Document:

Unassociated Document

 

SHARE PURCHASE AGREEMENT

 

BETWEEN

INTI HOLDINGS LIMITED

and

RAE-WALLACE MINING COMPANY

and

RAE WALLACE PERU S.A.C.

and

GEORGE COLE

 

  

 

  

 

TABLE OF CONTENTS

 

	
ARTICLE 1 INTERPRETATION

	
1

	
1.1

	
Definitions

	
1

	
1.2

	
Best Knowledge

	
6

	
1.3

	
Currency

	
6

	
1.4

	
Governing Law

	
6

	
1.5

	
Interpretation Not Affected by Headings

	
6

	
1.6

	
Number and Gender

	
6

	
1.7

	
Time of Essence

	
6

	
1.8

	
Severability

	
7

	
1.9

	
Accounting Terms

	
7

	
1.10

	
Calculation of Time Periods

	
7

	
1.11

	
Statutory Instruments

	
7

	
1.12

	
Incorporation of Schedules

	
7

	
ARTICLE 2 PURCHASE AND SALE

	
7

	
2.1

	
Purchased Shares

	
7

	
2.2

	
Purchase Price

	
8

	
2.3

	
Payment of Purchase Price

	
8

	
ARTICLE 3 REPRESENTATIONS AND WARRANTIES

	
8

	
3.1

	
Representations and Warranties of the Vendor, the Shareholder and the Corporation

	
8

	
3.2

	
Representations and Warranties of the Purchaser

	
20

	
3.3

	
Survival of Covenants, Representations and Warranties of the Parties

	
21

	
ARTICLE 4 COVENANTS

	
22

	
4.1

	
Conduct During Interim Period

	
22

	
4.2

	
Access to Information

	
23

	
4.3

	
Satisfaction of Closing Conditions

	
24

	
4.4

	
Delivery of Records

	
24

	
ARTICLE 5 CONDITIONS OF CLOSING

	
24

	
5.1

	
Conditions for the Benefit of the Purchaser

	
24

	
5.2

	
Waiver or Termination by the Purchaser

	
26

	
5.3

	
Conditions for the Benefit of the Vendor and the Shareholder

	
27

	
5.4

	
Waiver or Termination by the Vendor and the Shareholder.

	
27

	
5.5

	
Conditions Precedent

	
28

	
5.6

	
Survival following Termination

	
28

	
ARTICLE 6 CLOSING ARRANGEMENTS

	
28

	
6.1

	
Place of Closing

	
28

	
6.2

	
Deliveries at the Closing

	
28

	
ARTICLE 7 INDEMNIFICATION

	
28

	
7.1

	
Indemnification by the Vendor

	
28

	
7.2

	
Indemnification by the Purchaser

	
29

	
7.3

	
Notice of Claim

	
29

	
7.4

	
Procedure for Indemnification

	
30

	
7.5

	
General Indemnification Rules

	
30

	
ARTICLE 8 GENERAL

	
32

	
8.1

	
Confidentiality

	
32

	
8.2

	
Notices

	
32

	
8.3

	
Public Announcements and Disclosure

	
33

	
8.4

	
Assignment

	
33

	
8.5

	
Best Efforts

	
33

	
8.6

	
Expenses

	
34

	
8.7

	
Further Assurances

	
34

	
8.8

	
Entire Agreement

	
34

	
8.9

	
Waiver, Amendment

	
34

	
8.10

	
Rights Cumulative

	
34

	
8.11

	
Arbitration

	
34

	
8.12

	
Counterparts

	
35

	

Schedule 1.1(hh) – Peruvian Documents

	

1

	

Schedule 3.1(15) – Financial Statements

	

1

	

Schedule 3.1(28)(32)(33) - Material Contracts, Real and Leased Properties, Authorizations and Mineral Rights

	

1

	

Schedule 3.1(29) – Bank Accounts and Powers of Attorney

	

1

 

  

 

  

 

SHARE PURCHASE AGREEMENT

THIS AGREEMENT made as of the 3rd day of April, 2013,

BETWEEN:

INTI HOLDINGS LIMITED,

a corporation incorporated pursuant to the laws of the Cayman Islands

(the “Purchaser”)

- and -

RAE-WALLACE MINING COMPANY,

a corporation incorporated pursuant to the laws of the Cayman Islands

(the “Vendor”)

- and -

RAE WALLACE PERU S.A.C.

a corporation incorporated pursuant to the laws of Peru

(the “Corporation”)

-and-

GEORGE COLE

an individual resident in the United States of America

(the “Shareholder”)

WHEREAS the Vendor and the Shareholder are the registered and beneficial owners of all of the issued and outstanding shares in the capital of the Corporation;

 

AND WHEREAS the Purchaser wishes to purchase, and the Vendor wishes to sell, the Purchased Shares (as defined below) on the terms and conditions in this Agreement.

 

NOW THEREFORE BE IT RESOLVED THAT:

 

ARTICLE 1

INTERPRETATION

 

1.1           Definitions

 

In this Agreement and in the schedules, the following terms and expressions will have the following meanings:

 

  

1

  

 

	
  

	
(a)

	
“Agreement” means this share purchase agreement and all instruments amending it; “hereof”, “hereto” and “hereunder” and similar expressions mean and refer to this Agreement and not to any particular Article, Section, or other subdivision; “Article”, “Section” or other subdivisions of this Agreement followed by a number means and refers to the specified Article, Section or other subdivision of this Agreement;

 

	
  

	
(b)

	
“assessment” shall include a reassessment or additional assessment and the term “assessed” shall be interpreted in the same manner;

 

	
  

	
(c)

	
“Business” means the business carried on by the Corporation which primarily involves the exploration of mineral properties in the Republic of Peru and all operations related thereto;

 

	
  

	
(d)

	
“Business Day” means any day other than a Saturday, a Sunday or a statutory holiday in the Province of Ontario or any other day on which the principal chartered banks located in the City of Toronto are not open for business during normal banking hours;

 

	
  

	
(e)

	
“Claim” has the meaning ascribed in Section 7.3;

 

	
  

	
(f)

	
“Closing” means the completion of the Transactions pursuant to this Agreement at the Closing Time;

 

	
  

	
(g)

	
“Closing Date” means April 2, 2013, or such other date as the Parties may agree upon;

 

	
  

	
(h)

	
“Closing Time” means 10:00 a.m. in the City of Toronto on the Closing Date or such other time on the Closing Date as the Parties may agree upon as the time at which the Closing shall take place;

 

	
  

	
(i)

	
“Closing Time Year” means the taxation year of the Corporation ending at the Closing Time;

 

	
  

	
(j)

	
“Consent” means a license, permit, approval, consent, certificate, registration or authorization (including, without limitation, those made or issued by a Regulatory Authority, in respect of a Contract, or otherwise);

 

	
  

	
(k)

	
“Contract” means any agreement, understanding, indenture, contract, lease, deed of trust, license, option, instrument or other commitment;

 

	
  

	
(l)

	
“Deposit” has the meaning ascribed in Section 2.3;

 

	
  

	
(m)

	
“Encumbrances” means mortgages, charges, pledges, security interests, liens, encumbrances, actions, claims, demands and equities of any nature whatsoever or howsoever arising and any rights or privileges capable of becoming any of the foregoing;

 

	
  

	
(n)

	
“Environmental Consents” has the meaning ascribed in Section 3.1(34)(ii);

 

  

2

  

 

	
  

	
(o)

	
“Environmental Laws” has the meaning ascribed in Section 3.1(34)(i);

 

	
  

	
(p)

	
“Financial Statements” means the financial statements of the Corporation for the most recently completed reporting period consisting of a balance sheet, an income statement, a statement of changes in financial position and a statement of retained earnings together with the accompanying notes, a copy of which are attached as Schedule 3.1(15);

 

	
  

	
(q)

	
“Financial Statements Date” means the date of the balance sheet included in the Financial Statements;

 

	
  

	
(r)

