
executed "Election Form" (herein and therein the "ELECTION FORM"); in
substantially the form which is attached as Schedule "D" to the proposed Loan
Agreement; together with such registerable Discharges as may be necessary to
relieve the Company of any obligation to the Purchaser under the proposed Loan
Agreement and each and every other Security instrument already provided by the
Company to the Purchaser under the terms and conditions of the proposed Loan
Agreement. In conjunction with the Escrow Holder's receipt of the Election Form
and Discharges from the Purchaser it is hereby also acknowledged and agreed that
the Company will then be required to provide to the Escrow Holder, and as soon
as reasonably possible thereafter, a certificate or certificates representing
the Equity Interest duly registered to the prior order and direction of the
Purchaser together with such other documentation or assurances as may be
necessary, in the sole and absolute discretion of the Purchaser, acting
reasonably, in order to evidence the Company's compliance with the terms and
conditions of the proposed Loan Agreement and including, without limitation, the
issuance of such Equity Interest as provided for hereunder (herein and therein,
collectively, the "EQUITY INTEREST DOCUMENTATION"). In this regard, and on the
second business day subsequent to the Escrow Holder's receipt of the Equity
Interest Documentation from the Company, the Escrow Holder shall deliver to the
Purchaser the Equity Interest Documentation and to the Borrower the Election
Form and the Discharges, and, unless otherwise directed in writing by each of
the Purchaser and the Company, to the Purchaser's and the Company's respective
addresses for notice and delivery as set forth on the front page of the proposed
Loan Agreement. Notwithstanding the Company's prior exercise of its Right of
Redemption and/or the Purchaser's prior exercise of its Right of Election as
provided for in the proposed Loan Agreement and as set forth herein, and
notwithstanding the prior repayment to the Purchaser by the Company of all or
any portion of the entire Redemption Amount and/or the prior conversion by the
Purchaser of all or any portion of the entire Outstanding Indebtedness for any
Equity Interest as also provided for in the proposed Loan Agreement and as set
forth herein, no such action or actions will, in any manner, and unless this
Agreement is otherwise terminated for any reason whatsoever prior to the Closing
thereof, affect the within obligation of each of the Vendors, the Company and
the Purchaser to complete the proposed purchase and sale of the Purchased Shares
as contemplated by the terms and conditions of this Agreement.
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5.6 FINANCING BY THE COMPANY PRIOR TO CLOSING. It is hereby further
acknowledged and agreed by the Parties hereto that, notwithstanding the
Purchaser's good faith ability to complete the proposed Private Placement (as
hereinafter determined) and any Loan consequent thereon prior to the Closing
Date (as hereinafter determined), the Company has ongoing operating requirements
which cannot be ignored or underfunded prior thereto. Correspondingly, and with
the Purchaser's prior written consent; which consent shall not be unreasonably
withheld; it is hereby acknowledged and agreed that the Company may organize and
complete up to U.S. $500,000.00 in equity financing prior to the Closing Date
hereof (collectively, the "FINANCING") which may take the form, without
limitation, of a proposed revenue trust providing the subscriber thereof with a
revenue interest return of up to two hundred percent (200%), from the then net
cash flow of the Company, with up to a full share purchase warrant also being
provided to the subscriber to acquire up to one common share of any reporting
company which may result from any business combination with the Company
exercisable at not less than U.S. $1.00 per common share.
5.7 COSTS. It is hereby further acknowledged and agreed by the Parties
hereto that while any portion of any Outstanding Indebtedness is outstanding the
Company will be, and up to and including either the Closing Date (as hereinafter
determined) or the termination of either this Agreement will be, directly
responsible for and pay all fees and expenses and including, without limitation,
all legal, accounting, sponsorship, regulatory and filing fees and expenses, and
otherwise, in connection with the preparation and execution of this Agreement,
all filings with any regulatory authority as may have jurisdiction over either
any of the Vendors, the Company or the Purchaser in conjunction with the
completion of this Agreement and all documentation necessarily incidental
thereto; and which fees and expenses shall be added to and form part of the
Outstanding Indebtedness hereunder.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
6.1 PARTIES' CONDITIONS PRECEDENT PRIOR TO THE CLOSING DATE. All of the rights,
duties and obligations of each of the Parties hereto under this Agreement are
subject to the following conditions precedent for the exclusive benefit of each
of the Parties to be fulfilled in all material aspects in the reasonable opinion
of each of the Parties or to be waived by each or any of the Parties, as the
case may be, as soon as possible after the Execution Date; however, unless
specifically indicated as otherwise, not later than 10 calendar days prior to
the Closing Date (as hereinafter determined; such date being the "SUBJECT
REMOVAL DATE"):
(a) the specific ratification of the terms and conditions of this
Agreement by the Board of Directors of each of the Purchaser
and the Company within five business days of the due and
completion execution of this Agreement by each of the Parties
hereto (collectively, the "RATIFICATION");
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(b) the completion by each of the Purchaser and the Company of an
initial due diligence and operations review of the other
Party's respective businesses and operations within 10
calendar days of the prior satisfaction of the Ratification
(collectively, the "INITIAL DUE DILIGENCE");
(c) the completion by the Purchaser of not less than a minimum of
U.S. $500,000 of the Private Placement on or before December
31, 2002, together with the corresponding Principal Sum Loan
of not less than U.S. $250,000 from such minimum Private
Placement, all in accordance with the provisions of section
"4.1" and Article "5" hereinabove;
(d) the receipt of all necessary approvals to the terms and
conditions of and the transactions contemplated by this
Agreement;
(e) shareholders of the Purchaser passing an ordinary resolution
or, where required, a special resolution, approving the terms
and conditions of this Agreement and all of the transactions
contemplated hereby, and the Purchaser sending all required
notice to the Purchaser's shareholders in connection
therewith, or, in the alternative and if allowable in
accordance with applicable corporate and securities laws,
shareholders of the Purchaser holding over fifty percent (50%)
of the issued shares of the Purchaser providing written
consent resolutions evidencing their approval to the terms and
conditions of this Agreement and all of the transactions
contemplated hereby together with certification of any
required notice to all shareholders of the Purchaser of such
written consent resolutions; and
(f) the directors of the Purchaser and/or the shareholders of the
Purchaser, if required, approving of the within issuance by
the Purchaser to the order and direction of the Vendors of all
of the referenced Shares in accordance with sections "2.2" and
"2.3" hereinabove and, in addition, the directors and/or
shareholders of the Purchaser, if required, having also
approved and received any required notice of:
(i) the change of name of the Purchaser to "Petrogen
Corp.", or to such other name as may be determined by
management for the Company, in its sole and absolute
discretion, prior to the Closing Date (as hereinafter
determined), and as may be acceptable with the
appropriate Regulatory Authorities;
(ii) the Consolidation of the Purchaser's share capital
on a one new for 20 old share capital consolidation
basis;
(iii) an initial common share Private Placement funding for
the Purchaser, under Rule 506 or Regulation S under
the Securities Act, of a minimum of U.S. $500,000.00
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and a maximum of up to U.S. $1,000,000.00, and at a
subscription price of not less than U.S. $1.00 per
restricted common share, with an understanding to
utilize its reasonably commercial efforts to raise
not less than U.S. $250,000.00 of the Private
Placement within 60 calendar days from the acceptance
date of the Agreement In Principle by the Company and
the Purchaser and with a further understanding to
utilize its reasonably commercial efforts to raise
not less than an initial U.S. $100,000.00 of the
Private Placement within 15 calendar days from the
acceptance date of the Agreement In Principle by the
Company and the Purchaser. In this regard it is
hereby also acknowledged and agreed that at least
U.S. $250,000.00 raised in any such Private
Placement(s) will take the form of the secured Loan
from the Purchaser to the Company as contemplated in
Article "5" hereinabove;
(iv) the Subsidiary Sale by the Purchaser;
(v) the filing by the Purchaser, with the prior written
consent of the Company, of a Form S-8 registration
statement for a stock option plan in the estimated
amount of not less than 2,000,000 post-Consolidation
common shares of the Purchaser, at an exercise price
of not less than U.S. $0.50 per post-Consolidation
