SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
GLOBENET RESOURCES INC.
(the "Company")
----------------------
(Name of Small Business Issuer)
British Columbia, Canada NA
----------------------- ---------------- ------------
(State or Other Jurisdiction of Commission File I.R.S. Employer
Incorporation or Organization) Number Identification Number
25- 8551 General Currie Road Richmond,
British Columbia V6Y 1M3
--------------------------------------------------------------
(Address of Principal Executive Offices including Zip Code)
(604) 278 - 1502
--------------------------
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act: Common Voting
Stock, NPV
Number of outstanding shares of each class of the Issuer's classes of capital
or common shares of Globenet Resources Inc.: 6,838,636 Common Shares with no
par value.
Date of earliest event reported: July 30, 2002.
Page 1
INFORMATION TO BE INCLUDED IN THE REPORT
INFORMATION TO BE INCLUDED IN THE REPORT
Convention
In this Form 8K all references to "Canada" are references to The Dominion of
Canada. All references to the "Government" are references to the government
of Canada. Unless otherwise noted all references to "shares" or "common
stock" are references to the common shares of Globenet Resources Inc. (the
"Company").
In this document, all references to "SEC" are reference to the United States
Securities and Exchange Commission. References to "$", "Cdn Dollars", or
"Cdn$" are to the currency of Canada and all references to "US Dollars" or
"US$" are to the currency of the United States of America. Solely for the
convenience of the reader, this Form 8-K contains translations of certain
Cdn Dollars amounts into US Dollars at specified rates.
Exchange Rate Information
The rate of exchange means that noon buying rate in New York City for cable
transfer in Canadian dollars as certified for customs proposed by the Federal
Reserve Bank of New York. The average rate means the average of the exchange
rates on the last date of each month during a year.
2001 2000 1999 1998 1997
High $1.6034 $1.5583 $1.4849 $1.5770 $1.4328
Low 1.4935 1.4318 1.4420 1.4100 1.3470
Average for Period 1.5494 1.4854 1.4857 1.4894 1.3800
End of Period 1.5928 1.4995 1.4433 1.5375 1.4328
The exchange rate on June 30, 2002 was 1.5162.
The high and low exchange rates for the most recent six months are as
follows:
January February March April May June
2002 2002 2002 2002 2002 2002
High 1.6125 1.6094 1.5967 1.5988 1.5714 1.5481
Low 1.5873 1.5889 1.5777 1.5617 1.5280 1.5122
Page 2
GEOLOGIC TIME
Number of Years
Name of Period Name of Era before Present (Millions)
Quaternary Holocene 0 to 0.4
Pleistocene 0.4 to 1.8
Tertiary Pliocene 1.8 to 5.0
Miocene 5.0 to 24
Oligocene 24 to 38
Eocene 38 to 56
Paleocene 56 to 66
Mesozoic Cretaceous 66 to 140
Jurassic 140 to 200
Triassic 200 to 250
Paleozoic Permian 250 to 290
Carboniferous 290 to 365
Devonian 365 to 405
Silurian 405 to 425
Ordovician 425 to 500
Cambrian 500 to 570
Precambrian Precambrian > 570
Page 3
GLOSSARY
The following are abbreviations and definitions of terms commonly used in the
mining industry and this Report.
"Abitibi" or "Abitibi-Price" means Abitibi Inc., the Canadian forestry
company;
"AEM conductor" means airborne electro-magnetic conductor, an area of high
electrical conductivity as surveyed by geophysical instruments carried aboard
an aircraft;
"AND Co." means the Anglo-Newfoundland Development Corporation
"Anomaly" a deviation from the typical geological pattern
"Asarco" means Asarco Inc., the American-based mineral processing company
which co-owned the Buchans Mine from 1926 to 197 6;
" Au " abbreviation for gold
" Auriferous float" rock containing concentrations of gold
"Batholith" a large intrusive mass of igneous rock
"Chalcopyrite" means a mineral containing copper, iron, and sulphur and is an
ore mineral of copper;
"Disseminated" or "dissemination" is a descriptive term referring to mineral
grains, which are scattered evenly throughout a rock;
"EM" means electromagnetic and generally refers to a class of geophysical
survey useful in concentrations of sulphides;
"Gabbro" a type of igneous rock
"Galena" means a mineral containing lead and sulphur and is an ore mineral of
lead
"Greenschist facies" means the alteration of rock through a particular series
of temperature, pressure, and composition changes to products typical of low-
grade regional metamorphism;
"Igneous rock" a rock formed by the crystallization of molten rock or magma
"Magnetic survey" means a class of geophysical survey, which determines the
magnetic properties of a rock
"Massive sulphide" means a rock comprised entirely of metallic minerals;
"Mineralization" means the process by which minerals are introduced and
concentrated within a host rock, and the product of this process;
Page 4
"Net profits interest royalty" means a percentage of the dollar proceeds from
the sale of minerals, after all costs relating to the production, manufacture
and sale of the minerals are deducted;
"Net smelter return royalty" means a percentage of the gross dollar proceeds
obtained from the sale of minerals with only minor cost deductions for
shipping, insurance and smelter penalties allowed;
"Orebody" a natural aggregate of one or more minerals which, at a specific
time and place, may be mined and sold at a profit, or from which some part
can be profitably separated
"Ordovician" means a time period, approximately 500 to 440 million years ago;
"Pleistocene" means a time period, approximately 8,000 years ago to 2,000
years ago;
"Sedimentary Rock" rock formed from material derived from pre-existing rock
through mechanical means
"Sphalerite" means a mineral containing zinc and sulphur and is an ore
mineral of zinc
"Stockwork" means a three-dimensional network of veinlets;
"Total field magnetics" means the magnetic responses of the rock, as
collected from a "magnetic survey"
" Turbidite" a type of sedimentary rock
"Volcanogenic massive sulphide" or "VMS" means the accumulation of metals
precipitated on the ocean floor associated with ocean-floor volcanism and
which are enriched in iron and other metals;
"Volcaniclastic" means a sediment containing material of volcanic origin;
Page 5
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
(a) Merger Agreement
Pursuant to an Agreement and Plan of Reorganization (the "Merger Agreement")
dated July 22, 2002, Globenet Resources Inc. (the "Company"), a British
Columbia corporation, acquired all the outstanding shares of common stock of
Woodridge Capital Corp. ("Woodridge"), a Delaware corporation, from the
shareholders thereof in an exchange of an aggregate of 150,000 shares of
common stock of the Company (the "Acquisition"). Immediately following the
Acquisition Globenet Resources (Delaware) Corp. ("Subco") a Delaware
corporation and a wholly-owned subsidiary of the Company merged with
Woodridge (the "Merger").
The Acquisition was approved by the unanimous consent of the Board of
Directors of Woodridge and its shareholders on July 23, 2002. The
Acquisition was effective on July 23, 2002. The Merger was approved by
unanimous consent of the respective Board of Directors of Subco and
the Company on July 23, 2002. The Merger was effective on July 26, 2002. The
Acquisition and Merger is intended to qualify as reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
Upon effectiveness of the Acquisition and Merger, pursuant to Rule 12g-3(a)
of the General Rules and Regulations of the Securities and Exchange
Commission (the "Commission"), the Company elected to become the successor
issuer to Woodridge for reporting purposes under the United States Securities
Exchange Act of 1934 (the "1934 Act") and elects to report under the 1934 Act
effective July 30, 2002.
A copy of the Merger Agreement is filed as an exhibit to this Form 8-K and is
incorporated in its entirety herein. The foregoing description is modified by
such reference.
(b) Control of the Company
The Company had 6,838,636 shares of common stock issued and outstanding prior
to the Acquisition, and will have 6,988,636 shares issued and outstanding
following the Acquisition. Woodridge had 725,000 shares of common stock
issued and outstanding prior and after the Acquisition.
The following table sets forth each person known by Woodridge to be the
beneficial owner of five percent or more of the Woodridge's Common Stock,
prior to the closing of the Acquisition, all directors individually and all
directors and officers of Woodridge as a group. Except as noted, each person
has sole voting and investment power with respect to the shares shown.
Page 6
Name and Address Amount and Nature Percent of
Title of Class of Beneficial Owner of Beneficial Owner Class
- -------------- ------------------- ------------------- ----------
Common shares Colin Watt 725,000 100%
No par value 1350- 605 Robson Street
Vancouver BC
All Directors and Officers as a Group 725,000 100%
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of July 29, 2002, after
taking into effect the Acquisition, of (1) each person who is known to the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock, (2) each of the Company's directors and officers, and (3) all
directors and officers of the Company as a group:
Name and Address Amount and Nature Percent of
Title of Class of Beneficial Owner of Beneficial Owner Class
- -------------- ------------------- ------------------- ----------
No Par Value ROGER KIDLARK 68,000 Shares 1.0%
Common Stock 212 - 1128 6th Avenue N.W.
New Westminster, BC
President and Director
No Par Value JACK MILLIGAN nil nil
Common Stock 3936 Westridge
West Vancouver, BC
Director
No Par Value KERRY SPARKES 100,000 Shares 1.5%
Common Stock 2336 Riverbank Place
North Vancouver, BC
Director
No Par Value SHIRLEY MOONEY 715,000 Shares 10.5%
Common Stock # 25-8551 General Currie Road
Richmond, BC
Corporate Secretary
No Par Value DAVID PATTERSON 1,150,000 Shares 16.8%
Common Stock 2348 Orchard Lane
West Vancouver, BC
577 174 B.C. LTD. 500,000 Shares 7.3%
415 Gordon Avenue
West Vancouver, BC
No Par Value CERES INVESTMENTS INC. 600,000 Shares 8.8%
Common Stock Suite 1360 - 605 Robson Street
Vancouver, BC
Page 7
No Par Value ALIX V. PATTERSON 550,000 Shares 8.0%
Common Stock 2348 Orchard Lane
West Vancouver, BC
No Par Value MARTIN LEHN 550,000 Shares 8.0%
Common Stock 15490 Cliff Avenue
White Rock, BC
No Par Value DAVID BAKER 650,000 Shares 9.5%
Common Stock 4567 Hollypark Court
Delta, BC
No Par Value PACIFIC VENTURE 1,079,500 Shares 15.8%
Common Stock MARKETING CORP.
# 25-8551 General Currie Road
Richmond, BC
No Par Value ZURICHBERG 400,000 Shares 5.8%
Common Stock TREUHAND AG
Zurichbergstrasse 199, 8044
Zurich, Switzerland
No Par Value CARATAX LIMITED 347,223 Shares 5.1%
Common Stock PARTNERSHIP
2500 - 181 Bay Street
Toronto, ON
All Directors and Officers as a Group 883,000 Shares 12.9%
(1) All ownership is beneficial and of record, unless indicated otherwise
and includes shares issuable upon exercise of outstanding options, warrants
or other common stock equivalents that are exercisable within 60 days.
(2) Beneficial owners listed above have sole voting and investment power
with respect to the shares shown, unless otherwise indicated.
As of July 29, 2002 the Company had 301 shareholders of record.
Other than as disclosed above the Company is not aware of any other company,
any foreign government or any other person, jointly or severally, that
directly or indirectly controls the Company. The Company is not aware of any
arrangements the operation of which may at a future date result in a change
in control of the Company.
Page 8
Beneficial ownership in this Form 8K is determined in accordance with the
rules of the SEC and generally includes voting or investment power with
respect to securities. In accordance with SEC rules, shares of the Company's
common stock that maybe acquired upon exercise of stock options or warrants
are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of the
Company's common stock indicated as beneficially owned by them.
(c) Description of Woodridge Capital Corp.
Woodridge was organized under the laws of the State of Delaware on October
18, 2000. Woodridge was organized for the purposes of creating a corporate
vehicle to locate and acquire an operating business entity which management
of Woodridge felt would be a suitable acquisition (a "Target Company").
Woodridge recognized that as a result of its limited financial, managerial
and other resources, the number of suitable potential businesses that would
be available to it would be limited. Woodridge's principal business objective
was to seek long-term growth potential in the business in which it intended
to participate in rather than immediate, short-term earnings.
Woodridge did not restrict its search to any specific business, industry or
geographical location. It sought to acquire a Target Company which was
looking to avail itself of the benefits of being a "reporting issuer" in
order to facilitate capital formation to expand into new markets.
In order to better facilitate its business goals Woodridge voluntarily filed
with the SEC a Form 10SB12G on December 22, 2000 and became a "reporting
issuer" under the 1934 Act on February 20, 2001.
Woodridge did not, until the Merger, engage in any business activities other
than the identifying, investigating, and analyzing potential Target
Companies. Since its formation Woodridge has had limited finances and no
material assets or liabilities. Under the terms of the Merger the outstanding
assets and liabilities of Woodridge were assumed by Subco. The Company is not
obligated to pay any outstanding liabilities of Woodridge as a result of the
Merger.
Page 9
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) Criteria for Merger
The consideration exchanged pursuant to the Acquisition Agreement was
negotiated between Woodridge and the Company.
In evaluating the Acquisition, Woodridge used criteria such as the value of
assets of the Company, the Company's anticipated operations and acquisitions,
material contracts, business name and reputation, quality of management, and
current and anticipated operations. Woodridge determined that the
consideration for the merger was reasonable. In evaluating Woodridge, the
Company placed a primary emphasis on Woodridge's status as a reporting
company under the Section 12(g) of the 1934 Act, and Woodridge's facilitation
of the Company becoming a reporting company under the 1934 Act.
(b) Corporate History of the Company
Organization of the Company TC \l2 "Incorporation or Organization of the
Company
The Company was incorporated by registration of its Memorandum and Articles
under the Company Act (British Columbia) on May 30, 1980 under the name
"Lindex Explorations Ltd.". Effective November 15, 1984, the Company
consolidated its share capital on a five old for one new basis. On February
14, 1986, the Company changed its name from "Lindex Explorations Ltd." to
"Lectus Developments Ltd.". On May 15, 1991, the Company consolidated its
shares on a five old for one new basis and changed its name to "Swannell
Minerals Corp.". On April 1, 1997, the Company consolidated its shares on a
ten old for one new basis and changed its name to "Globenet Resources Inc.".
The head office of the Company is located at 25 - 8551 General Currie Road,
Richmond, British Columbia, V6Y 1M3 (Phone: 604-278-1502, Fax: 604-278-1592).
The registered office of the Company is located at Suite 602, 570 Granville
Street, Vancouver, British Columbia, V6C 3P1.
The auditors for the Company are Morgan & Company, Chartered Accountants, of
Vancouver British Columbia.
Intercorporate Relationships
The Company does not have any subsidiaries.
Employees
The Company presently does not have any employees. Two of the Company's
directors are geologists. None of the Company's current officers are employed
directly by the Company, and all officers devote less than 20% of their time
to the Company's business. All of the Company's officers and directors devote
a significant amount of their time to other interests or competing
businesses, which may conflict with the operations and business of the
Company.
Page 10
Trading
The Company is a reporting issuer in the Provinces of British Columbia and
Alberta, Canada. The Common Shares of the Company are currently listed on the
TSX Venture Exchange (the "Exchange") under the symbol GBR.
Business of the Company.
The Company is currently engaged in the acquisition, exploration and, if
warranted, development of natural resource properties, and currently holds
one principal mineral property, located in the central part of the Province
of Newfoundland and Labrador, Canada (the "South Quinn Lake Property").
History
In 1995 the Company acquired an interest in a staking syndicate (the
"Syndicate") which in return had a option to acquire a 100% interest in 17
properties totaling 2,529 claims in the Voisey's Bay area of Labrador,
Newfoundland (the "Voisey Property"). The Company issued 100,000 common
shares from its capital stock to a third party who staked the claims and
issued finder fees consisting of 98,583 common shares and $500 to a group who
arranged the transaction. In 1998 the Syndicate reduced its holding to 250
core mineral claims. In June, 2000 the Company sold its interest in the 250
claims to Donner Minerals Ltd. of Vancouver, British Columbia for 100,000
common shares of Donner Minerals Ltd.
In early 1999, the Company acquired a 100% interest in 185 contiguous claims
in the Lac Rocher area of the northern part of the Province of Quebec (the
"Lac Rocher Property"). As consideration, the Company paid $92,500 and issued
from its capital stock 50,000 common shares to the vendors. In addition the
Company reserved a 3% NSR for the vendors subject to a 2% buyback for
$1,000,000. In June 2000 the Company sold its interest in the properties for
$17,000 to Novawest Resources Inc and Goldeye Exploration Limited.
On March 20, 2000, the Company announced the proposed acquisition of Nascent
Advisers S.A. ("Nascent"), an Internet incubator located in Geneva,
Switzerland and Paris, France. Under the terms of the proposed acquisition,
the Company was to issue up to 37,000,000 shares in its capital stock for all
of the issued and outstanding shares of Nascent.
With the proposed acquisition of Nascent and the consequent change in the
Company's focus from mineral exploration to Internet incubator, the Company,
in June 2000 sold its remaining interests in the Voisey and Lac Rocher
properties. Due to market conditions, on July 10, 2000, the Company agreed
with Nascent to terminate the proposed acquisition.
Following the termination of its agreement with Nascent, the Company focused
its attention on seeking out a suitable business opportunity. On May 24,
2002, the Company announced the acquisition of an option to acquire a 100%
interest in the South Quinn Lake Property.
Page 11
South Quinn Lake Property
The following is a description of the South Quinn Lake Property. The
description of the property is summarized from the Technical Report dated
June 17, 2002 prepared for the Company by Kerry Sparkes, M.Sc., P.Geo., a
director of the Company.
Acquisition
Under an agreement dated May 24, 2002 with South Coast Ventures Inc. ("South
Coast") of St. John's, Newfoundland, the Company was granted an option (the
"Option") to acquire a 100% interest in the South Quinn Lake Property. In
consideration of the grant of the Option, the Company agreed to pay South
Coast cash consideration of $75,000 and issue to South Coast a total of
300,000 of the Company's common shares in staged payments: $5,000 and 20,000
common shares on Exchange acceptance, $5,000 and 30,000 common shares on or
before November 23, 2002; $15,000 and 75,000 common shares on or before May
23, 2003; $20,000 and 75,000 common shares on or before May 23, 2004; $30,000
and 100,000 common shares on or before May 23, 2005. The Company also agreed
to expend $400,000 in cumulative exploration expenditures on the South Quinn
Lake Property by May 23, 2005. South Coast will retain a 21/2% NSR in
production on the South Quinn Lake Property, of which the Company can
purchase 1% for $1,000,000.
The Company received Exchange approval to the Option on June 24, 2002.
Property Description and Location
The South Quinn Lake Property is located in central part of the Province of
Newfoundland, Canada, 55 km south of Buchans and about 75 km by road
southeast of Millertown and is comprised of two mapped staked licences issued
under the Mineral Act (Newfoundland). Assessment requirements in the first
year are $200 per claim, and the assessment requirement escalates by $50 per
claim per year for the first five years reaching $400 per claim in year 5.
Years six through ten require $600 in annual assessment. Also in year six, a
licence renewal fee of $50 per claim is charged. A summary of the titles
comprising the property is listed in Table 1.
Table 1
LICENCE CLAIMS HECTARES STAKED CREDITS EXCESS
#
6972M (1) 12 300 1999.07.19 $7255 $1855
8876M (2) 24 600 2002.05.24 $0 $0
(1) requires $1745 to be spent by 2002.08.19
(2) requires $ 4800 to be spent by 2003.08.24
Page 12
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The property is accessible by several logging roads, which pass adjacent to
the property. Local infrastructure of mining significance includes the Star
Lake hydroelectric generating facility located 25 km to the west, and the
Millertown hydroelectric facility located 60 kilometers to the north.
Undulating, hilly areas of moderate relief characterize the South Quinn Lake
Property region. Elevation ranges from 325 meters at the level of Rogerson
Lake to 450 meters above sea level on the highest hill within the property.
Vegetation consists of spruce and fir forest with 30% bog and scrub. The
region is covered with a thin veneer of Pleistocene glacial till and outwash
deposits typically 2 to 10 m thick, but reaching 30 m thick locally. Outcrop
exposure ranges from small areas of high outcrop density to large areas with
few exposures. Typical seasonal variation includes snowy winters from late
November to March and hot humid summers from June to September.
Regional Geology
The Victoria Lake Group includes all pre-Caradocian volcanic and sedimentary
rocks in the area bounded by Grand Falls in the northeast and King George IV
Lake in the southwest, Red Indian Lake in the northwest and Noel Paul's Brook
in the southeast. The group has proven to be very favourable for
volcanogenic massive sulphides and significant shear zone hosted lode gold
mineralization.
Regionally, the Victoria Lake Group can be subdivided into three belts
defined by their dominant lithology: (1) the Tulks Hill volcanic belt to the
southwest which includes the Victoria Mine sequence; (2) the Tally Pond
volcanic belt to the southeast, and (3) a volcanically derived sedimentary
belt in the northeast which in part is a lateral equivalent of the volcanic
belts.
The Victoria Lake Group has an inhomogeneously developed, regional
penetrative foliation defined by the orientation of chlorite and sericite,
flattened clasts and elongated crystal augen. The intensity of this
foliation, which is subparallel to bedding and axial planar to tight to
isoclinal folds, increases to the southwest. The rocks have been
metamorphosed to the lower-greenschist facies, except locally along their
southern margin where middle-greenschist to lower-amphibolite facies rocks
are present.
Property Geology
Regionally the area is located within easterly trending Ordovician and older
sedimentary and volcanic rocks of the Tally Pond Belt with younger Silurian
to Devonian mafic to felsic intrusive rocks.
Page 13
The property is predominantly underlain by a clastic sedimentary sequence
with a central volcanogenic unit. The general geological strike in the area
is 080? with steep dips towards the south. Towards the north these rocks are
in fault contact with the Silurian-aged Rogerson Lake conglomerate, and
towards the south they are in contact with a large Silurian to Devonian
granitic batholith. The clastic sequence is composed of fine-grained
siltstone, sandstone and graphitic sediments with lesser-intercalated pebble
conglomerates.
The central volcanogenic unit comprises mainly variably reworked felsic tuffs
with lesser reworked mafic tuff and mafic volcanic and intrusive rock. The
unit is at least 400m thick where the mineralized float is located and
appears to thicken eastward and grade into more proximal felsic quartz-eye
and lapilli tuffs. The felsic derived sediments are extensively Fe-carbonate
altered and sheared along the main trend of mineralized float.
Exploration History
American Smelting and Refining Company of New York, New York undertook the
earliest recorded work in the area in the late 1960's and early 1970's when
regional soil geochemistry surveys and reconnaissance ground geophysics
covered various anomalies outlined by an airborne-EM survey in the area. No
significant showings were located and there is no indication that their
geochemistry produced any anomalous values in the area.
Noranda Inc. of Toronto, Ontario began exploring the area in the late 1970's
and 1980's when it entered into a joint venture agreement with Price Nfld.
Co. Ltd of Grand Falls, Newfoundland. Initial work included regional
reconnaissance geological mapping and stream silt sampling. The latter
survey outlined numerous Pb, Zn anomalies in the Wilding Lake, Lake Douglas
and Haven Steady areas.
As a follow-up to the regional geochemistry survey, an airborne EM survey was
flown in the winter of 1983 and covered from the South Quinn Lake area north
to Reid Lot 235, south of the Rogerson Lake conglomerate. Subsequent ground
follow-up focused on targets in the area between Lake Douglas and Reid Lot
235. No airborne follow-up was undertaken in the South Quinn Lake area.
The area remained inactive until 1988 when it was covered as part of a
regional Au geochemistry program. Both basal till sampling and lake sediment
geochemistry surveys produced anomalous Au and base metal values in and
around South Quinn Lake. Reconnaissance prospecting was successful in
locating several angular quartz boulders bearing pyrite, arsenopyrite and
chalcopyrite over a strike length of 1.4 km, which returned values between
9.4 g/t Au, and 30.8 g/t Au. Several floats of massive to semi-massive
arsenopyrite were also located which returned assays between 1.7 g/t Au and
2.15 g/t Au.
Page 14
A grid was established on the property and covered with geological, soil
geochemical and geophysical surveys, including magnetics VLF-EM, HLEM (max-
min) and induced polarization. A limited trenching program undertaken in
1990 was successful in exposing a vein of semi-massive arsenopyrite and
quartz, which returned an assay of 11.7 g/t Au over 0.6m. A single hole
drilled beneath the trench encountered a 5.2 meter wide breccia zone
containing 15-20% arsenopyrite with 0.5 g/t Au over 1.0m. Several coincident
I.P. and soil anomalies remain untested.
Proposed Exploration
The Company presently contemplates undertaking a Phase I exploration program
(the "Phase I Program") consisting of a comprehensive geological evaluation
of the property. This evaluation would include re-establishing the old
Noranda grid, geological mapping and prospecting to trace the full extent of
the mineralized zone, and trenching of any new soil anomalies that are
coincident with induced polarization geophysics. Mag and VLF will aid in
delineating the structure that controls the mineralization. It is estimated
that the Phase I Program will take about 1 month and cost up to $65,000
On completion of the Phase I Program, the Company anticipates a Phase II
exploration program (the "Phase II Program") would be undertaken involving
drill testing the main zone to a vertical depth of 50 meters with 200 meter
spaced holes, with a 300 to 600 metre drill program. It is estimated that
the Phase II Program will take about 1 month and cost up to $85,000.
Funding requirements
The Company currently has sufficient funds for the Phase I Program. The
Company will need to raise additional capital to undertake the Phase II
Program. The Company proposes to raise additional financing through the sale
of equity securities during the next fiscal year, although there can be no
assurance that such funding will be available or that such funding, if
available, can be obtained on terms acceptable to the Company. In the event
that future equity financing cannot be raised or negotiations for joint
venture funding are not successful, the Company's activities may be curtailed
and this may adversely affect the Company's ability to carry out the required
level of expenditures to earn or maintain an equity interest in the South
Quinn Lake Property.
There is no assurance that the Company will earn revenue, operate profitably
or provide a return on investment to its security holders.
Should the Company decide that future exploration is warranted on the South
Quinn Lake Property a critical part of the Company's business plan will
require it to fund future exploratory costs. There can be no assurance that
the Company will be able to successfully raise the capital required, when
required, to meet its costs, or that it will successful in discovering
commercial quantities of minerals or that it will have access to funds to
develop a successful discovery without significant dilution or cost to the
Company's stockholders.
Page 15
(c) Management's Discussion and Analysis of Financial Condition and Results
of Operations
United States Generally Accepted Accounting Principles
See note 8 to the Financial Statements for a comparison of Canadian GAAP and
United States GAAP as applicable to the Company's operations.
Historically, the Company has been financed through the sale of its common
shares, either by way of private placement or through the exercise of
warrants or options. The Company does not expect to deviate from this
practice, and fully anticipates undertaking further private placements or
public offerings in the future in order to investigate and take advantage of
business opportunities which may arise.
Results of Operations
The following management discussion and analysis reviews the financial
statements of the Company for the past two fiscal years and offers an
explanation as to material changes which occur from year to year. Reference
should be made to the complete text of the Company's consolidated financial
statements, together with the notes and auditor's reports thereon.
Fiscal year ended July 31, 2001 compared to the fiscal year ended July 31,
2000
The Company's expenses for the year ended July 31, 2001 were $93,304 as
compared to $135,522 for the fiscal year ended July 31, 2000 reflecting the
Company's reduced activity following its failure to complete the acquisition
of Nascent Advisers S.A., the Internet incubator. The reduction in expenses
is predominantly attributable to a decrease in management fees from $43,000
in 2000 to $30,000 in 2001; office and printing costs from $59,100 in 2000 to
$25,593 in 2001; and legal fees from $11,281 in 2000 to $2,236 in 2001.
The Company incurred a net loss of $90,047 for the year ended July 31, 2001.
During the fiscal year ended July 31, 2000, it incurred a net loss of
$689,155. The net loss for 2000 included $559,181 in mineral property costs
written-off. The mineral property costs written-off related to the Company's
interests in the Voisey and Lac Rocher Properties.
The Company had interest income of $3,257 in the year ended July 31, 2001 and
interest income of $5,548 in the year ended July 31, 2000. The Company did
not have any other income in fiscal 2001 and 2000.
Page 16
The Company did not incur any mineral property acquisition, exploration or
development costs during fiscal 2001 or 2000.
Fiscal year ended July 31, 2000 compared to the fiscal year ended July 31,
1999
The Company's expenses for the year ended July 31, 2000 were $135,522 as
compared to $140,975 for the fiscal year ended July 31, 1999.
The Company incurred a net loss of $689,155 for the year ended July 31, 2000.
The net loss included $559,181 in mineral property costs written-off. The
mineral property costs written-off related to the Company's interest in the
Voisey and Lac Rocher Properties. During the fiscal year ended July 31,
1999, the Company incurred a net loss of $860,659, including $735,310 in
mineral property costs written-off. The mineral property costs written-off
related to the Company's mineral properties in Argentina.
