EXHIBIT 4.1
SHARE EXCHANGE AGREEMENT
AMONG:
THE SHAREHOLDERS OF LEXINGTON OIL & GAS LTD. CO.
AND:
LEXINGTON OIL & GAS LTD. CO.
AND:
INTERGOLD CORPORATION
CHANGING ITS NAME TO "LEXINGTON RESOURCES, INC."
LEXINGTON OIL & GAS LTD. CO.
3218 NS 372
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made and dated for reference
effective as at November 19, 2003 (the "EFFECTIVE DATE").
AMONG:
THE UNDERSIGNED SHAREHOLDERS OF LEXINGTON OIL & GAS LTD. CO.,
each having an address for notice and delivery located at 3218
NS 372, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(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:
LEXINGTON OIL & GAS LTD. CO., a company incorporated under the
laws of the State of Oklahoma, U.S.A., and having an address
for notice and delivery located at ▇▇▇▇ ▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "COMPANY");
OF THE SECOND PART
AND:
INTERGOLD CORPORATION, a company incorporated under the laws
of the State of Nevada, U.S.A., and having an address for
notice and delivery located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇., ▇▇▇▇▇
(the "PURCHASER");
OF THE THIRD PART
(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 Nevada, U.S.A.;
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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 3,000,000
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 "A" which is
attached hereto and which forms a material part hereof;
D. In accordance with the terms and conditions herein, 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 herein; and
E. The Parties hereto have agreed to enter into this agreement (the "AGREEMENT")
which formalizes and replaces, in its entirety, any 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) "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;
(b) "ATTORNEY" has the meaning ascribed to it in section "10.3"
hereinbelow;
(c) "BOARD OF DIRECTORS" means, as applicable, the respective
Board of Directors of each of the Parties hereto as duly
constituted from time to time;
(d) "BUSINESS DAY" means any day during which United States Banks
are open for business in Blaine, Washington;
(e) "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;
(f) "CLOSING" has the meaning ascribed to it in section "6.1"
hereinbelow;
(g) "CLOSING DATE" has the meaning ascribed to it in section "6.1"
hereinbelow;
(h) "COMMISSION" means the United States Securities and Exchange
Commission;
(i) "COMPANY" means LEXINGTON OIL & GAS LTD. CO., a company
incorporated under the laws of the State of Oklahoma, U.S.A.,
or any successor company, however formed, whether as a result
of merger, amalgamation or other action;
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(j) "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 form a material part
hereof;
(k) "COMPANY'S BUSINESS" has the meaning ascribed to it in recital
"B." hereinabove;
(l) "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 "B": which is
attached hereto and which forms a material part hereof;
(m) "COMPANY'S OPTIONS" has the meaning ascribed to it in section
"3.3" hereinbelow;
(n) "COMPANY'S PROPERTY" means the mineral interests described in
Schedule "C": which is attached hereto and the interests of
the Company, the registered owner therein, and any other claim
or property interests of the registered owner, the Company
incorporated into the Company's Property by the terms of this
Agreement;
(o) "CONFIDENTIAL INFORMATION" has the meaning ascribed to it in
section "9.1" hereinbelow;
(p) "CONSULTING SERVICES AGREEMENT" has the meaning ascribed to it
in section "3.3" hereinbelow; the proposed form of which being
attached hereto as Schedule "I" and forming a material part
hereof;
(q) "DEFAULTING PARTY" and "NON-DEFAULTING PARTY" have the
meanings ascribed to them in section "12.1" hereinbelow;
(r) "EFFECTIVE DATE" has the meaning ascribed to it on the front
page of this Agreement;
(s) "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;
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(t) "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
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;
(u) "FINANCING" has the meaning ascribed to it in section "5.6"
hereinbelow;
(v) "INITIAL DUE DILIGENCE" has the meaning ascribed to it in
section "6.1" hereinbelow;
(w) "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
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;
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(x) "OPERATOR" has the meaning ascribed to it in section "3.3"
hereinbelow and means, initially, Oakhills Energy, Inc.
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;
(z) "OTCBB" means the NASD Over-the-Counter Bulletin Board,
together with its respective successors and permitted assigns
as the context so requires;
(aa) "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;
(ab) "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;
(ac) "POWER OF ATTORNEY" has the meaning ascribed to it in section
"10.3" hereinbelow;
(ad) "PRIVATE PLACEMENT" has the meaning ascribed to it in section
"4.1" hereinbelow;
(ae) "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 "A": which is attached hereto;
(af) "PURCHASE PRICE" has the meaning ascribed to it in section
"2.2" hereinbelow;
(ag) "PURCHASER" means Intergold Corporation, 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;
(ah) "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 "F": which is
attached hereto and which forms a material part hereof;
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(aj) "RATIFICATION" has the meaning ascribed to it in section "5.1"
hereinbelow;
(ak) "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;
(al) "REGULATION S CERTIFICATE" and "ACCREDITED INVESTOR
CERTIFICATE" have the meanings ascribed to them in section
"3.2" hereinbelow;
(am) "REGULATORY APPROVAL" means the acceptance for filing, if
required, of the transactions contemplated by this Agreement
by the Regulatory Authorities;
(an) "REGULATORY AUTHORITY" and "REGULATORY AUTHORITIES" means,
either singularly or collectively as the context so requires,
the OTCBB, 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;
(ao) "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;
(ap) "SECURITIES" has the meaning ascribed to it in section "3.3"
hereinbelow; the particulars of which outstanding Securities
being set forth in Schedule "A": which is attached hereto;
(aq) "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;
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(ar) "SECURITY" has the meaning ascribed to it in section "3.1"
hereinbelow;
(as) "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;
(at) "TRANSFER AGENT" means the Purchaser's existing registrar and
transfer agent for its common shares, X-Clearing Corporation
of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, 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;
(au) "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": Purchased Shares, Vendors and Securities;
Schedule "B": Company's Financial Statements;
Schedule "C": Company's Property;
Schedule "D": Company's Material Contracts;
Schedule "E": Company's List of Bank Accounts etc.;
Schedule "F": Purchaser's Financial Statements;
Schedule "G": Purchaser's Material Contracts;
Schedule "H": Purchaser's List of Bank Accounts etc.;
Schedule "I": Consulting Services Agreement;
1.3 INTERPRETATION. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires,:
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(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
(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", and "4"
hereinbelow and the prior satisfaction of the conditions precedent which are set
forth in Article "6" 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 3,000,000 restricted common shares 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 "A" which is attached hereto.
