SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHNAGE ACT OF 1934
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LEXICO RESOURCES INTERNATIONAL CORPORATION
(Name of registrant as specified in its charter)
Colorado | 33-55254-22 | 87-0438633 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
8000 Burning Tree Drive Franktown, Colorado 80116 | 80116 |
(Address of principal executive offices) | (Zip Code) |
(213) 321-9858
Telephone number, including area code
LEXICO RESOURCES INTERNATIONAL CORPORATION
PROXY STATEMENT
DATED JUNE 22, 2010
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 11, 2010
Notice is hereby given that a Special Meeting of the Shareholders of Lexico Resources International Corporation, a Colorado corporation (the “Company”), will be held at 2:00 p.m. Mountain Standard Time on Wednesday, August 11, 2010 at the Las Brisas Restaurant, 6781 South Clinton Street, Greenwood Village, Colrado 80112, and any adjournments or postponements thereof (the "Special Meeting") for the following purposes:
*1. | To consider and vote for the election of the following two (2) persons to serve as directors of the Board of Directors of the Company until their successor shall have been elected and qualiied: Ronald L. Aden and F. Jeffrey Krupka; |
*2. | To consider and vote upon a proposal to approve: (i) the employment agreement between the Company and Ronald L. Aden dated June 1, 2010 (the “Aden Employment Agreement”); (ii) the employment agreement between the Company and Jeffrey Krupka dated June 1, 2010 (the “Krupka Employment Agreement”); and (iii) the compensation agreement between the Company and Southwest Consulting Associates, Inc. (“SWCA”) dated June 1, 2010 (the “Compensation Agreement”); |
3. | To consider and vote upon a proposal to approve an amendment to the Articles of Incorporation, as amended, to increase the authorized shares of common stock from 100,000,000 shares to 300,000,000 shares, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001 (the “Amendment”). Upon approval of the shareholders an amendment to the articles will be filed in the office of the Secretary of State of the State of Nevada in accordance wth the laws of the State of Nevada; |
4. | To consider and vote upon a proposal to authorize the Board of Directors to effect a reverse stock split of one-for-twenty (1:20) shares of the Company's outstanding common stock (the “Reverse Stock Split”), depending upon a determination by the Board of Directors that a Reverse Stock Split is in the best interests of the Company and its Shareholders with such post-split shares of common stock being referred to herein as the "New Common Stock"; |
*5. | To consider and vote upon a proposal to approve the agreement for satisfaction of judgment between the Company and Narnia Investments Ltd. (“Narnia Investments”) dated April 28, 2010 and as amended (the “Narnia Investments Agreement”); |
*6. | To consider and vote upon a proposal to approve the forbearance agreement between the Company and Aggregate Recovery Resources LLC (“Aggregate Recovery”) dated May 4, 2010 and as amended (the “Aggregate Recovery Forbearance Agreement”); |
7. | To consider and vote upon a proposal to ratify the engagement of M&K CPAs (“M&K”) to serve as the principal independent auditor for the Company for fiscal year ended December 31, 2010. |
8. | To consider and act upon such other business as may properly come before the Special Meeting or any adjournment thereof. |
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Our voting securities consist of shares of common stock, with a par value of $0.001 (the "Common Stock"). Shareholders of record at the close of business on June 18, 2010 are entitled to vote at the meeting. There were 57,585,796 shares of common stock issued and outstanding on the record date. Each share has one vote on any matter to be acted upon at the meeting. A quorum for the transaction of business is a majority of the total shares entitled to vote. Each matter to be acted upon at the meeting will be approved if the votes "for" are greater than the votes "against." Abstentions and "broker non-votes" are counted in determining a quorum. They are not counted "for" or "against" any matter. There are no dissenters' rights of appraisal with respect to the matters to be acted upon at the meeting.
We will conduct this proxy solicitation initially by mailing notice and then by making materials available at our designated website unless you request a paper or e-mail copy. This proxy statement and form of proxy will be first sent or given to shareholders on or about June 23, 2010. Proxies may also be solicited personally, by mail, e-mail or telephone. We will pay the expenses of the proxy solicitation, including the cost of preparing, assembling and mailing the material and making them electronically available. Directors, officers and regular employees may solicit proxies and will not receive additional compensation for soliciting. No specially engaged employees, representatives or other persons have been or are to be employed to solicit proxies. We will request banks and brokers to forward material to their customers who beneficia lly own shares held of record in nominee name and will reimburse the banks and brokers for reasonable out-of-pocket expenses.