common share; and in such amounts and with such
optionees as may be determined by management for the
Purchaser and the Company, acting reasonably, prior
to the Closing Date (as hereinafter determined), and
as may be acceptable with the appropriate Regulatory
Authorities; it being acknowledged and agreed that an
aggregate of 2,000,000 of such Options will be
exchanged as Purchaser's Options for the Company's
Options, on the same exercise terms and conditions,
for an equal number of incentive stock options in and
to the resulting Purchaser on a post-Consolidation
basis, in consideration of the ongoing involvement of
the existing Company's Optionholders in and to the
resulting Purchaser company and in exchange for the
agreed upon cancellation by said Company's
Optionholders of all of the then issued and
outstanding Company's Options as a consequence
thereof; and it being further acknowledged and agreed
that, subject to applicable securities laws, any
common shares which may arise from the exercise of
any such Purchaser's Options subsequent to the
Closing Date will be held in pool and either (i) sold
jointly and pro rata with any other Option common
shares deposited therein or (ii) restricted as to
sale in such maximum daily amounts as may be
determined in accordance with the sole and absolute
discretion and direction of such nominee or nominees
as may be mutually agreed upon in writing, from time
to time, by each of the Purchaser and the Company at
or subsequent to the Closing Date;
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(vi) the Purchaser's exchange of all existing Company's
Warrants, on the same exercise terms and conditions,
for an equal number of Purchaser's Warrants in and to
the resulting Purchaser on a post-Consolidation basis
in consideration, in part, of the ongoing involvement
of the existing Company's Warrantholders in and to
the resulting Purchaser company and in exchange for
the agreed upon cancellation by said Company's
Warrantholders of all of the then issued and
outstanding Company's Warrants as a consequence
thereof;
(vii) the appointment of the existing directors of the
Company to the resulting Board of Directors of the
Purchaser, together with the appointment of up to
three nominees of the Company as Executive Officers
of the Purchaser, at Closing (as hereinafter
determined); such appointees or nominees to be
determined prior to Closing, and in the Company's
sole and absolute discretion;
(viii) the entering into by the Purchaser prior to and/or
commensurate with the Closing (as hereinafter
determined) hereunder of the proposed Consulting
Services Agreement with ICI; a copy of form of which
proposed Consulting Services Agreement being attached
hereto as Schedule "O" and forming a material part
hereof; whereby ICI shall conduct certain consulting
services for the Purchaser as contemplated therein;
(ix) the entering into by the Purchaser commensurate with
the Closing (as hereinafter determined) hereunder of
the proposed Drilling and Operating Agreement with
Petrogen Ltd.; a copy of form of which proposed
Drilling and Operating Agreement being attached
hereto as Schedule "P" and forming a material part
hereof; whereby the exact details of which Residual
Interest and the Operator's responsibilities in
maintaining the Company's Property interests will be
set forth as contemplated therein; and
(x) such other matters as may be agreed to as between the
Parties hereto prior the completion of the
transactions contemplated by this Agreement.
6.2 PARTIES' WAIVER OF CONDITIONS PRECEDENT. The conditions precedent set
forth in section "6.1" hereinabove are for the exclusive benefit of each of the
Parties hereto and may be waived by each or any of the Parties in writing and in
whole or in part at any time; however, not later than five calendar days prior
to the Subject Removal Date.
6.3 THE VENDORS' AND THE COMPANY'S CONDITIONS PRECEDENT. The rights,duties
and obligations of each of the Vendors and the Company under this Agreement are
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also subject to the following conditions precedent for the exclusive benefit of
each of the Vendors and the Company to be fulfilled in all material aspects in
the reasonable opinion of the Vendors and the Company or to be waived by each or
any of the Vendors and the Company as soon as possible after the Execution Date,
however; unless specifically indicated as otherwise, not later than five
calendar days prior to the Subject Removal Date:
(a) the Purchaser shall have complied with all warranties,
representations, covenants and agreements herein agreed to be
performed or caused to be performed by the Purchaser on or
before the Closing Date (as hereinafter determined);
(b) the Purchaser shall have complied with all applicable
securities laws in connection with the issuance of the Shares
to the Vendors on or before the Closing Date (as hereinafter
determined);
(c) the Purchaser and each of the Purchaser's subsidiaries, if
any, will have obtained all authorizations, approvals, or
waivers that may be necessary or desirable in connection with
the transactions contemplated in this Agreement, and other
actions by, and have made all filings with, any and all
Regulatory Authorities required to be made in connection with
the transactions contemplated herein, and all such
authorizations, approvals and other actions will be in full
force and effect, and all such filings will have been accepted
by the Purchaser and the Purchaser's subsidiaries, if any, who
will be in compliance with, and have not committed any breach
of, any securities laws, regulations or policies of any
Regulatory Authority to which the Purchaser or any of the
Purchaser's subsidiaries, if any, may be subject;
(d) all matters which, in the opinion of counsel for the Vendors
and the Company, are material in connection with the
transactions contemplated by this Agreement shall be subject
to the favourable opinion of such counsel, and all relevant
records and information shall be supplied to such counsel for
that purpose;
(e) no material loss or destruction of or damage to either the
Purchaser or to any of the Purchaser's subsidiaries, if any,
shall have occurred since the Execution Date;
(f) no action or proceeding at law or in equity shall be pending
or threatened by any person, company, firm, governmental
authority, regulatory body or agency to enjoin or prohibit:
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(i) the purchase or transfer of any of the Purchased
Shares contemplated by this Agreement or the right of
any of the Vendors to dispose of any of the Purchased
Shares; or
(ii) the right of the Purchaser and the Purchaser's
subsidiaries, if any, to conduct their respective
operations and carry on, in the normal course, their
respective businesses and operations as they have
carried on in the past;
(g) the delivery to the Company by the Purchaser, on a
confidential basis, of the following documentation and
information:
(i) a copy of all material contracts, agreements, reports
and title information of any nature respecting the
Purchaser; and
(ii) details of any lawsuits, claims or potential claims
relating to the Purchaser of which the Purchaser is
aware and the Vendors and the Company are unaware;
(h) the Purchaser will, for a period of at least five business
days prior to the Closing Date (as hereinafter determined),
during normal business hours:
(i) make available for inspection by the respective
solicitors, auditors and representatives of the
Company, at such location as is appropriate, all of
the Purchaser's and each of the Purchaser's
subsidiaries', if any, books, records, contracts,
documents, correspondence and other written
materials, and afford such persons every reasonable
opportunity to make copies thereof and take extracts
therefrom at the sole cost of the Company; provided
such persons do not unduly interfere in the
respective operations of the Purchaser or any of the
Purchaser's subsidiaries, if any;
(ii) authorize and permit such persons at the risk and the
sole cost of the Company, and only if such persons do
not unduly interfere in the respective operations of
the Purchaser and each of the Purchaser's
subsidiaries, if any, to attend at all of their
respective places of business and operations to
observe the conduct of their respective businesses
and operations, inspect their respective properties
and assets and make physical counts of their
respective inventories, shipments and deliveries; and
(iii) require the Purchaser's and each of the Purchaser's
subsidiaries', if any, respective management
personnel to respond to all reasonable inquiries
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concerning the Purchaser's and each of the
Purchaser's subsidiaries', if any, respective
business assets or the conduct of their respective
businesses relating to their respective liabilities
and obligations; and
(i) the completion by the Vendors and the Company, and by the
Vendors' and the Company's respective professional advisors,
of a thorough due diligence and operations review of the
respective businesses and operations of the Purchaser and each
of the Purchaser's subsidiaries, if any, to the sole and
absolute satisfaction of each of the Vendors and the Company.
6.4 THE VENDORS' AND THE COMPANY'S WAIVER OF CONDITIONS PRECEDENT.
The conditions precedent set forth in section "6.3" hereinabove are for the
exclusive benefit of each of the Vendors and the Company and may be waived by
each or any of the Vendors and the Company in writing and in whole or in part at
any time after the Execution Date; however, unless specifically indicated as
otherwise, not later than five calendar days prior to the Subject Removal Date.