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
12-24 months as applicable 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
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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.
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;
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(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
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 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.
2.6 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,
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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;
(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;
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(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;
(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
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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 "A": 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;
(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,
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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 "A": 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;
(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;
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(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
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";
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:
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(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 "A": 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"; 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.
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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 "B": 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, other
than that disclosed in the financial statements and in 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, Operator and third parties as applicable,
(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, other than that disclosed in the financial
statements 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;
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(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 those relating to the normal course of business
as contemplated herein;
(g) the Company or its Operator 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;
(h) the presently authorized and issued share capital of the
Company is as described in Schedule "A": 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 "A":, 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
"A";
(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 "A": 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;
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(j) 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
action, suit or proceeding might be commenced with any
reasonable likelihood of success;
(k) from November 1, 2003 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
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(iv) effect any subdivision, consolidation or
reclassification of its share capital;
(l) 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;
(m) from November 1, 2003 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:
(i) other than as set forth in Schedule "A": 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;
(n) save and except for those matters which are listed in Schedule
"B": 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 "B": and forming a material
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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;
(o) no dividend or other distribution by the Company has been
made, declared or authorized since its incorporation, and from
November 1, 2003 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;
(p) save and except as set forth in Schedule "B": 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 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;
(q) 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;
(r) 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;
(s) 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;
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(t) 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;
(u) 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;
(v) from November 1, 2003 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;
(w) 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 November 1, 2003 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;
(x) save and except as set forth in Schedule "B": 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;
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(y) 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
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 "C": 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) 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;
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(af) 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;
(ag) except for the real property leases, 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;
(ah) as to the contracts listed in Schedule "I" which is attached
hereto:
(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;
(ai) 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;
(aj) Schedule "E": 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 "E": 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;
(ak) 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
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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;
(al) the Company utilizes no product warranties, guarantees or
product return policies;
(am) the most recently completed and consolidated
management-prepared Company's Financial Statements as at
November 17, 2003 are true and correct in every respect and
present fairly the financial position of the Company 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 Company's Financial
Statements being attached hereto as Schedule "B":;
(an) 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;
(ao) since November 17, 2003:
(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
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(iv) the Company's Business has been carried on in the
ordinary course;
(ap) save and except for those matters which are listed in Schedule
"B": 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 November 17, 2003;
(aq) 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;
(ar) 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;
(as) 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;
(at) 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;
(au) 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;
(av) 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;
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(aw) the Vendors and the Company have the full authority and
capacity required to enter into this Agreement and to perform
their respective obligations hereunder;
(ax) the present directors and officers of the Company are as
follows:
Name Position
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Managing Director
(ay) 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;
(az) 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;
(ba) 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
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(ii) not enter into any material transaction or assume or
incur any material liability outside the normal
course of its business;
(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) 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;
(bc) 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
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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;
(bd) 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;
(be) 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;
(bf) 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
(bg) 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
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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 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 "16" 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 with the exception of subisidiary
interests no longer of value to the Purchaser including
International Gold Corporation, a Nevada corporation;
(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;
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(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;
(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;
(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 "F": 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;
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(k) the authorized capital of the Purchaser consists of
200,000,000 common shares without par value of which,
according to the records of the Purchaser, an aggregate of
521,184 common shares of the Purchaser will be issued and
outstanding as fully paid and non-assessable as at 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 "F": 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
Purchaser is not in material default of any of its listing
requirements of the OTCBB, 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" hereinabove
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;
(o) from November 1, 2003 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:
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(i) redeem or acquire any shares in their respective
share capitals;
(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 November 1, 2003 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 "F": which is
attached hereto, from November 1, 2003 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;
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(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
"F": 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
November 1, 2003 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;
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(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 November 1, 2003 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;
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(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;
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(af) the most recently completed audited and unaudited consolidated
financial statements of the Purchaser as at December 31, 2002
and September 30, 2003, 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 "F": 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 "G": 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 "G":;
(ak) as to the contracts listed in Schedule "G": 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 "G": which is attached hereto;
(am) Schedule "H": 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 "H": 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 November 17, 2003:
(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
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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
"F": 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 November 17,
2003;
(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,
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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
▇▇▇▇▇ ▇▇▇▇▇▇ President, Secretary, and sole director;
▇▇▇▇▇▇ ▇▇▇▇▇▇ Chief Financial Officer
(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) 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;
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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
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(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 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
(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,
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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, together with the appointment of
up to one nominee of the Company as director, at Closing (as
hereinafter determined); such appointee or nominee 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. $25,000 as at November 17, 2003, 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 will have acquired the necessary approval of its
shareholders, if required, to change the name of the Purchaser
to "Lexington Resources, Inc.", or to such other name as the
Company's Board of Directors may determine at Closing (as
hereinafter determined); 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;
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(bj) 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
(bk) 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
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 "14" 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
CONDITIONS PRECEDENT TO CLOSING
5.1 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
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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:
(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");
(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 receipt of all necessary approvals to the terms and
conditions of and the transactions contemplated by this
Agreement;
(d) 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
(e) 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 "Lexington
Resources, Inc.", 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.
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(ii) the appointment of the existing director of the
Company to the resulting Board of Directors of the
Purchaser;
(iii) such other matters as may be agreed to as between the
Parties hereto prior the completion of the
transactions contemplated by this Agreement.
5.2 PARTIES' WAIVER OF CONDITIONS PRECEDENT. The conditions precedent set forth
in section "5.1" 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.
5.3 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 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:
(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);
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(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 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 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;
(f) 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;
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(g) 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; 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.