The matters to be acted upon at the meeting are listed in the preceding notice and more fully discussed below under the caption "Matters to be Acted Upon."
Please note that throughout this Proxy Statement, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Lexico Resources," refers to Lexico Resources International Corporation.
By Order of the Board of Directors
/s/ Ronald L. Aden
_______________________________
Ronald L. Aden, President
* Exhibits for the above listed purposes of the meeting are attached at the end of this document in the order listed above.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.
As of the date of this Proxy Statement, our directors and executive officers, their ages and positions held are as follows:
Name | Age | Position with the Company |
Ronald L. Aden | 66 | President/Chief Executive Officer and a Director |
L. Lex Dolton | 80 | Drector |
Larry Alex | 70 | Director |
Dennis Kesssler | 67 | Secretary/Treasurer |
FAMILY RELATIONSHIPS
There are no family relationships among our directors or officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, none of our directors, executive officers or persons that may be deemed promoters is or have been involved in any legal proceeding concerning: (i) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (ii) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction permanently or temporarily enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity; or (iv) being found by a court, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law (and the judgment has not been reversed, suspended or vacated).
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COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee
Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. In the event the Merger Agreement is not consummated, we intend to establish an audit committee during fiscal year 2010. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our Chief Executive Officer and those executive officers that earned in excess of $100,000 during fiscal years ended December 31, 2009 and 2008 (collectively, the “Named Executive Officers”):
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) | Stock Awards ($) | Option Awards ($)(2) | Non-Equity Plan ($) | Non-Qualified Deferred Earnings ($) | All Other Compensation $) | Total ($) |
Ronald L. Aden | 2008 2009 | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -- -- | -- -- | -- -- | -0- -0- |
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STOCK OPTIONS/SAW GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2009
The following table sets forth information as at December 31, 2009 relating to Stock Options that have been granted to the Named Executive Officers:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||
OPTION AWARDS | STOCK AWARDS | |||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) | |
Ronald L. Aden President/ CEO | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
The following table sets forth information relating to compensation paid to our directors during fiscal year ended December 31, 2009:
DIRECTOR COMPENSATION TABLE
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
Ronald L. Aden 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
L. Lex Dolton 2009 | -0- | -0- | -0- | -0- -0- -0- | -0- -0- -0- | -0- -0- -0- | $477,542 -0- $ 87,500 |
Larry Alex 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of the date of this Proxy Statement, the following table sets forth certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. As of the date of this Proxy Statement, there are 57,585,796 shares of common stock issued and outstanding.
Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(1) | Percentage of Beneficial Ownership |
Directors and Officers: | ||
Ronald L. Aden 8000 Burning Tree Drive Franktown, Colorado 80116 | 111,386 | Nil |
L. Lex Dolton | -0- | Nil |
Larry Alex | -0- | Nil |
Dennis Kessler P.O. Box 470924 Aurora, Colorado 80047 | 125,000 | Nil |
All executive officers and directors as a group (4 persons) | 236,386 | -0- |
Beneficial Owners Greater Than 5% | ||
James V. Aden 3020 W. Beautiful Lane Laveen, Arizona 85339 | 6,000,000 | 10.42% |
Marlene M. Roben 3961 S. Narcisses Way Denver Colorado 80237 | 4,000,000 | 6.95% |
Michigan Exploration Inc. 1801 Broadway, Suite 1050 Denver, Colorado 80282 | 4,000,000 | 6.95% |
Lexico Energy Corp. 12835 E. Arapahoe Road, Suite 350 Englewood, Colorado 80112 | 5,000,000 | 8.68% |
Hachador Holdings Ltd. 777 S. Figueroa Street, 40th Floor Los Angeles, California 90017 | 5,000,000 | 8.68% |
_________________________
* | Less than one percent. |
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(1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the perc entage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding as of the date of this Proxy Statement. As of the date of this Proxy Statement, there are 57,585,796 shares issued and outstanding. |
Changes in Control
We are unaware of any contract, or other arrangement or provision, the operation of which may at a subsequent date result in a change of control of our company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
None of our directors, officers or principal stockholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction or in any proposed transactions, which has materially affected or will materially affect us during fiscal year ended December 31, 2009.