6.5 PURCHASER'S CONDITIONS PRECEDENT PRIOR TO THE CLOSING DATE. The rights,
duties and obligations of the Purchaser under this Agreement are also subject to
the following conditions precedent for the exclusive benefit of the Purchaser to
be fulfilled in all material aspects in the reasonable opinion of the Purchaser
or to be waived by the Purchaser as soon as possible after the Execution Date;
however, unless specifically indicated as otherwise, not later than five
calendar days prior to the Subject Removal Date:
(a) the Vendors and the Company shall have complied with all
warranties, representations, covenants and agreements herein
agreed to be performed or caused to be performed by the
Vendors and the Company on or before the Closing Date (as
hereinafter determined);
(b) the Company will have obtained all authorizations, approvals
or waivers that may be necessary or desirable in connection
with the transactions contemplated in this Agreement, and
other actions by, and have made all filings with, any and all
Regulatory Authorities from whom any such authorization,
approval or other action is required to be obtained or to be
made in connection with the transactions contemplated herein,
and all such authorizations, approvals and other actions will
be in full force and effect, and all such filings will have
been accepted by the Company who will be in compliance with,
and has not committed any breach of, any securities laws,
regulations or policies of any Regulatory Authority to which
the Company may be subject;
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(c) all matters which, in the opinion of counsel for the
Purchaser, are material in connection with the transactions
contemplated by this Agreement shall be subject to the
favourable opinion of such counsel, and all relevant records
and information shall be supplied to such counsel for that
purpose;
(d) no material loss or destruction of or damage to the Company,
any of the Company's Assets, any of the Company's Business or
the Purchased Shares shall have occurred;
(e) no action or proceeding at law or in equity shall be pending
or threatened by any person, company, firm, governmental
authority, regulatory body or agency to enjoin or prohibit:
(i) the purchase or transfer of any of the Purchased
Shares contemplated by this Agreement or the right of
any of the Vendors to dispose of any of the Purchased
Shares; or
(ii) the right of the Company to conduct its operations
and carry on, in the normal course, its Company's
Business and operations as it has carried on in the
past;
(f) the delivery to the Purchaser by the Company, on a
confidential basis, of all Business Documentation and
including, without limitation, the following documentation and
information:
(i) a copy of all material contracts, agreements, reports
and information of any nature respecting the Company,
its assets and the Company's Business; and
(ii) details of any lawsuits, claims or potential claims
relating to either the Company, its assets, the
Company's Business or the Purchased Shares of which
either of the Vendors or the Company is aware and the
Purchaser is unaware;
(g) the delivery to the Purchaser by the Company and the
Guarantors of such Security and supporting documentation and
instruments respecting the granting by the Purchaser to the
Company of the within interim Loan as the Purchaser's
solicitors may reasonably require;
(h) the Company will, for a period of at least five business days
prior to the Closing Date (as hereinafter determined), during
normal business hours:
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(i) make available for inspection by the solicitors,
auditors and representatives of the Purchaser, at
such location as is appropriate, all of the Company's
books, records, contracts, documents, correspondence
and other written materials, and afford such persons
every reasonable opportunity to make copies thereof
and take extracts therefrom at the sole cost of the
Purchaser; provided such persons do not unduly
interfere in the operations of the Company;
(ii) authorize and permit such persons at the risk and the
sole cost of the Purchaser, and only if such persons
do not unduly interfere in the operations of the
Company, to attend at all of its respective places of
business and operations to observe the conduct of its
business and operations, inspect its properties and
assets and make physical counts of its inventories,
shipments and deliveries; and
(iii) require the Company's management personnel to respond
to all reasonable inquiries concerning the Company's
Business and assets or the conduct of its business
relating to its liabilities and obligations; and
(i) the completion by the Purchaser and by the Purchaser's
professional advisors of a thorough due diligence and
operations review of both the business and operations of the
Company together with the transferability of the Purchased
Shares as contemplated by this Agreement, to the sole and
absolute satisfaction of the Purchaser.
6.6 PURCHASER'S WAIVER OF CONDITIONS PRECEDENT. The conditions precedent
set forth in section "6.5" hereinabove are for the exclusive benefit of the
Purchaser and may be waived by the Purchaser in writing and in whole or in part
at any after the Execution Date; however, unless specifically indicated as
otherwise, not later than five calendar days prior to the Subject Removal Date.
6.7 THE VENDORS' ADDITIONAL INCOME TAX COVENANTS. The Vendors also
acknowledge and agree that:
(a) the Purchaser does not assume and shall not be liable for any
taxes under the Income Tax Act or any other taxes whatsoever
which may be or become payable by the Vendors and including,
without limitation, any taxes resulting from or arising as a
consequence of the transfer by the Vendors to the Purchaser,
of the Purchased Shares herein contemplated, and the Vendors
shall indemnify and save harmless the Purchaser from and
against all or any such taxes;
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(b) as to all income tax matters:
(i) an election under subsection "85.1(5)" of the Income
Tax Act may be made and filed by each of the Vendors
and by the Purchaser in the prescribed form, manner
and within the time prescribed by the Income Tax Act,
and each such election shall specify that each
Vendor's deemed proceeds of disposition of the
Purchased Shares transferred by such Vendor shall be
such amount as that Vendor shall specify in such
election; provided that the amount so specified is an
amount within the parameters established in
subsection 85.1(5) of the Income Tax Act;
(ii) the Purchaser's obligations under paragraph
"7.7(b)(i)" hereinabove shall be discharged upon its
execution of the prescribed form for making such
election, and returning said form to each of the
Vendors within seven calendar days of the date of
receipt thereof. Provided that the Purchaser has
discharged such obligation, the Purchaser shall have
no liability for any tax, interest, penalty, claim or
cost whatsoever which may arise from the making or
failure to make such election by any of the Vendors,
or the amounts selected in any such election; and
(iii) it is intended by the Parties hereto that the
consideration for the Purchased Shares shall be the
fair market value thereof as of the Closing Date.
Therefore, if Revenue Canada, Taxation, disputes the
fair market value of any of the Purchased Shares, and
any of the Parties have made and filed the joint
election as contemplated by paragraph "7.7(b)(i)"
hereinabove, the Parties agree to amend the said
joint election so as to conform to the fair market
value thereof, whether determined by agreement among
Revenue Canada, Taxation, the Vendors and the
Purchaser or by judicial determination beyond any
further right of appeal or by the expiry or waiver of
right to appeal any determination by Revenue Canada,
Taxation, of the fair market value thereof. Nothing
herein shall require any Party to make any adjustment
which would cause such Party to thereby become
insolvent within the meaning of the corporate laws
governing such Party, if applicable.
ARTICLE 7
CLOSING AND EVENTS OF CLOSING
7.1 CLOSING AND CLOSING DATE. The closing (the "CLOSING") of the within
purchase and delivery of the Purchased Shares, as contemplated in the manner as
set forth in Article "2" hereinabove, together with all of the transactions
contemplated by this Agreement, shall occur on such date or dates following the
due and complete satisfaction of all of the conditions precedent which are set
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out in Article "6" hereinabove (the "CLOSING DATE"), or on such earlier or later
Closing Dates as may be agreed to in advance and in writing by each of the
Parties hereto, and will be closed, in each such instance, at the offices of
Xxxxxx Xxxxxx, at Suite 2550, 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx
Xxxxxxxx, X0X 0X0, at 2:00 p.m. (Vancouver time) on each such Closing Date.
7.2 LATEST CLOSING DATE. If the final Closing Date has not occurred by
January 31, 2003 this Agreement will be terminated and unenforceable unless the
Parties hereto agree in writing to grant an extension of the final Closing Date.