The Company had interest income of $5,548 in the year ended July 31, 2000 and
interest income of $15,626 in the year ended July 31, 1999. The Company did
not have any other income in fiscal 2000 or 1999.
The Company did not incur any mineral property acquisition, exploration or
development costs during fiscal 2000 or 1999.
Liquidity and Capital Resources
The Company did not carry out any financing activities in fiscal 2001.
The Company had a working capital surplus of $97,833 at July 31, 2001
compared to a working capital surplus of $176,831 at July 31, 2000. The
decrease in its working capital surplus between July 31, 2000 and July 31,
2001 is attributable to the lack of financing activities as a result of the
failure of the Company to proceed with the acquisition of Nascent.
On July 26, 2002, the Company closed a private placement of 1,975,000 units
at a price of $0.10 per unit, for gross proceeds of $197,500. Each unit is
comprised of one common share and one common share purchase warrant, with
each share purchase warrant entitling the holder to purchase one additional
common share for a period of two years at a price of $0.12 per share. On
July 26, 2002, the Company closed a second private placement of 950,000 units
at a price of $0.20 per unit for gross proceeds of $190,000. Each unit is
comprised of one common share and one common share purchase warrant, with
each share purchase warrant entitling the holder to purchase one additional
common share for a period of two years at a price of $0.25 per share. The
funds raised by way of the two private placements will be used to further
exploration on the Company's South Quinn Lake Property and for working
capital purposes.
Page 17
As of April 30, 2002, the date of the Company's most recent nine month
quarterly financial statements, the Company had total assets of $51,487
($8,258 of cash, $34,662 of accounts receivable, $5,000 of marketable
securities and $3,567 of furniture and fixtures); $8,200 of accounts payable
and accrued liabilities; and shareholders' equity of $51,487. During that
period, the Company had net losses of $58,742 and a net loss per share of
$0.01. The majority of the expenditures during the nine months ended April
30, 2002 were for accounting and auditing fees, management fees and office
rent.
As of the date of this Form 8K, the Company has the following securities
issued and outstanding: (i) 6,838,636 common shares; (ii) 2,925,000 share
purchase warrants; and (iii) 165,000 share purchase options.
Capital Requirements update
The Company's greatest cash requirements during 2002 will be for funding its
obligations on the South Quinn Lake Property. The Company will be seeking to
fund activities and other operating needs in the next twelve months from
funds to be obtained through private placements or public offerings of debt
or equity securities.
Subsequent to the next 12 months, the Company plans to continue financing it
operations and capital requirements with new private financings and public
offerings of debt and equity securities.
The Company expects that its existing capital requirements arising from its
operations will be met from the Company's equity financing although there can
be no assurances that such financings will occur.
Qualitative Information about Market Risk
Currency Exchange Rate Sensitivity
The results of the Company's operations are subject to currency transnational
risk and currency transaction risk. Regarding currency transnational risk,
the operating results and financial position of the Company are reported in
Canadian dollars in the Company's consolidated financial statements. The
fluctuation of the US dollar in relation to the Canadian dollar will
therefore have an impact upon the profitability of the Company and may also
affect the value of the Company's assets and the amount of shareholders'
equity.
In regards to transaction risk, the Company's functional currency is the
Canadian dollar and its activities are predominantly executed using the
Canadian dollar. The Company does not incur any of its expenses in U.S.
dollars. The Company has not entered into any agreements or purchased any
instruments to hedge any possible currency risks at this time.
Page 18
Interest Rate Sensitivity
The Company currently has no significant short term or long term debt
requiring interest payments. As a result, the Company has not entered into
any agreement or purchased any instrument to hedge against possible interest
rate risks at this time.
Taxation
The following is a general discussion of certain possible Canadian and United
States federal income tax consequences, under current law, generally
applicable to a U.S. Holder (as hereinafter defined) of common shares of the
Company. This discussion does not address all potentially relevant federal
income tax matters and it does not address consequences peculiar to persons
subject to special provisions of federal income tax law, such as those
described below as excluded from the definition of a U.S. Holder. In
addition, this discussion does not cover any state, local, or foreign tax
consequences.
THE DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IT IS NOT
INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX
ADVICE TO ANY HOLDER OR PROSPECTIVE HOLDER OF COMMON SHARES OF
THE COMPANY AND NO OPINION OR REPRESENTATION WITH RESPECT TO
THE CANADIAN OR UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO ANY SUCH HOLDER OR PROSPECTIVE HOLDER IS MADE. ACCORDINGLY,
HOLDERS AND PROSPECTIVE HOLDERS OF COMMON SHARES OF THE
COMPANY SHOULD CONSULT THEIR OWN TAX ADVISORS ABOUT THE
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF COMMON SHARES OF THE
COMPANY.
U. S. Holders
As used herein, a "U.S. Holder" means a holder of common shares of the
Company who is a citizen or individual resident of the United States, a
company or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof or a trust whose
income is taxable in the United States irrespective of source. This summary
does not address the tax consequences to, and U.S. Holder does not include,
persons subject to specific provisions of federal income tax law, such as
tax-exempt organizations, qualified retirement plans, individual retirement
accounts and other tax-deferred accounts, financial institutions, insurance
companies, real estate investment trusts, regulated investment companies,
broker-dealers, non-resident alien individuals, persons or entities that have
a "functional currency" other than the U.S. dollar, shareholders who hold
common shares as part of a straddle, hedging or a conversion transaction,
and shareholders who acquired their common shares through the exercise of
employee stock options or otherwise as compensation for services.
Page 19
A "U.S. Resident" means a U.S. Holder who (i) is a resident of the United
States for the purposes of the Canada-United States Income Tax Convention,
1980 (the "Convention"); (ii) is not currently, nor has previously been a
resident of Canada or deemed to be a resident of Canada for the purposes of
the Income Tax Act (Canada) (herein referred to as the "Canada Tax Act") at
any time while the holder has held common shares; (iii) holds his or her
common shares as capital property; (iv) deals at arm's length with the
Company for the purposes of the Canada Tax Act; and (v) does not use or hold,
and is not deemed under the Canada Tax Act to use or hold, such common shares
in carrying a business or performing independent services in Canada. Common
shares will generally be considered to be capital property to a U.S. Resident
unless they are held as inventory in the course of carrying on a business or
were acquired in a transaction considered to be an adventure or concern in
the nature of trade.
This summary is limited to U.S. Holders who own common shares as capital
assets. This summary does not address the consequences to a person or entity
holding an interest in a shareholder or the consequences to a person of the
ownership, exercise or disposition of any options, warrants or other rights
to acquire common shares.
CANADIAN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon the current provisions of the Canada
Tax Act and the regulations (the "Regulations") enacted thereunder as at the
date hereof, the Company's understanding of the current published
administrative and assessing policies of the Canada Customs and Revenue
Agency, all specific proposals to amend the Canada Tax Act and the
Regulations publicly announced by the Minister of Finance before the date
hereof (the "Proposed Amendments") and the provisions of the Convention as at
the date hereof. This summary does not take into account provincial,
territorial or foreign income tax considerations (see "United States Federal
Income Tax Consequences" below), and does not take into account or anticipate
any changes in law, whether by judicial, governmental or legislation decision
or action except to the extent of the Proposed Amendments. No assurance can
be given that any of the Proposed Amendments will be enacted into law or that
legislation will implement the Proposed Amendments in the manner now
proposed.
Distribution on Common Shares of the Company
Under the Convention, dividends which are paid or credited, or are deemed to
be paid or credited, to a U.S. Resident in respect of the common shares will
generally be subject to Canadian withholding tax at a rate of 5% of the gross
amount of the dividends if the beneficial owner of the dividends is a company
which owns at least 10% of the voting stock of the Company or 15% of the
gross amount of the dividends if the beneficial owner of the dividends is
any other U.S. Resident (other than certain exempt organizations referred to
in Article XXI of the Convention).
Page 20
Disposition of Common Shares of the Company
A U.S. Resident will generally not be subject to tax under the Canada Tax Act
in respect of any capital gain realized on the disposition or deemed
disposition of common shares unless such common shares are "taxable Canadian
property", as defined in the Canada Tax Act, to the U.S. Resident. The
common shares will not generally constitute taxable Canadian property to a
U.S. Resident unless either (i) at any time during the five -year period
ending at the time of the disposition of the common shares by such U.S.
Resident, 25% or more of the issued shares (and in the view of the Canada
Customs and Revenue Agency, taking into account any rights to acquire shares)
of any class or series of the capital stock of the Company were owned by such
U.S. Resident, persons with whom the U.S. Resident did not deal at arm's
length or such U.S. Resident together with such persons, or (ii) the U.S.
Resident's common shares are otherwise deemed to be taxable Canadian
property. Capital gains realized on the disposition of common shares that
constitute taxable Canadian property to a U.S. Resident will nevertheless, by
virtue of the Convention, not be subject to tax under the Canadian Tax Act,
provided that shares of the Company do not derive their value principally
from real property, including the right to explore for or exploit natural
resources and rights to amounts computed by reference to production, situated
in Canada at the time of disposition.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon the sections of the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, published
Internal Revenue Service ("IRS") rulings, published administrative positions
of the IRS and court decisions that are currently applicable, any or all of
which could be materially and adversely changed, possibly on a retroactive
basis, at any time. This discussion does not consider the potential effects,
both adverse and beneficial, of any recently proposed legislation which, if
enacted, could be applied, possibly on a retroactive basis, at any time.
Distribution on Common Shares of the Company
U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to common shares of the Company are required to
include in gross income for United States federal income tax purposes the
gross amount of such distributions equal to the U.S. dollar value of such
dividends on the date of receipt (based on the exchange rate on such date) to
the extent that the Company has current or accumulated earnings and profits,
without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be credited, subject to
certain limitations, against the U.S. Holder's federal income tax liability
or, alternatively, may be deducted in computing the U.S. Holders' federal
taxable income by those who itemize deductions. (See more detailed
discussion at "Foreign Tax Credit" below). To the extent that distributions
exceed current or accumulated earnings and profits of the Company, they
will be treated first as a return of capital up to the U.S. Holder's adjusted
basis in the common shares and thereafter as gain from the sales of exchange
of the common shares. Preferential tax rates for long-term capital gains are
applicable to a U.S. Holder which is an individual, estate or trust. There
are currently no preferential tax rates for long-term capital gains for a
U.S. Holder which is a corporation.
Page 21
In the case of foreign currency received as a dividend that is not converted
by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will
have a tax basis in the foreign currency equal to its U.S. dollar value on
the date of receipt. Generally, any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, to the extent that there are no expenses associated with the
transaction that meet the requirement for deductibility as a trade or
business expense (other than travel expenses in connection with a business
trip) or as an expense for the production of income.
Dividends paid on the common shares of the Company will not generally be
eligible for the dividends received deduction provided to companies receiving
dividends from certain United States companies. A U.S. Holder which is a
company may, under certain circumstances, be entitled to a 70% or 80%
deduction of the United States source portion of dividends received from the
Company (unless the Company qualifies as a "foreign personal holding company"
or a "passive foreign investment company", as defined below) if such U.S.
Holder owns shares representing at least 10% or 20%, respectively, of the
voting power and value of the Company. The availability of this deduction is
subject to several complex limitations which are beyond the scope of this
discussion.
Under current temporary Treasury Regulations, dividends paid, and the
proceeds of a sales of Company's common shares, will be subject to U.S.
information reporting requirements and may also be subject to the 31% U.S.
backup withholding tax, unless the Company or paying agent is furnished witha
duly completed and signed Form W-9. Any amounts withheld under the U.S.
backup withholding tax rules will be allowed as a refund or a credit against
the U.S. Holder's U.S. federal income tax liability, provided the required
information is furnished to the IRS.
Foreign Tax Credit
A U.S. Holder who pays (or has withheld from distributions) Canadian income
tax with respect to the ownership of common shares of the Company may be
entitled, at the option of the U.S. Holder, to either receive a deduction or
a tax credit for such foreign tax paid or withheld. Generally, it will be
more advantageous to claim a credit because a credit reduces United States
federal income taxes on a dollar-for-dollar basis, while a deduction merely
reduces the taxpayer's income subject to tax. This election is made on a
year-by-year basis and applies to all foreign taxes paid by (or withheld
from) the U.S. Holder during that year. There are significant and complex
limitations which apply to the credit, amount which is the general limitation
that the credit cannot exceed the proportionate shares of the U.S. Holder's
United States income tax liability that the U.S. Holder's foreign sources
income bears to his or its worldwide taxable income. In the determination of
the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern
this classification process. In addition, this limitation is calculated
separately with respect to specific classes of income such as "passive
income", "high withholding tax interest", "financial services income",
"shipping income", and certain other classifications of income. Dividends
distributed by the Company will generally constitute "passive income" or, in
the case of certain U.S. Holders, "financial services income" for these
purposes. The availability of the foreign tax credit and the application of
the limitations on the credit are fact specific, and U.S. Holders of common
shares of the Company should consult their own tax advisors regarding their
individual circumstances.
Page 22
Disposition of Common Shares of the Company
A U.S. Holder will recognize a gain or loss upon the sale of common shares of
the Company equal to the difference, if any, between (i) the amount of cash
plus the fair market value of any property received, and (ii) the
shareholder's tax basis in the common shares of the Company. This gain or
loss will be a capital gain or loss if the common shares are a capital asset
in the hands of the U.S. Holder, which will be long-term capital gain or loss
if the common shares of the Company are held for more than one year. Lower
long-term capital gain rates will apply if the U.S. Holder is an individual,
estate or trust and such U.S. Holder has held the common shares for more than
eighteen months. Deduction for net capital loss may be carried over to be
used in later tax years until such net capital loss is thereby exhausted. For
U.S. Holders that are corporations (other than corporations subject to
Subchapter S of the Code), an unused net capital loss may be carried back
three years and carried forward five years from the loss year to be offset
against capital gains until such net capital loss is thereby exhausted.
Other Considerations
In the following circumstances, the above sections of this discussion may not
describe the United States federal income tax consequences resulting from the
holding and disposition of common shares:
Foreign Personal Holding Company
If at any time during a taxable year more than 50% of the total combined
voting power or the total value of the Company's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the United States and 50% (60% in the first year) or more of the
Company's gross income for such year was derived from certain passive sources
(e.g., from dividends received from its subsidiaries), the Company may be
treated as a "foreign personal holding company". In that event, U.S. Holders
that hold common shares would be required to include in gross income for such
year their allocable portions of such passive income to the extent the
Company does not actually distribute such income.
Foreign Investment Company
If 50% or more of the combined voting power or total value of the Company's
outstanding shares are held, directly or indirectly, by citizens or residents
of the United States, United States domestic partnerships or corporations, or
estates or trusts other than foreign estates or trusts (as defined by the
Code Section 7701(a)(31)), and the Company is found to be engaged primarily
in the business of investing, reinvesting, or trading in securities,
commodities, or any interest therein, it is possible that the Company may be
treated as a "foreign investment company" as defined in Section 1246 of the
Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging common shares to be treated as ordinary income rather than capital
gain.
Page 23
Passive Foreign Investment Company
Certain United States income tax legislation contains rules governing
"passive foreign investment companies" ("PFIC") which can have significant
tax effects on U.S. Holders of foreign corporations. These rules do not
apply to non-U.S. Holders. Section 1297 of the Code defines a PFIC as a
corporation that is not formed in the United States and, for any taxable
year, either (i) 7% or more of its gross income is "passive income", which
includes interest, dividends and certain rents and royalties or (ii) the
average percentage, by fair market value (or, if the Company is a controlled
foreign Company or makes an election, adjusted tax basis) of its assets
that produce or are held for the production of "passive income" is 50% or
more. The Company believes that it qualified as a PFIC for the current
fiscal year and may qualify as a PFIC in subsequent years. There can be no
assurance that the Company's determination concerning its PFIC status will
not be challenged or that it will able to satisfy record keeping requirements
which will be imposed on a Qualified Electing Fund ("QEF"). Each U.S. Holder
of the Company is urged to consult a tax advisor with respect to how the PFIC
rules affect their tax situation.
A U.S. Holder who holds stock in a foreign corporation during any year in
which such Company qualifies as a PFIC may elect to be subject to United
States federal income taxation under one of two alternative tax regimes. In
the event that no such election is made, the PFIC rules will apply. The
following is a discussion of the two alternative elective tax regimes applied
to such U.S. Holders of the Company. In addition, special rules apply if a
foreign corporation qualifies as both a PFIC and a "controlled foreign
Company" (as defined below) and a U.S. Holder owns, directly and indirectly,
ten percent (10%) or more of the total combined voting power of classes
of shares of such foreign corporation (See more detailed discussion at
"Controlled Foreign Company" below).
Assuming that the Company satisfies record-keeping requirements, a U.S.
Holder who elects in a timely manner to treat the Company as a QEF (an
"Electing U.S. Holder") will be subject, under Section 1293 of the Code, to
current federal income tax for any taxable year in which the Company
qualifies as a PFIC on his pro rata share of the Company's (i) "net capital
gain" (the excess of net long-term capital gain over net short-term capital
loss), which will be taxed as long-term capital gain to the Electing U.S.
Holder and (ii) "ordinary earnings" (the excess of earnings and profits over
net capital gain), which will be taxed as ordinary income to the Electing
U.S. Holder, in each case, for the shareholder's taxable year in which (or
with which) the Company's taxable year ends, regardless of whether such
amounts are actually distributed.
The effective QEF election also allows the Electing U.S. Holder to (i)
generally treat any gain realized on the disposition of Company common shares
(or deemed to be realized on the pledge of his shares) as capital gain; (ii)
treat his share of the Company's net capital gain, if any, as long-term
capital gain instead of ordinary income; and (iii) either avoid interest
charges resulting from PFIC status altogether, or make an annual election,
subject to certain limitations, to defer payment of current taxes on his
share of the Company's annual realized net capital gain and ordinary earnings
subject, however, to an interest charge. If the Electing U.S. Holder is not
a corporation, such an interest charge would be treated as "personal
interest" that is not deductible.
Page 24
The procedure a U.S. Holder must comply with in making an effective QEF
election will depend on whether the year of the election is the first year in
the U.S. Holder's holding period in which the Company is a PFIC. If the U.S.
Holder makes a QEF election in such first year, i.e., a timely QEF election,
then the U.S. Holder may make the QEF election by simply filing the
appropriate documents at the time the U.S. Holder files his tax return for
such first year. If, however, the Company qualified as a PFIC in a prior
year, then in addition to filing documents, the U.S. Holder must elect to
recognize (i) under the rules of Section 1291 of the Code (discussed below),
any gain that he would otherwise recognize if the U.S. Holder sold his stock
on the qualification date or (ii) if the Company is a controlled foreign
corporation, the U.S. Holder's pro rata share of the Company's post-1986
earnings and profits as of the qualification date. The qualification date
is the first day of the Company's first tax year in which the Company
qualified as a "qualified electing fund" with respect to such U.S. Holder.
The elections to recognize such gain or earnings and profits can only be made
if such U.S. Holder's holding period for the common shares of the Company
includes the qualification date. By electing to recognize such gain or
earnings and profits, the U.S. Holder will be deemed to have made a timely
QEF election. A U.S. Holder who made elections to recognize gain or earnings
and profits after May 1, 1992 and before January 27, 1997 may, under certain
circumstances, elect to change such U.S. Holder's qualification date to
the first day of the first QEF year. U.S. Holders are urged to consult a tax
advisor regarding the availability of and procedure for electing to recognize
gain or earnings and profits under the foregoing rules. In addition, special
rules apply if a foreign corporation qualifies as both a PFIC and a
"controlled foreign corporation" (as defined below) and a U.S. Holder owns,
directly and indirectly, ten percent (10%) or more of the total combined
voting power of classes of shares of such foreign corporation (See more
detailed discussion at "Controlled Foreign Corporation" below).
If the Company no longer qualifies as a PFIC in a subsequent year, a timely
QEF election will remain in effect, although not applicable, during those
years that the Company is not a PFIC. Therefore, if the Company requalifies
as a PFIC, the QEF election previously made is still valid, and the U.S.
Holder is required to satisfy the requirements of that election.
Furthermore, a QEF election remains in effect with respect to a U.S. Holder,
although dormant, after a U.S. Holder disposes of its entire interest in the
Company. Upon the U.S. Holder's reacquisition of an interest in the Company,
the QEF election will apply to the newly acquired stock of the Company.
Page 25
Effective for tax years of U.S. Holders beginning after December 31, 1997,
U.S. Holders who hold (actually or constructively) marketable stock of a
foreign corporation that qualifies as a PFIC, may annually elect to mark such
stock to the market (a "mark-to-market election"). If such an election is
made, such U.S. Holder will not be subject to the special taxation rules of
Section 1291 described below for the taxable year for which the mark-to-
market election is made. A U.S. Holder who makes such an election will
include in income for the taxable year for which the election was made in an
amount equal to the excess, if any, of the fair market value of the
common shares of the Company as of the close of such tax year over such U.S.
Holder's adjusted basis in such common shares. In addition, the U.S. Holder
is allowed a deduction for the lesser of (i) the excess, if any, of such U.S.
Holder's adjusted tax basis in the common shares over the fair market value
of such shares as of the close of the tax year, or (ii) the excess, if any,
of (A) the mark-to-market gains for the common shares in the Company included
by such U.S. Holder for prior tax years, including any amount which would
have been included for any prior tax year but for Section 1291 interest on
tax deferral rules discussed below with respect to Non-Electing U.S. Holders,
over (B) the mark-to-market losses for shares that were allowed as deductions
for prior tax years. U.S. Holder's adjusted tax basis in the common shares
of the Company will be increased to reflect the amount included or deducted
as a result of a mark-to-market election. A mark-to-market election only
applies to the taxable year in which the election was made. A separate
election must be made by a U.S. Holder for each subsequent taxable year.
Because the Internal Revenue Service has not established procedures for
making a mark-to-market election, U.S. Holders should consult their tax
advisor regarding the manner of making such an election.
If a U.S. Holder does not make a timely QEF or mark-to-market election during
a year in which it holds (or is deemed to have held) the shares in question
and the Company is a PFIC (a "Non-electing U.S. Holder"), then special
taxation rules under Section 1291 of the Code will apply to (i) gains
realized on the disposition (or deemed to be realized by reasons of a pledge)
of his Company common shares and (ii) certain "excess distributions", as
specifically defined, by the Company.
A Non-electing U.S. Holder generally would be required to pro rate all gains
realized on the disposition of his Company common shares and all excess
distributions on his Company common shares over the entire holding period for
the Company. All gains or excess distributions allocated to prior years of
the U.S. Holder (other than years prior to the first taxable year of the
Company during such U.S. Holder's holding period and beginning after January
1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for
each such prior year applicable to ordinary income. The Non-electing U.S.
Holder also would be liable for interest on the foregoing tax liability for
each such prior year calculated as if such liability had been due with
respect to each such prior year. A Non-electing U.S. Holder that is not a
corporation must treat this interest charge as "personal interest" which, as
discussed above, is wholly nondeductible. The balance of the gain or the
excess distribution will be treated as ordinary income in the year of the
disposition or distribution, and no interest charge will be incurred with
respect to such balance
If the Company is a PFIC for any taxable year during which a Non-electing
U.S. Holder holds Company common shares, then the Company will continue to be
treated as a PFIC with respect to such Company common shares, even if it is
no longer definitionally a PFIC. A Non-electing U.S. Holder may terminate
this deemed PFIC status by electing to recognize a gain (which will be taxed
under the rules discussed above for Non-electing U.S. Holders) as if such
Company common shares had been sold on the last day of the last taxable year
for which it was a PFIC.
Page 26
Under Section 1291(f) of the Code, the IRS has issued proposed regulations
that, subject to certain exceptions, would treat as taxable certain transfers
of PFIC stock by Non-Electing U.S. Holders that are generally not otherwise
taxed, such as gifts, exchanges pursuant to corporate reorganizations, and
transfers at death. Generally, in such cases the basis of the Company common
shares in the hands of the transferee and the basis of any property received
in the exchange for those common shares would be increased by the amount of
gain recognized. An Electing U.S. Holder would not be taxed on certain
transfers of PFIC stock, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. The transferee's basis in this case
will depend on the manner of the transfer. In a transfer at death, for
example, the transferee's basis is equal to (i) the fair market value of the
Electing U.S. Holder's common shares, less (ii) the excess of the fair market
value of the Electing U.S. Holder's common shares reduced by the U.S.
Holder's adjusted basis in these common shares at death. The specific tax
effect to the U.S. Holder and the transferee may vary based on the manner in
which the common shares are transferred. Each U.S. Holder of the Company is
urged to consult a tax advisor with respect to how the PFIC rules affect
their tax situation.
Certain special, generally adverse, rules will apply with respect to Company
common shares while the Company is a PFIC whether or not it is treated as a
QEF. For example under Section 1298(b)(6) of the Code, a U.S. Holder who
uses PFIC stock as security for a loan (including a margin loan) will, except
as may be provided in regulations, be treated as having made a taxable
disposition of such shares.
Controlled Foreign Company
If more than 50% of the voting power of all classes of shares or the total
value of the shares of the Company is owned, directly and indirectly, by
citizens or residents of the United States, United States domestic
partnerships and companies or estates or trusts other than foreign estates
or trusts, each of whom own 10% or more of the total combined voting power of
all classes of shares of the Company ("United States shareholder"), the
Company could be treated as a "controlled foreign Company" under Subpart F of
the Code. This classification would effect many complex results one of
which is the inclusion of certain income of a CFC which is subject to current
U.S. tax. The United States generally taxes a United States shareholder of a
CFC currently on their pro rata shares of the Subpart F income of the CFC.
Such U.S. shareholders are generally treated as having received a current
distribution out of the CFC's Subpart F income and are also subject to
current U.S. tax on their pro rata shares of the CFC's earnings invested in
U.S. property. The foreign tax credit described above may reduce the U.S.
tax on these amounts. In addition, under Section 1248 of the Code, gain from
the sale or exchange of shares by a U.S. Holder of common shares of the
Company who is or was a United States shareholder at any time during the
five-year period ending with the sale or exchange is treated as ordinary
income to the extent of earnings and profits of the Company attributable to
the shares sold or exchanged. If a foreign corporation is both a PFIC and
CFC, the foreign corporation generally will not be treated as a PFIC with
respect to United States shareholders beginning after 1997 and for taxable
years of foreign corporations ending with or within such taxable years of
United States shareholders. Special rules apply to United States
shareholders who are subject to the special taxation rules under Section 1291
discussed above with respect to PFIC. Because of the complexity of Subpart
F, and because it is not clear that Subpart F would apply to U.S. Holders of
common shares of the Company, a more detailed review of these rules is
outside of the scope of this discussion.
Page 27
Exchange Controls
There is no law or governmental decree or regulation in Canada that restricts
the export or import of capital, or affects the remittance of dividends,
interest or other payments to a non-resident holder of Common Shares, other
than withholding tax requirements.
There is no limitation imposed by Canadian law or by the constituent
documents of the Company on the right of a non-resident to hold or vote
Common Shares, other than are provided in the Investment Canada Act (Canada).
The following summarizes the principal features of the Investment Canada Act
(Canada).
The Investment Canada Act (Canada) requires certain "non-Canadian"
individuals, governments, corporations or other entities who wish to acquire
a "Canadian business" (as defined in the Investment Canada Act), or establish
a "new Canadian business" (as defined in the Investment Canada Act) to file
either a notification or an application for review with a governmental agency
known as "Investment Canada". The Investment Canada Act requires that
certain acquisitions of control by a Canadian business by a "non-Canadian"
must be reviewed and approved by the Minister responsible for the Investment
Canada Act on the basis that the Minister is satisfied that the acquisition
is "likely to be of net benefit to Canada", having regard to criteria set
forth in the Investment Canada Act. Only acquisitions of control rules for
the determination of whether control has been acquired and, pursuant to those
rules, the acquisition of one-third or more of the voting shares of a
corporation may, in some circumstances, be considered to constitute an
acquisition of control. Certain review able acquisitions of control may not
be implemented before being approved by the Minister; if the Minister does
not ultimately approve a review able acquisition that has been completed, the
acquired Canadian business would be divested. Failure to comply with the
review provisions of the Investment Canada Act could result in, among other
things, an injunction or a court order directing disposition of assets or
shares.
(d) Risk Factors
The following risks relate specifically to the Company's business and should
be considered carefully. The Company's business, financial condition and
results of operations could be materially and adversely affected by any of
the following risks.