5.4 THE VENDORS' AND THE COMPANY'S WAIVER OF CONDITIONS PRECEDENT. The
conditions precedent set forth in section "5.3" 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;
5.5 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
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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:
(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;
(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;
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(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 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; 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.
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5.6 PURCHASER'S WAIVER OF CONDITIONS PRECEDENT. The conditions precedent set
forth in section "5.5" 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.
5.7 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;
(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
"6.7(b)(i)" hereinbelow 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
ARTICLE 6
CLOSING AND EVENTS OF CLOSING
6.1 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
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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 out in
Article "5" hereinabove (the "CLOSING Date"), or on such earlier or later
Closing Dates as may be agreed to in advance by each of the Parties hereto at
2:00 p.m. (Vancouver time) on each such Closing Date.
6.2 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 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;
(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
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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 director of
the Company to the resulting Board of Directors 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 may
reasonably require.
6.3 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 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
with certification of any required notice to all shareholders
of the Purchaser of such written consent resolutions;
(b) a 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 "5.1(f)" hereinabove;
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(c) 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;
(d) all necessary consents and approvals in writing to the
completion of the transactions contemplated herein;
(e) 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;
(f) 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;
(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
(g) all such other documents and instruments as the Vendors' and
the Company's respective solicitors may reasonably require.
ARTICLE 7
DUE DILIGENCE INVESTIGATION
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7.1 DUE DILIGENCE. Each of the Parties hereto shall forthwith conduct such
further due diligence examination of the other Parties hereto as it deems
appropriate.
7.2 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 "8" and "9" 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 8
NON-DISCLOSURE
8.1 NON-DISCLOSURE. Subject to the provisions of section "8.3" 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 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.
8.2 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.
8.3 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.
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ARTICLE 9
PROPRIETARY INFORMATION AND
ADDITIONAL OBLIGATIONS OF THE PARTIES HERETO
9.1 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.
9.2 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
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.
9.3 COMPLIANCE WITH APPLICABLE LAWS. The Parties will comply with all 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.
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9.4 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 10
AMENDMENT, POWER OF ATTORNEY AND VARIATIONS
10.1 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.
10.2 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.
10.3 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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, a Vendor and the current
Managing Director of the Company, or such other present or future director or
officer of the Company as ▇▇. ▇▇▇▇▇▇▇▇▇ 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
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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.
10.4 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.
10.5 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 11
FORCE MAJEURE
11.1 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
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.
11.2 NOTICE. A Party shall, within seven calendar days, give notice to the other
Parties of each event of FORCE MAJEURE under section "11.1" 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 12
DEFAULT AND TERMINATION
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12.1 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.
12.2 CURING THE DEFAULT. If the default is not so cured or the Defaulting Party
does not commence or diligently proceed to cure the default, 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.
12.3 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 this Agreement 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) either of the Parties hereto has not either satisfied or
waived each of their respective conditions precedent;
(d) each of the conditions specified in section "5.1" hereinabove
have not been satisfied in the manner and within the time
periods as specified therein;
(e) either of the Parties hereto has failed to deliver or caused
to be delivered any of their respective documents required to
be delivered;
(f) 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 "7" and "8" hereinabove.
ARTICLE 13
NOTICE
13.1 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.
13.2 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 14
GENERAL PROVISIONS
14.1 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.
14.2 ENUREMENT. This Agreement will enure to the benefit of and will be binding
upon the Parties hereto, their respective heirs, executors, administrators and
assigns.
14.3 SCHEDULES. The Schedules to this Agreement are hereby incorporated by
reference into this Agreement in its entirety.
14.4 TIME OF THE ESSENCE. Time will be of the essence of this Agreement.
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14.5 APPLICABLE LAW. The situs of this Agreement is Blaine, Washington, U.S.A.
and for all purposes this Agreement will be governed exclusively by, construed
and enforced in accordance with, and attorn to the courts of the laws and Courts
prevailing in the State of Washington, U.S.A.
14.6 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.
14.7 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.
14.8 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.
14.9 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).
14.10 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.
14.11 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
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.
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14.12 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.
14.13 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.
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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.
ORIENT EXPLORATIONS LTD. ) No. of Purchased Shares: 2,250,000
------------------------ ) ------------------------------------
)
)
)
____________________________________)
Authorized Signatory )
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ) No. of Purchased Shares: 750,000
----------------- ) ----------------------------------
)
)
)
____________________________________)
Authorized Signatory )
LEXINGTON OIL & GAS LTD. CO., )
---------------------------- )
)
)
)
____________________________________)
Authorized Signatory )
INTERGOLD CORPORATION )
---------------------
)
)
)
____________________________________)
Authorized Signatory )
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SCHEDULE A
This is Schedule "A" to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
PURCHASED SHARES, VENDORS AND SECURITIES
VENDORS SHARES
Orient Explorations Ltd. 2,250,000 Lexington Resources, Inc.
▇.▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Shares
Grand Cayman, Cayman Islands
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 750,000 Lexington Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Shares
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇
________
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SCHEDULE B
This is Schedule "B" to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
COMPANY'S FINANCIAL STATEMENTS
Refer to the materials attached hereto.
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SCHEDULE C
This is Schedule "C" to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
Company's Property
LEXINGTON OIL & GAS LTD. CO.
PROPERTIES
1. DOC ▇▇▇▇ LEASE (160 ACRES) - Current Operator Paluca Petroleum,
Inc.
Legal Description: ▇▇▇▇▇▇ County Oklahoma: County
Section 8, Township 1N, Range 3W
Well Names: Doc ▇▇▇▇ 1B thru Doc ▇▇▇▇ 11B;
Eleven ▇▇▇▇▇; 75% N.R.I.; 100% W.I.
Doc ▇▇▇▇ 1A; One well; 66.479
N.R.I.; 100% W.I.
Well Depth: ▇▇▇▇▇ are approximately 2,800 feet
deep, producing from the
Pennsylvania Sand Zone.
Summary: Of the twelve ▇▇▇▇▇ 5 are currently
producing and 1 well is a water
disposal well. Current production is
between 8 to 14 barrels of oil per
day. To activate other ▇▇▇▇▇ will
require additional work-over
expenses.