	
“IFRS” means the International Financial Reporting Standards, as used by publicly accountable enterprises, adopted from time to time by the Accounting Standards Board as the accounting principles generally accepted in Canada and as issued, established and updated into the CICA Handbook of the Canadian Institute of Chartered Accountants, applied in a consistent manner from one accounting period to another;

 

	
  

	
(s)

	
“Hazardous Substance” has the meaning ascribed in Section 3.1(34)(iii);

 

	
  

	
(t)

	
“Indemnified Party” has the meaning ascribed in Section 7.3;

 

	
  

	
(u)

	
“Indemnifying Party” has the meaning ascribed in Section 7.3;

 

	
  

	
(v)

	
“Interim Period” means the period from and including the date of this Agreement to and including the Closing Date;

 

	
  

	
(w)

	
“ITA” means the Income Tax Act (Canada);

 

	
  

	
(x)

	
“Law” or “Laws” means all requirements imposed by statutes, regulations, rules, ordinances, by-laws, decrees, codes, policies, judgments, orders, rulings, decisions, approvals, notices, permits, guidelines or directives of any Regulatory Authority;

 

	
  

	
(y)

	
“Leased Premises” means the premises leased or subleased by the Corporation under the Leases;

 

	
  

	
(z)

	
“Leases” means the leases, subleases, agreements to lease and tenancy agreements under which the Corporation leases or subleases any real property as lessee or sublessee, as listed in Schedule 3.1(28)(32)(33);

 

	
  

	
(aa)

	
“Lessee” has the meaning ascribed in Section 3.1(32)(c);

 

	
  

	
(bb)

	
“Mineral Rights” has the meaning ascribed in Section 3.1(33);

 

	
  

	
(cc)

	
“NI 45-106” means National Instrument 45-106 Prospectus and Registration Exemptions adopted by the Ontario Securities Commission;

 

  

3

  

 

	
  

	
(dd)

	
“Parties” means the Vendor, the Purchaser, the Corporation and the Shareholder, and any other person that may become a party to this Agreement and Party means any one of them;

 

	
  

	
(ee)

	
“Pilot Gold NSR” means the 2% net smelter return royalty with respect to certain Mineral Rights, and for greater certainty such 2% net smelter return royalty not with respect to any interest in the Liscay project, granted in favour of Pilot Gold Inc. (“Pilot Gold”) pursuant to a termination agreement dated July 18th, 2012;

 

	
  

	
(ff)

	
“Permitted Encumbrances” means:

 

	
  

	
(i)

	
liens for Taxes, assessments and governmental charges due and being contested in good faith and diligently by appropriate proceedings (and for the payment of which adequate provision has been made);

 

	
  

	
(ii)

	
servitudes, easements, restrictions, rights of parties in possession, zoning restrictions, encroachments, reservations, rights-of-way and other similar rights in real property or any interest therein, provided the same are not of such nature as to materially adversely affect the validity of title to or the value, marketability or use of the property subject thereto by the Corporation;

 

	
  

	
(iii)

	
liens for Taxes either not due and payable or due but for which notice of assessment has not been given;

 

	
  

	
(iv)

	
undetermined or inchoate liens, charges and privileges incidental to current construction or current operations and Encumbrances claimed or held by any Regulatory Authority that have not at the time been filed or registered against the title to the asset or served upon the Corporation pursuant to law or that relate to obligations not due or delinquent;

 

	
  

	
(v)

	
assignments of insurance provided to landlords (or their mortgagees) pursuant to the terms of any Lease and liens or rights reserved in any Lease for rent or for compliance with the terms of such Lease;

 

	
  

	
(vi)

	
security given in the ordinary course of the Business to any Regulatory Authority in connection with the operations of the Business, other than security for borrowed money; and

 

	
  

	
(vii)

	
the reservations of any real property or interest therein and statutory exceptions to title that do not materially detract from the value of the real property concerned or materially impair its use in the operation of the Business;

 

	
  

	
(gg)

	
“person” includes any individual, corporation, partnership, firm, joint venture, syndicate, association, trust, government, governmental agency and any other form of entity or organization;

 

  