Page 28
The Company's limited operating history makes it difficult to evaluate the
Company's current business and forecast future results
The Company has only a limited operating history on which to base an
evaluation of the Company's current business and prospects, each of which
should be considered in light of the risks, expenses and problems frequently
encountered in the early stages of development of all companies. This limited
operating history leads the Company to believe that period-to-period
comparisons of its operating results may not be meaningful and that the
results for any particular period should not be relied upon as an indication
of future performance.
The Company's lack of cash flow and additional funding requirements
The Company has no significant source of operating cash flow. The Company has
limited financial resources.
The Company anticipates raising such additional capital through public or
private financings, as well as through loans and other resources. There is no
assurance that the necessary funds would be available to the Company on terms
and conditions acceptable to it.
Additional funds raised by the Company through the issuance of equity or
convertible debt securities will cause the Company's current stockholders to
experience dilution. Such securities may grant rights, preferences or
privileges senior to those of the Company's common stockholders.
The Company does not have any contractual restrictions on the Company's
ability to incur debt and, accordingly, the Company could incur significant
amounts of indebtedness to finance its operations. Any such indebtedness
could contain covenants, which would restrict the Company's operations.
Need for Additional Financing
If the Company wishes to participate further in it's mineral property, or in
additional mineral exploration programs, it would need to raise additional
financing to pay its share of exploration and drilling costs. There is no
assurance that such financing will be available on terms acceptable to the
Company or at all.
Limited Operating History
The Company has no history of pre-tax profit. There can be no assurance that
the Company's operations will be profitable in the future. The continued
operation of the Company will be dependent upon its ability to generate
operating revenues and to procure additional financing. There can be no
assurance that any such revenues can be generated or that other financing can
be obtained.
Page 29
Environmental Regulation
All phases of the Company's operations in Canada are subject to environmental
regulations. Environmental legislation in Canada is evolving in a manner
which may require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees. Although compliance with such laws
is not presently a significant factor in the Company's operations, there is
no assurance that compliance with future changes in environmental regulation,
if any, will not adversely affect the Company's operations
Jurisdiction
The Company is a Canadian corporation. All of its directors and officers are
residents of Canada and a significant part of its assets are, or will be,
located outside of the United States. As a result, it may be difficult for
shareholders resident in the United States to effect service within the
United States upon the Company, directors, officers or experts who are not
residents of the United States, or to realize in the United States judgments
of courts of the United States predicated upon civil liability of any of the
Company, directors or officers under the United States federal securities
laws. Accordingly, United States shareholders may be forced to bring actions
against the Company and its respective directors and officers under Canadian
law and in Canadian courts in order to enforce any claims that they may have
against the Company or its directors and officers. Subject to necessary
registration under applicable provincial corporate statutes in the case of a
corporate shareholder, Canadian courts do not restrict the ability of non-
resident persons to sue in their courts.
Mineral Exploration
The following risk factors relate to the mining industry generally:
The property interest owned by the Company or in which it has an option to
earn an interest is in the exploration stage only and is without a known body
of commercial ore. Development of the Company's mineral property would
follow only if favorable exploration results are obtained. Mineral
exploration and development involves a high degree of risk and few properties
which are explored are ultimately developed into producing mines. There is
no assurance that the Company's mineral exploration and development
activities will result in any discoveries of commercial bodies or ore. The
long-term profitability of the Company's operations will be in part directly
related to the cost and success of its exploration programs, which may be
affected by a number of factors.
Substantial expenditures are required to establish ore reserves through
drilling, to develop metallurgical processes to extract the metal from the
ore and, in the case of new properties to develop the mining and processing
facilities and infrastructure at any site chosen for mining. Although
substantial benefits may be derived from the discovery of a major mineralized
deposit, no assurance can be given that minerals will be discovered in
sufficient quantities or grades to justify commercial operation or that the
funds required for development can be obtained on a timely basis. Estimates
of reserves, mineral deposits and production costs can also be affected by
such factors as environmental permitting regulations and requirements,
weather, environmental factors, unforeseen technical difficulties, unusual or
unexpected geological formations and work interruptions. In addition, the
grade of ore ultimately mined may differ from that indicated by drilling
results. Short term factors relating to reserves, such as the need for
orderly development of ore bodies or the processing of new or different
grades, may also have an adverse effect on mining operations and on the
results of operations. Material changes in ore reserves, grades, stripping
ratios or recovery rates may affect the economic viability of any project.
Reserves are reported as general indicators of mine life. Reserves should
not be interpreted as assurances of mine life or of the profitability of
current or future operations.
Page 30
Mineral exploration involves risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in
which the Company has a direct or indirect interest may be subject to unusual
or unexpected formations, cave-ins, equipment breakdown, rugged terrain,
wildlife hazards and harsh weather conditions, all of which could result in
work stoppages, damage to property, and possible environmental damage. The
Company does not presently have insurance, in any significant amounts,
covering the South Quinn Lake Property and does not presently intend to
obtain liability insurance in an amount which it would consider adequate; the
nature of the risks associated with the Company's activities is such that
liabilities might exceed policy limits, the liabilities and hazards might not
be insurable against, or the Company might not elect to insure itself against
such liabilities due to high premium costs or other reasons, in which event
the Company could incur significant costs that could have a materially
adverse effect upon its financial condition.
The mining industry is intensely competitive and the Company competes with
other companies which have far greater resources, financial and otherwise.
No Proven Reserves
The property of the Company is considered to be in the exploration stages
only and does not contain a known body of commercial ore.
Title Matters
While the Company has reviewed and is satisfied with the title for any
property in which it has a material interest and, to the best of its
knowledge, such title is in good standing, there is no guarantee that title
to such claims will not be challenged or impugned.
Mineral Prices
The mining industry in general is intensely competitive and there is no
assurance that, even if commercial quantities of mineral resources are
developed, a profitable market will exist for the sale of same. Factors
beyond the control of the Company may affect the marketability of any
minerals discovered. Significant price movements over short periods of time
may be affected by numerous factors beyond the control of the Company,
including international economic and political trends, expectations of
inflation, currency exchange fluctuations (specifically, the U.S. dollar
relative to other currencies), interest rates and global or regional
consumption patterns, speculative activities and increased production due to
improved mining and production methods. The effect of these factors on the
price of minerals and therefore the economic viability of any of the
Company's exploration projects cannot accurately be predicted. As the
Company is in the exploration stage, the above factors have had no material
impact on operations or income.
Page 31
Environmental Regulation
All phases of the Company's operations in Canada are subject to environmental
regulations. Environmental legislation in Canada is evolving in a manner
which may require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees. Legislation and regulations
implemented by the Newfoundland Department of Natural Resources directly
affect the mining industry in the Province of Newfoundland, where the Company
has the option to acquire the South Quinn Lake Property. Labrador Properties.
Although compliance with such laws is not presently a significant factor in
the Company's operations, there is no assurance that compliance with future
changes in environmental regulation, if any, will not adversely affect the
Company's operations.
Potential fluctuations in the Company's operating results and quarterly
fluctuations may adversely affect the Company's trading price
The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside of the Company's
control. As a strategic response to changes in the competitive environment,
the Company may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material short-term or long-term
adverse effect on the Company's business, results of operations and financial
condition.
The Company's future performance is dependent on key personnel.
The Company's performance is substantially dependent on the performance and
continued efforts of the Company's Board of Directors. The loss of the
services of any of the Company's Board of Directors could have a material
adverse effect on the Company business, results of operations and financial
condition.
Page 32
No dividends declared or any likely to be declared in the future
The Company has not declared any dividends since inception, and has no
present intention of paying any cash dividends on its common stock in the
foreseeable future. The payment by the Company of dividends, if any, in the
future, rests in the discretion of the Company's Board of Directors and will
depend, among other things, upon the Company's earnings, its capital
requirements and financial condition, as well as other relevant factors.
The possible issuance of additional shares may impact the value of the
Company stock
The Company is authorized to issue up to 100,000,000 shares of common stock.
It is the Company's intention to issue more shares. Sales of substantial
amounts of common stock (including shares issuable upon the exercise of stock
options, the conversion of notes and the exercise of warrants), or the
perception that such sales could occur, could materially adversely affect
prevailing market prices for the common stock and the ability of the Company
to raise equity capital in the future.
Forward Looking Statements
This Form 8K includes "forward-looking statements" A shareholder or
prospective shareholder should bear this in mind when assessing the Company's
business. All statements, other than statements of historical facts,
included in this registration statement, including, without
limitation, the statements under and located elsewhere herein regarding
industry prospects and the Company's financial position are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward looking statements are reasonable, it can give no assurance that
such expectation will prove to have been correct.
Conflicts of Interest of certain directors and officers of the Company
From time to time certain of the directors and executive officers of the
Company may serve as directors or executive officers of other companies and,
to the extent that such other companies may participate in the industries in
which the Company may participate, the directors of the Company may have a
conflict of interest. In addition, the Company's dependence on directors
and officers who devote time to other business interests may create conflicts
of interest, i.e. that the fiduciary obligations of an individual to the
other company conflicts with the individual fiduciary obligations of the
Company and vice versa.
Directors and officers must exercise their judgment to resolve all conflicts
of interest in a manner consistent with their fiduciary duties to the
Company. If such a conflict of interest arises at a meeting of the directors
of the Company, a director who has such a conflict will abstain from voting
for or against the approval of such participation or such terms. In
appropriate cases, the Company will establish a special committee of
independent directors to review a matter in which several directors, or
management, may have a conflict. The Company is not aware of the existence
of any conflict of interest as described herein.
Page 33
Control of the Company by Management
Management of the Company and entities affiliated with the Company own
collectively 883,000 of the Company's issued and outstanding shares of common
stock. These stockholders, if acting together, will be able to significantly
influence all matters requiring approval by the Company's stockholders,
including the election of directors and the approval of mergers or other
business combination transactions.
The value and transferability of the Company's shares may be adversely
impacted by the limited trading market in the United States for the Company's
common stock, the penny stock rules and future share issuances. There is a
limited market for the Company's common stock in the United States.
The value and transferability of the Company shares may be adversely impacted
by the limited trading market for the Company's common stock, the penny stock
rules and futures share issuance. There is a limited market for the Company's
common stock in the US.
No assurance can be given that a market for the Company's common stock will
be quoted on the NASD's Over the Counter Bulletin Board.
The sale or transfer of the Company common stock by shareholders in the
United States may be subject to the so-called "penny stock rules."
Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a
"penny stock" (as defined in Rule 3a51-1) to or effect the purchase of a
penny stock by any person unless:
(a) such sale or purchase is exempt from Rule 15g-9;
(b) prior to the transaction the broker or dealer has (1) approved the
person's account for transaction in penny stocks in accordance with Rule
15g-9, and (2) received from the person a written agreement to the
transaction setting forth the identity and quantity of the penny stock to
be purchased; and
(c) the purchaser has been provided an appropriate disclosure statement as to
penny stock investment.
The SEC adopted regulations that generally define a penny stock to be any
equity security other than a security excluded from such definition by Rule
3a51-1. Such exemptions include, but are not limited to (1) an equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operations for at least
three years, (ii) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years; (2) except for
purposes of Section 7(b) of the Exchange Act and Rule 419, any security
that has a price of $5.00 or more; and (3) a security that is authorized
or approved for authorization upon notice of issuance for quotation on the
NASDAQ Stock Market, Inc.'s Automated Quotation System. It is likely that
shares of the Company's common stock, assuming a market were to develop in
the US therefore, will be subject to the regulations on penny stocks;
consequently, the market liquidity for the common stock may be adversely
affected by such regulations limiting the ability of broker/dealers to sell
the Company's common stock and the ability of shareholders to sell their
securities in the secondary market in the US.
Page 34
Moreover, the Company shares may only be sold or transferred by the Company
shareholders in those jurisdictions in the US in which an exemption for such
"secondary trading" exists or in which the shares may have been registered.
The Company has not declared any dividends since inception, and has no
present intention of paying any cash dividends on its common stock in the
foreseeable future.
The payment by the Company of dividends, if any, in the future, rests in the
discretion of the Company's Board of Directors and will depend, among other
things, upon the Company's earnings, its capital requirements and financial
condition, as well as other relevant factors.
(e) Description of Property
Property held by the Company.
As of the dates specified in the following table, the Company held the
following property on a Net Book Value basis:
Property July 31, 2001 July 31, 2000
--------- ----------------- ---------------
Cash $56,523 $144,183
Receivables $34,073 $ 35,441
Capital Assets $ 4,196 $ 5,245
Mineral property nil $10,000
(f) Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of July 29, 2002 by (i) each
person or entity known by the Company to be the beneficial owner of more than
5% of the outstanding shares of common stock, (ii) each of the Company's
directors and named executive officers, and (iii) all directors and executive
officers of the Company as a group.
Page 35
Name and Address Amount and Nature Percent of
Title of Class of Beneficial Owner of Beneficial Owner Class
- -------------- ------------------- ------------------- ----------
No Par Value ROGER KIDLARK 68,000 Shares 1.0%
Common Stock 212 - 1128 6th Avenue N.W.
New Westminster, BC
President and Director
No Par Value JACK MILLIGAN nil nil
Common Stock 3936 Westridge
West Vancouver, BC
Director
No Par Value KERRY SPARKES 100,000 Shares 1.5%
Common Stock 2336 Riverbank Place
North Vancouver, BC
Director
No Par Value SHIRLEY MOONEY 715,000 Shares 10.5%
Common Stock # 25-8551 General Currie Road
Richmond, BC
Corporate Secretary
All Directors and Officers as a Group 883,000 Shares 12.9%
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of the Company's
common stock which may be acquired upon exercise of stock options or warrants
which are currently exercisable or which become exercisable within 60 days of
the date of the table are deemed beneficially owned by the optionees. Subject
to community property laws, where applicable, the persons or entities named
in the table above have sole voting and investment power with respect to all
shares of the Company's common stock indicated as beneficially owned by them.
Page 36
(g) Directors, Executive Officers, Promoters and Control Persons
Executive Officers and Board of Directors of the Company:
The following persons are the directors, executive officers, promoters,
control persons and key employees of the Company:
Name and Age Term of Office Office(s)
Roger Kidlark (53) June 18, 1966 to present President and Director
Kerry Sparkes (39) October 18, 1999 to present Director
Jack Milligan (65) February 11, 2002 to present Director
Shirley Mooney (60) June 21, 2002 to present Corporate Secretary
Biographical Information on Company's Officers and Directors:
Roger Kidlark, President and Director
Mr. Kidlark has been the President and Director of the Company since June 18,
1996. From December1992 to date Mr. Kidlark has been an Independent
Geologist Consultant. He was a Senior Geologist with Reliance Geological
Services Ltd. of North Vancouver, BC from 1989 to1992. Mr. Kidlark has over
20 years of mining and exploration experience, has worked on exploration and
mining projects throughout North America.
Kerry Sparkes, Director
Mr. Kerry Sparkes joined the board on October 18, 1999. Mr. Sparkes is the
President of Sparkes Consulting Ltd since 1999, a private geological
consulting firm. Mr. Sparkes has been the Exploration Manager for Donner
Minerals Ltd. since March 1998. Mr. Sparkes was a Senior Geologist with
Voisey's Bay Nickel Ltd. from January 1997 to March 1998. Mr. Sparkes
obtained a B.Sc(Hons)-Geology (1986) and M.Sc-Geology (1989) from Memorial
University, Newfoundland.
Jack Milligan, Director
Mr. Jack Milligan joined the board on February 11, 2002. Mr. Milligan has
been an Independent Consultant since 1982 to date.
Shirley Mooney, Secretary
Mrs. Shirley Mooney has been the Secretary for the Company since June 21,
2002. She has been a principal of Image 2000 Corporate Services Inc., a
service provider to public companies. Mrs. Mooney is also President and
Director of Harlow Ventures Inc.
(h) Executive Compensation - Remuneration of Directors and Officers.
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company
will be reimbursed for any out-of-pocket expenses incurred on behalf of the
Company.
Page 37
Summary Compensation Table.
The table set forth below summarizes the annual and long-term compensation
for services in all capacities to the Company payable to the Chief Executive
Officer of the Company and the other executive officers of the Company whose
total annual salary and bonus is anticipated to exceed $30,000 during the
year ending 2002
Annual Compensation Long-Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Year Salary Bonus Other Restr Secur All
Principal ($) ($) Annual icted ities Other
Position Compen Stock Under Compen-
Sation Award(s) Options/ LTIP sation
($) ($) SARs Payouts ($)
(#) ($)
Roger Kidlark 2001 nil nil nil nil 40,000 nil nil
President and 2000 nil nil nil nil nil nil nil
Director 1999 nil nil nil nil nil nil 15,500
Compensation of Directors
Directors who are also employees of the Company receive no extra compensation
for their service on the Board of Directors of the Company. There are no
standard or other arrangements pursuant to which the Company's directors were
compensated in their capacity as such during the 2001 fiscal year, nor do
they receive any compensation for attending meetings of the Board of
Directors or serving on committees of the Board of Directors. The Company
may, however, determine to compensate its directors in the future. Directors
are entitled to reimbursement of expenses incurred in attending meetings.
The Company does not have a compensation committee of the board of directors
established.
Employment Contracts
The Company has not entered into any employment contracts.
Page 38
Stock Option Plans
The Board of Directors of the Company has not adopted a stock option plan but
may do so in the future. The terms of any such plan have not been determined.
Option Grants in the 2001 Fiscal Year
No stock options were granted in the 2001 Fiscal year.
Aggregate Option Exercised in the Last Fiscal Year and Fiscal Year- End
Option Values
No stock options were exercised by any named executive officer during the
2001 Fiscal year.
Number of
securities Value of
underlying unexercised in-the-
unexercised money options
options as of July 31,
July 31, 2001(1)($)
2001(#)
Shares
acquired on Value Exercisable/ Exercisable/
Name exercise (#) Realized ($) unexercisable unexercisable
Roger Kdlark nil nil nil nil
Jack Milligan nil nil nil nil
Kerry Sparkes nil nil nil nil
Shirley Mooney nil nil nil nil
Based on a July 31, 2001 closing price of $0.13 per share.
(i) Certain Relationships and Related Transactions
The Company will attempt to resolve any such conflicts of interest in favor
of the Company. The officers and directors of the Company are accountable to
the Company and its shareholders as fiduciaries, which requires that such
officers and directors exercise good faith and integrity in handling the
Company's affairs. A shareholder may be able to institute legal action on
behalf of the Company on or behalf of that shareholder and all other
similarly situated shareholders to recover damages or for other relief in
cases of the resolution of conflicts in any manner prejudicial to the
Company.
Page 39
The following transaction is reported as a transaction between the Company
and a related party for the last two years prior:
1. As of April 30, 2002, the Company paid management fees of $15,000
(2001-$22,500) to a company owned by a former director of the Company.
(j) Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
(k) Market for Common Equity and Related Stockholder Matters
The Common Shares of the Company are listed on the TSX Venture Exchange under
the symbol GBR. The following table sets out the market price range of the
Common Shares on the TSX Venture Exchange for the following periods;
Calendar Quarter High Low Volume
2002
First Quarter .46 .14 535,445
Second Quarter .40 .10 671,572
2001
First Quarter .25 .15 370,732
Second Quarter .17 .10 38,650
Third Quarter .16 .10 37,610
Fourth Quarter .18 .10 52,168
2000
First Quarter .80 .21 123,650
Second Quarter nil nil nil
Third Quarter .40 .31 24,405
Fourth Quarter .40 .18 89,979
During this period there was no active trading market for the shares of the
Company in the United States, although United States residents may have
purchased shares in Canada.
With the completion of the Merger, the Company will apply for participation
on the OTC Bulletin Board, an electronic quotation medium for securities
traded outside the Nasdaq Stock Market. There can be no assurance that the
Company will be approved for participation on the OTC Bulletin Board.
Page 40
(l) Recent Sales of Unregistered Securities
The following table discloses all sales of securities of the Company during
the preceding three years:
Date Securities Sold Number and Class of Consideration Received
Securities by Company
April 20, 1999 50,000 $ 11,500
October 22, 1999 100,000 $ 75,000
July 26, 2002 1,975,000(1) $197,500
July 26, 2002 950,000(1) $190,000
July 26, 2002 20,000(2) $ 2,600
(1) Each unit consisted of one common share and one non-transferable share
purchase warrant entitling the holder to purchase one additional common share
of the Company for a period of two years.
(2) First instalment of share issuances under the Option Agreement.
(m) Description of Securities
The Company is authorized to issue 100,000,000 shares of common stock, no par
value, each share of common stock having equal rights and preferences,
including voting privileges. The Company is not authorized to issue shares of
preferred stock. As of July 29, 2002, there were 6,838,636 shares of the
Company's common stock issued and outstanding.
The shares of no par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of
cash distributions made to shareholders, including dividend payments. The
holders of the Company's common stock are entitled to one vote for each share
of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors of the Company or
any other matter, with the result that the holders of more than 50% of the
shares voted for the election of those directors can elect all of the
Directors. The holders of the Company's common stock are entitled to receive
dividends when, as and if declared by the Company's Board of Directors from
funds legally available therefore; provided, however, that cash dividends are
at the sole discretion of the Company's Board of Directors. In the event of
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities of the Company and after
provision has been made for each class of stock, if any, having preference in
relation to the Company's common stock. Holders of the shares of Company's
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to the Company's common stock.
All of the outstanding shares of Company's common stock are duly authorized,
validly issued, fully paid and non-assessable.
Page 41
(n) Indemnification of Directors and Officers
Section 128 of the Company Act of British Columbia provides that a
corporation may, with the approval of the court, indemnify a person who is a
director or former director of the company against all costs, charges and
expenses, including an amount to settle an action or satisfy a judgment,
actually and reasonably incurred by the person because of being or having
been a director, if the person acted honestly and in good faith with a view
to the best interests of the corporation and in the case of criminal or
administrative action or proceeding, the person had reasonable grounds for
believing that the person's conduct was lawful.
DISCLOSURE OF OPINION OF SECURITIES AND EXCHANGE COMISSION
REGARDING INDEMNIFICATION FOR SECURITIES ACT LIABILITIES INSOFAR AS
INDEMNIFICATION FOR LIABILITIES OCCURRING PURSUANT TO THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE
COMPANY HAS BEEN INFORMED THAT IT IS THE OPINION OF THE SECURITIES
AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE SECURITIES ACT OF 1933 AND IS, THEREFORE,
UNENFORCEABLE.
(o) Financial Statements
The financial statements of the Company have been prepared on the basis of
Canadian GAAP. A reconciliation to U.S. GAAP is included therein.
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with Form 8K (see Item 7 below).
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S ACCOUNTANT.
Not Applicable
ITEM 5. OTHER EVENTS.
Successor Issuer Election
Upon effectiveness of the Merger on July 26, 2002, pursuant to Rule 12g-3(a)
of the General Rules and Regulations of the Commission, the Company became
the successor issuer to Woodridge for reporting purposes under the 1934 Act
and elects to report under the 1934 Act effective July 30, 2002.
Page 42
Foreign Private Issuer
As a foreign private issuer the Company will be exempt from the rules under
the 1934 Act , as amended prescribing the furnishing and content of proxy
statements, and officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the said 1934 Act.
The Company will furnish its shareholders with its annual reports, which will
include a review of operations and annual audited financial statements
prepared in conformity with U.S. GAAP.
Jurisdiction
The Company is a British Columbia corporation. All of its directors and
officers are residents of Canada and a significant part of its assets are, or
will be, located outside of the United States. As a result, it may be
difficult for shareholders resident in the United States to effect service
within the United States upon the Company, directors, officers or experts who
are not residents of the United States, or to realize in the United States
judgments of courts of the United States predicated upon civil liability of
any of the Company, directors or officers under the United States federal
securities laws. Accordingly, United States shareholders may be forced to
bring actions against the Company and its respective directors and officers
under British Columbia law and in British Columbian courts in order to
enforce any claims that they may have against the Company or its directors
and officers. Subject to necessary registration under applicable
provincial corporate statutes in the case of a corporate shareholder, British
Columbian courts do not restrict the ability of non-resident persons to sue
in their courts
ITEM 6. RESIGNATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The officer and director of Woodridge, Colin Watt erHe Herresigned such
offices as a result of the merger with the Subsidiary. The officers and
directors of the Company will continue as the officers and directors of the
Company as a successors issuer.
Page 43
ITEM 7. FINANCIAL STATEMENTS
(a) Index to Financial Statements.
Audited Financial Statements of the Company
Independent Accountant's Report F-1
Balance Sheet as at July 31, 2001 and 2001 F-2
Statement of Loss and Deficit for the years ended
July 31, 2001, 2000, 1999 F-3
Statement of Cash Flows for the years ended
July 31, 2001, 2000, 1999 F-4
Schedule of Mineral Property Deferred Costs
for the years ended July 31, 2001, 2000, 1999 F-5
Notes to Financial Statements F-6 - F-10
(b) Index to Exhibits.
Copies of the following documents are filed with this Form 8K as exhibits:
Exhibits Page
1 Memorandum and Articles of Incorporation E-1 through E-25
2 Certificates of Name Change E-26 through E-
28
3. Merger Agreement between the Company
and Woodridge Capital Corp. E-29 through E-42
4. Option Agreement between the Company and
South Coast Ventures Inc. dated the 24 day
May of 2002. E-43 through E-48
5. Technical Report dated June 17, 2002 on the
South Quinn Lake Property. E-49 through E-70
Page 44
AUDITORS' REPORT
To the Shareholders
GlobeNet Resources Inc.
We have audited the balance sheets of GlobeNet Resources Inc. as at July 31,
2001 and 2000, and the statements of loss and deficit, and cash flows for the
years ended July 31, 2001, 2000 and 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Canada and the United States. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at July 31, 2001 and 2000,
and the results of its operations and cash flows for each of the years ended
July 31, 2001, 2000 and 1999, in accordance with Canadian generally accepted
accounting principles. As required by the British Columbia Company Act, we
report that, in our opinion, these principles have been applied on a
consistent basis.
Vancouver, Canada "Morgan & Company"
September 14, 2001 Chartered Accountants
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by going concern considerations such as
described in Note 1(a) to the financial statements. Our report to the
shareholders, dated September 14, 2001, is expressed in accordance with
Canadian reporting standards which do not permit a reference to such
considerations in the Auditors' Report when the consideration is adequately
disclosed in the financial statements.
Vancouver, Canada "Morgan & Company"
September 14, 2001 Chartered Accountants
F-1
GLOBENET RESOURCES INC.
Balance Sheets
As at July 31, 2001 and 2000
2001 2000
- ---------------------------------------------------------------------
ASSETS
Current Assets
Cash and short-term deposits $ 56,523 $144,183
Marketable securities
(quoted market value $15,000) 10,000 -
Accounts receivable 34,073 35,441
Prepaid expenses - 1,184
- ---------------------------------------------------------------------
100,596 180,808
Mineral Properties and Deferred
Exploration and Development Costs (Note 3) - 10,000
Capital Assets (net of accumulated
amortization of $10,330 (2000 - $9,281) 4,196 5,245
- ---------------------------------------------------------------------
$104,792 $196,053
- ---------------------------------------------------------------------
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 2,763 $ 3,977
- ---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share Capital (Note 4) 10,947,238 10,947,238
Deficit (10,845,209) (10,755,162)
- ---------------------------------------------------------------------
102,029 192,076
$104,792 $196,053
- ---------------------------------------------------------------------
Approved by the Directors:
"Roger G. Kidlark" "Kerry Sparkes"
Director Director
See Accompanying Notes to Financial Statements
F-2
GLOBENET RESOURCES INC.
Statements of Loss and Deficit
For the Years Ended July 31, 2001, 2000 and 1999
2001 2000 1999
- ---------------------------------------------------------------------
Income
Interest and other Income $ 3,257 $ 5,548 $ 15,626
- ---------------------------------------------------------------------
Expenses
Accounting and auditing 12,827 1,660 5,750
Consulting fees 11,909 1,153 9,500
Amortization 1,049 1,311 1,506
Legal fees 2,236 11,281 2,199
Management fees 30,000 43,000 7,500
Office and printing 25,593 59,100 94,467
Public relations and advertising 6,764 14,810 15,421
Transfer agent's fees 2,926 3,207 4,632
- ---------------------------------------------------------------------
93,304 135,522 140,975
- ---------------------------------------------------------------------
Loss before the following (90,047) (129,974) (125,349)
Write-off of mineral properties - (559,181) (735,310)
- ---------------------------------------------------------------------
Loss for the year (90,047) (689,155) (860,659)
Deficit Beginning Of Year (10,755,162) (10,066,007) (9,205,348)
- ---------------------------------------------------------------------
Deficit - End of Year $(10,845,209)$(10,755,162)$(10,066,007)
- ---------------------------------------------------------------------
Loss per share $ (0.02) $ (0.18) $ (0.23)
- ---------------------------------------------------------------------
See Accompanying Notes to Financial Statement
F-3
GLOBENET RESOURCES INC.