MATTERS TO BE ACTED UPON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
Our Bylaws provide authorization to the Board of Directors of the Company to fix from time to time by resolution that number of directors of the Company. Directors hold office until their respective successors are elected and qualified or until their earlier death, resignation or removal. It is intended that the Shareholders will appoint the following nominees for director. It is intended that the proxies solicited hereby will be voted "for" election of the following nominees unless otherwise specified: (i) Ronald L. Aden; and (ii) Jeffrey Krupka. Mr. Aden is current a member of the Board of Directors. For a description of their respective background and experience, including their respective principal occupations during the past five years and the name and principal business in which such occupations were carried on, and the nominatin g process, please see below:
Biography
Ronald L. Aden. Mr. Aden has been the President of the Company since 2006 and a member of the Board of Directors of the Company since approximately September 2008. For the past twenty years, Mr. Aden has been involved in the construction industry, involving sales and rentals, and has considerable managerial experience. Mr. Aden was the founder and developer of Wee Pals Learning Centers, which he operated for over twenty years and ultimately sold. Mr. Aden previously worked in maintenance at Motorola. Mr. Aden was born and raised in Illinois on a farm where he developed his interests in construction and carpentry.
Jeffrey Krupka. Mr. Krupka has been involved in the real estate industry for over thirty years. Mr. Krupka obtained his real estate license in 1975 and worked for Robertson Realty and Chamberlain. Mr. Krupka subsequently entered in equity lending market, which included the purchase of numerour FDIC and failed industrial bank projects. During 1999, Mr. Krupka operated Real Estate Opportunitites, Inc. as his first Over-the-Counter Bulletin Board company. He developed and closed several successful real estate land developments, including subdividisions in Auruora and Auburn Hills, Aurora, Colorado, The Village at Frederick, Frederick, Colorado and the conversion of the corner of Steele and Colfax strip center in Denver Colorado. After moving to California in 2009, Mr. Krupka pursued motion picture development and assisted living businesses and was a part owner in projects in Tehachapi and Merced, California. Mr. Krupka currently operates a consulting business, Southwest Consulting Associates Inc., which was engaged by the Company in January 2010 to restructure the Company.
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PROPOSAL 2. APPROVAL OF THE ADEN EMPLOYMENT AGREEMENT, THE KRUPKA EMPLOYMENT AGREEMENT AND THE COMPENSATION AGREEMENT.
In the event that Messrs. Aden and Krupka are appointed by the Shareholders to the Board of Directors, the Aden Employment Agreement and the Krupka Employment Agreement, respectively, will be approved by the Board of Directors. The Company believes that the development, operation and growth of the Company will be materially enhanced by the capacities, industry and experience of Messrs. Aden and Krupka. The Company previously agreed to compensate SWCA for services rendered in relation to negotiating the debts of the Company and structuring the Shareholder Meeting as set forth in the Compensation Agreement.
In general, the terms and provisions of the Aden Employment Agreement are: (i) Ronald L. Aden agrees to act in the executive capacity as the President/Chief Executive Officer of the Company; (ii) the employment of Rob Aden shall continue until December 31, 2010, which employment shall automatically be renewed for additional one-year periods on each anniversiary date; (ii) the Company shall issue an aggregate 6,994,312 pre-Reverse Stock Split shares of restricted common stock (which will be reduced to 349,716 shares of restricted common stock after the effective date of the Reverse Stock Split; and (iv) the Company shall pay to Ronald L. Aden that amount equal to one-half of the net operating income earned by the Company on a monthly basis commencing after July 27, 2010 (the “Monthly Employment Payment”), which Monthly Emplo yment Payment shall be divided one-half with the Secretary/Treasurer of the Company. Upon the issuance of the aggregate 6,994,312 shares of common stock to Ronald L. Aden, Ronald L. Aden will hold approximately 5.30% of the total issued and outstanding shares of common stock of the Company.
In general, the terms and provisions of the Krupka Employment Agreement are: (i) Jeffrey Krupka agrees to act in the executive capacity as the Secretary and the Treasurer/Chief Financial Officer of the Company; (ii) the employment of Jeffrey Krupka shall continue until December 31, 2010, which employment shall automatically be renewed for additional one-year periods on each anniversiary date; (ii) the Company shall issue an aggregate 2,797,725 pre-Reverse Stock Split shares of restricted common stock (which will be reduced to 139,886 shares of restricted common stock after the effective date of the Reverse Stock Split; and (iv) the Company shall pay to Jeffrey Krupka that amount equal to one-half of the net operating income earned by the Company on a monthly basis commencing after July 27, 2010 (the “Monthly Employment Payment”), which Monthly Employment Payment shall be divided one-half with the President/Chief Executive Officer of the Company. Upon the issuance of the aggregate 2,797,725 shares of common stock to Jeffrey Krupka, Jeffrey Krupka will hold approximately 2.12% of the total issued and outstanding shares of common stock of the Company.