Potential: There is the potential to drill an
additional 5 ▇▇▇▇▇ on the property.
Requires additional geological and
engineering review. When initial
▇▇▇▇▇ were drilled they produced
between 75 and 100 barrels of oil
per day. ▇▇▇▇▇ adjacent to this
property have produced sizeable
increases with new types of
treatments and water floods.
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2. ▇▇▇▇▇▇ BOOCH SAND UNIT, Consisting of the ▇▇▇▇▇ Lease and
▇▇▇▇▇▇▇▇▇▇ Lease (80 Acres) Current Operator Peluca Petroleum,
Inc.
Legal Description: ▇▇▇▇▇▇ County Oklahoma: County
▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇ Names: ▇.▇. ▇▇▇▇▇ #▇, ▇▇▇▇▇ #▇, ▇▇▇▇▇▇▇▇▇▇
#▇ and ▇▇▇▇▇▇▇▇▇▇ #2; Four ▇▇▇▇▇;
76.171875 N.R.I.; 100% W.I.
Well Depth: ▇▇▇▇▇ are approximately 2,900 feet
deep, producing from the Booch Zone.
Summary: Two ▇▇▇▇▇ producing 5 to 6 barrels
per day. An additional well is
currently being worked on and should
be in production within a week,
increasing production by
approximately 3 barrels per day.
Potential: Originally an ARCO (Atlantic Rich-
field) property. There are an
additional 4 well bores on the
▇▇▇▇▇▇▇▇▇▇ lease that could possibly
be activated. Additional Geological
work is required to evaluate deeper
zones and behind pipe potential.
3. ▇▇▇▇▇▇ LEASE (590.2 acres)
Legal Description: Pittsburg County, Oklahoma; County
▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ Name: No ▇▇▇▇▇ have been drilled. Property
has the potential to drill 5 ▇▇▇▇▇.
Initial planning is the 3 horizontal
▇▇▇▇▇.
Well Depth: ▇▇▇▇▇ will have a total drilled
depth of approximately 4,000 feet
(includes both vertical and
horizontal depths).
Production Zone: This property is a Coal Bed Methane
prospect ("CBM"). The property is
located in the prolific Arkoma
Basin. The CBM is located in the
Hartshorne zone.
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
-3-
▇▇▇▇▇ adjacent to this property have
come in an average of between
500,000 and 1,000,000 MCF per day,
although a number of the ▇▇▇▇▇ are
producing over a 1,000,000 MCF per
day.
Summary: It is proposed to initially drill 3
horizontal CBM ▇▇▇▇▇. The first well
is expected to be drilled by the end
of 2003. The remaining ▇▇▇▇▇ are
expected to be completed in early
2004.
Potential: This property is located in the
middle of one of the largest CBM
drilling programs undertaken in the
state of Oklahoma. Major companies
located in the area are; ▇▇▇▇▇▇▇▇,
Questar and Devon.
4. ▇▇▇▇▇▇ LEASE (40 acres) Currently operated by Paluca Petroleum,
Inc.
Legal Description: ▇▇▇▇▇▇ County, Oklahoma; ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇.
Well Names: ▇▇▇▇▇▇ #1, ▇▇▇▇▇▇#2 and ▇▇▇▇▇▇ #3;
76% N.R.I.; 100% W.I.
Well Depth: ▇▇▇▇▇ are approximately 2,800 feet
deep, producing from the ▇▇▇▇▇ zone.
Summary: There are two producing ▇▇▇▇▇ and
one disposal well on the property.
▇▇▇▇▇ are not currently producing
waiting on approval/permitting for
the disposal well.
Potential: When ▇▇▇▇▇ reach production will be
in the 3 to 4 barrels of oil per
day. Re-working ▇▇▇▇▇ and fracking
▇▇▇▇▇ have produced significant
improvements. ▇▇▇▇▇ in the area gave
gone from 1-3 barrels of oil per day
to 13-16 bopd.
5. SASAKWA ▇▇▇▇▇▇▇▇▇ SAND UNIT (500 Acres) Currently operated
by Paluca Petroleum Inc.
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
-4-
Legal Description: Seminole County, Oklahoma; ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇.
87.50% N.R.I.; 100% W.I.
Well Names: Sasakwa ▇▇▇▇▇▇▇▇▇ 3,4,7,9,10,11,12,
13,14,15,16 (eleven ▇▇▇▇▇)
Well Depth: ▇▇▇▇▇ are approximately 2,900 feet
deep and production is from the
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ zones.
Summary: When ▇▇▇▇▇ initially drilled
produced 200 to 250 bopd. No ▇▇▇▇▇
are producing currently. Waiting on
approval for disposal well. Initial
production will be in the 7 to 10
bopd from 4 ▇▇▇▇▇. Of the 11 ▇▇▇▇▇
three are injection ▇▇▇▇▇ and 1 is a
disposal well. The remaining three
▇▇▇▇▇ can become producing with
relatively minor work.
Potential: The lease has additional potential
for production in the ▇▇▇▇▇▇ and
Senora zones, producing both oil and
gas at approximately 1500 feet. Some
additional geology will be required
drilling or access production from
existing well bores.
6. LEASES CURRENTLY UNDER REVIEW THAT ARE INCLUDED IN THE
ACQUISITION BUT REQUIRES FURTHER REVIEW BEFORE TRANSFERRING
TITLES TO COMPANY.
▇. ▇▇▇▇▇▇ Lease, Oklahoma County Oklahoma. 9,000 foot well. Past
production was from the Red Folk Zone. When well was shut in
it was producing 100 MCF per day. The logs indicate data that
shows a very strong possibility of gas up pipe at
approximately 7,500 feet - could produce 250,000 + MCF per
day. Located in the city limits of Oklahoma City requires
special bonds.
▇. ▇▇▇▇ Lease, ▇▇▇▇▇▇ County, Oklahoma. Consists of 1 well on 10
acres at 2,800 feet. It requires a water disposal well to be
viable. Currently speaking with landowner to discuss
possibilities of using disposal well on the property. If not
some new technology re: holding back water may be feasible.