Statements of Cash Flows
For The Years Ended July 31, 2001, 2000 and 1999
2001 2000 1999
- ----------------------------------------------------------------------
Cash provided from (Used for):
Operating Activities
Loss for the year $(90,047) $(689,155) $(860,659)
Items not affecting cash:
Amortization 1,049 1,311 1,506
Write-off of Mineral Properties - 559,181 735,310
- ----------------------------------------------------------------------
(88,998) (128,663) (123,843)
- ----------------------------------------------------------------------
Change in non-cash working capital related to
operations
Accounts receivable 1,368 (25,440) 7,868
Prepaid expenses 1,184 - 412
Accounts payable and accrued
Liabilities (1,214) (3,900) (116,322)
- ----------------------------------------------------------------------
1,338 (29,340) (108,042)
- ----------------------------------------------------------------------
(87,660) (158,003) (231,885)
- ----------------------------------------------------------------------
Investing Activities
Purchase of capital assets - - (1,143)
Mineral properties - 22,100 (258,537)
- ----------------------------------------------------------------------
- 22,100 (259,680)
- ----------------------------------------------------------------------
Financing Activity
Issuance of shares for cash, net of
share issue costs - 75,000 249,652
- ----------------------------------------------------------------------
Increase (Decrease) In Cash
During The Year $(87,660) $(60,903) $(241,913)
Cash - Beginning Of The Year $144,183 $205,086 $446,999
- ----------------------------------------------------------------------
Cash - End Of The Year $ 56,523 $144,183 $205,086
- ----------------------------------------------------------------------
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING AND FINANCING
ACTIVITIES:
During the year ended July 31, 2001, the Company sold a 100% of its interest
in the Adlatok River 1 and 2 claim blocks located in the South Voisey Bay
area of Labrador. In consideration, the Company received 100,000 common
shares of Donner Minerals Ltd. at a deemed value of $0.10 per share.
During the year ended July 31, 1999, the Company issued 50,000 shares with an
aggregate value of $11,500 as non-cash consideration for mineral property
acquisitions.
See Accompanying Notes to Financial Statement
F-4
GLOBENET RESOURCES INC.
Schedule of Mineral Property Deferred Costs
For The Years Ended July 31, 2001 and 2000
- -------------------------------------------------------------------------
Balance Expenditures Recoveries/ Balance
July 31, for the Disposal July 31,
2000 period for the period 2001
- -------------------------------------------------------------------------
Acquisition costs, option
payments and advance
royalties:
Labrador Nickel Syndicate $10,000 $ - $(10,000) $ -
Deferred exploration and
development expenditures:
Labrador Nickel Syndicate - - - -
- -------------------------------------------------------------------------
$10,000 $ - $(10,000) $ -
- -------------------------------------------------------------------------
Balance Expen- Recoveries/ Write- Balance
July 31, ditures Disposal offs July 31,
1999 for the for the for the 2001
period period period
- -------------------------------------------------------------------------
Acquisition costs, option
payments and advance
royalties:
Labrador Nickel Syndicate $111,012 $ - $ - $(101,012) $10,000
Lac Rocher Properties 64,010 (22,100) (41,910) -
Deferred exploration and
development expenditures:
Labrador Nickel Syndicate 416,259 - - (416,259) -
- -------------------------------------------------------------------------
$591,281 $ - $(22,100) $(559,181) $10,000
- -------------------------------------------------------------------------
See Accompanying Notes to Financial Statements
F-5
GLOBENET RESOURCES INC.
Notes to Financial Statements
July 31, 2001 and 2000
1. CONTINUED OPERATIONS:
The Company has not yet determined whether its mineral properties contain ore
reserves that are economically recoverable. The continuing operations of the
Company and recoverability of amounts shown for mineral properties are
dependent upon the discovery of economically recoverable ore reserves, the
ability of the Company to obtain the necessary financing to complete
development, confirmation of the Company's interest in the underlying mineral
claims, and future profitable production or the proceeds from the
dispositions of mineral properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a) Mineral properties:
The Company capitalizes the costs of acquiring, exploration and developing
mineral properties on a property-by-property basis until such time as the
properties are placed into production, sold, abandoned, or there has been
impairment in value. At that time costs will be amortized on a unit-
of-production basis or written off, as appropriate.
Amounts shown for mineral properties represent costs incurred to date, less
write-offs, and are not intended to reflect present or future values.
b) Loss per share:
Loss per share is calculated using the weighted average number of shares
outstanding during the year. Fully diluted loss per share has not been
presented as it is anti-dilutive.
c) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company's management to make estimates and
assumptions that affect the amount reported in the financial statements and
related notes to the financial statements. Actual results may differ from
those estimates.
d) Amortization of Capital Assets
The Company amortizes its furniture and fixture assets at the rate of 20% per
year on the declining balance basis.
e) Stock Based Compensation
Employee and director stock options granted by the Company (as described in
Note 4(c)) are not recognized in the accounts until exercised, and then are
recorded only as a credit to share capital to the extent of the exercise
price. No remuneration expense is recorded by the Company on the excess, if
any, of the trading price of the stock over its exercise price.
f) Marketable Securities
The Company's marketable securities are recorded at the lower of cost and
market value.
F-6
3. MINERAL PROPERTIES AND DEFERRED EXPLORATION AND DEVELOPMENT COSTS
a) Labrador Nickel Syndicate:
The Company and a company related by a common officer and director formed the
Labrador Nickel Syndicate ("LNS") and optioned a 100% interest in seventeen
properties totaling 2,529 claims located in the Voisey's Bay/Harp Lake area
of Labrador. LNS was a 50-50 joint venture between the two companies.
Under the agreements, the Company issued 100,000 shares to a third party who
staked the claims, and issued finders fees consisting of 95,583 shares and
$500 to a group who arranged for the transaction.
On June 21, 1995, the Company announced that the land position had been
increased to 2,533 claims south of the major Voisey's Bay discovery and that
pursuant to an agreement between itself, the related company, and a public
company, it was agreed that the public company could earn a 50% interest in
the property, subject to a new smelter return royalty of 3% payable to the
staker, for $250,000 and the issuance of 350,000 shares of the public company
paid to the staker; and work commitments totaling $500,000.
In November, 1995, the public company earned a 50% interest in the property
in accordance with the terms of the agreement.
In 1998, the LNS decided to reduce its holding to the core mineral claims,
and reduced the property to 250 claims.
During the year ended July 31, 2001, the Company received approval for an
agreement whereby Donner Minerals Ltd. acquired 100% of the Company's
interest in the 250 claims located in the South Voisey Bay area of Labrador.
In consideration, Donner issued 100,000 common shares to GlobeNet at a deemed
value of $0.10 per share.
4. SHARE CAPITAL:
a) Authorized - 100,000,000 common shares without par value
b) Share capital has been issued as follows:
Issued: Number of
Common Shares Amount
- -------------------------------------------------------------------
BALANCE JULY 31, 1999 3,797,416 $10,872,238
ISSUED FOR CASH:
For exercise of warrants 100,000 75,000
- -------------------------------------------------------------------
BALANCE JULY 31, 2000 3,897,416 $10,947,238
Cancelled shares (3,780) -
- -------------------------------------------------------------------
BALANCE JULY 31, 2001 3,893,636 $10,947,238
- -------------------------------------------------------------------
<Page>
F-7
4. SHARE CAPITAL: CONTINUED
c) Options:
As of July 31, 2001 options to purchase common shares of the Company were
outstanding as follows:
Number
Type Outstanding Exercise Price Expiry Date
- ---------------------------------------------------------------
Options 65,000 $0.71 January 8, 2003
Options 100,000 $0.78 March 30, 2003
Options 10,000 $0.75 March 13, 2002
A summary of the changes in stock options for the year ended July 31, 2001
and 2000 is presented below:
Weighted
Average
Exercise
Shares Price
----------------------
Balance, July 31, 1999 180,000 $0.76
Granted 10,000 0.75
Cancelled (15,000) 0.82
----------------------
Balance, July 31, 2000 and 2001 175,000 $0.75
----------------------
5. RELATED PARTY TRANSACTIONS
During 2001, the Company paid: management fees of $30,000 (2000-$43,000;
1999-$7,500) to a company owned by a director of the company, $Nil (2000-
$Nil; 1999-$3,150) in accounting fees to a company controlled by a former
officer, $Nil (2000-$Nil; 1999-$9,500) in consulting fees and $Nil (2000-
$Nil; 1999-$6,000) in geological costs to directors. Accounts receivable
includes $33,500 (2000-$33,500) due from a company related by virtue of a
common director.
6. INCOME TAX
No provision for income taxes has been provided in these financial
statements due to the accumulated net losses. At July 31, 2001, the Company
has net operating loss carryforwards, which expire between 2002 and 2009,
totalling $1,147,583, the benefits of which have not been recorded. In
addition, the Company has resource pools of approximately $10,000,000, the
potential income tax benefits of which have not been recorded in these
financial statements.
7. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and short term deposits,
marketable securities, accounts receivable, and accounts payable and accrued
liabilities. Unless otherwise noted, it is management's opinion that the
Company is not exposed to significant interest, currency or credit risks
arising from these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
F-8
8. MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
The Company prepares its financial statements in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"), which differ in
certain respects from those principles that the Company would have followed
had its financial statements been prepared in accordance with accounting
principles generally accepted in the United States ("US GAAP"). The major
differences between Canadian and US GAAP, which affect the Company's
financial statements, are described below, and their effect on the financial
statements is summarized as follows:
2001 2000 1999
- ----------------------------------------------------------------------------
Loss in accordance with Canadian GAAP $(90,047) $(689,155) $(860,659)
Deduct:
Mineral property recoveries (expenditures) 10,000 22,100 (270,034)
Add:
Mineral property expenditures written
off in the period that would have been
expensed in a prior period - 581,281 692,136
- ----------------------------------------------------------------------------
Loss in accordance with US GAAP (80,047) (85,774) (438,557)
Unrealized gain on securities 5,000 - -
- ----------------------------------------------------------------------------
Comprehensive income (loss) $(75,047) $ (85,774) $(438,557)
- ----------------------------------------------------------------------------
2001 2000 1999
- ----------------------------------------------------------------------------
Loss per share (US GAAP) $(0.02) $(0.02) $(0.12)
- ----------------------------------------------------------------------------
Weighted average shares
outstanding (US GAAP) 3,895,376 3,874,676 3,721,446
- ----------------------------------------------------------------------------
2001 2000 1999
- ----------------------------------------------------------------------------
Shareholders' equity
(deficiency) - Canadian GAAP $102,029 $192,076 $806,231
Mineral property expenditures - (10,000) (591,281)
- ----------------------------------------------------------------------------
Shareholders' equity (deficiency)
- US GAAP $102,029 $182,076 $214,950
- ----------------------------------------------------------------------------
Mineral properties - Canadian GAAP $ - $ 10,000 $591,281
Exploration expenditures expensed
per US GAAP - (10,000) (591,281)
- ----------------------------------------------------------------------------
Mineral property interests - US GAAP $ - $ - $ -
- ----------------------------------------------------------------------------
i) Under US GAAP, the Company would record its mineral property interests
at cost. Exploration and development costs incurred on a mineral property
are expensed unless the property has economically recoverable reserves at
which time further exploration and development costs are deferred. At this
stage, the Company has not yet identified economically recoverable reserves
on any of its properties. Accordingly, under US GAAP, all exploration and
development costs incurred during the period are to be expensed.
F-9
8. MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP): continued
ii) The Company accounts for options granted according to requirements of
Canadian GAAP, and those requirements are similar to the accounting
prescribed in Accounting Principles Board Opinion No. 25 ("APB 25"). Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. An alternative method under US GAAP is
the fair value accounting provided for under FASB Statement No. 123 ("SFAS
No. 123"), which requires the use of option valuation models. Pro-forma
information regarding net income and earnings per share is required by SFAS
No. 123, and has been determined as if the Company had accounted for its
options granted under the fair value method of that Statement. The fair
value for these options was estimated at the date of the grant using a Black-
Scholes option pricing model with the following weighted average assumptions
for 2001, 2000 and 1999: risk free rate of 5.25%; no dividends; volatility
factor of the expected life of the Company's common stock of 134%; and
weighted average expected life of the options granted in each year of two
years.
The pro-forma effect of SFAS No. 123 is as follows:
July 31, 2001
Loss for the year - US GAAP $(80,047)
Loss per share (0.02)
July 31, 2000
Loss for the year - US GAAP (90,841)
Loss per share (0.02)
July 31, 1999
Loss for the year - US GAAP (438,557)
Loss per share (0.12)
iii) SFAS No. 115 requires investments to be classified with respect to
holding period, as determined by management, as either held-to-maturity debt
securities, trading securities or available-for-sale investments.
The Company has no held-to-maturity debt securities or trading securities.
The Company's investments are classified as available-for-sale investments
and recorded at the lower of cost and market value for Canadian GAAP
purposes. Such investments are not actively traded on short term differences
in price, and for US GAAP purposes, must have holding gains and losses
reported as a component of comprehensive income.
iv) United States accounting standards for income taxes are set forth in
SFAS No. 109. The Company has determined that the adoption of SFAS No. 109
would have no material affect on the assets, liabilities or operations for
the years presented in these financial statements. The only significant tax
assets the Company has are the accumulated non-capital losses and accumulated
resource related expenditures which are available to offset future taxable
income. The Company's operations have no income subject to income taxes and
it is not likely that such tax assets will be realized. Accordingly, the
Company would eliminate the effect of the recognition of any of these tax
assets by the recording of a valuation allowance equal to the value of the
tax assets.
F-10
ARTICLES OF LINDEX EXPLORATIONS LTD.
PART 1
INTERPRETATION
1.1 In these Articles, unless there shall be something In the subject or
context inconsistent there with:
"Board" and "the Directors" mean the Directors of the Company for the time
being.
"Company Act" means the Company Act of the Province of British Columbia as
from time to time enacted and any amendments thereto and includes the
regulations made pursuant thereto.
"the seal" means the common seal of the Company. if the Company has one.
"month" means calendar month.
1.2 Expressions referring to writing shall be construed as meaning
references to printing, lithography, typewriting, photography and other modes
of representing or reproducing words in a visible form.
1.3 Words importing the singular include the plural and vice versa; and words
importing male persons Include female persons and words importing persons
shall include corporations.
1.4 Subject to Article 1.1 hereof, any words or phrases defined in the
Company Act shall, if they are not inconsistent with the subject or context,
bear the same meaning in these Articles.
1.5 The regulations contained in Table A in the First Schedule to the Company
Act shall not apply to the Company.
1.6 Unless the Company Act, the Memorandum, or these Articles otherwise
provide, any action to be taken by a resolution of the members may be taken
by an ordinary resolution.
PART 2
SHAPES AND SHARE CERTIFICATES
2.1 Every member Is entitled, without charge, to one certificate representing
the share or shares of each class held by him; provided that in respect of a
share or shares held Jointly by several persons, the Company shall not
be bound to Issue more than one certificate, and delivery of a certificate
for a share to one of several joint holders or to his duly authorized agent
shall be sufficient delivery to all; and provided further that the Company
shall not be bound to Issue certificates representing redeemable shares, if
such shares are to be redeemed within one month of the date on which they
were allotted. Any share certificate may be sent through the post by
registered prepaid mail to the member entitled thereto, and the Company shall
not be liable for any loss occasioned to the member owing to any such share
certificate so sent being lost In the post or stolen.
E-1
2.2 if a share certificate:
(a) is worn out or defaced, the Directors may, upon production to them of the
said certificate and upon such other terms, if any, as they may think fit
order the said certificate to be cancelled and may Issue a new certificate
in lieu thereof;
(b) is lost, stolen or destroyed, then, upon proof thereof to the
satisfaction of the Directors and upon such Indemnity, if any, as the
Directors deem adequate being given a new certificate in lieu thereof
shall be issued to the person entitled to such lost, stolen or destroyed
certificate; or
(c) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company issue,
registered in his name, two or more certificates each representing a
specified number of shares and in the aggregate representing the same number
of shares as die certificate so surrendered, the Company shall cancel the
certificate so surrendered and issue in lieu thereof certificates in
accordance with such request.
Such sum, not exceeding that permitted by the Company Act, as the Directors
may from time to time fix. shall be paid to the Company for each certificate
issued under this Article.
2.3 Every share certificate shall be signed manually by at least one
officer or Director of the Company, or by or on behalf of a registrar, branch
registrar, transfer agent or branch transfer agent of the Company and any
additional signatures may be printed or otherwise mechanically reproduced
and, in such event, a certificate so signed Is as valid as if signed
manually, notwithstanding that any person whose signature is so printed or
mechanically reproduced shall have ceased to hold the office that is stated
on such certificate to hold at the date of the !me of a share certificate.
2.4 Except as required by law or statute or these Articles, no person shall
be recognized by the Company as holding any share upon any trust and the
Company shall not be bound by or compelled in any way to recognize (even when
having notice thereof) any equitable, contingent, future or partial interest
in any share or any interest in any fractional part of a share or (except
only as by law or statute or these Articles provided or as ordered by a court
of competent jurisdiction) any other rights In respect of any share except an
absolute right to the entirety thereof in the registered holder.
2.5 Save as provided in the Company Act, the Company shall not give financial
assistance by means of a loan, guarantee, the provision of security or
otherwise for the purpose of or in connection with the purchase of or
subscription by any person for shares or debt obligations issued by the
Company or an affiliate of the Company or upon the security, in whole or in
part, of a pledge or other charge upon the shares or debt obligations issued
by the Company or an affiliate of the Company.
E-2
PART 3
ISSUE OF SHARES
3.1 Subject to Article.3.2 and to any direction to the contrary contained In
a resolution passed at a general meeting authorizing any increase in capital,
the issue of shares (whether In the original or any Increased capital of the
Company) shall be under the control of the Directors who may, subject to the
rights of the holders of the shares of the Company for the time being issued,
allot or otherwise dispose of, and/or grant options on, shares authorized but
not yet Issued at such times and to such persona (including Directors) and in
such manner and under such terms and conditions, and at such price or for
such consideration, as they, in their absolute discretion, may determine.
3.2 If the Company is or becomes a Company which is not a reporting company
and the Directors are required by the Company Act before allotting any shares
to offer them pro rata to the members, the Directors shall, before allotting
any shares, comply with the applicable provisions of the Company Act; and
without limiting the generality of the foregoing, shall, for the time being,
offer those shares pro rata to the members, but if there are classes of
shares, the Directors shall first offer the shares to be allotted pro rata to
the members holding shares of the class proposed to be allotted and if any
shares remain, the Directors shall then offer the remaining shares pro
rata to the other members. The offer shall he made by notice specifying the
number of shares offered and limiting a time for acceptance. After the
expiration of the time for acceptance or on receipt of written confirmation
from the person to whom the offer Is made that he declines to accept the
offer, and if there are no other members holding shares who should first
receive an offer, the Directors may for three months thereafter offer the
shares to such persons and in such manner as they think most beneficial to
the Company; but the offer to those persons shall not be at a price less
than, or on terms more favourable than, the offer to the members.
3.3 The Company, or the Directors on behalf of the Company, may pay or allow
a commission or discount to any person in consideration of his subscribing or
agreeing to subscribe or procuring or agreeing to procure subscriptions,
whether absolutely or conditionally, for any such shares with a par value In
the Company, provided that, if the Company is not a specially limited
Company, the rate of the commission and discount shall not in the aggregate
exceed 25 per cent of the subscription price of such shares, or an amount
equivalent to such percentage. The Company may also pay such brokerage as may
be lawful.
3.4 No share may be issued until it is fully paid and the Company shall have
received the full consideration therefore in cash, property or past services
actually performed for the Company. The value of property or services, for
the purpose of this Article, shall be the value determined by the Directors
by resolution to be, in all circumstances of the transaction, the fair market
value thereof. A document evidencing indebtedness of the person to whom the
shares are allotted is not property for the purpose of this Article.
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PART 4
SHARE REGISTERS
4.1 The Company shall keep or cause to be kept a register of members, a
register of transfers and a register of allotments within British Columbia.
If the Company's capital shall consist of more than one class of shares, a
separate register of members, register of transfers and register of
allotments may be kept in respect of each class of shares. The Directors on
behalf of the Company may appoint a trust company to keep the register of
members, register of transfers and registers of allotments or. if there is
more than one class of shares, the Directors may appoint a trust company,
which need not be the same trust company, to keep the register of members,
register of transfers and register of allotments for each class of shares.
The Directors on behalf of the Company may also appoint one or more trust
companies. Including the trust company which keeps the said registers of its
shares or of a class thereof, as transfer agent for its shares of such class
thereof, as the case may be, and the same or another trust company or
companies as registrar for its shares or such class thereof, as the case may
be.
4.2 The Company shall be entitled to cause to be kept one or more branch
registers of members at such place or places as the Directors may from time
to time determine and the Directors may by resolution, regulation or
otherwise Invoke such provisions as they think fit respecting the keeping of
such branch registers.
4.3 The Directors may fix in advance a date not more than 49 days preceding
the date of any meeting of members or any class thereof or of the payment of
any dividend or of the proposed taking of any other proper action requiring
the determination of members as the record date for the determination of the
members entitled to notice of or to attend and vote at any such meeting. or
entitled to receive payment of any such dividend or for any other proper
purpose and, in such case, notwithstanding anything elsewhere contained in
these Articles, only members of record on the date so fixed shall be deemed
to be members for the purposes aforesaid. In no event shall the Company close
its register of members.
PART 5
SHARE TRANSFERS
5.1 Subject to the provisions of these Articles that may be applicable. any
member may transfer his shares by instrument in writing executed by or on
behalf of such member and delivered to the Company or Its transfer agent. The
instrument of transfer of any shares of the Company shall be in the form, if
any, on the back of the Company's share certificates or in such form as the
Directors may from time to time approve. Except to the extent that the
Company Act may otherwise provide, the transferor shall be deemed to remain
the holder of the shares until the name of the transferee is entered In the
register of members or a branch register of members in respect thereof.
5.2 The signature of the registered owner of any shares or of his duly
authorized attorney upon any form of transfer approved by the Directors shall
constitute a complete and sufficient authority to the Company, its Directors,
officers and agents to register, in the name of the person, firm or
corporation named in the form of transfer as transferee or, if no person,
firm or corporation Is named therein as transferee, then in the name of the
person, firm or corporation In whose behalf the certificate Is deposited with
the Company for the purpose of having the transfer registered, all the shares
comprised -in the said certificate or so many thereof as the form of transfer
shall state are to be transferred. Neither the Company nor any Director,
officer or agent thereof shall be bound to inquire Into the title of the
person, firm or corporation named In the form of transfer as transferee, or,
if no person, firm or corporation Is named therein as transferee, of the
person, firm or corporation in whose behalf the certificate is deposited with
the Company for the purpose of having the transfer registered or be liable to
any claim by such registered owner or by any intermediate owner of the
certificate or of any of the shares represented thereby for registering the
transfer. and the transfer, when registered, shall confer upon the person,
firm or corporation in whose name the shares have been registered a valid
title to such shares.
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5.3 Notwithstanding Article 5.2, the Company and any Director, officer or
agent thereof may decline to recognize any instrument of transfer unless it
is accompanied by the certificate of the shares to which it relates and such
other evidence as the Company and any such Director, officer or agent may
reasonably requite to show the right of the transferor to make the transfer
and unless the Instrument of transfer relates to only one class of share.
PART 6
TRANSMISSION OF SHARES
6.1 In the case of the death of a member the legal personal representative of
the deceased shall be the only person recognized by the Company as having any
title to or Interest in the shares registered In the name of the deceased.
Before recognizing any legal personal representative the Directors may
require him to obtain a grant of probate or letters of administration In
British Columbia.
6.2 Any person becoming entitled to shares In consequence of the death or
bankruptcy of a member shall, upon such documents and evidence being produced
to the Company as the Company Act requires and as may from time to time be
reasonably required by the Directors, have the right either to be registered
as a member in respect of the shares, or, if he is a personal representative,
instead of being registered himself, to make such transfer of the shares as
the deceased person could have made; but the Directors shall, in either case,
have the same right, if any, to de-cline or suspend registration as they
would have In the case of a transfer of the shares by the deceased bankrupt
person before the death or bankruptcy.
6.3 Upon the death or bankruptcy of a member, his personal representative or
trustee in bankruptcy, although not a member, shall have the same rights,
privileges and obligations that attach to the shares of the deceased or
bankrupt member if the documents required by the Company Act shall have been
deposited at the Company's registered office.
PART 7
ALTERATION OF CAPITAL
7.1 The Company may by ordinary resolution filed with the Registrar amend its
Memorandum to Increase the authorized capital of the Company by:
(a) creating shares with par value or shares without par value, or both;
(b) increasing the number of shares with par value or shares without par
value. or both; or
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(c) increasing the par value of a class of shares with par value. If no
shares of that class are issued.
7.2 The Company may alter its Memorandum to subdivide, consolidate, change
from shares with par value to shares without par value, or from shares
without par value to shares with par value, change the designation of or to
cancel, all or any of its shares to such extent, in such manner and with such
consents of members holding a class of shares which is the subject of or
affected by such alteration as the Company Act provides.
7.3 The Company may alter its Memorandum or these Articles
(a) by special resolution, to create, define and attach special rights or
restrictions to any shares: and
(b) by special resolution and by otherwise complying with any applicable
provision of the Memorandum or these Articles, to vary or abrogate the
special rights and restrictions attached to any shares and by filing such
resolution with the Registrar but no right or special right or restriction
attached to any issued shares shall be prejudiced or Interfered with unless
members holding shares of each class whose right or special right or
restriction is so prejudiced or inter-fered with all consent thereto In
writing. or unless a resolution consenting thereto Is passed at a separate
class meeting of the holders of the shares of each such class by a majority
of three-fourths, or such greater majority as may be specified by the special
rights attached to the class of shares. or the Issued shares of such class.
Notwithstanding such consent in writing or such resolution, no such
alteration, other than a cancellation of shares, shall be valid as to any
part of the issued shares of any clan unless the holders of the rest of the
Issued shares of such class either all consent thereto In writing or consent
thereto by a resolution passed by the votes of members holding three-fourths
of such shares.
7.4 If the Company is or becomes a reporting company, no resolution to
create, vary or abrogate any special right of conversion attaching to any
class of shares shall be submitted to any meeting of members unless, if so
required by the Company Act, the British Columbia Securities Commission shall
have consented to the resolution.
7.5 Unless these Articles otherwise provide, the provisions of these Articles
relating to general meetings, shall apply, with the necessary changes and so
far as they are applicable, to a class meeting of members holding a
particular class of shares but the quorum at a class meeting shall be one
person holding or representing by proxy one-third of the shares affected.
7.6 Except as otherwise provided by conditions imposed at the time of
creation of any new shares or by these Articles, any addition to the
authorized capital resulting from the creation of new shares shall be subject
to the provisions of these Articles.
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PART 8
PURCHASE AND REDEMMON OF SHARES
8.1 Subject to the special rights and restrictions attached to any class of
shares, the Company may, by a resolution of the Directors and in compliance
with the Company Act purchase any of Its shares pursuant to an offer made to
and accepted by the holders thereof at the price and upon the terms specified
in such resolution, but no such purchase shall be made if the Company is
insolvent at the time of the proposed purchase or the proposed purchase would
render the Company insolvent. Unless the shares are to be purchased through a
stock exchange or the Company is purchasing the shares from a dissenting
member pursuant to the requirements of the Company Act, the Company shall
make Its offer to purchase pro rata to every member who holds shares of
the class to be purchased.
8.2 if the Company proposes at its option to redeem some but not all of the
shares of any class, the Directors may, subject to the special rights and
restrictions attached to such class of shares, decide the manner in which
the shares to be redeemed shall be selected.
8.3 The shares so purchased or redeemed by the Company may be sold by it, but
the Company shall not exercise any vote in respect of those shares nor shall
any dividend be paid thereon while they are held by the Company.
PART 9
BORROWING POWERS
9.1 The Directors may from time to time at their discretion authorize the
Company to borrow any sum of money for the purposes of the Company and may
raise or secure the repayment of that sum in such manner and upon such terms
and conditions, In all respects, as they think fit, and in particular, and
without limiting the generality of the foregoing & by the issue of bonds or
debentures, on any mortgage or charge, whether specific or floating, or other
security on the undertaking or the whole or any part of the property of the
Company, both present and future.
9.2 The Directors may make any debentures, bonds or other debt obligations
Issued by the Company by their terms assignable free from any equities
between the Company and the person to whom they may be issued, or any other
person who lawfully acquires the same by assignment, purchase or otherwise,
howsoever.