7.3 DOCUMENTS TO BE DELIVERED BY THE VENDORS AND THE COMPANY PRIOR TO
THE CLOSING DATE. Not later than five calendar days prior to each Closing Date,
and in addition to the documentation which is required by the agreements and
conditions precedent which are set forth hereinabove, the Vendors and the
Company shall also execute and deliver, or cause to be delivered, to the
Purchaser, the Transfer Agent and/or the Escrow Agent, as applicable, all such
other documents, resolutions and instruments as may be necessary, in the opinion
of counsel for the Purchaser, acting reasonably, to complete all of the
transactions contemplated by this Agreement and including, without limitation,
the necessary transfer all of the Purchased Shares to the Purchaser free and
clear of all liens, charges and encumbrances, and in particular including, but
not being limited to, the following materials:
(a) all documentation as may be necessary and as may be required
by the solicitors for the Purchaser, acting reasonably, to
ensure that all of the Purchased Shares have been transferred,
assigned and are registerable in the name of and for the
benefit of the Purchaser under all applicable corporate and
securities laws;
(b) the certificates representing the Purchased Shares registered
in the respective names of the Vendors and duly endorsed for
transfer to the Purchaser and/or irrevocable stock powers
transferring the Purchased Shares to the Purchaser;
(c) a certificate representing the Purchased Shares registered in
the name of the Purchaser;
(d) a certified copy of the resolutions of the directors of the
Company (and of any of the Vendors, if necessary) authorizing
the transfer by the Vendors to the Purchaser of the Purchased
Shares;
(e) a copy of all corporate records and books of account of the
Company and including, without limiting the generality of the
foregoing, a copy of all minute books, share register books,
share certificate books and annual reports of the Company;
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(f) a certificate of an officer of the Company, dated as of the
Closing Date, acceptable in form to the solicitors for the
Purchaser, acting reasonably, certifying that the warranties,
representations, covenants and agreements of the Company
contained in this Agreement are true and correct in all
respects and will be true and correct as of the Closing Date
as if made by the Company on the Closing Date;
(g) consents to act or other documents as may be required in
connection with the appointment of the existing directors of
the Company to the resulting Board of Directors of the
Purchaser, together with the appointment of up to three
nominees of the Company as Executive Officers of the
Purchaser, all as the Company may so determine in writing,
from time to time, and in its sole and absolute discretion,
prior to the Closing Date;
(h) all remaining Business Documentation; and
(i) all such other documents and instruments as the Purchaser's
solicitors may reasonably require.
7.4 DOCUMENTS TO BE DELIVERED BY THE PURCHASER PRIOR TO THE CLOSING DATE.
Not later than five calendar days prior to each Closing Date, and in addition to
the documentation which is required by the agreements and conditions precedent
which are set forth hereinabove, the Purchaser shall also execute and deliver,
or cause to be delivered, to the Company, the Transfer Agent and/or the Escrow
Agent, as applicable, all such other documents, resolutions and instruments as
may be necessary, in the opinion of counsel for the Vendors and the Company,
acting reasonably, to complete all of the transactions contemplated by this
Agreement and including, without limitation, the necessary acceptance of the
transfer of all of the Purchased Shares to the Purchaser free and clear of all
liens, charges and encumbrances, and in particular including, but not being
limited to, the following materials:
(a) a Closing agenda;
(b) a certified copy of an ordinary resolution of the shareholders
of the Purchaser or, where required, a special resolution,
approving the terms and conditions of this Agreement and all
of the transactions contemplated hereby, and the Purchaser
sending all required notice to the Purchaser's shareholders in
connection therewith, or, in the alternative and if acceptable
in accordance with applicable corporate law, shareholders of
the Purchaser holding over fifty percent (50%) of the issued
shares of the Purchaser providing written consent resolutions
evidencing their approval to the terms and conditions of this
Agreement and all of the transactions contemplated together
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with certification of any required notice to all shareholders
of the Purchaser of such written consent resolutions;
(c) a certified copy of the resolutions of the directors of the
Purchaser providing for the approval of all of the
transactions contemplated hereby and including, without
limitation, each of the matters provided for in paragraph
"6.1(f)" hereinabove;
(d) an executed treasury order (or treasury orders) of the
Purchaser providing for the due issuance of all of the
Purchase Price Shares to the order and direction of the
Vendors in accordance with sections "2.2" and "2.3"
hereinabove;
(e) all necessary consents and approvals in writing to the
completion of the transactions contemplated herein;
(f) a certificate of an officer of the Purchaser, dated as of the
Closing Date, acceptable in form to the solicitors for the
Vendors and the Company, acting reasonably, certifying that
the warranties, representations, covenants and agreements of
the Purchaser contained in this Agreement are true and correct
and will be true and correct as of the Closing Date as if made
by the Purchaser on the Closing Date;
(g) the resignation in writing of all existing directors and
officers of the Purchaser;
(h) a certified copy of the resolutions of the directors of the
Purchaser accepting the resignations of all of the existing
directors and officers of the Purchaser and, in addition,
appointing the directors of the Company to the resulting Board
of Directors of the Purchaser, together with the appointment
of not less than three nominees of the Company as Executive
Officers of the Purchaser, all as the Company may so determine
in writing, from time to time, and in its sole and absolute
discretion, prior to the Closing Date;
(i) an opinion of counsel to the Purchaser, dated as at the
Closing Date, and addressed to the Vendors, the Company and
their respective counsel, in form and substance satisfactory
to the Vendors' and the Company's respective counsel, acting
reasonably, and including the following:
(i) the due incorporation, existence and standing of the
Purchaser and its qualification to carry on business;
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(ii) the authorized and issued capital of the Purchaser
(relying on a certificate of the registrar and
Transfer Agent of the Purchaser as to the number of
securities issued);
(iii) all necessary steps and proceedings and including,
without limitation, compliance with all applicable
securities laws, have been taken in connection with
the execution, delivery and performance of this
Agreement and the transactions contemplated herein;
and
(iv) the due issuance of the Shares as fully paid and
non-assessable and having been issued in accordance
with an applicable registration and prospectus
exemption available under the Securities Act; and
(j) all such other documents and instruments as the Vendors' and
the Company's respective solicitors may reasonably require.
ARTICLE 8
APPOINTMENT OF ESCROW AGENT AND TRANSFER DOCUMENTS
8.1 APPOINTMENT OF ESCROW AGENT. The Parties hereto hereby acknowledge and
initially appoint Xxxxxx Xxxxxx, Barristers and Solicitors, of Suite 2550, 000
Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, counsel for the
Company herein, as escrow agent (the "ESCROW AGENT") herein, or such other
Escrow Agent as may be mutually determined by the Parties hereto prior to the
Subject Removal Date.
8.2 ESCROW OF TRANSFER DOCUMENTS. Subject to and in accordance with the
terms and conditions hereof and the requirements of Articles "2", "5", "6" and
"7" hereinabove, and without in any manner limiting the obligations of each of
the Parties hereto as contained therein and hereinabove, it is hereby
acknowledged and confirmed by the Parties hereto that each of the Parties will
execute, deliver, or cause to be delivered, all such documentation as may be
required by the requirements of Articles "2", "5", "6" and "7" hereinabove
(herein, collectively, the "TRANSFER DOCUMENTS") and deposit the same with the
Escrow Agent, or with such other mutually agreeable escrow agent, together with
a copy of this Agreement, there to be held in escrow for release by the Escrow
Agent to the Parties in accordance with the strict terms and provisions of
Articles "2", "5", "6" and "7" hereinabove.
8.3 RESIGNATION OF ESCROW AGENT.The Escrow Agent may resign from its duties
and responsibilities if it gives each of the Parties hereto three calendar days'
written notice in advance. Upon receipt of notice of the Escrow Agent's
intention to resign, the Parties shall, within three calendar days, select a
replacement escrow agent and jointly advise the Escrow Agent in writing to
deliver the Transfer Documents to the replacement escrow agent. If the Parties
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fail to agree on a replacement escrow agent within three calendar days of such
notice, the replacement escrow agent shall be selected by a Judge of the Supreme
Court of the Province of British Columbia upon application by any Party hereto.
The Escrow Agent shall continue to be bound by this Agreement until the
replacement escrow agent has been selected and the Escrow Agent receives and
complies with the joint instructions of the Parties to deliver the Transfer
Documents to the replacement escrow agent. The Parties agree to enter into an
escrow agreement substantially in the same form of this Agreement with the
replacement escrow agent.
8.4 INSTRUCTIONS TO ESCROW AGENT. Instructions given to the Escrow Agent
pursuant to this Agreement shall be given by duly authorized signatories of the
respective Parties hereto.
8.5 NO OTHER DUTIES OR OBLIGATIONS. The Escrow Agent shall have no duties
or obligations other than those specifically set forth in this Article.