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
-5-
OPERATING COMPANY:
Currently all the above ▇▇▇▇▇ except for the ▇▇▇▇▇▇ Lease are operated by Paluca
Petroleum. It is Lexington's intention to transfer well operations to Oak Hills.
Oak Hills has operated and drilled ▇▇▇▇▇ since 1996. Its President is ▇▇▇▇
▇▇▇▇▇▇▇▇▇ who has drilled and in excess of 500 ▇▇▇▇▇ from shallow 1,000 foot
▇▇▇▇▇ to as deep as 20,000 feet and has operated over 549 ▇▇▇▇▇ in 5 states.
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
SCHEDULE D
This is Schedule "D": to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
COMPANY'S MATERIAL CONTRACTS
==========
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
SCHEDULE E
This is Schedule "E": to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
COMPANY'S LIST OF BANK ACCOUNTS
Lexington Oil & Gas Ltd. Co.:
SCHEDULE F
This is Schedule "F" to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
PURCHASER'S FINANCIAL STATEMENTS
COMPANY'S FINANCIAL STATEMENTS
INTERGOLD CORPORATION
(A Development Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
CONSOLIDATED BALANCE SHEETS
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
-2-
INTERGOLD CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2003 2002
------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 819 $ 227
------------------------------------------------------------------------------------------------------------------
$ 819 $ 227
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 674,146 $ 592,061
Loans payable (Note 3) 418,195 1,258,718
Notes payable - 51,890
Accrued Series A warrant redemption payable - 60,000
Accrued interest payable (Note 3) 277,693 534,453
------------------------------------------------------------------------------------------------------------------
1,370,034 2,497,122
------------------------------------------------------------------------------------------------------------------
GOING CONCERN CONTINGENCY (Note 1)
STOCKHOLDERS' EQUITY (DEFICIENCY) (Note 4)
Common stock $.00025 par value; 200,000,000 shares authorized
521,184 (2002 - 257,135) post reverse-split shares issued and outstanding 39,081 19,284
Preferred stock, $.001 par value; 75,000,000 shares authorized
Issued and outstanding
Series A - nil shares (2002 - 6,200,000 shares) - 6,200
Series B - nil shares (2002 - 2,510,000 shares) - 2,510
Additional paid-in capital 13,974,004 10,298,039
Deficit accumulated during the development stage (15,382,300) (12,822,928)
------------------------------------------------------------------------------------------------------------------
(1,369,215) (2,496,895)
------------------------------------------------------------------------------------------------------------------
$ 819 $ 227
==================================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements.
-3-
INTERGOLD CORPORATION
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months Nine months Nine months July 26, 1996
ended Sept. ended Sept. ended Sept. ended Sept. (inception) to
30, 2003 30, 2002 30, 2003 30, 2002 Sept 30, 2003
------------------------------------------------------------------------------------------------------------------------------
REVENUE
Other income $ - $ - $ - $ - $ 1,699
------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Mineral property exploration expenses - - - 5,882,078
Directors fees - - - - 21,500
General and administrative 32,198 25,945 97,050 80,130 4,533,655
Interest expense 26,416 46,345 73,489 124,274 670,220
Loss on settlement of debt - - - - 1,317,540
Professional fees (recovery) 3,995 6,382 21,808 (37,479) 1,872,899
Realized loss on sale of available for
sale investment - - - - 20,000
Gain on settlement of lawsuit - - - - (1,589,224)
------------------------------------------------------------------------------------------------------------------------------
62,609 78,762 192,347 166,925 12,728,668
------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $(62,609) $(78,672) $(192,347) $ (166,925) $(12,728,668)
==============================================================================================================================
BASIC NET LOSS PER SHARE $ (0.14) $ (0.31) $ (0.45) $ (0.65)
============================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 449,827 257,135 428,711 257,135
============================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements.
-4-
INTERGOLD CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 31, 2002 TO SEPTEMBER 30, 2003
(UNAUDITED)
Deficit
Accumulated
Additional during
Common stock Preferred stock Paid-in Development
Shares Amount Shares Amount Capital Stage Total
------------ -------- ---------- ------- ----------- ----------- -----------
Balance, December 31, 2002 77,140,600 $ 19,284 8,710,000 $ 8,710 $10,298,039 $(12,822,928) $(2,496,895)
20% cumulative dividends payable on
Conversion of Series A Preferred
Stock - - - - - (1,371,475) (1,371,475)
Expiry of Series A Preferred Stock
Share Purchase Warrant - - - - 60,000 - 60,000
Issuance of common stock in
settlement of Cumulative dividend on
converted Series A Preferred stock 5,485,900 1,371 - - 1,370,104 - 1,371,475
Issuance of common stock pursuant to
Conversion of Series A Preferred
stock 6,200,000 1,550 (6,200,000) (6,200) 4,650 - -
20% cumulative dividends payable on
Conversion of Series B Preferred
Stock - - - - - (995,550) (995,550)
Issuance of common stock in settlement
of Cumulative dividend on converted
Series B Preferred stock 1,991,100 498 - - 995,052 - 995,550
Issuance of common stock pursuant to
Conversion of Series B Preferred
stock 2,510,000 628 (2,510,000) (2,510) 1,882 - -
Issuance of common stock in
settlement of debt 63,001,343 15,750 - - 1,244,277 - 1,260,027
------------------------------------------------------------------------------------------
Balance before reverse stock split 156,328,943 39,081 - - 13,974,004 (15,189,953) (1,176,868)
300:1 reverse stock split, August 8,
2003 (155,807,759) - - - - - -
Net Loss, period ended Sept. 30, 2003 - - - - - (192,347) (192,347)
------------------------------------------------------------------------------------------
521,184 $ 39,081 - $ - $13,974,004 $(15,382,300) $(1,369,215)
==========================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements.