9.3 The Directors may authorize the issue of any debentures, bonds or other
debt obligations of the Company at a discount premium or otherwise, and with
special or other rights or privileges as to redemption, surrender, drawings,
allotment of or conversion into or exchange for shares, attending at general
meetings of the Company and otherwise as the Directors may determine at or
before the time of issue
9.4 The Company shall keep or cause to be kept in accordance with the
Company Act
(a) a register of its debentures and debt obligations; and
(b) a register of the holders of Its bonds, debentures and other debt
obligations.
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and, subject to the provisions of the Company Act may keep or cause to be
kept one or more branch registers of the holders of its bonds, debentures, or
other debt obligations within or without the Province of British Columbia as
the Directors may from time to time determine and the Directors may by
resolution, regulations or otherwise make such provisions as they think fit
respecting the keeping of such branch registers.
9.5 if the Directors so authorize. or if any instrument under which any
bonds, debentures or other debt obligations of the Company arc issued so
provides, any bonds, debentures and other debt obligations of the. Company,
Instead of being manually signed by the Directors or officers authorized In
that behalf, may have the facsimile signatures of such Directors or officers
printed or otherwise mechanically reproduced thereon and in either case,
shall be as valid as If signed manually. but no such bond, debenture or other
debt obligation shall be Issued unless it is manually signed, countersigned
or certified by or on behalf of a trust company or other transfer agent or
registrar duly authorized by the Directors or the instrument under which such
bonds, debentures or other debt obligations are issued so to do.
Notwithstanding that any persons whose facsimile signature is so used shall
have ceased to hold the office that he is stated on such bond, debenture or
other debt obligation to hold at the date of the actual issue thereof, the
bond, debenture or other debt obligation shall be valid and binding on the
Company.
9.6 The Company shall keep or cause to be kept a register of its indebtedness
to every Director or officer of the Company or every associate of any of
them.
PART 10
GENERAL MEETINGS
10.1 Subject to Article 10. 2 and to the Company Act the first annual general
meeting shall be held within 15 months from the date of incorporation and
thereafter an annual general meeting shall be held once in every calendar
year at such time, not being more than 13 months after the holding of the
last preceding annual general meeting. and place as the Directors shall
appoint.
10.2 If the Company is not a reporting company and if all members entitled to
attend and vote at the annual general meeting of the Company consent in
writing each year to the business required to be transacted at the annual
general meeting, that business shall be as valid as if transacted at an
annual general meeting duly convened and held and. it is not necessary for
the Company to hold an annual general meeting that year.
10.3 Every general meeting, other than an annual general meeting are referred
to in these Articles as and may be called extraordinary general meeting.
10.4 The Directors may, whenever they think fit, convene an extraordinary
general meeting. An extraordinary general meeting may also be convened if
requisitioned In accordance with the Company Act, by the Directors or, if not
convened by the Directors, by the requisitionists as provided in the Company
Act.
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10.5 If the Company is or becomes a reporting company, advance notice shall
be published in the manner required by the Company Act of any general meeting
at which Directors are to be elected.
10.6 Not less than 21 days notice of any general meeting specifying the time
and place of meeting and In case of special business, the general nature of
that business shall be given in the manner mentioned in these Articles, or in
such other manner, if any, as may be prescribed by ordinary resolution
whether previous notice thereof has been given or not, to any person as may
by law or under these Articles or other regulations of the Company entitled
to receive such notice from the Company. But the accidental omission to give
notice of any meeting to, or the non-receipt of any such notice by, any of
such persons shall not Invalidate any proceedings at that meeting.
10.7 Persons entitled to notice of a general meeting may waive or reduce the
period of notice convening the meeting, by unanimous consent in writing, and
may give such waiver before, during, or after the meeting.
10.8 Where any special business includes the presenting, considering,
approving, ratifying or authorizing of the execution of any document, then
the portion of any notice relating to such document shall be sufficient if
the same states that a copy of the document or proposed document is or will
be available for Inspection by members at a place in the Province of British
Columbia specified in such notice during business hours in any specified
working day or days prior to the date of the meeting.
PART 11
PROC-EEDINGS AT GENERAL MEETINGS
11.1 All business shall be deemed special business which is transacted at
(a) an extraordinary general meeting; and
(b) an annual general meeting, with the exception of the consideration of the
financial statements, the respective reports of the Directors and Auditors,
changing the number of Directors, approval of a motion to elect two or more
Directors by a single resolution, the appointment of Auditors, the election
of Directors, the fixing of the remuneration of the Auditors and such
business as by these Articles or the Company Act may be transacted at a
general meeting without prior notice thereof being given to the members.
11.2 No business shall be transacted at any general meeting unless a quorum
of members, entitled to attend and vote, is present at the time when the
meeting proceeds to business, but the quorum need not be present throughout
the meeting; save as herein otherwise provided. A quorum shall be two persons
present and being, or representing by proxy, members holding not less than
one-tenth of the shares which may be voted at the meeting. If there is only
one member entitled to vote at a general meeting, the quorum is one person
present and being, or representing by proxy, such member. The Directors shall
be entitled to attend at all general meetings but no Director shall be
counted In the quorum or be entitled to vote at any general meeting unless be
shall be a member, proxyholder or representative of a corporation entitled to
vote thereat.
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11.3 All the members of the Company entitled to attend and vote at a general
meeting may, by unanimous consent in writing, or if they are present at the
meeting by a unanimous vote, waive or reduce the period of notice of such
meeting and an entry in the minute book of such waiver or reduction shall be
sufficient evidence of the due convening of the meeting.
11.4 If within half an hour from the time appointed for the meeting a quorum
is not present, the meeting, if convened upon the requisition of members,
shall be dissolved; in any other case it shall stand adjourned to the same
day in the next week, at the same time and place, and, if at the adjourned
meeting a quorum is not present within half an bout from the time appointed
for the meeting, those persons present and being or representing by proxy
members entitled to attend and vote at the meeting shall be a quorum.
11.5 The Chairman of the Board. if any, or in his absence the President of
the Company shall preside as chairman at every general meeting of the
Company.
11.6 If at any meeting neither the Chairman of the Board nor President is
present within fifteen minutes after the time appointed for holding the
meeting or is willing to act as Chairman, the Directors present shall choose
some one of their number to be chairman or if all the Directors present
decline to take the chair or shall fail to so choose or if no Director be
present, the members present shall choose one of their number to be Chairman.
11.7 The Chairman may and shall, if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left unfinished
at the meeting from which the adjournment took place. When a meeting is
adjourned for thirty days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall not
be necessary to give any notice of an adjourned meeting or of the business to
be transacted at an adjourned meeting.
11.8 Subject to the provisions of the Company Act at any general meeting a
resolution put to the vote of the meeting shall be decided on a show of
hands, unless a poll is (before or on the declaration of the result of the
show of hands) demanded by at least one member or proxyholder of a member
entitled to attend, and, unless a poll is so demanded, a declaration by the
Chairman that a resolution has, on a show of hands, been carried or carried
unanimously or by a particular majority or lost, and an entry to that effect
in the book of the proceedings of the Company shall be conclusive evidence of
the fact, without proof of the number or proportion of the votes recorded in
favour of or against that resolution.
11.9 In the case of an equality of votes, whether on a show of hands or on a
poll, the Chairman of the meeting at which the show of hands takes place or
at which the poll Is demanded shall not be entitled to a second or casting
vote.
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11.10 A poll demanded on the election of a Chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other question
shall be taken at such time and place within seven days and in such manner as
the Chairman of the meeting directs and the result of the poll shall be
deemed to be the resolution of and passed at the meeting at which the poll
was demanded. Any business other than that upon which the poll has been
demanded may be proceeded with pending the taking of the poll. The demand for
a poll may be withdrawn in any dispute as to the admission or rejection of a
vote the decision of the Chairman made in good faith shall be final and
conclusive.
11.11 Every ballot cast upon a poll and every proxy appointing a proxyholder
who cast a ballot upon a poll shall be retained by the Secretary for such
period and be subject to such Inspection as the Company Act may provide.
11.12 No resolution proposed at a meeting need he seconded and the chairman
of any meeting shall be entitled to move or second a resolution.
PART 12
VOTES OF MEMBERS
12.1 Subject to any special voting rights or restrictions attached to any
class of shares and the restrictions on joint holders of shares, on a show of
hands every individual who is present as a member or as a proxyholder of a
member shall have one vote and on a poll every member shall have one vote for
each share of which he Is the registered holder and may exercise such vote
either in person or by proxyholder.
12.2 Any person who is not registered as a member but Is entitled to vote at
any general meeting in respect of a share, may vote the share in the same
manner as if he were a member; but, unless the Directors have previously
admitted his right to vote at that meeting in respect of the share, he
shall satisfy the Directors of his right to vote the share before the time
for holding the meeting, or adjourned meeting, as the case may be, at which
he proposes to vote.
12.3 Where there are joint members registered in respect of any share, any
one of the joint members may vote at any meeting, either personally or by
proxy, in respect of the share as if he were solely entitled to it. If more
than one of the joint members is present at any meeting, personally or by
proxy, the joint member present whose name stands first on the register In
respect of the share shall alone be entitled to vote in respect of that
share. Several executors or administrators of a deceased member in whose sole
name any share stands shall, for the purpose of this Article, be deemed joint
members.
12.4 A corporation, not being a subsidiary, that is a member may vote by its
proxyholder or by its duly authorized representative, who is entitled to
speak and vote, and in all other respects exercise the rights of a member and
any authorized representative shall be deemed to be a member for all purposes
in connection with any general meeting of the Company.
12.5 A member of unsound mind entitled to attend and vote. in respect of whom
an order has been made by any Court having jurisdiction, may vote, whether on
a show of hands or on a poll, by his committee, curator bonis, or other
person in the nature of a committee or curator bonis appointed by that Court,
and any such committee, curator bonis, or other person may appoint a
proxyholder.
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12.6 A member holding more than one share In respect of which lie Is entitled
to vote shall be entitled to appoint one or more proxyholders to attend, act
and vote for him on the same occasion, if such a member should appoint more
than one proxyholder for the same occasion he shall specify the number of
shares each proxyholder shall be entitled to vote.
12.7 The instrument appointing a proxyholder shall be in writing under the
hand of the appointer or of his attorney duly authorized in writing, or, if
the appointer Is a corporation, either under the seal of the corporation or
under the hand of a duly authorized officer. A proxyholder need not he a
member of the Company.
12.8 Any person may act as a proxyholder whether or not he Is entitled on his
own behalf to be present and to vote at the meeting at which he acts as
proxyholder. The proxy may authorize the person so appointed to act as
proxyholder for the appointer for the period, at such meeting or meetings and
to the extent permitted by the Company Act.
12.9 An Instrument appointing a proxyholder and the power of attorney, if
any, under which it Is signed or a notarially certified copy thereof shall be
deposited at the office of the Company or at such other place as Is specified
for that purpose In the notice convening die meeting, not less than 48 hours
(excluding Saturdays. Sundays and holidays) before the time for holding the
meeting in respect of which the person named in the instrument is appointed.
In addition to any other method of depositing Instruments appointing a proxy
provided for in these Articles, the Directors may from time to time by
resolution make regulations permitting the lodging of instruments appointing
a proxyholder at any place or places and within the time or times not
exceeding 48 hours (excluding Saturdays, Sundays and holidays) preceding the
meeting or adjourned meeting specified in the notice calling a meeting of
members and providing for particulars of such instruments to be sent to the
Company in writing or by letter, telegram, telex or any method of
transmitting legibly recorded messages so as to arrive before the
commencement of the meeting or adjourned meeting at the office of the Company
or of any agent of the Company appointed for the purpose of receiving such
particulars and providing that an instrument appointing a proxyholder so
lodged may be acted upon as though the instrument itself was produced to the
chairman of the meeting or adjourned meeting as required by this Article and
votes given in accordance with proxies deposited under such regulations shall
be valid and shall be counted.
12.10 A vote given in accordance with the terms of a proxy shall be valid
notwithstanding the previous death or insanity of the member or revocation of
the proxy or of the authority under which the proxy was executed, or the
transfer of the share in respect of which the proxy is given, provided no
prior notice in writing of the death, insanity, revocation or transfer as
aforesaid shall have been received at the Registered Office of the Company or
by the chairman of the meeting or adjourned meeting at which the vote was
given.
12.11 Unless, in the circumstances, the Company Act requires any other form
of proxy, a proxy, appointing a proxyholder, whether for a specified meeting
or otherwise, shall be in the form following, or in any other form that the
Directors shall approve:
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(Name of Company)
The undersigned being a member of the above Company hereby appoints
________________ of ___________________ or failing him ___________________
of __________________ as proxyholder for the undersigned to attend, act and
vote for and on behalf of the undersigned at the annual (extraordinary)
general meeting of the Company to be held on the ____ day of _______________
and at any adjournment thereof.
Dated this ___ day of _____________________.
12.12 On a poll a person entitled to cast more than one vote need not, if he
votes, use all his votes or cast all the votes he uses in the same way.
PART 13
DIRECTORS
13.1 The Directors shall manage, or supervise the management of the affairs
and business of the Company and may exercise all such powers of the Company
as are not, by the Company Act or by these Articles, required to be exercised
by the Company in general meeting.
13.2 The subscribers to the Memorandum are the first Directors. The Directors
to succeed the first Directors may be appointed in writing by a majority of
the subscribers of the Memorandum and the number of Directors shall be the
same as the number of Directors so appointed. The number of Directors may be
changed from time to time by ordinary resolution, whether previous
notice thereof has been given or not, or failing such ordinary resolution,
the number of directors shall be the number who hold office from time to
time. In any event the members or Directors shall never be less than one or,
if the Company is or becomes a reporting company, three.
13.3 The remuneration of the Directors as such may from time to time be
determined by the members, unless by ordinary resolution the Directors are
authorized to determine their remuneration. Such remuneration may be in
addition to any salary or other remuneration paid to any officer or employee
of the Company as such who is also a Director. The Directors shall be
repaid such reasonable expenses as they may Incur in and about the business
of the Company and if any Director shall perform any professional or other
services for the Company that in the opinion of the Directors are outside the
ordinary duties of a Director or shall otherwise be specifically occupied in
or about the Company's business, he may be paid a remuneration to be
fixed by the Board, or, at the option of such Director, by the Company in
general meeting, and such remuneration may be either in addition to, or In
substitution for any other remuneration that he may be entitled to receive.
The Directors on behalf of the Company, unless otherwise determined by
ordinary resolution, may pay a gratuity or pension or allowance on retirement
to any Director who has held any salaried office or place of profit with the
Company or to his spouse or dependents and may make contributions to any find
and pay premiums for the purchase or provision of any such gratuity, pension
or allowance.
13.4 No Director shall be required to hold a share In the authorized capital
of the Company as qualification for his office. Each Director so long as he
shall be a Director is deemed to have agreed to be bound by the provisions of
these Articles.
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13.5 The Directors may from time to time. by power of attorney or other
instrument under seal, appoint any person the attorney of the Company for
such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Directors under these
Articles and excepting the powers of the Directors relating to the
constitution of the Board and of any of its committees and the appointment or
removal of officers and the power to declare dividends) and for such period,
with such remuneration and subject to such conditions as the Directors may
think fit, and any such appointment may be made in favour of any of the
Directors or any of the members or in favour of any corporation, or of any of
the members, directors, nominees or managers of any corporation or firm, or
otherwise in favour of any fluctuating body of persons, whether nominated
directly or indirectly by the Directors, and such power of attorney may
contain such provisions for the protection or convenience of persons dealing
with such attorney as the Directors think fit. Any such attorney may be
authorized by the Directors to sub-delegate all or any of the powers,
authorities and discretions for the time being vested in him.
13.6 A Director who is, in any way, directly or indirectly interested In an
existing or proposed contract or transaction with the Company or who holds
any office or possesses any property whereby, whether directly or indirectly,
a duty or interest might be created in conflict with his duty or Interest as
a Director shall declare the nature and extent of his interest in such
contract or transactions or of the conflict or potential conflict with his
duty and Interest as a Director, as the case may be. in accordance with the
provisions of the Company Act. A Director shall not vote in respect of any
such contract or transaction with the Company in he Is Interested and If he
shall do so his vote shall not be counted, but he shall be counted in the
quorum present at the meeting at which such vote is taken. The foregoing
shall not apply to:
(a) any such contract or transaction relating to a loan to the Company, which
a Director or a specified corporation or a specified firm in which he has an
interest has guaranteed or joined in guaranteeing the repayment of the loan
or any part of the loan;
(b) any contract or transaction made or to be made with, or for the benefit
of a holding corporation or a subsidiary corporation of which a Director is a
Director;
(c) any contract by a Director to subscribe for or underwrite shares,
debentures or debt obligations to be issued by the Company or a subsidiary of
the Company, or any contract, arrangement or transaction in which a Director
is, directly or indirectly, interested if all the other
Directors are also, directly or indirectly Interested In the contract,
arrangements or transactions; or
(d) determining the remuneration of the directors.
Subject to the Company Act the foregoing prohibitions and exceptions thereto
may from time to time be suspended or amended to any extent by ordinary
resolution, either generally or In respect of any particular contract,
arrangement or transaction or for any particular period.
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13.7 A Director may hold any office or place of profit under the Company
(other than, if the Company is or becomes a reporting company. the office of
auditor of the Company) in conjunction with his office of Director for such
period and on such terms (as to remuneration or otherwise) as the Directors
may determine and no Director or intended Director shall be disqualified by
his office from contracting with the Company either with regard to his tenure
of any such other office or place of profit or as vendor, purchaser or
otherwise, and, subject to compliance with the provisions of the Company Act,
no contract or transaction entered into by or on behalf of the Company in
which a Director Is in any way interested shall be liable to be-voided.
13.8 A Director may act by himself or his firm In a professional capacity for
the Company (except as auditor of the Company) and lie or his firm shall he
entitled to remuneration for professional services as if he were not a
Director.
13.9 Any Director may, from time to time, appoint any person who is approved
by resolution of the Directors to be his alternate Director. The appointee,
while he holds office as an alternate Director, shall be entitled to notice
of meetings of the Directors and. in the absence of the Director for whom he
is an alternate, to attend and vote thereat as a Director or sign any
resolution of Directors to be consented to in writing, and shall not be
entitled to be remunerated otherwise than out of the remuneration of the
Director appointing him. Any Director may make or revoke an appointment of
his alternate Director by notice in writing or by telegram or cable to be
delivered or addressed, postage or other charges prepaid. to the Registered
Office of the Company. The Directors may by resolution revoke any appointment
of an alternate Director, any such revocation to become effective upon notice
thereof having been given to the Director who made the appointment. No person
shall act as an alternate for more than one Director at any given time and no
Director may act as an alternate for any other Director.
13.10 A Director may be or become a Director or other officer or employee of,
or otherwise interested in. any corporation or firm In which the Company may
be Interested as a shareholder or otherwise, and, such Director shall not be
accountable to the Company for any remuneration or other benefits received by
him as Director, officer or- employee of, or from his interest in, such other
corporation or firm, unless the Company otherwise directs.
PART 14
TERMINATION OF DIRECTORSHIP OF DIRECTORS
14.1 The directorship of a Director shall be immediately terminated:
(a) if he Is found to be incapable of managing his own affairs by reason of
mental Infirmity..
(b) if by notice in writing to the Company at Its Registered Office he
resigns;
(c) if he is removed pursuant to Article 15.2;
(d) If convicted within or without the Province of an Indictable offence and
the other Directors resolve to remove him; or
(e) If he ceases to be qualified to act as a Director under the Company Act.
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PART 15
RETIREMENT AND ELECTION OF DIRECTORS
15.1 At each annual general meeting of the Company all the Directors shall
retire and the Company shall elect a Board of Directors consisting of the
number of Directors for the time being fixed pursuant to these Articles, if
in any calendar year the Company does not hold an annual general meeting, the
Directors appointed to the last annual general meeting of the Company shall
be deemed to have been elected or appointed as Directors on the last day on
which the meeting could have been held pursuant to the Company Act and the
Directors so appointed or elected may hold office until other Directors are
appointed or elected or until the day on which the next annual general
meeting is held.
15.2 The Company may by special resolution remove any Director and, by
ordinary resolution, appoint another person in his stead. Any Director so
appointed shall hold office only until the next following annual general
meeting of the Company. but shall be eligible for re-election at such
meeting.
15.3 The Directors shall have power at any time and from time to time to
appoint any person as a Director, to fill a casual vacancy on the Board or a
vacancy resulting from an Increase of the number of Directors necessitated by
the Company Act upon the Company becoming a reporting company. Any Director
so appointed shall hold office only until the next following annual general
meeting of the Company, but shall be eligible for re-election at such
meeting.
15.4 A retiring Director shall be eligible for re-election.
15.5 if at any general meeting at which there should be an election of
Directors, the places of any of the retiring Directors are not filled, such
of the retiring Directors who are not re-elected as may be requested by the
newly-elected Directors shall, If willing to do so, continue in office to
complete the number of Directors for the time being-fixed by these Articles
until further new Directors are elected at a general meeting convened for the
purpose, if the number of retiring Directors so requested and willing to
continue in office is Insufficient to complete the number of Directors for
the time being fixed by these Articles, the number of Directors shall be
reduced accordingly.
15.6 Between successive annual general meetings the Directors shall hive
power to appoint additional Directors. Any Director so appointed shall hold
office only until the next following annual general meeting of the Company,
but shall he eligible for election at such meeting, and so long as he is an
additional Director the number of Directors shall be increased accordingly.
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PART 16
PROCEEDINGS OF DIRECTORS
16.1 The Directors may meet together at such places as they think fit for the
discussion of business, adjourn and otherwise regulate their meetings and
proceedings as they see fit. The Directors may from time to time fix the
quorum necessary for the transaction of business and unless so fixed such
quorum shall be two. Provided however, that if the Board of Directors is made
up of one Director only that a quorum necessary for the transaction of
business shall be one Director in number. The Chairman of the Board, if any,
or in his absence the President of the Company, shall be chairman of all
meetings of the Board, but If at any meeting neither the Chairman of the
Board, if any, nor the President shall be present within 30 minutes after the
time appointed for holding the same or If both the Chairman of the Board and
the President, being present decline to act, the Directors present may choose
some one of their number to be chairman at such meeting. A Director
Interested is to be counted in a quorum notwithstanding his Interest.
16.2 A Director may at any time. and the Secretary, upon the written request
of a Director, shall call a meeting of the Directors. Notice thereof
specifying the time and place of such meeting shall be mailed, postage
prepaid, addressed to each of the Directors and alternate Directors at his
registered address at least 48 hours before the time fixed for the meeting or
such lesser period as may be reasonable under the circumstances, or such
notice may be given to each Director either personally or by leaving It at
his usual business or residential address or by telephone, telegram, telex or
other method of transmitting legibly recorded messages, at least 24 hours
before such time or such lesser period as may be reasonable under the
circumstances. It shall not be necessary to give to any Director notice of a
meeting of Directors Immediately following a general meeting at which such
Director has been elected or notice of a meeting of Directors at which such
Director shall have been appointed. Accidental omission to give notice of a
meeting of Directors to, or the non-receipt of notice by any Director, shall
not invalidate the proceedings at that meeting.
16.3 A meeting of the Directors at which a quorum is present shall be
competent to exercise all or any of the authorities, power and discretions
for the time being vested in or exercisable by the Directors.
16.4 The continuing Directors may act notwithstanding any vacancy in their
body, but, if and so long as their number is reduced below the number fixed
pursuant to these Articles as the necessary quorum of Directors, the
continuing Directors or Director may act for the purpose of increasing the
number of Directors to that number, or for the purpose of summoning a general
meeting of the Company, but for no other purpose.
16.5 The Directors may by resolution appoint one or more Standing Committees
consisting of such member or members of their body as they see fit and may
delegate to any such Standing Committee between meetings of the Board such
powers of the Board (except the power to fill vacancies In the Board and the
power to change the membership of or fill vacancies In any such Standing
Committee or In any Executive Committee of the Board and the power to appoint
or remove officers appointed by the Board), subject to the conditions as may
be prescribed In such resolution, and all Committees so appointed shall keep
regular minutes of their transactions and shall cause them to be recorded In
books kept for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time to time
require. The Directors shall also have power at any time to revoke or
override any authority given to or acts to be done by any such Standing
Committees except as to acts done before such revocation or overriding and to
revoke the appointment or change the membership of a Standing Committee
and to fill vacancies in it. Standing Committees may make rules for the
conduct of their business and may appoint such assistants as they may deem
necessary. A majority of the members of a Standing Committee shall constitute
a quorum thereof.
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16.6 The Directors may by resolution appoint an Executive Committee to
consist of such member or members of their body as they think fit, which
Committee shall have, and may exercise, during the Intervals between the
meetings of the Board, all the powers vested In the Board except the power to
fill vacancies in the Board, the power to change the membership of, or fill
vacancies in, said Committee or any Standing Committee of the Board and such
other powers, if any, as may be specified In the resolution. The said
Committee shall keep regular minutes of its transactions and shall cause them
to be recorded in books kept for that purpose, and shall report the same to
the Board of Directors at such times as the Board of Directors may from time
to time require. The Board shall have the power at any time to revoke or
override the authority given to or acts to be done by the Executive Committee
except as to acts done before such revocation or overriding, to revoke the
appointment or change the membership of such Committee, and to fill -
vacancies in it. The Executive Committee may make rules for the conduct of
its business and may appoint web assistants as It may deem necessary. A
majority of the members of said Committee shall constitute a quorum thereof.
16.7 A Standing Committee or an Executive Committee may meet and adjourn as
it thinks proper. Questions arising at any meeting shall be determined by a
majority of votes of the members of the Committee present and in case of an
equality of votes the chairman shall have a second or casting vote. A
resolution approved in writing by all the members of a Standing Committee or
an Executive Committee shall be as valid and effectual as if It had been
passed at a meeting of such Committee duly called and constituted.
16.8 All acts done by any meeting of the Directors or of a Committee of
Directors, or by any person acting as a Director, shall, notwithstanding that
it be afterwards discovered that there was some defect in the qualification,
election or appointment of any such Directors or of the members of such
Committee or person acting as aforesaid, or that they or any of them were
disqualified, be as valid as If every such person had been duly elected or
appointed and was qualified to be a Director.
16.9 For the first meeting of the Board to be held Immediately following the
appointment or election of a Director or Directors at an annual or general
meeting of shareholders or for a meeting of the Board at which a Director is
appointed to fill a vacancy in the Board, no notice of such meetings shall be
necessary to the newly elected or appointed Director or Directors in order
for the meeting to be duly constituted, provided that a quorum of Directors
is present.
16.10 Any Director of the Company may file with the Secretary a writing
executed by him waiving notice of any meeting or meetings of the Directors
being sent to him and may at any time withdraw such waiver with respect to
meetings held thereafter. After filing such waiver and until such waiver is
withdrawn no notice need be given to such Director of any meeting of
Directors and all meetings of the Directors so held (provided a quorum of the
Directors be present) shall be valid and binding upon the Company.
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16.11 Questions arising at any meeting of the Directors shall be decided by a
majority of votes. In case of an equality of votes the Chairman shall have a
second or casting vote.
16.12 A resolution consented to in writing, or by telegram, telex or any
method of transmitting legibly recorded messages by all of the Directors
shall be as valid and effectual as If It bad been passed at a meeting of the
Directors duly called and constituted. Such resolution may be in two or more
counterparts each signed by one or more Directors and the signed resolution
or counterparts shall be filed with the minutes of the proceedings of the
Directors.
16.13 A Director may participate in a meeting of the Board or of any
committee of the Directors by means of conference telephone or other
communications facilities by means of which all persons participating in the
meeting can hear each other and provided that all such persons agree to such
participation. A Director participating in a meeting In accordance with this
Article shall be deemed to be present at the meeting and shall be counted in
the quorum therefore and be entitled to speak and vote thereat.
PART 17
OFFICERS
17.1 The Directors shall, from time to time, appoint a President and a
Secretary and such other officers, if any, as the Directors shall determine
and the Directors may, at any time, terminate any such appointment.
17.2 One person may hold more than one of such offices except that the
offices of President and Secretary must be held by different persons unless
the Company has only one member. Any person appointed as the Chairman of the
Board, the President, or the Managing Director shall be a Director. The other
officers need not be Directors. The remuneration of the officers of the
Company as such and the terms and conditions of their tenure of office or
employment shall from time to time be determined by the Directors; such
remuneration may be by way of salary, fees, wages or commission or
participation in profits or any or all of these modes and an officer
may in addition to such remuneration be entitled to receive after he ceases
to hold such office or leaves the employment of the Company a pension or
gratuity. The Directors may decide what functions and duties each officer
shall perform and may entrust to and confer upon him any of the powers
exercisable by them upon such terms and conditions and with such restrictions
as they think fit and may from time to time revoke, withdraw, alter or vary
all or any of such functions, duties and powers. The Secretary shall, inter
alia, perform his functions specified In the Company Act.