8.6 NO OBLIGATION TO TAKE LEGAL ACTION. The Escrow Agent shall not be
obligated to take any legal action hereunder which might, in its judgment,
involve any expense or liability unless it shall have been furnished with a
reasonable indemnity by all of the Parties hereto together with such other third
parties as the Escrow Agent may require in its sole and absolute discretion.
8.7 NOT BOUND TO ANY OTHER AGREEMENTS. The Escrow Agent is not bound in any
way by any other contract or agreement between the Parties hereto whether or not
it has knowledge thereof or of its terms and conditions and its only duty,
liability and responsibility shall be to hold and deal with the Transfer
Documents as herein directed.
8.8 NOTICE. The Escrow Agent shall be entitled to assume that any notice
and evidence received by it pursuant to these instructions from anyone has been
duly executed by the Party by whom it purports to have been signed and that the
text of any notice and evidence is accurate and the truth. The Escrow Agent
shall not be obliged to inquire into the sufficiency or authority of the text or
any signatures appearing on such notice or evidence.
8.9 INDEMNITY. The Parties hereto, jointly and severally,covenant and agree
to indemnify the Escrow Agent and to hold it harmless against any loss,
liability or expense incurred, without negligence or bad faith on its part,
arising out of or in connection with the administration of its duties hereunder
including, without limitation, the costs and expenses of defending itself
against any claim or liability arising therefrom.
8.10 NOT REQUIRED TO TAKE ANY ACTION. In the event of any disagreement
between any of the Parties hereto to these instructions or between them or
either or any of them and any other person, resulting in adverse claims or
demands being made in connection with the Transfer Documents, or in the event
that the Escrow Agent should take action hereunder, it may, at its option,
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refuse to comply with any claims or demands on it, or refuse to take any other
action hereunder, so long as such disagreement continues or such doubt exists,
and in any such event, it shall not be or become liable in any way or to any
person for its failure or refusal to act, and it shall be entitled to continue
so to refrain from acting until:
(a) the rights of all Parties shall have been fully and finally
adjudicated by a court of competent jurisdiction; or
(b) all differences shall have been adjusted and all doubt
resolved by agreement among all of the interested persons, and
it shall have been notified thereof in writing signed by all
such persons.
ARTICLE 9
DUE DILIGENCE INVESTIGATION
9.1 DUE DILIGENCE. Each of the Parties hereto shall forthwith conduct
such further due diligence examination of the other Parties hereto as it deems
appropriate.
9.2 CONFIDENTIALITY. Each Party may in a reasonable manner carry out
such investigations and due diligence as to the other Parties hereto, at all
times subject to the confidentiality provisions of Articles "10" and "11"
hereinbelow, as each Party deems necessary. In that regard the Parties agree
that each shall have full and complete access to the other Parties' books,
records, financial statements and other documents, articles of incorporation,
by-laws, minutes of Board of Directors' meetings and its committees, investment
agreements, material contracts and as well such other documents and materials as
the Parties hereto, or their respective solicitors, may deem reasonable and
necessary to conduct an adequate due diligence investigation of each Party, its
respective operations and financial condition prior to the Closing.
ARTICLE 10
NON-DISCLOSURE
10.1 NON-DISCLOSURE. Subject to the provisions of section "10.3"
hereinbelow, the Parties hereto, for themselves, their officers, directors,
shareholders, consultants, employees and agents, agree that they each will not
disseminate or disclose, or knowingly allow, permit or cause others to
disseminate or disclose to third parties who are not subject to express or
implied covenants of confidentiality, without the other Parties' express written
consent, either: (i) the fact or existence of this Agreement or discussions
and/or negotiations between them involving, INTER ALIA, possible business
transactions; (ii) the possible substance or content of those discussions; (iii)
the possible terms and conditions of any proposed transaction; (iv) any
statements or representations (whether verbal or written) made by either Party
in the course of or in connection with those discussions; or (v) any written
material generated by or on behalf of any Party and such contacts, other than
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such disclosure as may be required under applicable securities legislation or
regulations, pursuant to any order of a Court or on a "need to know" basis to
each of the Parties' respective professional advisors.
10.2 DOCUMENTATION. Any document or written material generated by either
Party hereto in the course of, or in connection with, the due diligence
investigations conducted pursuant to this Agreement shall be marked or deemed
"Confidential" and shall be treated by each Party as a trade secret of the other
Parties. Upon termination of this Agreement prior to Closing all copies of any
and all documents obtained by any Party from any other Party herein, whether or
not marked "Confidential", shall be returned to the other Parties forthwith.
10.3 PUBLIC ANNOUNCEMENTS. Notwithstanding the provisions of this Article,
the Parties hereto agree to make such public announcements of this Agreement
promptly upon its execution in accordance with the requirements of applicable
securities legislation and regulations.
ARTICLE 11
PROPRIETARY INFORMATION AND
ADDITIONAL OBLIGATIONS OF THE PARTIES HERETO
11.1 CONFIDENTIAL INFORMATION. Each Party hereto acknowledges that any and
all information which a Party may obtain from, or have disclosed to it, about
the other Parties constitutes valuable trade secrets and proprietary
confidential information of the other Parties (collectively, the "CONFIDENTIAL
INFORMATION"). No such Confidential Information shall be published by any Party
without the prior written consent of the other Parties hereto, however, such
consent in respect of the reporting of factual data shall not be unreasonably
withheld, and shall not be withheld in respect of information required to be
publicly disclosed pursuant to applicable securities or corporation laws.
Furthermore, each Party hereto undertakes not to disclose the Confidential
Information to any third party without the prior written approval of the other
Parties and to ensure that any third party to which the Confidential Information
is disclosed shall execute an agreement and undertaking on the same terms as
contained herein.
11.2 IMPACT OF BREACH OF CONFIDENTIALITY. The Parties hereto acknowledge
that the Confidential Information is important to the respective businesses of
each of the Parties and that, in the event of disclosure of the Confidential
Information, except as authorized hereunder, the damage to each of the Parties
hereto, or to either of them, may be irreparable. For the purposes of the
foregoing sections the Parties recognize and hereby agree that a breach by any
of the Parties of any of the covenants therein contained would result in
irreparable harm and significant damage to each of the other Parties that would
not be adequately compensated for by monetary award. Accordingly, the Parties
agree that in the event of any such breach, in addition to being entitled as a
matter of right to apply to a Court of competent equitable jurisdiction for
relief by way of restraining order, injunction, decree or otherwise as may be
appropriate to ensure compliance with the provisions hereof, any such Party will
also be liable to the other Parties, as liquidated damages, for an amount equal
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to the amount received and earned by such Party as a result of and with respect
to any such breach. The Parties also acknowledge and agree that if any of the
aforesaid restrictions, activities, obligations or periods are considered by a
Court of competent jurisdiction as being unreasonable, the Parties agree that
said Court shall have authority to limit such restrictions, activities or
periods as the Court deems proper in the circumstances. In addition, the Parties
further acknowledge and agree that all restrictions or obligations in this
Agreement are necessary and fundamental to the protection of the respective
businesses of each of the Parties and are reasonable and valid, and all defenses
to the strict enforcement thereof by either of the Parties are hereby waived by
the other Parties.
11.3 COMPLIANCE WITH APPLICABLE LAWS. The Parties will comply with all
Canadian, U.S. and foreign laws, whether federal, provincial or state,
applicable to their respective duties hereunder and, in addition, hereby
represent and warrant that any information which they may provide to any person
or company hereunder will, to the best of their respective knowledge,
information and belief, be accurate and complete in all material respects and
not misleading, and will not omit to state any fact or information which would
be material to such person or company.
11.4 OPINIONS, REPORTS AND ADVICE OF THE VENDORS. The Vendors acknowledge
and agree that all written and oral opinions, reports, advice and materials
provided by the Vendors to the Purchaser or the Company in connection with
purchase and sale contemplated herein are intended solely for the Purchaser's
benefit and for the Purchaser's use only, and that any such written and oral
opinions, reports, advice and information are the exclusive property of the
Purchaser. In this regard the Vendors covenant and agree that the Purchaser may
utilize any such opinion, report, advice and materials for any other purpose
whatsoever and, furthermore, may reproduce, disseminate, quote from and refer
to, in whole or in part, at any time and in any manner, any such opinion,
report, advice and materials in the Purchaser's sole and absolute discretion.