In general, the terms and provisions of the Compensation Agreement are to issue to SWCA an aggregate 6,994,312 pre-Reverse Stock Split shares of restricted common stock (which will be reduced to 349,716 shares of restricted common stock after the effective date of the Reverse Stock Split). Upon the issuance of the aggregate 6,994,312 shares of common stock to SWCA, SWCA will hold approximately 5.30% of the total issued and outstanding shares of common stock of the Company.
Reasons for proposal
Messrs. Aden and Krupka are professionals with considerable experience involving the management and administration of public companies. Both have specialized knowledge in providing consulting advise on exploration strategies, management and operational service considerations to oil and gas exploration companies involved in the areas of business carried out by the Company and desire to provide professional consulting services to the Company and act in the capacity as members of the Company’s Board of Directors. The Company desires to retain Messrs. Aden and Krupka to act in the capacity as members of the Board of Directors and Messrs. Aden and Krupka both desire to accept such positions, in order to provide such related services to the Company.
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PROPOSAL 3. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE OUR AUTHORIZED CAPITAL FROM 100,000,000 TO 300,000,000 SHARES OF $0.001 PAR VALUE COMMON STOCK AND 100,000,000 SHARES OF $0.001 PAR VALUE PREFERRED.
Our Board of Directors will approve an amendment to our Articles of Incorporation to increase our authorized capital from 100,000,000 shares of $0.001 par value common stock to 300,000,000 shares of common stock and 100,000,000 shares of $0.001 par value preferred stock.
Reasons for proposal
Our Board of Directors believes that the amendment is in the best interests of our stockholders and us. We believe that the increase is necessary so that we will have a sufficient number of authorized shares to meet our obligations to issue additional shares and for future contingencies. The increase in authorized capital may also be necessary in order to have sufficient shares to issue upon conversion of notes, exercise of warrants and options.
The objective of the proposed change in the authorized capital structure of the Company is to allow for future issuances of common stock of the Company in accordance with forward stock splits, proposed equity financings, debt settlement, and contractual provisions. Moreoever, based upon the Company’s historical losses from operations, the Company will require additional funding in the future. If the Company cannot obtain capital through private offerings and financings or otherwise, its ability to execute developmental plans will be greatly limited. The Company’s current developmental plans require it to make capital expenditures for the development of its properties. Historically, the Company has funded its operations through the issuance of equity. It’s potential future cash flow and availability of financing may be subject to the appeal of private offerings, including the market prices of its common stock. Further, debt financing, if utilized, could lead to a diversion of cash flow to satisfy debt-servicing obligations and create restrictions on business operations.
The Board of Directors believes that an increase in the authorized capital structure will increase the marketability and liquidity of the Company in the future. The newly authorized shares of common stock will be available for issuance at the discretion and approval of the Company’s Board of Directors, without any further shareholder action. Since the Board of Directors will have the authority to issue additional shares of the Company’s common stock to provide additional financing in the future, the issuance of any such shares may result in a reduction of the book value or market price of the outstanding shares of the Company‘s common stock. If the Company does issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a res ult of such dilution, a shareholder’s proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuances could result in a change of control. As at the date of this Proxy Statement, the Board of Directors does not anticipate any immediate issuance of shares of common stock.
Lastly, an increase in the Company’s authorized capital could provide potential anti-takeover defenses, such as the “poison pill” or “golden parachute” defense. A “poison pill” defense may include adoption of a shareholder rights plan pursuant to which holders of common stock would receive one right for each share held allowing them an option to buy more shares of common stock. In the event a suitor company makes an unwelcome bid, the rights can begin trading trading separate from the shares. If the takeover bid is successful, the shareholder rights may be exercised to purchase shares at a discount from the going market price. All the shareholder except the acquirer can exercise their rights to purchase shares at a discount. This results in a significant dilution in the share hodlers of the acq uirer. A “golden parachute” defense may include provisions in stock option plans or employment agreements, which are triggered when there is a substantial change in the control of the corporation.