17.3 Every officer of the Company who holds any office or possesses any
property whereby, whether directly or indirectly, duties or interests might
be created In conflict with his duties or interests as an officer of the
Company shall. In writing, disclose to the President the fact and the
nature, character and extent of the conflict.
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PART 18
MINUTES, DOCUMENTS AND RECORDS
18.1 The Directors shall cause minutes to be duly entered in books, provided
for the purpose:
(a) of all appointments of officers,
(b) of the names of the Directors', their alternates present at each meeting
of Directors and of any Committee of Directors;
(c) of all Orders made by the Directors or Committees of Directors;
(d) of all resolutions and proceedings of general meetings of the Company and
of all meetings of the Directors and of Committees of Directors.
18.2 The Directors shall cause the Company to keep at its Records Office or
at such other place as the Company Act may permit, the documents, copy
documents, registers, minutes and records which the Company as required by
the Company Act to keep at Its Records Office or such other place.
PART 19
EXECUTION OF DOCUMENTS
19.1 The Directors may provide a common seal for the Company and for its use
and the Directors shall have power from time to time to destroy the seal and
substitute a new seal in place thereof.
19.2 Subject to the provisions of the Company Act, the Directors may provide
for use in any other Province, State or Country an official seal, which shall
have on its face the name of the Province, Territory, State or Country where
it is to be used.
19.3 The Directors shall provide for the safe custody of the common seal of
the Company, if any, which shall not be affixed to any instrument except in
the presence of any two directors of the Company pursuant to a resolution of
the board of the directors, or by the authority of the Directors and by such
person or persons as may be authorized by such resolution; and such
person or persons shall sign every instrument to which the seal of the
Company is affixed in his or their presence; provided that a resolution of
the Directors directing the general use of the seal, If any, may at any time
be passed by the Directors and shall apply to the use of the seal until
countermanded by another resolution of the Directors.
19.4 The signature of any officer of the Company may, if authorized by the
Directors, be printed, lithographed, engraved or otherwise mechanically
reproduced upon all instruments executed or issued by the Company or any
officer thereof, and any instrument on which the signature of any such person
is so reproduced, shall be deemed to have been manually signed by such person
whose signature Is so reproduced and shall be as valid to all Intents and
purposes as if such instrument had been signed manually, and notwithstanding
that the person whose signature is so reproduced may have ceased to hold
office at the date of the delivery or issue of such instrument. The term
instrument as used in this Article shall include deeds, mortgages, hypothecs,
charges, conveyances, transfers and assignments of property, real or
personal, agreements, releases, receipts and discharges for the payment of
money or other obligations, certificates of the Company's shares, share
warrants of the Company, bonds, debentures and other debt obligations of the
Company, and all paper writings.
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19.5 To enable the seal of the Company to be affixed to any bonds,
debentures, share certificates, or other securities of the Company, whether
in definitive or interim form, on which facsimiles of any of the signatures
of the Directors or officers of the Company are, in accordance with the
Company Act and/or these Articles, printed or otherwise mechanically
reproduced there may be delivered to the firm or company employed to engrave,
lithograph or print such definitive or interim bonds, debentures, share
certificates or other securities one or more unmounted dies reproducing the
Company's seal and the Chairman of the Board, the President, the Managing
Director or a Vice-President and the Secretary, Treasurer. Secretary -
Treasurer, an Assistant Secretary or an Assistant Secretary-Treasurer may by
writing, authorize such firm or company to cause the Company's seal to be
affixed to such definitive or interim bonds, debentures, share certificates
or other securities by the use of such dies, Bonds, debentures, share
certificates or other securities to which the Company's seal has been so
affixed shall for all purposes be deemed to be under and to bear the
Company's seal as if it had actually been affixed thereto.
PART 20
DIVIDENDS
20.1 The Directors may declare dividends and fix the date of record therefore
and the date for payment thereof. No notice need be given of the declaration
of any dividend.
Subject to the terms of shares with special rights or restrictions, all
dividends shall be declared according to the number of shares held.
No dividend shall bear interest against the Company.
The Directors may direct payment of any dividend wholly or partly by the
distribution of specific assets or of paid-up shares, bonds, debentures or
other debt obligations of the Company or in any one or more of those ways,
and, where any difficulty arises in regard to the distribution, the Directors
may settle the same as they think expedient, and in particular may fix the
value for distribution of specific assets, and may determine that cash
payments shall be made to a member upon the basis of the value so fixed In
place of fractional shares, bonds, debentures or other debt obligations in
order to adjust the rights of all parties, and may vest any of those specific
assets in trustees upon such trusts for the persons entitled as may seem
expedient to the Directors.
20.5 Notwithstanding anything contained in these Articles the Directors may
from time to time capitalize any undistributed surplus on hand of the Company
and may from time to time issue as fully paid and non-assessable any unissued
shares or any bonds, debentures or other debt obligations of the Company as a
dividend representing such undistributed surplus on hand or any part thereof.
20.6 Any dividend, interest or other moneys payable in cash in respect of
shares may be paid by cheque or warrant sent through the post directed to the
registered address of the holder, or, in the case of joint holders, to the
registered address of that one of the joint holders who is first named on the
register or to such person and to such address as the holder or joint holders
may in writing direct. Every such cheque or warrant shall be made payable to
the order of the person to whom it is sent. Any one of two or more joint
holders may give effectual receipts for any dividends, bonuses or other
moneys payable in respect of the shares held by them as joint holders.
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20.7 A transfer of a share shall not pass the right to any dividend declared
thereof before the registration of the transfer in the register.
20.8 Notwithstanding any other provisions of these Articles should any
dividend result in any shareholders being entitled to a fractional part of a
share of the Company, the Directors shall have the right to pay such
shareholders in place of that fractional share, the cash equivalent thereof
calculated on the par value thereof or, in the case of shares without par
value, calculated on the price or consideration for which such shares were or
were deemed to be issued, and shall have the further right and complete
discretion to carry out such distribution and to adjust the rights of the
shareholders with respect thereto on as practical and equitable a basis as
possible including the right to arrange through a fiscal agent or otherwise
for the sale, consolidation or other disposition of those fractional shares
on behalf of those shareholders of the Company.
20.9 The Directors may, before declaring any dividend, set aside out of the
profits of the Company such sums as they think proper as appropriations from
income, which shall at the discretion of the Directors, be applicable for
meeting contingencies, or for equalizing dividends or for any other purpose
to which the profits of the Company may be properly applied, and pending such
application may, either be employed in the business of the Company or be
invested in such Investments as the Directors In their discretion may from
time to time determine.
PART 21
ACCOUNTS
21.1 The Directors shall cause records and books of accounts to be kept as
necessary to properly record the financial affairs and conditions of the
Company and to comply with the provisions of statutes applicable to the
Company.
21.2 The Directors shall determine the place at which the accounting records
of the Company shall be kept and those records shall be open to the
inspection of any Director during the normal business hours of the Company.
21.3 The Directors shall from time to time cause to be prepared and laid
before the Company in general meeting such financial statements and reports
as are required by the Company Act.
PART 22
NOTICES
22.1 A notice, statement or report may be given or delivered by the Company
to any member either by delivery to him personally or by sending it by post
to him to his address as recorded in the register of members. Where a notice,
statement or report is sent by post, service or delivery of the notice,
statement or report shall be deemed to be effected by properly addressing,
prepaying and posting the notice, statement or report and to have been given
on the day. Saturdays. Sundays and holidays excepted following the date of
posting. A certificate signed by the Secretary or other officer of the
Company or of any other corporation acting In that behalf for the Company
that the letter, envelope or wrapper containing the notice was so addressed,
prepaid and posted shall be conclusive evidence thereof.
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22.2 A notice, statement or report may be given or delivered by the Company
to the joint holders of a share by giving the notice to the joint holder
first named in the register of members in respect of the share.
22.3 A notice, statement or report may be given or delivered by the Company
to the persons entitled to a share in consequence of the death or bankruptcy
or incapacity of a member by sending it through the post prepaid addressed to
them by name or by the title of representatives of the deceased, or trustee
of the bankrupt, or committee, or by any like description, at the address (if
any) supplied to the Company for the purpose by the persons claiming to be so
entitled, or (until such address has been so supplied) by giving the notice
in a manner in which the same might have been given if the death or
bankruptcy or incapacity had not occurred.
22.4 Notice of every general meeting or meeting of members holding a class of
shares shall be given in a manner hereinbefore authorized to every member
holding at the time of the Issue of the notice or the date fixed for
determining the members entitled to such notice, whichever is the earlier,
shares which confer the right to notice of and to attend and vote at any such
meeting. No other person except the auditor of the Company and the Directors
of the Company shall be entitled to receive notices of any such meeting.
PART 23
INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES
23.1 Subject to the provisions of the Company Act, the Company shall
indemnify a Director or former Director of the Company and a Director or
former Director of a corporation of which the Company is or was a shareholder
and the heirs and personal representatives of any such Director or former
Director against all costs, charges and expenses; including an amount paid to
settle an action or satisfy a Judgment, actually and reasonably incurred by
him or them including an amount paid to settle an action or satisfy a
judgment In a civil, criminal or administrative action or proceeding to which
he is or they are made a party by reason of his being or having been a
Director of the Company or a Director of such corporation, including any
action brought by the Company or any such corporation. Each Director on being
elected or appointed shall be deemed to have contracted with the Company on
the terms of the foregoing Indemnity.
23.2 Subject to the provisions of the Company Act~ the Directors may cause
the Company to indemnify every officer, employee or agent of the Company or
of a corporation of which the Company is or was a shareholder
(notwithstanding that he is also a Director) and his heirs and personal
representatives against all costs, charges and expenses whatsoever Incurred
by him or them and resulting from his acting as an officer, employee or agent
of the Company or such corporation. In addition the Company shall indemnify
the Secretary or an Assistant Secretary of the Company (if he shall not be a
full time employee of the Company and notwithstanding that he is also a
Director) and his respective heirs and legal representatives against all
costs, charges and expenses whatsoever Incurred by him or them and arising
out of the functions assigned to the Secretary by the Company Act or these
Articles and the Secretary and each Assistant Secretary shall on being
appointed be deemed to have contracted with the Company on the terms of the
foregoing indemnity.
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23.3 The Directors are authorized from time to time to cause the Company to
give Indemnities to any Director, officer, employee, agent or other person
who has undertaken or Is about to undertake any liability on behalf of the
Company or any corporation controlled by it.
23.4 If the Directors or any of them, or any other persons become personally
liable for the payment of any sum for which the Company is primarily liable,
the Directors may, execute or cause to be executed any mortgage, charge or
security over or affecting all or any part of the assets of the Company by
way of indemnity to secure the Directors or persons so becoming liable as
aforesaid from loss in respect of such liability.
23.5 Directors may rely upon the accuracy of any statement of fact
represented by an officer of the Company to be correct or upon statements in
a written report of the Auditor of the Company and shall not be responsible
or held liable for any loss or damage resulting from the paying of any
dividends or otherwise act in good faith upon any such statement.
23.6 The Directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was a Director, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
Director, officer, employee or agent of another corporation, a partnership,
joint venture, trust or other enterprise against any liability incurred by
him as a Director, officer, employee or agent.
PART 24
PROHIBITIONS
24.1 So long as the Company is a company which is not a reporting company.
(a) No transfer of shares shall be entered in the register of members without
the prior approval of the Directors, and the Company shall not keep a branch
register of members outside the Province of British Columbia unless the
Company Act so permits.
(b) The number of members for the time being of the Company, exclusive of
persons who are for the time being In the employment of the Company and of
persons who were members while in the employment of the Company and continue
to be members after the termination of such employment, is not to exceed 50.
(c) No shares nor debt obligations issued by the Company shall be offered to
the public for subscription.
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PART 25
RESTRICTION ON SHARE TRANSFERS
25.1 So long as the Company is a company which is not a reporting company, no
shares in the capital of the Company shall be transferred by any member, or
the personal representative of any deceased member or trustee in bankruptcy
of any bankrupt member. or the liquidator of a member which is a corporation,
except under the following conditions.
(a) A person (herein called the "proposing transfer") desiring to transfer
any share or shares in the Company shall give notice in writing (herein
called the "transfer notice") to the Company that he desires to transfer the
same. The transfer notice shall specify the price, which shall be expressed
in lawful money of Canada, and the terms of payment upon which the proposing
transferor is prepared to transfer the share or shares and shall constitute
the Company his agent for the sale thereof to any member or members of the
Company at the price and upon the terms of payment so specified. The transfer
notice shall also state whether or not the proposing transferor has had an
offer to purchase the shares or any of them from, or proposes to sell the
shares or any of them to, any particular person or persons who are not
members and if so the names and addresses of such persons shall be specified
In the transfer notice. The transfer notice shall constitute an offer by the
proposing transferor to the other members of the Company holding shares of
the class or classes included in the transfer notice and shall not be
revocable except with the sanction of the Directors, if the transfer notice
pertains to shares of more than one class then the consideration and terms of
payment for each class of shares shall be stated separately in the transfer
notice.
(b) The Directors shall forthwith upon receipt thereof transmit the transfer
notice to each of the members, other than the proposing transferor, holding
shares of the class or classes set forth in the transfer notice and request
the member to whom the transfer notice is sent to state in writing within 14
days from the date of the transfer notice whether he is willing to accept
any, and if so, the maximum number of shares he is willing to accept at the
price and upon the terms specified in the transfer notice. A member shall
only be entitled to purchase shares of the class or classes held by him.
(c) Upon the expiration of the 14 day notice period referred to in Article
25. 1 (b). If the Directors shall have received from the members entitled to
receive the transfer notice sufficient acceptances to take up the full number
of shares offered by the transfer notice and, If the transfer notice includes
shares of more than one class, sufficient acceptances from the members of
each class to take up the full number of shares of each class inferred by the
transfer notice, the Directors shall thereupon apportion shares so offered
among the members so accepting and so far as may be, pro rata, according to
the number of shares held by each of them respectively, and in the case of
more than one class of shares, then pro rata in respect of each class. If the
Directors shall not have received sufficient acceptances as aforesaid, they
may, but only with the consent of the proposing transferor who shall not be
obliged to sell to members in the aggregate less than the total number of
shares of one or more classes of shares offered by die transfer notice,
apportion the shares so offered among the members so accepting so far as may
be according to the number of shares held by each respectively but only to
the amount accepted by such members respectively. Upon any such apportionment
being made the proposing transferor shall be bound, upon payment of the price
to transfer the shares to the respective members to whom the Directors have
apportioned same, if, in any case, the proposing transferor, having become so
bound fails in transferring any share, the Company may receive the purchase
money for that share and shall upon receipt cause the name of the purchasing
member to be entered in the register as the holder of the shares and cancel
the certificate of the share held by the proposed transferor, whether the
same shall be produced to the Company or not, and shall hold such purchase
money in trust for the proposing transferor. The receipt of the Company for
the purchase money shall be a good discharge to the purchasing member arid
after his name has been entered in the register the validity of the
proceedings shall not be questioned by any person.
(d) in the event that some or all of the shares offered shall not be sold
under the preceding Articles within the 14 day period referred to in Article
25. 1 (b), the proposing transferor shall be at liberty for a period of 90
days after the expiration of that period to transfer such of the shares
so offered as are not sold to any person provided that lie shall not sell
them at a price less than that specified in the transfer notice or on terms
more favourable to a purchaser than those specified in the transfer notice.
(e) The provisions as to transfer contained in this Article shall not apply:
(i) if before the proposed transfer of shares is made, the transferor shall
obtain consents to the proposed transfer from members of the Company, who at
the time of the transfer are the registered holders of two-thirds or more of
the issued shares of the class to be transferred of the Company or if the
shares comprise more than one class, then from the registered holders of
two-thirds or more of the share, of each class to be transferred and such
consent shall be taken to be a waiver of the application of the preceding
Articles as regards such transfer; or
(ii) to a transfer of shares desired to be made merely for the purpose of
effectuating the appointment of a new trustee for the owner thereof, provided
that it is proved to the satisfaction of the Board that such is the case.
25.2 Notwithstanding anything contained in these Articles the Directors may
in their absolute discretion decline to register any transfer of shares and
shall not be required to disclose their reasons therefore.
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CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
"SEAL" 210585
Province of British Columbia
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
LINDEX EXPLORATIONS LTD.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
LECTUS DEVELOPMENTS LTD.
GIVEN, UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA
THIS 14TH DAY OF FEBRUARY, 1986
" /Signed/"Roberta J. Lowdon"
ROBERTA J. LOWDON
"SEAL" Deputy Registrar of Companies
E-26
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
"SEAL" 210585
Province of British Columbia
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
LECTUS DEVELOPMENTS LTD.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
SWANNELL MINERALS CORP.
GIVEN, UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA
THIS 15TH DAY OF MAY, 1991
" /Signed/"David W. Boyd"
DAVID W. BOYD
"SEAL" Registrar of Companies
E-27
"SEAL" NUMBER: 262523
BRITISH
COLUMBIA
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
I Hereby Certify that
SWANNELL MINERALS CORP.
has this day changed its name to
GLOBENET RESOURCES INC.
Issued under my hand at Victoria, British Columbia
on April 01, 1997
/Signed/ "John S. Powell"
JOHN S. POWELL
"SEAL" Registrar of Companies
E-28
Merger Agreement between the Company and Woodbridge Capital Corp.
AGREEMENT AND PLAN OF MERGER between Woodridge Capital Corp., a Delaware
corporation ("Woodridge"), Globenet Resources (Delaware) Corp, a Delaware
corporation ("Subco"), and Globenet Resouces Inc., a British Columbia
corporation ("Globenet"), Woodridge, Subco and Globenet being sometimes
referred to herein as the "Constituent Corporations."
WHEREAS, the board of directors of each Constituent Corporation deems
it advisable that Subco and Woodridge merge into a single corporation in a
transaction intended to qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("the
Merger") and upon completion of the Merger, pursuant to Rule 12g-3(a)
of the General Rules and Regulations of the Securities and Exchange
Commission (the "Commission"), Globenet will elect to become the successor
issuer to Woodridge for reporting purposes under the Securities Exchange Act
of 1934;
NOW, THEREFORE, in consideration of the premises and the respective
mutual covenants, representations and warranties herein contained, the
parties agree as follows:
1. SURVIVING CORPORATION. Woodridge shall be merged with and into
Subco which shall be the surviving corporation in accordance with the
applicable laws of its state of incorporation.
2. MERGER DATE. The Merger shall become effective (the "Merger
Date") upon the completion of:
2.1. Adoption of this agreement by Woodridge, Subco and Globenet
pursuant to the Delaware General Corporation Law; and
2.2. Execution and filing by Woodridge and Subco of a Certificate of
Merger with the Secretary of State of the State of Delaware in accordance
with the Delaware General Corporation Law.
3. TIME OF FILINGS. The Certificate of Merger shall be filed with
the Secretary of State of Delaware upon the approval, as required by law, of
this agreement by the Constituent Corporations and the fulfillment or waiver
of the terms and conditions herein.
4. GOVERNING LAW. The surviving corporation shall be governed by the
laws of the State of incorporation of Subco.
5. CERTIFICATE OF INCORPORATION. The Articles of Incorporation of
Subco shall be the Articles of Incorporation of the surviving corporation
from and after the Merger Date, subject to the right of Subco to amend its
Articles of Incorporation in accordance with the laws of the State of its
incorporation.
6. BYLAWS. The Bylaws of the surviving corporation shall be the
Bylaws of Subco as in effect on the date of this agreement.
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7. BOARD OF DIRECTORS AND OFFICERS. The officers and directors of
Subco, or such other persons as shall be selected by it, shall be the
officers and directors of the surviving corporation following the Merger
Date.
8. NAME OF SURVIVING CORPORATION. The name of the surviving
corporation will continue as "Globenet Resources (Delaware) Corp." unless
changed by Subco.
9. CONVERSION. The mode of carrying the Merger into effect and the
manner and basis of converting the shares of Woodridge into shares of
Globenet are as follows:
9.1. The aggregate number of shares of Woodridge Common Stock issued
and outstanding on the Merger Date shall, by virtue of the Merger and without
any action on the part of the holders thereof, be converted into an aggregate
of 150,000 shares of Globenet Common Stock adjusted by any increase for
fractional shares and reduced by any Dissenting Shares (defined below).
The 150,000 Globenet Common Stock to be issued hereunder (the
"Globenet Shares") will be issued pursuant to applicable exemptions under the
British Columbia Securities Act and to the shareholders of Woodridge that are
U.S. residents, if any, pursuant to Section 4(2) of the Securities Act 1933
and/or Rule 506 of the General Rules and Regulations of the Securities and
Exchange Commission. The Globenet Shares will be restricted as to
transferability pursuant to applicable securities legislation in the Province
of British Columbia. In addition the Globenet Shares issued to U.S. residents
will be restricted as to transferability pursuant to Rule 144 thereof, and
will bear substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT")
AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144
UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT.
9.3. All outstanding Common or Preferred Stock of Woodridge and all
warrants, options or other rights to its Common or Preferred Stock shall be
retired and canceled as of the Merger Date.
9.4. Each share of Woodridge Common Stock that is owned by Woodridge
as treasury stock shall, by virtue of the Merger and without any action on
the part of Woodridge, be retired and canceled as of the Merger Date.
9.5. Each certificate evidencing ownership of shares of Globenet
Common Stock issued and outstanding on the Merger Date or held by Globenet in
its treasury shall continue to evidence ownership of the same number of
shares of Globenet's Common Stock.
9.6. Globenet Common Stock shall be issued to the shareholders of
Woodridge Common Stock in exchange for their shares.
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9.7. The Globenet shares to be issued in exchange for Woodridge
Common Stock hereunder shall be proportionately reduced by any shares owned
by Woodridge shareholders who shall have timely objected to the Merger
("Dissenting Shares") in accordance with the provisions of the Delaware
Business Corporation Act as provided therein.
10. EXCHANGE OF CERTIFICATES. As promptly as practicable after the
Merger Date, each holder of an outstanding certificate or certificates
theretofore representing shares of Woodridge Common Stock (other than
certificates representing Dissenting Shares) shall surrender such
certificate(s) for cancellation to the party designated herein to handle such
exchange (the "Exchange Agent"), and shall receive in exchange a certificate
or certificates representing the number of full shares of Globenet Common
Stock which they are entitled to receive in exchange for their shares of
Woodridge Common Stock. Any exchange of fractional shares will be rounded up
to the next highest number of full shares.
11. UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate that prior to the Merger Date represented Woodridge Common Stock
(other than certificates representing Dissenting Shares) shall be deemed for
all purposes, other than the payment of dividends or other distributions, to
evidence ownership of the number of shares of Globenet Common Stock into
which it was converted. No dividend or other distribution payable to
holders of Globenet Common Stock as of any date subsequent to the Merger Date
shall be paid to the holders of outstanding certificates of Woodridge Common
Stock; provided, however, that upon surrender and exchange of such
outstanding certificates (other than certificates representing Dissenting
Shares), there shall be paid to the record holders of the certificates issued
in exchange therefor the amount, without interest thereon, of dividends and
other distributions that would have been payable subsequent to the Merger
Date with respect to the shares of Globenet Common Stock represented thereby.
12. EFFECT OF THE MERGER. On the Merger Date, the separate existence
of Woodridge shall cease (except insofar as continued by statute), and it
shall be merged with and into Subco. All the property, real, personal, and
mixed, of each of Woodridge and Subco, and all debts due to either of them,
shall be transferred to and vested in Subco, without further act or
deed. Subco shall thenceforth be responsible and liable for all the
liabilities and obligations, including liabilities to holders of Dissenting
Shares, of each of the Woodridge and Subco, and any claim or judgment against
either of Woodridge or Subco may be enforced against Subco.
13. REPRESENTATIONS AND WARRANTIES OF WOODRIDGE. Woodridge
represents and warrants that:
13.1. CORPORATE ORGANIZATION AND GOOD STANDING. Woodridge is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
13.2. REPORTING COMPANY STATUS. Woodridge has filed with the
Securities and Exchange Commission a registration statement on Form 10-SB and
is a reporting company pursuant to Section 12(g) thereunder.
E-31
13.3. REPORTING COMPANY FILINGS. Woodridge has timely filed and is
current on all reports required to be filed by it pursuant to Section 13 of
the Securities Exchange Act of 1934.
13.4. CAPITALIZATION. Woodridge's authorized capital stock consists
of 1,000,000 shares of Common Stock, $.0001 par value, of which 725,000
shares are issued and outstanding.
13.5. ISSUED STOCK. All the outstanding shares of its Common Stock
are duly authorized and validly issued, fully paid and non-assessable.
13.6. STOCK RIGHTS. Except as set out by attached schedule, there
are no stock grants, options, rights, warrants or other rights to purchase or
obtain Woodridge Common issued or committed to be issued.
13.7. CORPORATE AUTHORITY. Woodridge has all requisite corporate
power and authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this agreement and all other
agreements and instruments related to this agreement.
13.8. SUBSIDIARIES. Woodridge has no subsidiaries.
13.9. FINANCIAL STATEMENTS. Woodridge's financial statements dated
October 31, 2000 and October 31, 2001 copies of which will have been
delivered by Woodridge to Globenet prior to the Merger Date (the "Woodridge
Financial Statements"), fairly present the financial condition of Woodridge
as of the date therein and the results of its operations for the periods then
ended in conformity with generally accepted accounting principles
consistently applied.
13.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the Woodridge Financial Statements,
Woodridge did not have at that date any liabilities or obligations (secured,
unsecured, contingent, or otherwise) of a nature customarily reflected in a
corporate balance sheet prepared in accordance with generally accepted
accounting principles.
13.11. NO MATERIAL CHANGES. There has been no material adverse
change in the business, properties, or financial condition of Woodridge since
the date of the Woodridge Financial Statements.
13.12. LITIGATION. There is not, to the knowledge of Woodridge, any
pending, threatened, or existing litigation, bankruptcy, criminal, civil, or
regulatory proceeding or investigation, threatened or contemplated against
Woodridge or against any of its officers.
13.13. CONTRACTS. Woodridge is not a party to any material contract
not in the ordinary course of business that is to be performed in whole or in
part at or after the date of this agreement.
13.14. TITLE. Woodridge has good and marketable title to all the
real property and good and valid title to all other property included in the
Woodridge Financial Statements. The properties of Woodridge are not subject
to any mortgage, encumbrance, or lien of any kind except minor encumbrances
that do not materially interfere with the use of the property in the
conduct of the business of Woodridge.
E-32
13.15. TAX RETURNS. All required tax returns for federal, state,
county, municipal, local, foreign and other taxes and assessments have been
properly prepared and filed by Woodridge for all years for which such returns
are due unless an extension for filing any such return has been filed. Any
and all federal, state, county, municipal, local, foreign and other taxes and
assessments, including any and all interest, penalties and additions imposed
with respect to such amounts have been paid or provided for. The provisions
for federal and state taxes reflected in the Woodridge Financial Statements
are adequate to cover any such taxes that may be assessed against Woodridge
in respect of its business and its operations during the periods covered by
the Woodridge Financial Statements and all prior periods.
13.16. NO VIOLATION. Consummation of the Merger will not constitute
or result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree,
law, or regulation to which any property of Woodridge is subject or by which
Woodridge is bound.
14. REPRESENTATIONS AND WARRANTIES OF GLOBENET. Globenet represents
and warrants that:
14.1. CORPORATE ORGANIZATION AND GOOD STANDING. Globenet is a
corporation duly organized, validly existing, and in good standing under the
laws of the Province of British Columbia and is qualified to do business as a
foreign corporation in each jurisdiction, if any, in which its property or
business requires such qualification.
14.2. CAPITALIZATION. Globenet's authorized capital stock consists of
100,000,000 shares of Common Stock No Par Value, of which 3,897,416 shares
are issued and outstanding as of the date of this agreement.
14.3. ISSUED STOCK. All the outstanding shares of its Common Stock
are duly authorized and validly issued, fully paid and non-assessable.
14.4. CORPORATE AUTHORITY. Globenet has all requisite corporate
power and authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all other
agreements and instruments related to this agreement.
14.5. SUBSIDIARIES. Except as set out in Disclosure Schedule 14.5,
Globenet has no subsidiaries other than Subco .
14.6. FINANCIAL STATEMENTS. Globenet's financial statements dated
July 31, 2000 and July 31, 2001 copies of which will have been delivered by
Globenet to Woodridge prior to the Merger Date (the "Globenet Financial
Statements"), fairly present the financial condition of Globenet as of the
date therein and the results of its operations for the periods then ended in
conformity with generally accepted accounting principles consistently
applied.