The Vendors further covenant and agree that no public references to the
Purchaser, the Company or the Vendors, or disclosure of the Vendors' role in
respect of the Purchaser or the Company, be made by the Vendors without the
prior written consent of the Purchaser in each specific instance and,
furthermore, that any such written opinions, reports, advice or materials shall,
unless otherwise required by the Purchaser, be provided by the Vendors to the
Purchaser in a form and with such substance as would be acceptable for filing
with and approval by any Regulatory Authority having jurisdiction over the
affairs of the Purchaser and the Company from time to time.
ARTICLE 12
AMENDMENT, POWER OF ATTORNEY AND VARIATIONS
12.1 ASSIGNMENT. Save and except as provided herein, no Party hereto may
sell, assign, pledge or mortgage or otherwise encumber all or any part of its
respective interest herein without the prior written consent all of the other
Parties hereto.
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12.2 AMENDMENT. This Agreement and any provision thereof may only be amended
in writing and only by duly authorized signatories of each of the respective
Parties hereto.
12.3 POWER OF ATTORNEY ON BEHALF OF THE VENDORS. In order to better provide
for the administration and completion of each of the transactions which are
contemplated by the terms and conditions of this Agreement, each Vendor does
hereby make, constitute and appoint Xxxxx X. Xxxxxxxx, a Vendor and the current
President and director of the Company, or such other present or future director
or officer of the Company as Xx. Xxxxxxxx may appoint in writing, and in his
sole and absolute discretion, in his time(s) of absence (the "ATTORNEY"), as
such Vendor's true and lawful Attorney for such Vendor and in such Vendor's
name, place and stead and for the sole purpose and power of specifically doing
all acts and executing all deeds, resolutions, documents, matters and things and
including, without limitation, any agreement supplemental thereto, which may be
necessary to be done in such Vendor's place and stead and in order to complete
all of transactions on such Vendor's behalf which may be required under the
terms and conditions of this Agreement (the "POWER OF ATTORNEY"). In this regard
the within Power of Attorney for each particular Vendor shall be effective from
the Execution Date of this Agreement and shall continue in full force and effect
until the earlier of either the final Closing or the termination of the within
purchase and sale.
12.4 CORRECTIONS AND AMENDMENTS TO BE MADE BY ATTORNEY. Without in any
manner whatsoever limiting the Power of Attorney granted to the Attorney by each
Vendor as set forth immediately hereinabove, the Vendors hereby also
specifically authorize the Attorney to correct any errors in, to complete any
information missing from and to make any amendments to this Agreement, together
with any and all other documents, resolutions and instruments as may be
necessary, in the opinion of Attorney, acting reasonably, to complete all of the
transactions contemplated by terms and conditions of this Agreement.
12.5 VARIATION IN THE TERMS OF THIS AGREEMENT UPON REVIEW. It is
hereby acknowledged and agreed by each of the Parties hereto that where any
variation in the terms and/or conditions of this Agreement is reasonably
required by any of the Regulatory Authorities as a condition of their respective
Regulatory Approval to any of the terms and conditions of this Agreement, any
such reasonable variation or variation will be deemed to be accepted by each of
the Parties hereto and form part of the terms and conditions of this Agreement.
ARTICLE 13
FORCE MAJEURE
13.1 EVENTS. If any Party hereto is at any time prevented or delayed in
complying with any provisions of this Agreement by reason of strikes, walk-outs,
labour shortages, power shortages, fires, wars, acts of God, earthquakes,
storms, floods, explosions, accidents, protests or demonstrations by
environmental lobbyists or native rights groups, delays in transportation,
breakdown of machinery, inability to obtain necessary materials in the open
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market, unavailability of equipment, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons beyond the control of
that Party, then the time limited for the performance by that Party of its
respective obligations hereunder shall be extended by a period of time equal in
length to the period of each such prevention or delay.
13.2 NOTICE. A Party shall, within seven calendar days, give notice to the
other Parties of each event of FORCE MAJEURE under section "13.1" hereinabove,
and upon cessation of such event shall furnish the other Parties with notice of
that event together with particulars of the number of days by which the
obligations of that Party hereunder have been extended by virtue of such event
of FORCE MAJEURE and all preceding events of FORCE MAJEURE.
ARTICLE 14
ARBITRATION
14.1 MATTERS FOR ARBITRATION. The Parties hereto agree that all questions
or matters in dispute with respect to this Agreement shall be submitted to
arbitration pursuant to the terms hereof.
14.2 NOTICE. It shall be a condition precedent to the right of any Party
to submit any matter to arbitration pursuant to the provisions hereof that any
Party intending to refer any matter to arbitration shall have given not less
than 10 calendar days' prior written notice of its intention to do so to the
other Parties together with particulars of the matter in dispute. On the
expiration of such 10 calendar days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided in section "14.3" hereinbelow.
14.3 APPOINTMENTS. The Party desiring arbitration shall appoint one
arbitrator, and shall notify the other Parties of such appointment, and the
other Parties shall, within 10 calendar days after receiving such notice,
appoint an arbitrator, and the two arbitrators so named, before proceeding to
act, shall, within 10 calendar days of the appointment of the last appointed
arbitrator, unanimously agree on the appointment of a third arbitrator, to act
with them and be chairman of the arbitration herein provided for. If the other
Parties shall fail to appoint an arbitrator within 10 calendar days after
receiving notice of the appointment of the first arbitrator, or if the two
arbitrators appointed by the Parties shall be unable to agree on the appointment
of the chairman, the chairman shall be appointed under the provisions of the
Arbitration Act. Except as specifically otherwise provided in this section, the
arbitration herein provided for shall be conducted in accordance with such
Arbitration Act. The chairman, or in the case where only one arbitrator is
appointed, the single arbitrator, shall fix a time and place in Vancouver,
British Columbia, for the purpose of hearing the evidence and representations of
the Parties, and he shall preside over the arbitration and determine all
questions of procedure not provided for under such Arbitration Act or this
section. After hearing any evidence and representations that the Parties may
submit, the single arbitrator, or the arbitrators, as the case may be, shall
make an award and reduce the same to writing, and deliver one copy thereof to
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each of the Parties. The expense of the arbitration shall be paid as specified
in the award.
14.4 AWARD. The Parties hereto agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be
final and binding upon each of them.
ARTICLE 15
DEFAULT AND TERMINATION
15.1 DEFAULT. The Parties hereto agree that if any Party hereto is in
default with respect to any of the provisions of this Agreement (herein called
the "DEFAULTING PARTY"), the non-defaulting Parties (herein called,
collectively, the "NON-DEFAULTING PARTY") shall give notice to the Defaulting
Party designating such default, and within 10 calendar days after its receipt of
such notice, the Defaulting Party shall either:
(a) cure such default, or commence proceedings to cure such
default and prosecute the same to completion without undue
delay; or
(b) give the Non-Defaulting Party notice that it denies that such
default has occurred and that it is submitting the question to
arbitration as herein provided.
15.2 ARBITRATION. If arbitration is sought, a Party shall not be deemed
in default until the matter shall have been determined finally by appropriate
arbitration under the provisions of Article "14" hereinabove.
15.3 CURING THE DEFAULT. If:
(a) the default is not so cured or the Defaulting Party does not
commence or diligently proceed to cure the default; or
(b) arbitration is not so sought; or
(c) the Defaulting Party is found in arbitration proceedings to be
in default, and fails to cure it within five calendar days
after the rendering of the arbitration award,
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the Non-Defaulting Party may, by written notice given to the Defaulting Party at
any time while the default continues, terminate the interest of the Defaulting
Party in and to this Agreement.
15.4 TERMINATION. In addition to the foregoing it is hereby acknowledged
and agreed by the Parties hereto that this Agreement will be immediately
terminated, unless otherwise extended in accordance with section "7.2"
hereinabove, in the event that:
(a) the Ratification has not been satisfied by each of the
Purchaser and the Company within five business days of the
Execution Date;
(b) each of the Purchaser and the Company fails to complete a
successful and Initial Due Diligence review of the other
Party's respective businesses and operations within 30
calendar days of the prior satisfaction of the Ratification;
(c) the Purchaser has failed to complete a minimum of U.S.