-5-
INTERGOLD CORPORATION
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months Nine months July 26, 1996
ended ended (inception) to
Sept 30, 2003 Sept 30, 2002 Sept 30, 2003
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $(192,347) $(166,925) $(12,779,600)
Adjustments to reconcile net loss to net cash used in
operating activities:
- Depreciation - - 1,634
- Loss on disposal of fixed assets - - 2,666
- (Gain) loss on expense recoveries and settlement of debt (65,501) 1,317,540
- Gain on settlement of lawsuit - - (1,589,224)
- Loss on sale of investment - - 20,000
- Non-cash exploration costs - - 2,860,000
- Changes in working capital assets and liabilities
Notes payable - 103,597 -
Accounts payable (3,550) 4,561 625,810
Accrued interest payable 73,489 124,274 667,527
Accrued and unpaid fees payable 90,000 - 736,600
------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES (32,408) 6 (8,137,047)
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale investments - - (170,000)
Equipment purchases - - (4,300)
------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (174,300)
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances payable 33,000 - 1,751,508
Sale of common stock - - 1,957,658
Sale of Series A preferred stock - - 2,500,000
Sale of Series B preferred stock - - 1,255,000
Net cash received on settlement of lawsuit - - 798,000
Note payable - - 50,000
------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 33,000 - 8,312,166
------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH 592 6 819
CASH, BEGINNING OF PERIOD 227 127 -
------------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD $ 819 $ 133 $ 819
==================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
During the period the Company issued shares of common stock in settlement of
cumulative dividends payable on Series A and Series B preferred stock and in
settlement of debt. (Refer to Note 4).
The accompanying notes are an integral part of these interim consolidated financial statements.
-6-
INTERGOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
The Company was previously involved in mineral property exploration and
development. To date, the Company has not generated significant revenues from
operations and has a working capital deficit and a stockholders' deficiency of
$1,369,215 at September 30, 2003. The Company's continuance of operations and
movement into an operating basis are contingent on raising additional working
capital, settling its outstanding debts and on the future development of a new
business venture. Advances from certain significant shareholders will form the
primary source of short-term funding for the Company during the next twelve
months. Accordingly, these factors raise substantial doubt about the Company's
ability to continue as a going concern.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-B. They do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
except as disclosed herein, there have been no material changes in the
information disclosed in the notes to the financial statements for the year
ended December 31, 2002 included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission. The interim unaudited
consolidated financial statements should be read in conjunction with those
financial statements included in the Form 10-KSB. In the opinion of Management,
all adjustments considered necessary for a fair presentation, consisting solely
of normal recurring adjustments, have been made. Operating results for the nine
months ended September 30, 2003 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2003.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, International Gold Corporation ("IGC"). IGC was
acquired by purchase on July 23, 1997. The acquisition of International Gold
Corporation has been accounted for on the purchase method of accounting. All
significant intercompany transactions and account balances have been eliminated.
MINERAL PROPERTIES
The Company's resource property acquisition, exploration and development costs
were expensed as incurred. Once the Company has determined that a property can
be economically developed, further exploration and development costs are
capitalized. The capitalized costs are depleted on a property-by-property basis
over the estimated useful lives of the properties upon commencement of
commercial production using the unit-of-production method. Capitalized costs
relating to mineral properties which are sold or abandoned are written off when
such events occur. The proceeds received from property options granted are
applied against the costs of the related property and any excess is included in
earnings for the period. The Company reviews the carrying value of resource
properties whenever events or changes in circumstances indicate that the
carrying value may not be recoverable, at which time a write-down is recorded.
-7-
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing earnings (loss) for the
period by the weighted average number of common shares outstanding for the
period. Fully diluted earnings (loss) per share reflects the potential dilution
of securities by including other potential common stock, including convertible
preferred shares, in the weighted average number of common shares outstanding
for a period and is not presented where the effect is anti-dilutive. The
presentation is only of basic earnings (loss) per share as the effect of
potential dilution of securities has no effect on the current period's basic
earnings per share.
FINANCIAL INSTRUMENTS
The fair value of the Company's financial assets and financial liabilities
approximate their carrying values due to the immediate or short-term maturity of
these financial instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
STOCK-BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, (2) amend the disclosure
provisions to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information. The disclosure provisions of SFAS No. 148 were effective
for the Company for the period ended September 30, 2003 and the required
disclosures have been made below.
The Company has elected to continue to account for stock-based employee
compensation arrangements using the intrinsic value based method in accordance
with the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", ("APB No. 25") and comply with the disclosure
provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under
APB No. 25, compensation expense is recognized based on the difference, if any,
on the date of grant between the estimated fair value of the Company's stock and
the amount an employee must pay to acquire the stock. Compensation expense is
recognized immediately for past services and pro-rata for future services over
the option-vesting period. In addition, with respect to stock options granted to
employees, the Company provides pro-forma information as required by SFAS No.
123 showing the results of applying the fair value method using the
Black-Scholes option pricing model.
In accordance with SFAS No. 123, the Company applies the fair value method using
the Black-Scholes option-pricing model in accounting for options granted to
consultants.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
-8-
The Company has also adopted the provisions of the Financial Accounting
Standards Board Interpretation No.44, Accounting for Certain Transactions
Involving Stock Compensation - An Interpretation of APB Opinion No. 25 ("FIN
44"), which provides guidance as to certain applications of APB 25. FIN 44 is
generally effective July 1, 2000 with the exception of certain events occurring
after December 15, 1998.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Future tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment.
COMPARATIVE FIGURES
Certain of the comparative figures have been restated to conform to the current
year's presentation.
NOTE 3: LOANS AND ACCRUED INTEREST PAYABLE
LOANS PAYABLE
Loans payable are comprised of cash advances as follows:
September 30, December 31,
2003 2002
------------- ------------
Sonanini Holdings Ltd. $ - $ 442,770
Investor Communications International, Inc. 342,998 309,998
Tristar Financial Services Ltd. - 435,119
▇▇▇▇▇ ▇▇▇▇▇▇ 70,831 70,831
--------------------------
$ 413,829 $1,258,718
==========================
ACCRUED INTEREST PAYABLE
Demand loans and certain accounts payable bear 10% simple interest. There is
$261,978 of interest accrued on these loans and liabilities as of September 30,
2003 (2002 - $473,408). See Note 6 - Related Party Transactions.