As of the date of this Proxy Statement, the Company has certain specific plans to issue shares of common stock in accordance with the terms of private placement offerings for financing purposes and upon the conversion of notes.
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Interest of Management in the Amendment to the Articles of Incorporation
Management does not have a direct or indirect material interest in the proposed Amendment to the Articles of Incorporation.
Proposed changes in authorized capital
Under the Amendment to the Articles of Incorporation, our authorized capital stock will be 300,000,000 shares of common stock, with a par value of $0.001, and 100,000,000 shares of preferred stock, with a par value of $0.001. Our authorized capital currently consists of 100,000,000 shares of common stock.
Common
Shares of common stock may be issued from time to time as the Board of Directors may determine. Holders of common stock will be entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available therefor after any applicable requirements with respect to preferential dividends have been met. In the event of liquidation, holders of common stock will be entitled to a proportionate share in any distribution of our assets after the payment of liabilities and after distribution in full of preferential amounts, if any. Holders of common stock will not have preemptive rights. Each share of common stock will be entitled to one vote, and cumulative voting will not be permitted in the election of directors.
A quorum for the transaction of business at any meeting of the stockholders will be a majority of the shares entitled to vote. The affirmative vote of the holders of at least a majority of the shares voted at a meeting of the stockholders at which a quorum is present will constitute stockholder approval of matters to be acted upon by the stockholders. However, in the case of a sale or other transfer of substantially all our assets, liquidation, merger, consolidation, reorganization, or similar type of extraordinary corporate transaction with a beneficial owner of 10% or more of such shares, the affirmative vote of two-thirds of the shares entitled to vote thereon will constitute approval unless such transaction is with an affiliate or subsidiary, or the transaction is approved by the affirmative vote of a majority of our continuing dir ectors. Continuing directors will be those directors who were our directors prior to the beneficial owner of 10% or more becoming a beneficial owner or affiliate, or who are designated continuing directors prior to or at their first election as directors.
Stockholders may act by written consent of a majority of the shares entitled to vote, subject to any greater voting requirements as set forth above.
Preferred
The Board of Directors will be authorized to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the board of directors, without further action by shareholders, and may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions as determined by the board of directors. Although the Company does not have any present plans to issue any shares of preferred stock, the issuance of preferred stock in the future could adversely affect the rights of the holders of common stock and reduce the value of the common stock.
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PROPOSAL 4. AUTHORIZATION OF BOARD OF DIRECTORS TO EFFECT THE REVERSE STOCK SPLIT DEPENDING UPON A DETERMINATION BY THE BOARD OF DIRECTORS THAT A REVERSE STOCK SPLIT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
The Board of Directors has authorized, subject to Shareholder approval, a Reverse Stock Split of one-for-twenty shares of the Company's outstanding common stock that may be effected by the Board depending on market conditions. The intent of the Reverse Stock Split is to increase the marketability and liquidity of the common stock.
If the Reverse Stock Split is approved by the Shareholders at the Special Meeting, it will be effected only upon a determination by the Board of Directors that the Reverse Stock Split is in the best interests of the Company and the Shareholders. In the Board's judgment, the Reverse Stock Split would result in the greatest marketability and liquidity of the Common Stock, based upon prevailing market conditions, the proposed public offering described below, on the likely effect on the market price of the Common Stock and other relevant factors.
If approved by the Shareholders, the Reverse Stock Split will become effective on any date (the "Effective Date") selected by the Board of Directors upon filing the appropriate documentation with FINRA. If no Reverse Stock Split is effected by such date, the Board of Directors will take action to abandon the Reverse Stock Split without further Shareholder action.
Purposes And Effects Of The Reverse Stock Split
Consummation of the Reverse Stock Split will not alter the number of authorized shares of common Stock. The common stock is listed for trading on the Pink Sheets Market under the symbol “LXXI.PK”. On the Record Date, the reported closing price of the common stock on the Pink Sheets Market was $0.00 per share. The Company intends to use its best efforts in the future to cause its shares of common stock to be approved for trading on the OTC Bulletin Board. Management intends to effect a Reverse Stock Split at a level of one-to-twenty, which it believes will result in attaining both of its goals of achieving a higher per-share price and increasing the marketability and liquidity of the Company's common stock.