$500,000 of the Private Placement on or before December 31,
2002, together with the corresponding Principal Sum Loan of
not less than U.S. $250,000 from such minimum Private
Placement, all in accordance with the provisions of section
"4.1" and Article "5" hereinabove;
(d) either of the Parties hereto has not either satisfied or
waived each of their respective conditions precedent prior to
the Subject Removal Date in accordance with the provisions of
Article "6" hereinabove;
(e) each of the conditions specified in section "6.1" hereinabove
have not been satisfied in the manner and within the time
periods as specified therein;
(f) either of the Parties hereto has failed to deliver or caused
to be delivered any of their respective documents required to
be delivered by Articles "5", "6", "7" and "8" hereinabove
prior to each of the Subject Removal Date and the Closing Date
in accordance with the provisions of Articles "5", "6", "7"
and "8";
(g) the final Closing has not occurred on or before January 31,
2003 in accordance with section "7.2" hereinabove; or
(h) by agreement in writing by each of the Parties hereto;
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and in such event this Agreement will be terminated and be of no further force
and effect other than the obligations under Articles "10" and "11" hereinabove.
ARTICLE 16
INDEMNIFICATION AND LEGAL PROCEEDINGS
16.1 INDEMNIFICATION. The Parties hereto agree to indemnify and save
harmless the other Parties hereto and including, where applicable, their
respective affiliates, directors, officers, employees and agents (each such
party being an "INDEMNIFIED Party") harmless from and against any and all
losses, claims, actions, suits, proceedings, damages, liabilities or expenses of
whatever nature or kind, including any investigation expenses incurred by any
Indemnified Party, to which an Indemnified Party may become subject by reason of
the terms and conditions of this Agreement.
16.2 NO INDEMNIFICATION. This indemnity will not apply in respect of
an Indemnified Party in the event and to the extent that a court of competent
jurisdiction in a final judgment shall determine that the Indemnified Party was
grossly negligent or guilty of willful misconduct.
16.3 CLAIM OF INDEMNIFICATION. The Parties hereto agree to waive any right
they might have of first requiring the Indemnified Party to proceed against or
enforce any other right, power, remedy, security or claim payment from any other
person before claiming this indemnity.
16.4 NOTICE OF CLAIM. In case any action is brought against an Indemnified
Party in respect of which indemnity may be sought against any of the Parties
hereto, the Indemnified Party will give the relevant Party hereto prompt written
notice of any such action of which the Indemnified Party has knowledge and such
Party will undertake the investigation and defense thereof on behalf of the
Indemnified Party, including the prompt Consulting of counsel acceptable to the
Indemnified Party affected and the payment of all expenses. Failure by the
Indemnified Party to so notify shall not relieve any Party hereto of such
Party's obligation of indemnification hereunder unless (and only to the extent
that) such failure results in a forfeiture by any Party hereto of substantive
rights or defenses.
16.5 SETTLEMENT. No admission of liability and no settlement of any action
shall be made without the consent of each of the Parties hereto and the consent
of the Indemnified Party affected, such consent not to be unreasonable withheld.
16.6 LEGAL PROCEEDINGS. Notwithstanding that the relevant Party hereto
will undertake the investigation and defense of any action, an Indemnified Party
will have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
will be at the expense of the Indemnified Party unless:
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(a) such counsel has been authorized by the relevant Party hereto;
(b) the relevant Party hereto has not assumed the defense of the
action within a reasonable period of time after receiving
notice of the action;
(c) the named parties to any such action include any Party hereto
and the Indemnified Party shall have been advised by counsel
that there may be a conflict of interest between any Party
hereto and the Indemnified Party; or
(d) there are one or more legal defenses available to the
Indemnified Party which are different from or in addition to
those available to any Party hereto.
16.7 CONTRIBUTION. If for any reason other than the gross negligence or bad
faith of the Indemnified Party being the primary cause of the loss claim,
damage, liability, cost or expense, the foregoing indemnification is unavailable
to the Indemnified Party or insufficient to hold them harmless, the relevant
Party hereto shall contribute to the amount paid or payable by the Indemnified
Party as a result of any and all such losses, claim, damages or liabilities in
such proportion as is appropriate to reflect not only the relative benefits
received by any Party hereto on the one hand and the Indemnified Party on the
other, but also the relative fault of the Parties and other equitable
considerations which may be relevant. Notwithstanding the foregoing, the
relevant Party hereto shall in any event contribute to the amount paid or
payable by the Indemnified Party, as a result of the loss, claim, damage,
liability, cost or expense (other than a loss, claim, damage, liability, cost or
expenses, the primary cause of which is the gross negligence or bad faith of the
Indemnified Party), any excess of such amount over the amount of the fees
actually received by the Indemnified Party hereunder.
ARTICLE 17
NOTICE
17.1 NOTICE. Each notice, demand or other communication required or
permitted to be given under this Agreement shall be in writing and shall be sent
by prepaid registered mail deposited in a Post Office addressed to the Party
entitled to receive the same, or delivered to such Party, at the address for
such Party specified above. The date of receipt of such notice, demand or other
communication shall be the date of delivery thereof if delivered, or, if given
by registered mail as aforesaid, shall be deemed conclusively to be the third
calendar day after the same shall have been so mailed, except in the case of
interruption of postal services for any reason whatsoever, in which case the
date of receipt shall be the date on which the notice, demand or other
communication is actually received by the addressee.
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17.2 CHANGE OF ADDRESS. Either Party may at any time and from time to time
notify the other Parties in writing of a change of address and the new address
to which notice shall be given to it thereafter until further change.
ARTICLE 18
GENERAL PROVISIONS
18.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement to
date between the Parties hereto and supersedes every previous agreement,
communication, expectation, negotiation, representation or understanding,
whether oral or written, express or implied, statutory or otherwise, between the
Parties hereto with respect to the subject matter of this Agreement and
including, without limitation, the Agreement In Principle as between the
Purchaser and the Company.
18.2 ENUREMENT. This Agreement will enure to the benefit of and will be
binding upon the Parties hereto, their respective heirs, executors,
administrators and assigns.
18.3 SCHEDULES. The Schedules to this Agreement are hereby incorporated by
reference into this Agreement in its entirety.
18.4 TIME OF THE ESSENCE. Time will be of the essence of this Agreement.
18.5 REPRESENTATION AND COSTS. It is hereby acknowledged by each of the
Parties hereto that Xxxxxx Xxxxxx, Barristers and Solicitors, and the law office
of Xxxx & Xxxx, PC, act solely for the Company, and, correspondingly, that each
of the Vendors and the Purchaser have been required by each of Xxxxxx Xxxxxx,
the law office of Xxxx & Xxxx, PC and the Company to obtain independent legal
advice with respect to their respective reviews and execution of this Agreement.
In addition, it is hereby further acknowledged and agreed by the Parties hereto
that Xxxxxx Xxxxxx, Barristers and Solicitors, and certain or all of its
principal owners or associates, from time to time, may have both an economic or
shareholding interest in and to the Company and/or a fiduciary duty to the same
arising from either a directorship, officership or similar relationship arising
out of the request of the Company for certain of such persons to act in a
similar capacity while acting for the Company as counsel. Correspondingly, and
even where, as a result of this Agreement, the consent of each Party hereto to
the role and capacity of Xxxxxx Xxxxxx, Barristers and Solicitors, and its
principal owners and associates, as the case may be, is deemed to have been
received, where any conflict or perceived conflict may arise, or be seen to
arise, as a result of any such capacity or representation, each Party hereto
acknowledges and agrees to, once more, obtain independent legal advice in
respect of any such conflict or perceived conflict and, consequent thereon,
Xxxxxx Xxxxxx, Barristers and Solicitors, together with any such principal
owners or associates, as the case may be, shall be at liberty at any time to
resign any such position if it or any Party hereto is in any way affected or
uncomfortable with any such capacity or representation. Each Party to this
Agreement will also bear and pay its own costs, legal and otherwise, in
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connection with its respective preparation, review and execution of this
Agreement and, in particular, that the costs involved in the preparation of this
Agreement, and all documentation necessarily incidental thereto, by Xxxxxx
Xxxxxx, Barristers and Solicitors, and the law office of Xxxx & Xxxx, PC shall
be at the cost of the Company.