NOTE 4: STOCKHOLDERS' EQUITY
COMMON STOCK
On March 15, 2003 the Company settled $1,260,027 in loans, notes and accrued
interest in exchange for the issuance of 210,004 post reverse-split shares of
the Company's common stock.
-9-
On March 15, 2003 the holders of 6,200,000 Series A preferred shares elected to
convert their shares to common stock. As a result cumulative undeclared
dividends totaling $1,371,475 became payable on March 15, 2003. Accordingly, the
Company issued 38,953 post reverse-split shares of common stock in exchange for
the 6,200,000 Series A preferred shares and settlement of the dividend liability
of $1,371,475 in accordance with the terms of the Series A preferred stock
described below.
On March 15, 2003 the holders of 2,510,000 Series B preferred shares elected to
convert their shares to common stock. As a result cumulative undeclared
dividends totaling $995,550 became payable on March 15, 2003. Accordingly, the
Company issued 15,004 post reverse-split shares of common stock in exchange for
the 2,510,000 Series B preferred shares and settlement of the dividend liability
of $995,550 in accordance with the terms of the Series B preferred stock
described below.
Effective March 10, 2003, the Company increased the number of authorized shares
of common stock from 125,000,000 to 200,000,000 at a par value of $.00025 per
share.
PREFERRED STOCK
The Company authorized for issuance 5,000,000 shares of Preferred Stock at a par
value of $.001 per share at December 31, 1997.
Effective August 6, 1998, the Company increased the number of authorized shares
of preferred stock from 5,000,000 to 75,000,000 at a par value of $.001 per
share.
SERIES A
Pursuant to a private placement memorandum dated August 10, 1998, the Company
offered 50 Series A units at a cost of $50,000 each for a total of $2,500,000.
Each unit consisted of 200,000 shares of Series A Preferred stock with a par
value of $.001 per share and 200,000 warrants. Each warrant entitles the holder
to purchase one share of restricted common stock at $.25 per share. The warrants
expired on July 31, 2001. The Series A preferred shares were redeemable by the
Company at any time after July 31, 2001 for $.25 per share, plus accrued and
unpaid dividends. Dividends accrued cumulatively at the rate of 20% per year but
were payable annually in arrears when, as and if declared by the Company's Board
of Directors or upon conversion at the election of the holders to shares of
common stock. Each Series A preferred share is convertible into one share of
restricted common stock and all then accrued and unpaid dividends are
convertible into restricted common stock at the conversion price of $.25 per
share.
As of September 30, 2003, there are no Series A Preferred shares issued and
outstanding.
SERIES B
During 1999, the Company completed a private placement of Series B units
consisting of 100,000 shares of Series B preferred stock with a par value of
$.001 per share and 100,000 warrants. The terms and conditions of the Series B
unit offering are similar to those of the Series A offering except the cost per
share and any conversion price is at $0.50 per share and the Series B offering
is subordinate to the Series A offering.
As of September 30, 2003, there are no Series B Preferred shares issued and
outstanding.
REVERSE STOCK SPLIT
Effective August 7, 2003 the Company completed a reverse stock split of
one-for-three hundred of the Company's outstanding common stock, resulting in a
reduction of the then outstanding common stock from 156,328,943 shares to
521,184 shares. The par value and the number of authorized but unissued shares
of the Company's common stock was not changed as a result of the reverse stock
split.
-10-
Except for in the Statement of Stockholders' Equity, unless otherwise noted, all
references to common stock, common shares outstanding, average numbers of common
shares outstanding and per share amounts in these Financial Statements and Notes
to Financial Statements prior to the effective date of the reverse stock split
have been restated to reflect the one-for-three hundred common stock split on a
retroactive basis.
NOTE 5: EMPLOYEE STOCK OPTION PLAN
During 1997, the Company authorized a Non-Qualified Employee Stock Option Plan
for employees. The plan authorized the issuance of 2,000,000 pre reverse-split
options that can be exercised at $.50 per share of common stock and an
additional 2,500,000 pre reverse-split options that can be exercised to purchase
shares of common stock at $1.00 per share. All options granted expire December
27, 2017. Shares which may be acquired through the plan may be authorized but
unissued shares of common stock or issued shares of common stock held in the
Company's treasury. As of June 30, 2003 no stock options under the Non-Qualified
SOP have been exercised.
During the fiscal years ended December 31, 1999 and December 31, 2000, the Board
of Directors of the Company authorized the grant of stock options to certain
officers, directors and consultants. The options granted consisted of 2,000,000
pre reverse-split options with an exercise price of $.50 per share of common
stock and 1,450,000 pre reverse-split options with an exercise price of $1.00
per common share. Selected information regarding the Company's employee stock
options as of September 30, 2003 are as follows:
As of August 7, 2003, concurrent with the adoption of a New Stock Option Plan
(described below), the Board of Directors of the Company voted to terminate the
Non-Qualified SOP and to unilaterally cancel the 3,450,000 pre-reverse-split
options as granted. The Board of Directors based its decision regarding
cancellation of the stock options on the fact that the Non-Qualified SOP and
subsequent grants of stock options were done at a time when management
anticipated that the Company would have a viable and ongoing business
development venture relating to the mining claims located on the Blackhawk
Property. The grantees did not perform the services intended as the gold mining
claims did not contain any gold and associated business operations failed. The
business venture was subject to litigation (as previously disclosed in
regulatory filings) and is no longer being pursued by the Company.
Sept. 30, 2003
------------------------------
Weighted
Number of average
options exercise price
Outstanding at beginning of period 3,450,000 $.71/share
Cancelled during period (3,450,000) $.71/share
---------- ----------
Exercisable at end of period Nil -
========== ==========
NEW STOCK OPTION PLAN
By Directors' Resolution dated March 15, 2003 and effective August 7, 2003, the
Company adopted a New Stock Option Plan ("New SOP"). The New SOP shall be deemed
effective August 7, 2003. The New SOP provides authority for the Board to grant
Options, for the purchase of a total number of shares of the Company's post
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reverse-split common stock, not to exceed 3,500,000 post reverse-split shares.