Additionally, the Board of Directors believes that the current per-share price of the common stock has limited the effective marketability of the common stock because of the reluctance of many brokerage firms and institutional investors to recommend lower-priced stocks to their clients or to hold them in their own portfolios. Certain policies and practices of the securities industry may tend to discourage individual brokers within those firms from dealing in lower-priced stocks. Some of those policies and practices involve time-consuming procedures that make the handling of lower priced stocks economically unattractive. The brokerage commission on a sale of lower-priced stock may also represent a higher percentage of the sale price than the brokerage commission on a higher priced issue. Any reduction in brokerage commissions resulting from the Reverse Stock Split may be offset, however, in whole or in part, by increased brokerage commissions required to be paid by stockholders selling "odd lots" created by such Reverse Stock Split.
On the Record Date the number of record holders of the common stock was approximately 298 and the number of beneficial holders of common stock was estimated to be approximately 500. The Company does not anticipate that any Reverse Stock Split will result in a significant reduction in the number of such holders, and does not currently intend to effect any Reverse Stock Split that would result in a reduction in the number of holders.
The Reverse Stock Split would have the following effects upon the number of shares of common stock outstanding (57,585,796 shares as of the Record Date) assuming that no additional shares of common stock are issued by the Company after the Record Date and that the Reverse Stock Split is effected and without taking into account any increase in the number of outstanding shares. The common stock will continue to be $0.001 par value common stock following any Reverse Stock Split and the number of shares of common stock outstanding will be reduced. The following example is intended for illustrative purposes.
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Common Stock Before | Common Stock Outstanding | |
Reverse Stock | Outstanding Before | Outstanding After |
Split | Reverse Stock Split | Reverse Stock Split |
1 for 20 | 57,585,796 | 2,879,290 |
At the Effective Date, each share of the common stock issued and outstanding immediately prior thereto (the "Old Common Stock"), will be reclassified as and changed into the appropriate fraction of a share of the Company's common stock, $0.001 par value per share (the "New Common Stock"), subject to the treatment of fractional share interests as described below. No certificates or scrip representing fractional share interests in the New Common Stock will be issued, and no such fractional share interest will entitle the holder thereof to vote or to any rights of a shareholder of the Company. In lieu of any such fractional share interest, each holder of Old Common Stock in excess of 0.50% interest who would otherwise be entitled to receive a fractional share of New Common Stock will in lieu receive one full share upon surrender of certif icates formerly representing Old Common Stock held by such holder.
Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of the material federal income tax consequences of the proposed Reverse Stock Split. This summary does not purport to be complete and does not address the tax consequences to holders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, nonresident alien individuals, broker-dealers and tax-exempt entities. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations and proposed regulations, court decisions and current administrative rulings and pronouncements of the Internal Revenue Service ("IRS"), all of which are subject to change, possibly with retroactive effect, and assumes that the New Common Stock will be held as a "capital asset" (generally, property held fo r investment) as defined in the Code. Holders of Old Common Stock are advised to consult their own tax advisers regarding the federal income tax consequences of the proposed Reverse Stock Split in light of their personal circumstances and the consequences under state, local and foreign tax laws.
1. The Reverse Stock Split may qualify as a recapitalization described in Section 368(a)(1)(E) of the Code.
2. No gain or loss will be recognized by the Company in connection with the Reverse Stock Split.
3. No gain or loss will be recognized by a shareholder who exchanges all of his shares of Old Common Stock solely for shares of New Common Stock.
4. The aggregate basis of the shares of New Common Stock to be received in the Reverse Stock Split (including any whole shares received in lieu of fractional shares) will be the same as the aggregate basis of the shares of Old Common Stock surrendered in exchange therefore.
5. The holding period of the shares of New Common Stock to be received in the Reverse Stock Split (including any whole shares received in lieu of fractional shares) will include the holding period of the shares of Old Common Stock surrendered in exchange therefor.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH HOLDER OF COMMON STOCK OF THE COMPANY IS URGED TO CONSULT WITH HIS OWN TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, MUNICIPAL, FOREIGN OR OTHER TAXING JURISDICTION.
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PROPOSAL 5. APPROVAL OF THE NARNIA INVESTMENTS AGREEMENT.
On June 13, 2006, the District Court for the City and County of Denver, Colorado (the “District Court”) issued an order regarding Case No. 06CV5115, Narnia Investments, Ltd., Plaintiff, vs. Lexico Resources International Corporation, Defendant. The Order was issued by the District Court pertaining to a judgment granted to Narnia Investments Ltd. (“Narnia Investments”) in the amount of $377,500.00 from the State of Texas (the “Narnia Investments Judgment”). In accordance with the provisions of Colorado Revised Statute, Section 13-53-103, the District Court ordered that the Narnia Investments Judgment was entitled to enforcement, satisfaction or re-opening, vacating or staying as provided for by law.