4

  

 

	
  

	
(hh)

	
“Peruvian Documents” means the corporate and tax documents that are required to be delivered by the Vendor and the Purchaser to SUNAT as attached as Schedule 1.1(hh);

 

	
  

	
(ii)

	
“Purchase Price” has the meaning ascribed in Section 2.2;

 

	
  

	
(jj)

	
“Purchased Shares” means the Shareholder Share and the Vendor Shares;

 

	
  

	
(kk)

	
“Real Properties” means the real properties, other than the mineral properties, owned by the Corporation which are described in Schedule 3.1(28)(32)(33);

 

	
  

	
(ll)

	
“Records” means all technical, business and financial records relating to the Business, including, without limitation, minute books, share ledger, customer lists, operating data, files, financial books, correspondence, credit information, research materials, contract documents, title documents, leases, surveys, records of past sales, supplier lists, employee documents, inventory data, accounts receivable data, financial statements and any other similar records in any form whatsoever (including written, printed, electronic or computer printout form);

 

	
  

	
(mm)

	
“Regulatory Authority” means any government, regulatory or administrative authority, agency, commission, utility or board (federal, provincial, municipal or local, domestic or foreign) having jurisdiction in the relevant circumstances and any person acting under the authority of any of the foregoing and any judicial, administrative or arbitral court, authority, tribunal or commission having jurisdiction in the relevant circumstances;

 

	
  

	
(nn)

	
“Release” has the meaning ascribed in Section 3.1(34)(iv);

 

	
  

	
(oo)

	
“Royalty Agreement” means the purchase agreement made effective as of the 8th day of July, 2010 between Geologix Explorations Inc., Geologix (Peru) S.A. (“Geologix”), the Vendor and the Corporation by which Geologix granted Newmont Peru S.R.L. a two percent (2%) net smelter return royalty for precious metals and a one percent (1%) net smelter return royalty for all other minerals from the sale or other disposition of all minerals produced from the properties;

 

	
  

	
(pp)

	
“Securities Act” means the Securities Act (Ontario);

 

	
  

	
(qq)

	
“Shareholder Share” means the 1 common share issued and outstanding in the capital of the Corporation being sold by the Shareholder and purchased by the Purchaser;

 

	
  

	
(rr)

	
“SUNAT” means the Peruvian National Superintendence of Tax Administration;

 

	
  

	
(ss)

	
“Tax” and “Taxes” have the meaning ascribed in Section 3.1(31)(i);

 

	
  

	
(tt)

	
“Tax Return” has the meaning ascribed in Section 3.1(31)(ii);

 

  

5

  

 

	
  

	
(uu)

	
“Termination Agreement” means the termination agreement made as of the 9th day of July, 2012 (as amended by an amending agreement dated January 30, 2013) between Pilot Gold, the Vendor and the Corporation by which the parties agreed to, among other things, terminate an option agreement with respect to the Mineral Rights and grant Pilot Gold the Pilot Gold NSR;

 

	
  

	
(vv)

	
“Transactions” means the purchase and sale of the Purchased Shares and all other transactions contemplated by this Agreement; and

 

	
  

	
(ww)

	
“Vendor Shares” means the 3,613,879 issued and outstanding common shares in the capital of the Corporation being sold by the Vendor and purchased by the Purchaser.

 

1.2           Best Knowledge

 

Any reference herein to “the best knowledge” of the Vendor will be deemed to mean the actual knowledge of the Chief Executive Officer and Chief Financial Officer of the Vendor, together with the knowledge which they would have had if they had conducted a diligent inquiry into the relevant subject matter.

 

1.3           Currency

 

Unless otherwise indicated, all references to dollar amounts in this Agreement are expressed in United States currency.

 

1.4           Governing Law

 

This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. The Parties hereby irrevocably attorn to the non-exclusive jurisdiction of the courts of Ontario with respect to any matter arising under or related to this Agreement.

 

1.5           Interpretation Not Affected by Headings

 

The division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

 

1.6           Number and Gender

 

In this Agreement, unless the context otherwise requires, any reference to gender shall include both genders and words importing the singular number shall include the plural and vice-versa.