The option period of options granted under the New SOP shall be up to 10 years
and the option price per share shall be no less than the fair market value of a
share of common stock on the date of grant of the stock option. As of September
30, 2003 no options have been granted under the New SOP and no options are
outstanding.
NOTE 6: RELATED PARTY TRANSACTIONS
The Company, on January 1, 1999, entered into a management services agreement
with Investor Communications, Inc. ("ICI") to provide management of the
day-to-day operations of the Company for a two year term. The management
services agreement requires monthly payments not to exceed $75,000 for services
rendered. The Company's subsidiary entered into a similar agreement on January
1, 1999 with Amerocan Marketing, Inc. ("Amerocan") with required monthly
payments not to exceed $25,000 for services rendered for a two year term. Both
agreements were extended for a further two year term to January 1, 2003.
Subsequent to January 1, 2003, the Agreement with ICI has been extended on a
month-to month basis and the Agreement with Amerocan has expired and will not be
renewed.
An officer and director of Intergold Corporation has been contracted by ICI as
part of the management team provided to Intergold Corporation and its
subsidiary. During the nine month period ended September 30, 2003 a total of
$90,000 (2002 - $78,650) was incurred to ICI which is also a significant
shareholder, for managerial, administrative and investor relations services
provided to the Company and its subsidiary. During the nine month period ended
September 30, 2003 ICI paid a total of $25,875 (2002 - $9,075) to this officer
and director for services provided to the Company and its subsidiary. In
addition, during the nine month period ended September 30, 2003, ICI and other
shareholders paid expenses on behalf of the Company totaling $33,000 (2002 -
$24,947). As of September 30, 2003 the Company owed ICI a total of $652,805 in
accrued management fees payable, loans of $342,998 and interest of $267,959
accrued on outstanding loans and management fees payable, for a total of
$1,263,762 (2002 - $1,020,283). (Refer to Note 3)
During the nine month period ended September 30, 2003 the Company settled
$1,260,027 in loans, notes and accrued interest due to related parties in
exchange for the issuance of 210,004 post-reverse split shares of the Company's
common stock.
NOTE 7: INCOME TAXES
The Company has adopted FASB No. 109 for reporting purposes. As of September 30,
2003, the Company had net operating loss carry forwards of approximately
$11,000,000 that may be available to reduce future years' income taxable income
and will expire between the years 2006 - 2018. Due to the uncertainty of
realization the Company has provided a full valuation allowance for the deferred
tax assets resulting from these loss carry forwards.
NOTE 8: SUBSEQUENT EVENT
The Company commenced negotiations in early September 2003 with Lexington Oil &
Gas Ltd. Lexington Oil & Gas Ltd. is a recently organized corporation with oil
and gas operations in the State of Oklahoma. The Company has not entered into a
formal agreement with Lexington Oil & Gas Ltd. regarding definitive terms and
provisions for acquisition of Lexington Oil & Gas Ltd. and continues in its due
diligence.
Lexington Oil & Gas Ltd. has agreements to obtain varying property interests in
▇▇▇▇▇▇, Seminole, ▇▇▇▇▇▇, Oklahoma, and ▇▇▇▇▇▇▇ Counties in the State of
Oklahoma as a base of minor oil and gas production and inventory. Many ▇▇▇▇▇ on
the property interests are shut in and require re-work programs to obtain
production. Various upgrades to ▇▇▇▇▇ on these leases are planned to provide a
base of minor producing ▇▇▇▇▇. In addition to current property interests, the
company plans to concentrate new acquisitions in the Coal Bed Methane regions of
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the State of Oklahoma where many companies have employed cost effective
horizontal drilling methods to provide long-term gas production. Certain
properties located in Oklahoma's Arkoma Basin are in stages of negotiation to
acquire property interests for the purposes of drilling. The company expects to
weight its development initiatives towards gas production.
The Board of Directors of the Company recently approved the execution of an
agreement in principle to be entered into between the Company and Lexington Oil
& Gas Ltd. The proposed agreement will be subject to standard conditions
precedent, which management believes will include board of director approval and
ratification, due diligence, and the negotiation and execution of a formal
agreement. Based upon the status of current negotiations, management believes
that by approximately mid-November, a definitive Agreement will be entered into
between the Company and Lexington Oil & Gas Ltd. It is contemplated that such
Agreement may require the issuance by the Company of up to approximately
3,000,000 shares of its restricted common stock in exchange for 100% of the
total issued and outstanding shares of Lexington Oil & Gas Ltd.
In the event that the Company is required to issue a sufficient number of shares
of its common stock, such that the former shareholders of Lexington Oil & Gas
Ltd. acquire control of the Company, the transaction will be accounted for as a
reverse acquisition with Lexington being treated as the accounting parent and
the Company being treated as the accounting subsidiary.
Statements made in this Form 10-QSB that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe harbors for
such statements. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. Any forward-looking statements represent management's best judgment as to
what may occur in the future. However, forward-looking statements are subject to
risks, uncertainties and important factors beyond the control of the Company
that could cause actual results and events to differ materially from historical
results of operations and events and those presently anticipated or projected.
The Company disclaims any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statement
or to reflect the occurrence of anticipated or unanticipated events.
----------
SCHEDULE G
This is Schedule "G" to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
PURCHASER'S MATERIAL CONTRACTS
None
----------
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
SCHEDULE H
This is Schedule "H" to that certain Share Exchange Agreement
among each of the Vendor shareholders of LEXINGTON OIL & GAS LTD. CO., LEXINGTON
OIL & GAS LTD. CO. and Intergold Corporation {changing its name to "Lexington
Resources, Inc."}.
PURCHASER'S LIST OF BANK ACCOUNTS
Bank Name:
Bank Address:
Telephone:
ABA Number:
Account Name:
Account Number:
----------
- Share Exchange Agreement -
- Intergold Corporation changing its name to Lexington Resources, Inc. -