Therefore, on April 28, 2010, the Company and Narnia Investments entered into that certain settlement agreement, as amended (the “Narnia Investments Agreement”). In accordance with the terms and provisions of the Narnia Investments Agreement: (i) the Company shall pay to Narnia Investments $50,000 within fourteen days after the Shareholders Meeting; (ii) the Company shall issue to Narnia Investments 12,500,000 pre-Reverse Stock Split shares of its restricted common stock within fourteen days after the Shareholders Meeting, which 12,500,000 shares will be reduced to 625,000 shares of common stock after the effective date of the Reverse Stock Split; and (iii) Narnia Investments shall release the Company from the Narnia Investments Judgment and the Narnia Investments Judgment shall be deemed satisfied. Upon the issuance of the aggregate 12,500,000 shares of common stock to Narnia Investments, Narnia Investments will hold approximately 9.50% of the total issued and outstanding shares of common stock of the Company.
PROPOSAL 6. APPROVAL OF THE AGGREGATE RECOVERY FORBEARANCE AGREEMENT.
Aggregate Recovery LLC, d/b/a Aggrega Recovery Resources LLC, a Colorado limited liability company (“Aggregate Recovery”) obtained a judgment against the Company in the District Court in and for the City and County of Denver, State of Colorado, captioned “Aggregate Recovery LLC vs. Lexico Resources Corporation, Case No. 02 CV 6334 (the “Aggregate Recovery Judgment”). Subsequently, Aggregate Recovery has been engaged in a number of post-judgment proceedings, which include sheriff’s sales in Colorado and Utah, and post-judgment and other collection activitites in Utah, which include obtaining a writ of execution on its judgment lien on certain interests that the Company has in real property located in Township 9, South Range 20 East, S.L.M. Section 15:S/2SW/4, SW/4SE/4 in Uintah County, Utah, and condu cting a sheriff’s sale of the same. Aggregate Recovery is also currently engaged in post-judgment collection activitites in the courts of Colorado, including pursuing claims and judgments against Lex Dolton, the Company, Lexico Energy Corporation and Hachador Holdings Limited. The Company desires to continue its business operations without the burden of Aggregate Recovery’s post-judgment activitites directed at the Company’s assets other than those already the subject of Aggregate Recovery’s post-judgment and collection activitites.
Therefore, on May 4, 2010, the Company and Aggregate Recovery LLC, d/b/a Aggregate Recovery Resources LLC (“Aggregate Recovery”) entered into that certain forbearance agreement (the “Aggregate Recovery Forbearance Agreement”). In accordance with the terms and provisions of the Aggregate Recovery Forbearance Agreement, Aggregate Recovery will refrain from engaging in post-judgment execution proceedings on its judgment againstg the Company, except as to any asset, right or interest that has been or is currently the subject of or relatged to any post-judgment proceeding or collection action engaged in on behalf of Aggregate Recovery (the “Forbearance”). The Forbearance shall include the Company’s 25% interest in leases for oil and goas or geothermal resources, which may be located in Ui ntah Couth. In accordance with the terms and provisions of the Aggregate Recovery Forbearance Agreement, Aggregate Recovery shall retain all assets, interests, rights, money and documents that it has obtained through any poist-judgment execution proceedings or collection action against the Company.
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In further accordance with the terms and provisions of the Aggregate Recovery Forbearance Agreement: (i) the Company shall pay to Aggregate Recovery $4,500 for the professional fees incurred by Aggregate Recovery relating to the Aggregate Recovery Forbearance Agreement; (ii) Aggregate Recovery shall transfer 6,000,000 shares of the Company’s common stock held of record by Aggregate Recovery to Ronald L. Aden, which at the time of issuance had no value; (iii) Aggregate Recovery shall return to the Company the 1,000,000 shares of preferred stock held of record by Aggregate Recovery, which at the time of issuance had no value; and (iv) the Company shall issue to Aggregate Recovery an aggregate 45,000,000 pre-Reverse Stock Split shares of its restricted common stock within five days after the Shareholders Meeting, which 45,000,000 sh ares will be reduced to 2,250,000 shares of common stock after the effective date of the Reverse Stock Split. Upon the issuance of the aggregate 45,000,000 shares of common stock to Aggregate Recovery, Aggregate Recovery will hold approximately 34.12% of the total issued and outstanding shares of common stock of the Company.