18.6 APPLICABLE LAW. The situs of this Agreement is Vancouver, British
Columbia, and for all purposes this Agreement will be governed exclusively by
and construed and enforced in accordance with the laws and Courts prevailing in
the Province of British Columbia.
18.7 FURTHER ASSURANCES. The Parties hereto hereby, jointly and severally,
covenant and agree to forthwith, upon request, execute and deliver, or cause to
be executed and delivered, such further and other deeds, documents, assurances
and instructions as may be required by the Parties hereto or their respective
counsel in order to carry out the true nature and intent of this Agreement.
18.8 INVALID PROVISIONS. If any provision of this Agreement is at any time
unenforceable or invalid for any reason it will be severable from the remainder
of this Agreement and, in its application at that time, this Agreement will be
construed as though such provision was not contained herein and the remainder
will continue in full force and effect and be construed as if this Agreement had
been executed without the invalid or unenforceable provision.
18.9 CURRENCY. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of the United States.
18.10 SEVERABILITY AND CONSTRUCTION. Each Article, section, paragraph, term
and provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to any of the Parties
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and agreement as of the date upon which the ruling becomes
final).
18.11 CAPTIONS. The captions, section numbers, Article numbers and Schedule
numbers appearing in this Agreement are inserted for convenience of reference
only and shall in no way define, limit, construe or describe the scope or intent
of this Agreement nor in any way affect this Agreement.
18.12 COUNTERPARTS. This Agreement may be signed by the Parties hereto in as
many counterparts as may be necessary and, if required, by facsimile, each of
which so signed being deemed to be an original, and such counterparts together
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shall constitute one and the same instrument and, notwithstanding the date of
execution, will be deemed to bear the Execution Date as set forth on the front
page of this Agreement.
18.13 NO PARTNERSHIP OR AGENCY. The Parties hereto have not created a
partnership and nothing contained in this Agreement shall in any manner
whatsoever constitute any Party the partner, agent or legal representative of
any other Party, nor create any fiduciary relationship between them for any
purpose whatsoever. No Party shall have any authority to act for, or to assume
any obligations or responsibility on behalf of, any other party except as may
be, from time to time, agreed upon in writing between the Parties or as
otherwise expressly provided.
18.14 CONSENTS AND WAIVERS. No consent or waiver expressed or implied by
either Party hereto in respect of any breach or default by any other Party in
the performance by such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or
waiver pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach
or default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver
pursuant to this section in any other or subsequent instance.
IN WITNESS WHEREOF each of the Parties hereto has hereunto set its seal
by the hand of its duly authorized signatory as of the Execution Date as set
forth on the front page of this Agreement.
The COMMON SEAL of ) NO. OF PURCHASED SHARES: 2,951,750
PETROGEN INTERNATIONAL LTD., )
a Vendor herein, was hereunto affixed )
in the presence of: ) (C/S)
)
_________________________________________)
Authorized Signatory )
The COMMON SEAL of ) NO. OF PURCHASED SHARES: 4,012,500
UNIT HOLDINGS LTD., )
a Vendor herein, was hereunto affixed )
in the presence of: ) (C/S)
)
_________________________________________)
Authorized Signatory )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 3,375,000
XXX XXXXXXX XXXXXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ____________________
) XXX XXXXXXX XXXXXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 285,000
XXXXX X. XXXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) _______________
) XXXXX X. XXXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 191,250
XXXXX XXXXXXXX-XXXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) _____________________
) XXXXX XXXXXXXX-XXXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
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SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 150,000
XXXXX XXXXXX FAMILY TRUST, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) _________________________
) XXXXX XXXXXX FAMILY TRUST
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 110,000
XXXXX XXXXXX (IN TRUST )
FOR FAMILY MEMBERS), )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ______________________
) XXXXX XXXXXX (IN TRUST
_________________________________________) FOR FAMILY MEMBERS)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 100,000
XXXXXX X. DEUTSCH, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) _________________
) XXXXXX X. DEUTSCH
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
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SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 37,500
XXXXXXX X. XXXXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) __________________
) XXXXXXX X. XXXXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 90,000
XXXX X. XXXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ______________
) XXXX X. XXXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 90,000
XXXXX X. XXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ______________
) XXXXX X. XXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
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SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 75,000
XXXXXX XXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ___________
) XXXXXX XXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
The COMMON SEAL of ) NO. OF PURCHASED SHARES: 75,000
GLOBAL FINANCIAL GROUP, INC., )
a Vendor herein, was hereunto affixed )
in the presence of: ) (C/S)
)
_________________________________________)
Authorized Signatory )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 37,500
MINOR BUCKINGHAM, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ________________
) MINOR BUCKINGHAM
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 56,250
XXXXX X. XXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ______________
) XXXXX X. XXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
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Xxx XXXXXX SEAL of ) NO. OF PURCHASED SHARES: 56,250
XXXXXXXXX ASSET MANAGEMENT, )
a Vendor herein, was hereunto affixed )
in the presence of: ) (C/S)
)
_________________________________________)
Authorized Signatory )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 3,750
XXXXXX X. XXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ______________
) XXXXXX X. XXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 3,750
XXXXXX XXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ___________
) XXXXXX XXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
SIGNED, SEALED and DELIVERED by ) NO. OF PURCHASED SHARES: 67,500
XXX X. XXXXX, )
a Vendor herein, in the presence of: )
)
_________________________________________)
Witness Signature ) ____________
) XXX X. XXXXX
_________________________________________)
Witness Address )
)
_________________________________________)
Witness Name and Occupation )
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Xxx XXXXXX SEAL of ) NO. OF PURCHASED SHARES: 39,000
590498 B.C. LTD., )
a Vendor herein, was hereunto affixed )
in the presence of: ) (C/S)
)
_________________________________________)
Authorized Signatory )
The COMMON SEAL of )
PETROGEN, INC., )
the Company herein, was hereunto affixed )
in the presence of: ) (C/S)
)
_________________________________________)
Authorized Signatory )
The CORPORATE SEAL of )
HADRO RESOURCES, INC., )
the Purchaser herein, was hereunto )
affixed ) (C/S)
in the presence of: )
)
_________________________________________)
Authorized Signatory )
__________
SCHEDULE A
This is Schedule "A" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
AGREEMENT IN PRINCIPLE
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE B
This is Schedule "B" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
PURCHASED SHARES, VENDORS AND SECURITIES
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE C
This is Schedule "C" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
POOLING AGREEMENT
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE D
This is Schedule "D" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
COMPANY'S FINANCIAL STATEMENTS
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE E
This is Schedule "E" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
COMPANY'S PROPERTY
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE F
This is Schedule "F" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
COMPANY'S INTELLECTUAL PROPERTY
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE G
This is Schedule "G" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc. {changing its name to "Petrogen Corp."}.
COMPANY'S LEASE
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE H
This is Schedule "H" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
COMPANY'S CONTRACTS OF EMPLOYMENT
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE I
This is Schedule "I" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
COMPANY'S MATERIAL CONTRACTS
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE J
This is Schedule "J" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
COMPANY'S LIST OF BANK ACCOUNTS ETC.
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE K
This is Schedule "K" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
PURCHASER'S FINANCIAL STATEMENTS
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE L
This is Schedule "L" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
PURCHASER'S MATERIAL CONTRACTS
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE M
This is Schedule "M" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
PURCHASER'S LIST OF BANK ACCOUNTS ETC.
REGULATION S CERTIFICATE AND ACCREDITED INVESTOR CERTIFICATE
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE N
This is Schedule "N" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
LOAN AGREEMENT
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE O
This is Schedule "O" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
CONSULTING SERVICES AGREEMENT
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE P
This is Schedule "P" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
OPERATOR'S AGREEMENT
REFER TO THE MATERIALS ATTACHED HERETO.
__________
SCHEDULE Q
This is Schedule "Q" to that certain Share Exchange Agreement among
each of the Vendor shareholders of Petrogen, Inc., Petrogen, Inc. and Hadro
Resources, Inc.
VENDOR CERTIFICATES
REGULATION S CERTIFICATE AND ACCREDITED INVESTOR CERTIFICATE
REFER TO THE MATERIALS ATTACHED HERETO.
__________