 

1.7           Time of Essence

 

Time shall be of the essence of every provision of this Agreement.

 

  

6

  

 

1.8           Severability

 

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof.

 

1.9           Accounting Terms

 

All accounting terms not specifically defined in this Agreement shall be construed in accordance with IFRS.

 

1.10           Calculation of Time Periods

 

Where a time period is expressed to begin or end at, on or with a specified day, or to continue to or until a specified day, the time period includes that day. Where a time period is expressed to begin after or to be from a specified day, the time period does not include that day. Where anything is to be done within a time period expressed after, from or before a specified day, the time period does not include that day. If the last day of a time period is not a Business Day, the time period shall end on the next Business Day.

 

1.11           Statutory Instruments

 

Unless otherwise specifically provided in this Agreement, any reference in this Agreement to any Law shall be construed as a reference to such Law as amended or re-enacted from time to time or as a reference to any successor thereto.

 

1.12           Incorporation of Schedules

 

The following are the schedules attached to and incorporated by reference into this Agreement:

 

	

Schedule 1.1(hh) 

	

Peruvian Documents

	
Schedule 3.1(15)

	
Financial Statements;

	
Schedule 3.1(28)(32)(33)

	
Material Contracts, Real Properties and Leased Premises and Mineral Rights

	

Schedule 3.1(29) 

	

Bank Accounts and Powers of Attorney

 

  

7

  

 

ARTICLE 2

PURCHASE AND SALE

 

2.1           Purchased Shares

 

On the terms and subject to the fulfilment of the conditions of this Agreement, the Vendor and the Shareholder each agree to sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from the Vendor and the Shareholder at the Closing Time on the Closing Date, all of the Purchased Shares.

 

2.2           Purchase Price

 

The purchase price (the “Purchase Price”) payable by the Purchaser to the Vendor for the Purchased Shares shall be seven hundred thousand dollars (USD$700,000).

 

2.3           Payment of Purchase Price

 

The Purchase Price shall be paid and satisfied by the payment by cash, certified cheque, or wire payment in immediate available funds to the Vendor on the Closing Date of seven hundred thousand dollars (USD$700,000).

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and Warranties of the Vendor, the Shareholder and the Corporation

 

The Vendor and the Shareholder hereby make the following representations and warranties to the Purchaser and acknowledge that the Purchaser is relying on such representations and warranties in entering into this Agreement and completing the Transactions:

 

(1)           Incorporation and Existence of the Corporation  The Corporation is a corporation incorporated and existing under the laws of Peru and is a majority-owned subsidiary of the Vendor.

 

(2)           Incorporation and Existence of the Vendor  The Vendor is a corporation incorporated and existing under the laws of the Cayman Islands.

 

(3)           Corporate Power  The Corporation has the corporate power and authority to own or lease its property and to carry on the Business as now being conducted by it.

 

(4)           Qualification  The Corporation is duly qualified, licensed or registered to carry on business and is in good standing in the jurisdiction of its incorporation.

 

(5)           Authorized and Issued Capital  The authorized capital of the Corporation consists of an unlimited number of common shares of which at the date of this Agreement 3,613,880 common shares have been duly issued and are outstanding as fully paid and non-assessable common shares of the Corporation and at the Closing Time, 3,613,880 common shares shall have been duly issued and shall be outstanding as fully paid and non-assessable common shares of the Corporation.

 

(6)           Options and Warrants  Except for the Purchaser’s right in this Agreement, no person has any option, warrant, right, call, commitment, conversion right, right of exchange or other agreement or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an option, warrant, right, call, commitment, conversion right, right of exchange or other agreement for: (a) the purchase from the Vendor or the Shareholder of any of the Purchased Shares; (b) the purchase, subscription, allotment or issuance of any unissued shares or securities of the Corporation; or (c) other than in the ordinary course of the Business, the purchase or other acquisition from the Corporation of any of its undertaking, property or assets.  The Vendor, the Shareholder and the Corporation have each respectively waived any legal pre-emptive right to acquire any of the Purchased Shares.