PROPOSAL 7. TO APPROVE THE ENGAGEMENT OF M&K AS THE PRINCIPAL INDEPENDENT AUDITOR FOR THE COMPANY FOR FISCAL YEEAR ENDED DECEMBER 31, 2010.
The Company recommends that the shareholders vote in favor of ratifying the selection of the certified public
accounting firm of M&K of Denver, Colorado as the auditors who will audit the financial statements for the fiscal years ended December 31, 2008, December 31, 2009 and December 31, 2010 or until the Board of Directors, in its discretion, replaces them.
An affirmative vote of the majority of shares represented at the Shareholders Meeting is necessary to ratify the selection of auditors. There is no legal requirement for submitting this proposal to the shareholders; however, the Board of Directors believes it is of sufficient importance to seek ratification. The Company has considered whether the provision of the services covered in this section is compatible with maintaining M&K's independence and believes that it is.
Audit Fees
The Company did not incur any audit fees for the prior two fiscal years ended December 31, 2008 and December 31, 2009.
The Company did not incur any financial information systems design and implementation fees for the prior two fiscal years ended December 31, 2008 and December 31, 2009.
All Other Fees
The Company did not incur any other associated fees for the prior two fiscal years ended December 31, 2008 and December 31, 2009.
PROPOSAL 8. OTHER MATTERS
Our Board of Directors knows of no other matters to be acted upon at the meeting other than those presented to the Shareholders for their approval and consent at the Special Meeting.
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PROXY CARD
LEXICO RESOURCES INTERNATIONAL CORPORATION
SOLICITED FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 11, 2010
The undersigned hereby constitutes, appoints and authorizes Ronald L. Aden the true and lawful agent of the undersigned with full power of substitute and appointment, for and in the name, place and stead of the undersigned to act for and vote as designated below, all of the undersigned’s shares of the $0.001 par value common stock of Lexico Resources International Corporation, a Nevada corporation, at the special meeting of shareholders to be held at 2:00 p.m. Mountain Standard Time on Wednesday, August 11, 2010 at the Las Brisas Restaurant, 6781 South Clinton Street, Greenwood Village, Colrado 80112, and any adjournments or postponements thereof (the "Special Meeting”), for the following purposes:
1. | To elect two directors to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified: |
[ ] FOR all nominees listed below (except as marked to the contrary):
Ronald L. Aden Jeffrey Krupka
[ ] WITHHOLD AUTHORITY to vote for all nominees.
Instruction: To withhold authority to vote for any nominee, draw a line through or otherwise strike ou his name. If authority to vote for the election of any nominee is not withheld, the execution of this proxy card will be deemed to grant such authority.
2. | To approve the employment agreement between the Company and Ronald L. Aden dated June 1, 2010 (the “Aden Employment Agreement”). |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. | To approve the employment agreement between the Company and Jeffrey Krupka dated June 1, 2010 (the “Krupka Employment Agreement”). |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. | To approve the compensation agreement between the Company and Southwest Consulting Associates, Inc. (“SWCA”) dated June 1, 2010 (the “Compensation Agreement”). |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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5. | To approve an amendment to the Articles of Incorporation, as amended, to increase the authorized shares of common stock from 100,000,000 shares to 300,000,000 shares, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001 (the “Amendment”). |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. | To approve and authorize the Board of Directors to effect a reverse stock split of one-for-twenty (1:20) shares of the Company's outstanding common stock (the “Reverse Stock Split”), depending upon a determination by the Board of Directors that a Reverse Stock Split is in the best interests of the Company and its Shareholders with such post-split shares of common stock being referred to herein as the "New Common Stock". |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. | To approve the agreement for satisfaction of judgment between the Company and Narnia Investments Ltd. (“Narnia Investments”) dated April 28, 2010 and as amended (the “Narnia Investments Agreement”). |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. | To approve the forbearance agreement between the Company and Aggregate Recovery Resources LLC (“Aggregate Recovery”) dated May 4, 2010 and as amended (the “Aggregate Recovery Forbearance Agreement”). |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
9. | To ratify the engagement of M&K CPAs (“M&K”) to serve as the principal independent auditor for the Company for fiscal year ended December 31, 2010. |
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Shareholder Name: ____________________________________________________________
Please Print Name above
Signature: ___________________________________________________________________
___________________________________________________________________
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