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14.7. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in Globenet Financial Statements, Globenet did
not have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
14.8. NO MATERIAL CHANGES. There has been no material adverse change
in the business, properties, or financial condition of Globenet since July
30, 2001.
14.9. LITIGATION. Except as set out in Disclosure Schedule 14.9,
there is not, to the knowledge of Globenet, any pending, threatened, or
existing litigation, bankruptcy, criminal, civil, or regulatory proceeding or
investigation, threatened or contemplated against Globenet or against any of
its officers.
14.10. CONTRACTS. Globenet is not a party to any material contract
not in the ordinary course of business or in the course of its proposed
acquisitions that is to be performed in whole or in part at or after the date
of this Agreement.
14.11. TITLE. Globenet has good and marketable title to all the real
property and good and valid title to all other property included in the
Globenet Financial Statements. The properties of Globenet are not subject to
any mortgage, encumbrance, or lien of any kind except minor encumbrances that
do not materially interfere with the use of the property in the conduct of
the business of Globenet.
14.12. TAX RETURNS. All required tax returns for federal, state,
county, municipal, local, foreign and other taxes and assessments have been
properly prepared and filed by Globenet for all years for which such returns
are due unless an extension for filing any such return has been filed. Any
and all federal, provincial, county, municipal, local, foreign and other
taxes and assessments, including any and all interest, penalties and
additions imposed with respect to such amounts have been paid or provided
for. The provisions for federal and state taxes reflected in the Globenet
Financial Statements are adequate to cover any such taxes that may be
assessed against Globenet in respect of its business and its operations
during the periods covered by the Globenet Financial Statements and all prior
periods.
14.13. NO VIOLATION. Consummation of the Merger will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree,
law, or regulation to which any property of Globenet is subject or by which
Globenet is bound.
15. REPRESENTATIONS AND WARRANTIES OF SUBCO. Subco represents and
warrants that:
15.1. CORPORATE ORGANIZATION AND GOOD STANDING. Subco is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
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15.2. CAPITALIZATION. Subco's authorized capital stock consists of
100,000 shares of Common Stock $.0001 Par Value, of which 1,000 shares are
issued and outstanding.
15.3. ISSUED STOCK. All the outstanding shares of its Common Stock
are duly authorized and validly issued, fully paid and non-assessable.
15.4. CORPORATE AUTHORITY. Subco has all requisite corporate power
and authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all other
agreements and instruments related to this agreement.
15.5 CORPORATE ASSETS. Subco has no assets or liabilities.
15.6. NO VIOLATION. Consummation of the Merger will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree,
law, or regulation to which any property of Subco is subject or by which
Subco is bound.
16. CONDUCT OF WOODRIDGE PENDING THE MERGER DATE. Woodridge
covenants that between the date of this Agreement and the Merger Date:
16.1. No change will be made in Woodridge's Certificate of
Incorporation or bylaws/articles.
16.2. Woodridge will not make any change in its authorized or issued
capital stock, declare or pay any dividend or other distribution or issue,
encumber, purchase, or otherwise acquire any of its capital stock other than
as provided herein.
16.3. Woodridge will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will
not enter into any material commitment except in the ordinary course of
business.
17. CONDUCT OF GLOBENET PENDING THE MERGER DATE. Globenet covenants
that between the date of this Agreement and the Merger Date:
17.1. No change will be made in Globenet's Memorandum of Incorporation
or Articles.
17.2. Globenet will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will
not enter into any material commitment except in the ordinary course of
business.
18. CONDUCT OF SUBCO PENDING THE MERGER DATE. Subco covenants that
between the date of this Agreement and the Merger Date:
18.1. No change will be made in Subco's Articles of incorporation or
articles.
18.2. Subco will not enter into any material commitment except in the
ordinary course of business.
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19. CONDITIONS PRECEDENT TO OBLIGATION OF WOODRIDGE. Woodridge's
obligation to consummate the Merger shall be subject to fulfillment on or
before the Merger Date of each of the following conditions, unless waived in
writing by Woodridge:
19.1. GLOBENET'S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Globenet set forth herein shall be true and correct at the
Merger Date as though made at and as of that date, except as affected by
transactions contemplated hereby.
19.2. GLOBENET'S COVENANTS. Globenet shall have performed all
covenants required by this agreement to be performed by it on or before the
Merger Date.
19.3. APPROVAL. This agreement shall have been approved by Globenet
in such manner as is required by law including all appropriate action by
directors and, if required, by shareholders and/or approval by regulatory
authorities.
19.4. SUPPORTING DOCUMENTS OF GLOBENET . Globenet shall have delivered
to Woodridge supporting documents in form and substance satisfactory to
Woodridge to the effect that:
(i) Globenet is a corporation duly organized, validly existing,
and in good standing.
(ii) Globenet's authorized and issued capital stock is as set
forth herein.
(iii) The execution and adoption of this agreement have been duly
authorized by Globenet in such manner as is required by law including all
appropriate action by directors and, if required, by shareholders.
19.5. SUBCO'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Subco set forth herein shall be true and correct at the Merger
Date as though made at and as of that date, except as affected by
transactions contemplated hereby.
19.6. SUBCO'S COVENANTS. Subco shall have performed all covenants
required by this agreement to be performed by it on or before the Merger
Date.
19.7. APPROVAL. This agreement shall have been approved by Subco in
such manner as is required by law including all appropriate action by
directors and, if required, by shareholders.
19.8. SUPPORTING DOCUMENTS OF SUBCO. Subco shall have delivered to
Woodridge supporting documents in form and substance satisfactory to
Woodridge to the effect that:
(i) Subco is a corporation duly organized, validly existing, and
in good standing.
(ii) Subco's authorized and issued capital stock is as set forth
herein.
E-36
(iii) The execution and adoption of this agreement have been duly
authorized by Subco in such manner as is required by law including all
appropriate action by directors and, if required, by shareholders
20. CONDITIONS PRECEDENT TO OBLIGATION OF GLOBENET. Globenet's
obligation to consummate the Merger shall be subject to fulfillment on or
before the Merger Date of each of the following conditions, unless waived in
writing by Globenet:
20.1. WOODRIDGE'S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Woodridge set forth herein shall be true and correct at the
Merger Date as though made at and as of that date, except as affected by
transactions contemplated hereby.
20.2. WOODRIDGE'S COVENANTS. Woodridge shall have performed all
covenants required by this agreement to be performed by it on or before the
Merger Date.
20.3. APPROVAL. This Agreement shall have been approved by Woodridge in
such manner as is required by law including all appropriate action by
directors and, if required, by shareholders.
20.4. SUPPORTING DOCUMENTS OF WOODRIDGE. Woodridge shall have delivered
to Globenet supporting documents in form and substance satisfactory to
Globenet to the effect that:
(i) Woodridge is a corporation duly organized, validly existing, and
in good standing.
(ii) Woodridge's authorized and issued capital stock is as set forth
herein.
(iii) The execution and adoption of this Agreement have been duly
authorized by Woodridge in such manner as is required by law including all
appropriate action by directors and, if required, by shareholders.
21. ACCESS. From the date hereof to the Merger Date, Globenet, Subco
and Woodridge shall provide each other with such information and permit each
other's officers and representatives such access to its properties and books
and records as the other may from time to time reasonably request. If the
Merger is not consummated, all documents received in connection with this
agreement shall be returned to the party furnishing such documents, and all
information so received shall be treated as confidential.
22. CLOSING.
22.1. The transfers and deliveries to be made pursuant to this agreement
(the "Closing") shall be made by and take place at the offices of the
Exchange Agent or other location designated by the Constituent Corporations
without requiring the meeting of the parties hereof. All proceedings to be
taken and all documents to be executed at the Closing shall be deemed to have
been taken, delivered and executed simultaneously, and no proceeding shall
be deemed taken nor documents deemed executed or delivered until all have
been taken, delivered and executed.
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22.2. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission required by this agreement or any
signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original
could be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing
or transmission or original signature.
22.3. At the Closing, Woodridge shall deliver to the Exchange Agent in
satisfactory form, if not already delivered to Globenet:
(i) a list of the holders of record of the shares of Woodridge Common
Stock being exchanged, with an itemization of the number of shares held by
each, the address of each holder, and the aggregate number of shares of
Globenet Common Stock to be issued to each holder;
(ii) evidence of the execution and adoption of this Agreement in such
manner as is required by law including all appropriate action by directors
and, if required, by shareholders;
(iii) certified copies of the resolutions of the board of directors
of Woodridge authorizing the execution of this agreement and the consummation
of the Merger;
(iv) the Woodridge Financial Statements;
(v) secretary's certificate of incumbency of the officers and
directors of Woodridge;
(vi) any document as may be specified herein or required to satisfy
the conditions, representations and warranties enumerated elsewhere herein;
and
(vii) the share certificates for the outstanding Common Stock of
Woodridge to be exchanged hereunder each share certificate duly endorsed for
transfer.
22.4. At the Closing, Globenet shall deliver to the Exchange Agent in
satisfactory form, if not already delivered to Woodridge:
(i) evidence of the execution and adoption of this Agreement in such
manner as is required by law including all appropriate action by directors
and, if required, by shareholders;
(ii) certificate of the Secretary of State of its state of
incorporation as of a recent date as to the good standing of Globenet;
(iii) certified copies of the resolutions of the board of directors
of Globenet authorizing the execution of this agreement and the consummation
of the Merger;
(iv) secretary's certificate of incumbency of the officers and
directors of Globenet;
(v) any document as may be specified herein or required to satisfy
the conditions, representations and warranties enumerated elsewhere herein;
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(vi) the share certificates of Globenet (the "Globenet Certificates")
to be delivered to the shareholders of Woodridge hereunder, in proper names
and amounts, as instructed by the Exchange Agent, and bearing legends, if
any, required and appropriate under applicable securities laws; and
22.5 RELEASE OF CONSIDERATION. Upon filing of the Articles of Merger and
Certificate of Merger, the Exchange Agent is expressly authorized to:
(1) deliver the Woodridge Certificates to Globenet; and
(2) deliver the Globenet Certificates to the Woodridge
Shareholders.
23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Constituent Corporations set out herein shall survive the
Merger Date.
24.ASSUMPTION OF REPORTING OBLIGAGTIONS. Upon effectiveness of the
Merger, pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Commission, Globenet will elect to become the successor issuer to Woodridge
for reporting purposes under the Securities Exchange Act of 1934.
25. ARBITRATION.
25.1. SCOPE. The parties hereby agree that any and all claims (except
only for requests for injunctive or other equitable relief) whether existing
now, in the past or in the future as to which the parties or any affiliates
may be adverse parties, and whether arising out of this agreement or
from any other cause, will be resolved by arbitration before the American
Arbitration Association within the District of Columbia.
25.2. CONSENT TO JURISDICTION, SITUS AND JUDGMENT. The parties hereby
irrevocably consent to the jurisdiction of the American Arbitration
Association and the situs of the arbitration (and any requests for injunctive
or other equitable relief) within the District of Columbia. Any award in
arbitration may be entered in any domestic or foreign court having
jurisdiction over the enforcement of such awards.
25.3. APPLICABLE LAW. The law applicable to the arbitration and this
agreement shall be that of the State of Delaware, determined without regard
to its provisions which would otherwise apply to a question of conflict of
laws.
25.4. DISCLOSURE AND DISCOVERY. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to
any matters which are the subject of the arbitration and to compel compliance
with such disclosure and discovery order. The arbitrator may order the
parties to comply with all or any of the disclosure and discovery
provisions of the Federal Rules of Civil Procedure, as they then exist, as
may be modified by the arbitrator consistent with the desire to simplify the
conduct and minimize the expense of the arbitration.
25.5. RULES OF LAW. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of
the jurisdiction whose law applies to the arbitration so that the decision of
the arbitrator will be, as much as possible, the same as if the dispute had
been determined by a court of competent jurisdiction.
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25.6. FINALITY AND FEES. Any award or decision by the American
Arbitration Association shall be final, binding and non-appealable except as
to errors of law or the failure of the arbitrator to adhere to the
arbitration provisions contained in this agreement. Each party to the
arbitration shall pay its own costs and counsel fees except as specifically
provided otherwise in this agreement.
25.7 MEASURE OF DAMAGES. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and\or securities
issued or to be issued and no claims shall be made by any party or affiliate
for lost profits, punitive or multiple damages.
25.8. COVENANT NOT TO SUE. The parties covenant that under no
conditions will any party or any affiliate file any action against the other
(except only requests for injunctive or other equitable relief) in any forum
other than before the American Arbitration Association, and the parties agree
that any such action, if filed, shall be dismissed upon application and shall
be referred for arbitration hereunder with costs and attorney's fees to the
prevailing party.
25.9. INTENTION. It is the intention of the parties and their affiliates
that all disputes of any nature between them, whenever arising, whether in
regard to this Agreement or any other matter, from whatever cause, based on
whatever law, rule or regulation, whether statutory or common law, and
however characterized, be decided by arbitration as provided herein and that
no party or affiliate be required to litigate in any other forum any disputes
or other matters except for requests for injunctive or equitable relief.
This Agreement shall be interpreted in conformance with this stated intent of
the parties and their affiliates.
25.10. SURVIVAL. The provisions for arbitration contained herein shall
survive the termination of this agreement for any reason.
26. GENERAL PROVISIONS.
26.1. FURTHER ASSURANCES. From time to time, each party will execute
such additional instruments and take such actions as may be reasonably
required to carry out the intent and purposes of this agreement.
26.2. WAIVER. Any failure on the part of either party hereto to comply
with any of its obligations, agreements, or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
26.3. BROKERS. Each party agrees to indemnify and hold harmless the
other party against any fee, loss, or expense arising out of claims by
brokers or finders employed or alleged to have been employed by the
indemnifying party.
26.4. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or
sent by prepaid first-class certified mail, return receipt requested, or
recognized commercial courier service, as follows:
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If to Woodridge, to: 700-625 Howe Street
Vancouver, B.C. V6C 2T6
If to Globenet: 25 - 8551 General Currie Road
Richmond B.C. V6Y 1M3
If to Subco, to: 25- 8551 General Currie Road
Richmond B.C. V6Y 1M3
27. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
28. ASSIGNMENT. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this
agreement without the written consent of the other party shall be void.
29. COUNTERPARTS. This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures sent
by facsimile transmission shall be deemed to be evidence of the original
execution thereof.
30. EXCHANGE AGENT AND CLOSING DATE. The Exchange Agent shall be
Maitland & Company 700-625 Howe Street Vancouver B.C. The Closing shall take
place upon the fulfillment by each party of all the conditions of Closing
required herein, but not later than 15 days following execution of this
Agreement unless extended by mutual consent of the parties.
31. REVIEW OF AGREEMENT. Each party acknowledges that it has had time
to review this Agreement and, as desired, consulted with counsel. In the
interpretation of this agreement, no adverse presumption shall be made
against any party on the basis that it has prepared, or participated in the
preparation of, this Agreement.
32. SCHEDULES. All schedules attached hereto, if any, shall be
acknowledged by each party by signature or initials thereon.
33. EFFECTIVE DATE. This effective date of this agreement shall be July
22, 2002.
IN WITNESS WHEREOF, the parties have executed this Agreement.
WOODRIDGE CAPITAL CORP.
By: /s/Colin Watt/s/
Colin Watt, President
GLOBENET RESOURCES INC. GLOBENET RESOURCES (DELAWARE) CORP.
By: /s/Kerry Sparkes/s/ By: /s/ Kery Sparkes /s
Kerry Sparkes, Director Kerry Sparkes, Director
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CERTIFICATE OF SECRETARY OF
WOODRIDGE CAPITAL CORP.
Written consent has been given to the adoption of the foregoing Agreement and
Plan of Merger by the holders of all of the outstanding stock of Woodridge
Capital Corp. in accordance with the provisions of Article 23.b.11 of the
Delaware Business Corporations Act.
Dated: Delaware July 23, 2002
/s/ Colin Watt /s/
Colin Watt, Secretary
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GLOBENET RESOURCES INC.
Suite 25 - 8551, General Currie Road
Richmond, British Columbia
Canada, V6Y 1M3
Tel: 604-278-3372
Fax: 604-278-1592
May 24, 2002
South Coast Ventures Inc.
7 Parsons Place
St. John's, Newfoundland
A1A 1Y2
Attention: Charles Dearin
Dear Sirs:
Re: Option Agreement and Acquisition of the South Quinn Lake Property,
Newfoundland
Further to our previous discussions, we provide this letter to confirm the
terms and conditions upon which we will acquire by option all of your
interest in the South Quinn Lake Gold Property. By signing this letter you
are confirming that you have entered into a binding agreement (the "Option
Agreement") with us on the terms and conditions contained herein.
1. For the purposes of this Option Agreement, the following terms shall be
defined as follows:
(a) "GlobeNet" means GlobeNet Resources Inc., having an office at Suite 25 -
8551, General Currie Road, Richmond, British Columbia;
(b) "Area of Interest" means any area or areas lying within a distance
of two (2) kilometres from the current external boundaries of the "Property";
(C) "Property" means the South Quinn Lake property located in the
central Newfoundland, comprised of 12 mineral claims under Mineral License
6792M; plus the additional 24 claims in License 8876M staked around License
6792M on May 24, 2002
(d) "South Coast" means South Coast Ventures Inc., having an office
located at 7 Parsons Place, St. John's, Newfoundland A1A 1Y2 ;
(e) "TSX" means the TSX Venture Exchange; and
(f) "TSX Acceptance" means the acceptance of this Agreement for filing
by the TSX and such other approvals as may be required.
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(g) "Net Smelter Returns Royalty Agreement" means the agreement
attached hereto as Schedule A.
2. We have entered into this Agreement based upon the following
representations and warranties made by you:
(a) the Property:
(i) is legally and beneficially owned by South Coast and has
been validly staked, located, recorded or otherwise properly acquired by
South Coast in accordance with all applicable laws and regulations, South
Coast has free and unimpeded right of access to the Property, and it has use
of the Property surface for the herein purposes;
(ii) is in good standing in accordance with all applicable laws
and regulations and all taxes, charges and assessments of any kind whatsoever
required to keep the Property in good standing have been paid or filed, as
the case may be, and will remain in good standing until August 19, 2002 by
which time $1,745 must be incurred in exploration expenditures and a work
report filed by October 17, 2002 or an equivalent and refundable cash deposit
made to hold the 12 claims in good standing to August 19, 2003;
(iii) is not subject to any liens, charges, encumbrances,
adverse claims, royalties, joint ventures, options or underlying agreements
of any kind whatsoever; andno (i) hazardous substances from any source
(mining or otherwise) have been released on the Property, (ii) underground or
above-ground site of historic or current mining operations on the Property
could cause or constitute a release or threat of release of hazardous
substances into the environment, (iii) part of the Property has been studied
or proposed for study by any regulatory agency, (iv) site of historic or
current mining, milling, smelting or other industrial workings, or any one or
more of them, on the Property is presently in such condition as to
potentially raise liability to the past, present or future owners and
operators of the Property, or any one or more of them, pursuant to applicable
laws, or (v) reclamation obligations for prior operations on the Property are
unsatisfied; and
(b) South Coast has good and sufficient right and authority to enter
into this Agreement and to carry out its obligations hereunder.
3. You have entered into this Agreement based upon the representation and
warranty made by us that we have good and sufficient right and authority to
enter into this Agreement and to carry out, subject to TSX Acceptance, our
obligations hereunder.
4. South Coast hereby grants to GlobeNet the sole and exclusive
irrevocable, right and option to acquire a 100% undivided interest (the
"Interest") in the Property. In order to earn the Interest,
GlobeNet shall:
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(a) pay to South Coast the sum of Cdn. $75,000 as follows:
(i) the sum of Cdn. $5,000 within ten days of TSX Acceptance;
(ii) the sum of Cdn. $5,000 on or before November 23, 2002;
(iii) the sum of Cdn. $15,000 on or before May 23, 2003;
(iv) the sum of Cdn. $20,000 on or before May 23, 2004; and
(v) the sum of Cdn. $30,000 on or before May 23, 2005;
(b) expend, on the exploration and development of the Property,
cumulative exploration expenditures of Cdn. $400,000 by May 23, 2005;
(c) issue to South Coast, up to 300,000 common shares (the "Shares")
in the capital of GlobeNet at a deemed price of Cdn. $0.12 per share, such
Shares to be issued as follows:
(i) 20,000 of the Shares within ten days of TSX Acceptance;
(ii) 30,000 of the Shares on or before November 23, 2002;
(iii) 75,000 of the Shares on or before May 23, 2003;
(iv) 75,000 of the Shares on or before May 23, 2004; and
(v) 100,000 of the Shares on or before May 23, 2005.
The Interest shall vest in GlobeNet, without any further action by any party,
immediately upon the last of the foregoing obligations having been met. Upon
GlobeNet's Interest vesting, GlobeNet shall be entitled to register its
Interest in all such places as it may properly be registered.
4.1 GlobeNet shall pay to South Coast a two and one half percent (2 1/2 %)
net smelter returns royalty ('the Royalty') in accordance with the Net
Smelter Returns Royalty Agreement as attached in Schedule A.
4.2 GlobeNet shall be entitled, at any time, to purchase 1% of the Royalty
(including any accrued but unpaid Royalty) for the sum of Cdn. $1,000,000.
5. GlobeNet shall have the sole and exclusive right and authority to
explore, develop and mine the Property and, in this regard, GlobeNet shall be
entitled to:
(a) enter on the Property and have sole exclusive and quiet possession
thereof;
(b) do such prospecting, exploration, development and other mining work on
the Property as GlobeNet, in its sole discretion, may deem advisable;
E-45
(c) bring and erect upon the Property such buildings, plant, machinery and
equipment (collectively the "Operating Fixtures") as GlobeNet in its sole
discretion, may deem advisable; and
(d) do all such further acts as may, from time to time, be reasonably
necessary to carry out the full intent and meaning of this Agreement.
In carrying out its activities on the Property, GlobeNet shall:
(a) maintain the Property in good standing by the doing and filing of
assessment work or the making of payments in lieu thereof, and by the payment
of taxes and the performance of all other actions which may be necessary in
that regard; and
(b) perform all work on the Property in a good and workmanlike fashion and
in accordance with all applicable laws and regulations.
6. GlobeNet shall be entitled to terminate this Agreement at any time on
written notice to South Coast at which point all of its obligation hereunder,
except its obligations to remove any of its Operating Fixtures which are on
the Property, shall cease. South Coast shall be entitled to terminate this
Agreement but only if GlobeNet fails to meet a material obligation hereunder
and only after South Coast have given GlobeNet written notice of such failure
and only if GlobeNet has not rectified such failure within 30 days of the
notice.
7. During the currency of the Option Agreement if either GlobeNet or South
Coast stake any new claims located wholly or in part within the "Area of
Interest", such claims will automatically form part of the Property. Such
new claims will be subject to the Net Smelter Returns Royalty Agreement.
GlobeNet has expressed its desire to immediately stake an additional 16 to 24
claims adjacent to the current Property, such claims will form part of the
Property. Any claims staked by either party outside of the Area of Interest
with respect to the Property as defined in section 1.(c) will not form part
of this Agreement.
8. The parties further agree that:
(a) GlobeNet shall be entitled to defer any obligation hereunder in the
event of force majeure, where force majeure is defined as an act of God, war,
revolution, insurrection, riot, blockade or any other unlawful act against
public order or authority, strike, lockout or other industrial
disturbance, storm, fire, flood, explosion or lightning, the failure to
obtain the approval or any government, governmental agency, commission, board
or other tribunal having jurisdiction, and any other event not reasonably
within the control of GlobeNet;
(b) any disputes hereunder shall be submitted to a single arbitrator for
arbitration pursuant to the Commercial Arbitration Act (British Columbia);
(c) any notice, demand, payment or other communication to be given hereunder
shall be in writing and shall be delivered to the address or fax number of
the party appearing herein;
E-46
(d) they shall do all such things and execute all such written materials as
may be required to carry out the full intent and meaning of this Agreement;
(e) GlobeNet shall be entitled to assign this Agreement without the consent
of South Coast, provided that the assignee agrees to be bound by the terms
and conditions of this Agreement, and South Coast shall be entitled to assign
this Agreement but only if it first obtains the written consent of
GlobeNet;
(f) this Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns;
(g) this Agreement shall be construed and interpreted in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein; and
(h) this is the entire Agreement between the parties in respect of the
matter referred to herein and no amendment or interpretation of this
Agreement will be binding on the parties unless same is in writing executed
by the parties hereto.
Please sign and return the enclosed copy of this Agreement to us to indicate
your agreement to the terms and conditions set forth herein. The parties
acknowledge that this Agreement may be signed in counterpart and by
facsimile, if necessary.
Yours truly,
GLOBENET RESOURCES INC.
Per:
/s/Kerry Sparkes, Director/s/
Kerry Sparkes, Director
South Coast Ventures Inc. hereby accepts and agrees to be bound by the terms
set out in this Agreement as of the _______ day of May, 2002.
SOUTH COAST VENTURES INC.
Per:
_________________________
Signature
_________________________
Name (please print)
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Schedule "A"
To an Agreement between GlobeNet Resources Inc and South Coast Ventures Inc.
dated as of the 24th.day of May, 2002.
NET SMELTER RETURNS ROYALTY AGREEMENT
South Quinn Lake Project, Newfoundland
E-48
TECHNICAL REPORT
On the
SOUTH QUINN LAKE PROPERTY
NTS Map Sheet 12A/7
Central Newfoundland, Canada
Prepared on behalf of
Globenet Resources Inc.
By
Kerry Sparkes, M.Sc, P.Geo
2336 Riverbank Place, North Vancouver, British Columbia, V7H-2L2
June 17th, 2002
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TABLE OF CONTENTS
Page
Summary 1
SECTION 1 2
1.0 Introduction and Terms of Reference 2
1.1 Property Location 2
1.2 Access and Infrastructure 2
1.3 Climate and Physiography 5
SECTION 2
2.1 Property Status 5
2.2 Land Claims and Environmental Issues Affecting Tenure 6
2.3 Ownership History of the South Quinn Lake Property 6
2.4 Previous Work 7
2.5 Competitor Activity 8
SECTION 3
3.1 Regional Geology 8
3.1.1 Introduction 8
3.1.2 Geology of the Victoria Lake Group 8
Volcanic Rocks 10
Sedimentary Rocks 10
Intrusive Rocks 11
3.1.3 South Quinn Lake Area 11
Introduction 11
Property Geology 11
Mineralization 12
SECTION 4
4.0 Conclusions 12
SECTION 5
5.0 Recommendations 13
SECTION 6
6.0 Cost Estimates 13
SECTION 7
7.0 Certificate of Qualifications 16
SECTION 8
8.0 References 18
APPENDIX I 20
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SUMMARY
The South Quinn Lake property is 9.25 square kilometers in area in an
elongate 1.5 x 5 km east-west oriented rectangle. The property is held in
two map-staked licences ( 6972M & 8876M ), totaling 36 claims. Historically,
the property has seen very little work. Historical expenditures on the
specific property are hard to quantify due to Noranda's filing methods with
the Government of Newfoundland and Labrador. However, a reasonable estimate
is ~ $75,000 to date, including South Coast Ventures work. The property is
vastly under explored for Au mineralization and holds excellent potential to
host mesothermal high grade Au in quartz veins, with associated gold bearing
wall rock.
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SECTION 1
1.0 Introduction and Terms of Reference
Globenet Resources Inc. ( Globenet ) has been granted an option to acquire a
100% interest, subject to a 2.5% NSR in the South Quinn Lake Property ( the
"Property" ) from South Coast Ventures Inc. ( "South Coast" ). Management of
Globenet has commissioned the report, excerpts of which will be used to file
an Annual Information Form for the company. The report is non-arms length in
nature.
The report on the South Quinn Lake property is based upon assessment and work
report documents provided by South Coast, public assessment files from the
Newfoundland government, scientific and other publications in various
journals.
Additionally, this report is based on extensive work experience in
Newfoundland by the author over the past 12 years and in particular is based
upon experience as Project Geologist for Noranda and part of the team
assessing the South Quinn Lake Property in 1989. The author can verify the
existence of high-grade pyrite-arsenopyrite-quartz bearing boulders on the
property. The author also helped log the only drill hole on the property for
Noranda Inc.
A brief glossary of terms used in this report is provided in Appendix I.
1.1 Property Location
The South Quinn Lake Property is located in central Newfoundland, Canada, 55
km south of Buchans and about 75 km by road SE of Millertown ( Figures 1 &
2). The property is accessible by several logging roads, which pass adjacent
to the property. It is located on the 12A/7 map sheet.
1.2 Access and Infrastructure
The South Quinn Property Lake is accessible from the Rogerson Lake forestry
road, which is partially maintained during the summer by Abitibi-Price, and
connects to the Trans-Canada Highway through Millertown, located 60
kilometers to the north (Figure 2). The property can be reached by driving
from St.John's, the provincial capital, in less than 6 hrs. Scheduled
airlines fly from Gander. These locations are shown on Figure 1. Local
infrastructure of mining significance includes the Star Lake hydroelectric
generating facility located 25 km to the west, and the Millertown
hydroelectric facility located 60 kilometers to the north.
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Figure 1 - Location Map
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Figure 2: Claim Location Map
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1.3 Climate and Physiography
Undulating, hilly areas of moderate relief characterize the South Quinn Lake
Property region. Elevation ranges from 325 meters at the level of Rogerson
Lake to 450 meters above sea level on the highest hill within the property.
Vegetation consists of spruce and fir forest with 30% bog and scrub. The
region is covered with a thin veneer of Pleistocene glacial till and outwash
deposits typically 2 to 10 m thick, but reaching 30 m thick locally. Outcrop
exposure ranges from small areas of high outcrop density to large areas with
few exposures. Typical seasonal variation includes snowy winters from late
November to March and hot humid summers from June to September.
The area is home to abundant moose, caribou, black bears, and rabbits, which
are all hunted seasonally. The area historically held salmon but these have
not been present since the construction of the Millertown Hydroelectric dam
across the Exploits River, although a salmon ladder constructed recently at
the dam are allowing the salmon to make a comeback. Small trout are present
in most ponds.
SECTION 2
2.1 Property Status
Mapped staked licences are issued under the Mineral Act from the Newfoundland
government. Assessment requirements in the first year are $200 per claim,
and the assessment requirement escalates by $50 per claim per year for the
first five years reaching $400 per claim in year 5. Years six through ten
require $600 in annual assessment. Also in year six, a licence renewal fee
of $50 per claim is charged. A summary of the titles comprising the property
is listed in Table 1.
Table 1: Summary of South Quinn Lake Mineral Titles
Licence # Claims Hectares Staked Credits Excess
6972M 12 300 1999.07.19 $7255 $1855
* requires $1745 to be spent by 2002.08.19
8876M 24 600 2002.05.24 $ 0 $ 0
* requires $ 4800 to be spent by 2003.08.24
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2.2 Land Claims and Environmental Issues Affecting Tenure
There are no outstanding land claims on the island of Newfoundland to affect
land tenure of the South Quinn Lake property.
Normal environmental legislation typical of all of Canada applies to this
area, however the property originated as a crown concession specifically for
the purpose of developing the forestry, mineral and water rights.
Environmental groups have not designated any portion of the original
concession a "protected area" or other environmentally sensitive area.
2.3 Ownership History of the South Quinn Lake Property
The Anglo Newfoundland Development Company Limited ("AND Co.") (owned by
Newfoundland Timber Estates and the Hampsworth Publishing family of England)
in 1905 was granted a renewable 99 year lease to the timber, water, and
mineral rights of some 2,000 square miles of land in central Newfoundland,
including the South Quinn Lake Property area. The lands were sought
principally for water and timber rights to support a pulp and paper venture
but mineral rights were also acquired in the hopes that deposits of sulphur
would be found to supplement the paper making process.
The AND Co. vested the mineral rights to this tract of land in 1905 to Terra
Nova Properties Limited ("TNP Ltd."). In 1926, American Smelting and
Refining Company ("Asarco") negotiated from TNP Ltd. the right to explore and
develop any orebody within a 20 mile radius of Buchans, where prospector
Matty Mitchell had recently discovered massive base metal sulphides. The
Asarco-TNP Ltd. agreement was renegotiated later in 1926 to include a 30 mile
radius for a period of 50 years. In 1976, ownership of the AND Co. lands
reverted to Abitibi-Price Company (the successor company of TNP Ltd.) when
the Asarco-TNP Ltd. agreement expired.
In September 1985, BP Resources Canada Ltd. ("BP") purchased the mineral
rights to the AND Co. land from Abitibi-Price. The sale took place at a time
when the BP-owned Hope Brook gold mine in southern Newfoundland was being
delineated, the price of gold was at a relative high, and the AND Co. lands
had not previously been explored for precious metals. In 1991, following the
downturn in commodity prices and disappointment in the profitability of Hope
Brook, BP suspended exploration and put its mineral assets in Canada up for
sale.
Noranda in 1975 began an extensive exploration program in the adjacent Tally
Pond volcanic belt, which led to the discovery of massive sulphide boulders
at the Boundary "Deposit" in 1981 and the Duck Pond "Deposit" in 1986. In
December 1992 Noranda began evaluation of and in February 1993 completed the
purchase of mineral rights to the AND Co. land from BP to augment its
exposure to base metal resources within trucking distance of Duck Pond.
However, in 1995-6, Noranda acquired a large ground position in the vicinity
of Voisey Bay, which consumed a large portion of the eastern Canada
exploration budget from then through 1997. Noranda closed the Newfoundland
office in 1998 and during 1998 - 1999 completed divestiture of all
Newfoundland assets including interests in Tally Pond, the former AND Co.
charter area, Reid Lots, and other Newfoundland properties.
E-56
New Newfoundland provincial legislation enacted in mid-1998 allowed for the
conversion of old mineral crown grants and leases held under Impost Act
titles to be converted to standard mineral claims. Noranda elected to
convert the area of the AND Charter grant area, originally granted to
the AND Company in 1905, to claims issued on 29-January-1999. Noranda
elected to convert the area to claims to facilitate its option or joint
venture.
In 1999, Noranda claims at South Quinn Lake were allowed to lapse.
In June of 1999, the South Quinn Lake property ( 12 claims ) was staked 100%
by South Coast Ventures Inc.; there are no underlying ownerships or
obligations on the claims. Subsequent to the deal being announced with
Globenet, an additional 24 claims were staked at South Quinn Lake by South
Coast Ventures to form part of the agreement.
2.4 Previous Work
Asarco undertook the earliest recorded work in the area in the late 1960's
and early 1970's when regional soil geochemistry surveys and reconnaissance
ground geophysics covered various anomalies outlined by an airborne-EM survey
in the area. No significant showings were located and there is no indication
that their geochemistry produced any anomalous values in the area.
Noranda began exploring the area in the late 1970's and 1980's when it
entered into a joint venture agreement with Price Nfld. Co. Ltd. Initial
work included regional reconnaissance geological mapping and stream silt
sampling. The latter survey outlined numerous Pb, Zn anomalies in the
Wilding Lake, Lake Douglas and Haven Steady areas.
As a follow-up to the regional geochemistry survey, an airborne EM survey was
flown in the winter of 1983 and covered from the South Quinn Lake area north
to Reid Lot 235, south of the Rogerson Lake conglomerate. Subsequent ground
follow-up focused on targets in the area between Lake Douglas and Reid Lot
235. No airborne follow-up was undertaken in the South Quinn Lake area.
The area remained inactive until 1988 when it was covered as part of a
regional Au geochemistry program. Both basal till sampling and lake sediment
geochemistry surveys produced anomalous Au and base metal values in and
around South Quinn Lake. Reconnaissance prospecting was successful in
locating several angular quartz boulders bearing pyrite, arsenopyrite and
chalcopyrite over a strike length of 1.4 km, which returned values between
9.4 g/t Au, and 30.8 g/t Au. Several floats of massive to semi-massive
arsenopyrite were also located which returned assays between 1.7 g/t Au and
2.15 g/t Au.
E-57
A grid was established on the property and covered with geological, soil
geochemical and geophysical surveys, including magnetics VLF-EM, HLEM (max-
min) and induced polarization. A limited trenching program undertaken in
1990 was successful in exposing a vein of semi-massive arsenopyrite and
quartz, which returned an assay of 11.7 g/t Au over 0.6m. A single
hole drilled beneath the trench encountered a 5.2 meter wide breccia zone
containing 15-20% arsenopyrite with 0.5 g/t Au over 1.0m. Several coincident
I.P. and soil anomalies remain untested.
2.5 Competitor Activity
The break-up of the former AND Co. - Terra Nova Properties has rekindled base
and precious metal exploration in the region of central Newfoundland. Table
2 summarizes nearby projects and their recent ownership status.
Table 2: Summary of Competitor Activity
Project Optionor Commodity
Valentine Lake Mountain Lake Resources Inc. Au
Quinn Lake North Mountain Lake Resources Inc. Au
SECTION 3
3.1 Regional Geology
3.1.1 Introduction
The Victoria Lake Group (Kean, 1977) includes all pre-Caradocian volcanic and
sedimentary rocks in the area bounded by Grand Falls in the northeast and
King George IV Lake in the southwest, Red Indian Lake in the northwest and
Noel Paul's Brook in the southeast (Fig. 3). The group has proven to be very
favourable for volcanogenic massive sulphides and significant shear zone
hosted lode gold mineralization.
3.1.2 Geology of the Victoria Lake Group
Regionally, the Victoria Lake Group can be subdivided into three belts
defined by their dominant lithology (Fig. 3) (Kean and Jayasinghe, 1980;
Kean, 1985): 1) the Tulks Hill volcanic belt to the southwest which
includes the Victoria Mine sequence; 2) the Tally Pond volcanic belt to the
southeast, and 3) a volcanically derived sedimentary belt in the northeast
which in part is a lateral equivalent of the volcanic belts.
The Victoria Lake Group has an inhomogeneously developed, regional
penetrative foliation defined by the orientation of chlorite and sericite,
flattened clasts and elongated crystal augen. The intensity of this
foliation, which is subparallel to bedding and axial
E-58
Figure 3: Geology of the Victoria Lake Group
E-59
planar to tight to isoclinal folds, increases to the southwest. The rocks
have been metamorphosed to the lower-greenschist facies, except locally along
their southern margin where middle-greenschist to lower-amphibolite facies
rocks are present.
Volcanic Rocks
Linear belts of predominantly felsic pyroclastic rocks with intercalated
mafic flows, pillow lava, tuff, agglomerate and breccia characterize both the
Tulks Hill and the Tally Pond volcanics. Lithologically the two volcanic
belts are similar but mafic flows are more prevalent in the Tally Pond
volcanics. Deformation within the Tulks Hill volcanics is more intense than
in the Tally Pond volcanics and has largely obliterated primary structures.
Despite their lithological similarity, geochronological studies of the two
volcanic belts indicate that they are not the same age. The Tally Pond
volcanics have been dated as Cambrian 513 +/-2 Ma, the Tulks Hill volcanics
at 498 +6/-4 Ma (Lower Ordovician), and the Victoria Mine sequence, at 462
+4/-2 Ma (Middle Ordovician).
Geochemical studies of mafic volcanic rocks in the Victoria Lake Group have
revealed a variety of geochemical types representing diverse tectonic
environments. These mafic volcanic rocks appear to fit into three broad
groupings:
1) island-arc tholeiites, with locally highly incompatible element depleted
refractory lavas. This group is represented by the Beatons Pond-Harmsworth
Steady basalts of the Tulks Hill volcanics and by the Lake Ambrose-Tally Pond
basalts and the Sandy Lake sequence of the Tally Pond volcanics.
2) calc-alkaline basalts represented by the Victoria Mine sequence.
3) non-arc rocks represented by the Upper Valley Brook and Tome Joe Brook
basalts and the Diversion Lake Group.
Sedimentary Rocks
Siliciclastic rocks constitute much of the sedimentary belt. These rocks,
comprised of greywacke and interbedded siltstone, shale, argillite,
conglomerate and rare limestone, are interpreted to represent a shallowing-
upward turbidite sequence (Kean and Jayasinghe, 1982).
Volcanic detritus is common in the sedimentary rocks of the Victoria Lake
Group and increases in both amount and coarseness towards the volcanic belts.
The clastic sedimentary rocks are therefore interpreted to have been derived
from the adjacent and underlying volcanic sequences. Small lenses of
volcanic rock occur throughout the sedimentary sequence.
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Limestone lenses at the mouth of Victoria River near the top of the
sedimentary belt have yielded Late Llanvirn to Early Llandeilo conodonts
(Kean and Jayasinghe, 1982). Siliceous siltstone and chert are more common
near the top of the sequence where the sedimentary rocks pass conformably
upwards into Llandeilo-Caradocian chert and shale (Kean and Jayasinghe,
1982).
Intrusive Rocks
Linear bodies of medium grained quartz monzonite, minor granite and
granodiorite, diorite and gabbro, interpreted to be coeval with the
volcanism, intrude the volcanic belts of the Victoria
Lake Group. The Roebucks quartz monzonite, which intrudes the Tulks Hill
volcanics, is dated at 495 +/-2 Ma, and is therefore coeval with the
volcanism (Evans et al. 1990).
The larger plutonic bodies located along the southeastern margin of the
Victoria Lake Group (Valentine Lake and Crippleback Lake), have recently been
shown to be Precambrian in age (Evans et al. 1990) and are interpreted to
have been structurally emplaced.
3.1.3 South Quinn Lake Area
Introduction
Gold mineralization is hosted by quartz veins with arsenopyrite, pyrite
and chalcopyrite stringer sulphides within a Cambro-Ordovician sequence of
sheared Fe-carbonate altered volcanogenic sediments. Grab sampling has
returned assays up to 11.7 g/t Au in bedrock and between 9.4 g/t Au and 30.8
g/t Au from angular float located over a strike length of 1.7 km. The gold
is thought to occur in structurally controlled lodes.
Property Geology
Regionally the area is located within easterly trending Ordovician and older
sedimentary and volcanic rocks of the Tally Pond Belt with younger Silurian
to Devonian mafic to felsic intrusive rocks (Figure 3).
The property is predominantly underlain by a clastic sedimentary sequence
with a central volcanogenic unit. The general geological strike in the area
is 080? with steep dips towards the south. Towards the north these rocks are
in fault contact with the Silurian-aged Rogerson Lake conglomerate, and
towards the south they are in contact with a large Silurian to Devonian
granitic batholith. The clastic sequence is composed of fine-grained
siltstone, sandstone and graphitic sediments with lesser-intercalated pebble
conglomerates.
The central volcanogenic unit comprises mainly variably reworked felsic tuffs
with lesser reworked mafic tuff and mafic volcanic and intrusive rock. The
unit is at least 400m thick where the mineralized float is located and
appears to thicken eastward and grade into more proximal felsic quartz-eye
and lapilli tuffs. The felsic derived sediments are extensively Fe-carbonate
altered and sheared along the main trend of mineralized float.
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Mineralization
The most significant bedrock mineralization encountered to date is a semi-
massive arsenopyrite-quartz vein which returned an assay of 11.7 g/t Au over
a 0.6m wide channel sample (Figure 4). The vein is hosted by a wide zone (at
least 11.0m) of strongly sheared and Fe-carbonate altered felsic sediments,
with numerous thin barren quartz veins.
The vein is exposed directly over a trend of mineralized float, which extends
over a strike length of 1.7 km. To date some 15 samples have been located
with assays ranging between 1.17 g/t Au and 30.8 g/t Au. Much of the float
is angular and appears not to have been transported far from source.
The most auriferous float contains 30.89 g/t Au, 25.7 g/t Au, 22.6 g/t Au,
20.9 g/t Au and 14.6 g/t Au from four separate sites over 1.7 km. In each
case the samples consisted of coarsely crystalline quartz with 10-20%
stringer and disseminated sulphides consisting mainly of pyrite and
arsenopyrite with lesser chalcopyrite.
Figure 4 Grid Geology
E-62
Several samples of massive and semi-massive arsenopyrite have been located
and returned assays between 2.03 g/t Au and 2.15 g/t Au. One float sample
located near the bedrock showing is approximately one cubic meter in size.
As well, numerous samples of strongly sheared Fe-carbonate altered quartz
veined felsic sediment have been located along the float trend and returned
assays between 1.17 g/t Au and 3.3 g/t Au. Most of these samples contain
between 2 and 5% stringer and disseminated sulphide consisting of pyrite and
arsenopyrite.
SECTION 4
4.0 Conclusions
The South Quinn Lake property has seen virtually no work in the past 12 years
since the initial discovery by Noranda prospectors in 1989. The VMS belt as
a whole has also only seen limited gold exploration over a 75 year span. In
1990, Noranda decided to discontinue it's exploration for gold and focus on
it's core business of copper / zinc, leaving South Quinn Lake in limbo for
nine years.
Both soil geochem surveys and IP geophysics have outlined several coincident
targets both along the strike of the zone as well as off the zone, none of
which have been followed up with trenching or drilling. The Quinn Lake South
property holds an excellent potential for wide and elongate mesothermal
style, high-grade Au quartz veins.
SECTION 5
5.0 Recommendations
PHASE 1
A comprehensive geological evaluation should take place in Phase 1. This
should involve re-establishing the old Noranda grid, geological mapping and
prospecting to trace the full extent of the mineralized zone, and trenching
of any new soil anomalies that are coincident with IP geophysics. Mag and
VLF will aid in delineating the structure that controls the mineralization.
PHASE II
The second phase would involve drill testing ( 3 holes @ 100m each) the main
zone to a vertical depth of 50 meters with 200 meter spaced holes. An
alternative budget for phase II is also included, which would involve six
hundred meters of diamond drilling.
Detailed costs for both phases are found in Section 6.
E-63
SECTION 6
6.0 Cost Estimates
Phase 1: Mapping, Trenching & Sampling
Geological mapping/supervision (21 days @ $400/day) $8,400
Prospector (10 days @ $250/day)* $2,500
Labour (recut & extend grid - 10 days x 2 men @ $250/manday)* $5,000
VLF-EM & mag survey (5,000m long @ 50m spaced lines @ 1,000 m long =
100 km of survey @ approx. $75/km) $7,500
Soil collection (test old anomalies - 250 soils: 2 men x 5 days @ $250)*
$2,500
Trenching (backhoe-traxcavator - 10 to 20 trenches (75 to 150m long);
10 days @ ~$1,000/day $10,000
Assays: -rocks (200 @ $25/sample)* 5,000
-soil sample (250 'B' horizon @ $25/sample)* $6,300
Camp costs (accommodations, food, supplies) (85 mandays @ $35/manday)*
$3,000
Truck & 2 ATV quads (21 days @ $225 day; all in)* $4,800
Report, maps, etc. (4 days @ $400/day + reproductions)* $2,000
Miscellaneous 5%* $2,900
Management & Administration fee (on items marked *) @ 15% $5,100
Total Phase 1 Costs $65,000
Phase 2: Diamond Drilling (3 holes @ 100m each)
JCEAP report, application, program prep. etc. (3 days @ $400/day+reprod.)
$1,500
Mobe-demobe drill 1 $5,000
Diamond drilling (3 holes @ 100m each = total 300m @ $60/metre) 1 $18,000
Misc. drill costs: (standby, consumables, core boxes, etc.
@ 15% of drill $) 1 $3,000
E-64
Assays (3 holes @ 15 samples x $25/sample)*1 $1,200
Camp costs (5 men @ $45/manday x 14 days)*1 $3,200
Geologist (supervision, logging, etc. 18 days @ $400/day) $7,200
Transportation (truck, ATV, gas, etc. @ $150/day @ 18 days)*1 $2,700
Miscellaneous @ 10% $4200
Report (3 days @ $400/day + reproductions) 1 $1,500
Management & Administration fee (on items marked *) @ 15% $1,100
Phase 2 Drill Program Costs $48,600
Phase 1 Costs $65,000
TOTAL PROGRAM COSTS $113,600
~$46,000 is eligible for JCEAP (items marked 1 are eligible) - $23,000
Total Phase 1 & 2 Costs $90,600
Alternative Phase 2 Diamond Drilling (6 holes @ 100m each):
JCEAP report, application, program prep. etc.
(3 days @ $400/day+reprod.) $1,500
Mobe-demobe drill 1 $5,000
Diamond drilling (6 holes @ 100m each = total 600m @ $60/metre) 1 $36,000
Misc. drill costs: (standby, consumables, core boxes, etc.
@ 15% of drill $) 1 $5,500
Assays (6 holes @ 15 samples x $25/sample)*1 $2,300
Camp costs (5 men @ $45/manday x 23 days)*1 $5,200
Geologist (supervision, logging, etc. 28 days @ $400/day) 1 $11,200
Transportation (truck, ATV, gas, etc. @ $150/day @ 28 days)*1 $4,200
Miscellaneous @ 10% 1 $7,100
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Final Report (3 days @ $400/day + reproductions) 1 $1,500
Management & Administration fee (on items marked *) @ 15% $1,800
Phase 2 Drill Program Costs $81,300
Phase 1 Costs 65,000
TOTAL PROGRAM COSTS $146,300
~$78,000 is eligible for JCEAP (items marked 1 are eligible) - $39,000
TOTAL PROGRAM COSTS (After JCEAP) $107,300
E-66
SECTION 7
7.0 Certificate of Qualifications
I, KERRY SPARKES, P.Geo, President of Sparkes Consulting Ltd, am a registered
Professional Geoscientist with business address at 2336 Riverbank Place,
North Vancouver, British Columbia, V7H-2L2 and herby certify:
I am a registered member in good standing of the Association of Professional
Engineers and Geoscientists of British Columbia since 1999; a registered
member in good standing of the Association of Professional Engineers and
Geoscientists of Newfoundland since 1991;
I am a graduate of Memorial University of Newfoundland with a Bachelor of
Science (Honours) degree in geology (1986) and subsequently obtained a Master
of Science degree in geology from Memorial University of Newfoundland (1989),
and I have practiced my profession continuously since graduation;
I have been involved in mineral exploration for gold, copper, lead, zinc,
antimony, nickel, cobalt, platinum, and palladium in Canada since 1989. I
have worked in projects in Quebec, Manitoba, and Newfoundland & Labrador;
I am presently a Consulting Geologist and have been since September of 1999;
From 1989 - 1994, I undertook exploration for base and precious metals in
Newfoundland for Noranda Exploration Company Ltd., as Senior Project
Geologist. From 1995-1997, I was exploration Manager for Archean Resources
and subsequently Senior Geologist for Voisey's Bay Nickel Company Ltd., in
charge of all Ni-Cu-Co exploration activity at the Voisey's Bay Deposit.
From 1998 - 1999, I was Exploration Manager for Donner Minerals Ltd., in
charge of all Ni exploration in Labrador. Since 1999, I have been consulting
for a variety of junior mining companies, some of which are Donner Minerals
Ltd., Skygold Ventures Ltd., and Globenet Resources Ltd. As a result of my
experience and qualifications, I am a qualified Person as defined in N.P. 43-
101;
I previously worked on the South Quinn Lake Property for Noranda Exploration
Company Ltd, and was last on the property in 1989. I can verify the
existence of the high-grade gold mineralization.
In 1998, I completed a due diligence review and examination of the South
Quinn Lake Property for another unrelated corporation interested in acquiring
an option on the property from Noranda;
The sources of all information not based on personal examination are quoted
in the report;
In the disclosure of information relating to title and related issues I have
relied on information provided to me by the claims recorder at the
Newfoundland Department of Mines and Energy, St. John's, Newfoundland;
I have been a director of Globenet Resources Ltd., since October 13th, 1999;
I currently hold no stock or options in Globenet;
I am not aware of any material fact or material change with respect to the
subject matter of this technical report, which is not reflected in this
report, the omission to disclose which would make this report misleading;
I have read National Instrument 43-101, Form 43-101FI and this report has
been prepared in compliance with NI 43-101 and Form 43-101FI.
Dated at Vancouver, British Columbia, this 6th day of June, 2002
Qualified Person
E-67
SECTION 8
8.0 References
Collins, C. and Squires, G.
1991: Report on Assessment work over concession lands within the
boundary of the Noranda - B.P. Canada Resources Limited joint venture ( Reid
Lot 229, 231, 235 & AND Charter ) NTS 12A/7, 9, 10. Noranda Exploration
Company Limited, unpublished open file report submitted to the Newfoundland
Dept. of Mines and Energy, 84 pages.
Dearin, C.
2000: Assessment Report on Mineral Licence 6972M, Quinn Lake Gold
Project, South Quinn Lake, Central Newfoundland, assessment report submitted
to the Newfoundland Department of Mines and Energy.
Evans, D.T.W.
1996: Epigenetic Gold Occurrences, Eastern and Central Dunnage Zone,
Newfoundland. Mineral Resource Report 9, Dept. of Mines and Energy,
Geological Survey, 135 pages
Evans, D.W.T., Kean, B.F., and Dunning, G.R.
1990: Geological Studies, Victoria Lake Group, central Newfoundland, In
Current Research: Nfld. Dept. of Mines and Energy, Geological Survey Branch,
Rept. 90-1, 144 pages.
Evans, D.T.W., and Kean, B.F.
1990: Geology and Mineral Deposits of the Victoria Lake Group in
Metallogenic Framework of Base and Precious Metal deposits, Central and
Western Newfoundland. 8th IAGOD Symposium, Field Trip GuideBook, Geological
Survey of Canada Open File Report 2156, Swinden, H.S., Evans, D.T.W., and
Kean, B.F. eds, 232 pages
Kean, B.F.
1977: Geology of the Victoria Lake Map Area (12A/6), Newfoundland:
Nfld. Dept. of Mines and Energy, Mineral Development Division, Report 77-4,
11 pages
Kean. B.F., and Jaysinge, N.R.
1980: Geology of Lake Ambrose (12A/10) and Noel Pauls Brook (12A/9) map
areas, Newfoundland: Nfld. Dept. of Mines and Energy, Mineral Development
Division, Rept., 80-2, 29 pages
Kean. B.F., and Jaysinge, N.R.
1982: Geology of the Badger Map area (12A/16), Newfoundland: Nfld.
Dept. of Mines and Energy, Mineral Development Division, Rept., 81-2, 37
pages
Kean, B.F.
1985: Metallogeny of the Tally Pond Volcanics, Victoria Lake Group,
central Newfoundland, In Current Research: Nfld. Dept. of Mines and Energy,
Mineral Development Division, Rept., 85-1, p. 89-93
E-68
APPENDIX I
GLOSSARY OF TERMS
"Abitibi" or "Abitibi-Price" means Abitibi Inc., the Canadian forestry
company;
"AEM conductor" means airborne electro-magnetic conductor, an area of high
electrical conductivity as surveyed by geophysical instruments carried aboard
an aircraft;
"AND Co." means the Anglo-Newfoundland Development Corporation
"Anomaly" a deviation from the typical geological pattern
"Asarco" means Asarco Inc., the American-based mineral processing company
which co-owned the Buchans Mine from 1926 to 197 6;
" Au " abbreviation for gold
" Auriferous float" rock containing concentrations of gold
"Batholith" a large intrusive mass of igneous rock
"Chalcopyrite" means a mineral containing copper, iron, and sulphur and is an
ore mineral of copper;
"Disseminated" or "dissemination" is a descriptive term referring to mineral
grains, which are scattered evenly throughout a rock;
"EM" means electromagnetic and generally refers to a class of geophysical
survey useful in concentrations of sulphides;
"Gabbro" a type of igneous rock
"Galena" means a mineral containing lead and sulphur and is an ore mineral of
lead
"Greenschist facies" means the alteration of rock through a particular series
of temperature, pressure, and composition changes to products typical of low-
grade regional metamorphism;
"Igneous rock" a rock formed by the crystallization of molten rock or magma
"Magnetic survey" means a class of geophysical survey, which determines the
magnetic properties of a rock
E-69
"Massive sulphide" means a rock comprised entirely of metallic minerals;
"Mineralization" means the process by which minerals are introduced and
concentrated within a host rock, and the product of this process;
"Net profits interest royalty" means a percentage of the dollar proceeds from
the sale of minerals, after all costs relating to the production, manufacture
and sale of the minerals are deducted;
"Net smelter return royalty" means a percentage of the gross dollar proceeds
obtained from the sale of minerals with only minor cost deductions for
shipping, insurance and smelter penalties allowed;
"Orebody" a natural aggregate of one or more minerals which, at a specific
time and place, may be mined and sold at a profit, or from which some part
can be profitably separated
"Ordovician" means a time period, approximately 500 to 440 million years ago;
"Pleistocene" means a time period, approximately 8,000 years ago to 2,000
years ago;
"Sedimentary Rock" rock formed from material derived from pre-existing rock
through mechanical means
"Sphalerite" means a mineral containing zinc and sulphur and is an ore
mineral of zinc
"Stockwork" means a three-dimensional network of veinlets;
"Total field magnetics" means the magnetic responses of the rock, as
collected from a "magnetic survey"
" Turbidite" a type of sedimentary rock
"Volcanogenic massive sulphide" or "VMS" means the accumulation of metals
precipitated on the ocean floor associated with ocean-floor volcanism and
which are enriched in iron and other metals;
"Volcaniclastic" means a sediment containing material of volcanic origin;
E-70