 

  

8

  

 

(7)           Title to Purchased Shares  The Vendor Shares are owned by the Vendor as the registered and beneficial owner with good and marketable title, free and clear of all Encumbrances and the Vendor has the exclusive right to sell, dispose or transfer the Vendor Shares.  The Shareholder Share is owned by the Shareholder as the registered and beneficial owner with good and marketable title, free and clear of all Encumbrances and the Shareholder has the exclusive right to sell, dispose or transfer the Shareholder Share.

 

(8)           Dividends and Distributions  Since the Financial Statements Date, the Corporation has not, directly or indirectly, declared or paid any dividends or declared or made any other distribution on any of its shares of any class and has not, directly or indirectly, reduced the capital of the Corporation or reduced the face value of its shares, redeemed, purchased or otherwise acquired any of its outstanding shares of any class or agreed to do so.

 

(9)           Corporate Records  The corporate records of the Corporation are complete and accurate and all corporate proceedings and actions reflected therein have been conducted or taken in compliance with all applicable Laws and with the articles and by-laws of the Corporation and without limiting the generality of the foregoing, (a) the minute books contain complete and accurate minutes of all meetings of the directors and shareholders of the Corporation held since their respective dates of incorporation, and all such meetings were duly called and held; (b) the minute books contain all written resolutions passed by the directors and shareholders of the Corporation and all such resolutions were duly passed; (c) the share certificate books or share ledger, registers of shareholders and registers of securities transfers of the Corporation and any existing Encumbrance upon the shares are completely and accurately recorded, and all transfers of securities have been duly completed and approved and any exigible tax payable in connection with the transfer of any securities of the Corporation has been duly paid; and (d) the registers of directors and officers are complete and accurate and all former and present directors and officers of the Corporation were duly elected or appointed as the case may be.

 

(10)           Validity of Agreement

 

	
  

	
(a)

	
The Vendor and the Shareholder have all necessary corporate power to own the Purchased Shares and to enter into and perform their obligations under this Agreement, and each of the Vendor, Corporation and the Shareholder have all necessary corporate power to enter into and perform their respective obligations under any other agreements or instruments to be delivered or given by it pursuant to this Agreement.

 

	
  

	
(b)

	
The Vendor’s execution and delivery of, and performance of its obligations under, this Agreement and the consummation of the Transactions have been duly authorized by all necessary corporate action on the part of each of the Vendor and the Corporation, respectively.

 

  

9

  

 

	
  

	
(c)

	
This Agreement or any other agreements entered into pursuant to this Agreement to which either of the Corporation or the Vendor is a party constitute legal, valid and binding obligations of each of the Corporation or the Vendor, as the case may be, enforceable against each of them in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.

 

(11)           No Violation  The execution and delivery of this Agreement by the Vendor, the consummation of the Transactions and the fulfilment by the Vendor of the terms, conditions and provisions hereof will not (with or without the giving of notice or lapse of time, or both):

 

	
  

	
(a)

	
contravene or violate or result in a breach or a default under or give rise to a right of termination, amendment or cancellation or the acceleration of any obligations of the Vendor or the Corporation:

 

	
  

	
(i)

	
any applicable Law;

 

	
  

	
(ii)

	
any judgment, order, writ, injunction or decree of any Regulatory Authority having jurisdiction over the Vendor or the Corporation;

 

	
  

	
(iii)

	
the articles, by-laws or any resolutions of the board of directors or shareholders of the Vendor or the Corporation;

 

	
  

	
(iv)

	
any Consent held by the Vendor or the Corporation or necessary to the ownership of the Purchased Shares or the operation of the Business; or

 

	
  

	
(v)

	
the provisions of any Contract to which the Vendor or the Corporation is a party or by which any of them is, or any of their properties or assets are, bound; or

 

	
  

	
(b)

	
result in the creation or imposition of any Encumbrance on any of the Purchased Shares or any of the property or assets of the Corporation.

 

(12)           Shareholders’ Agreements  There are no shareholders’ agreements, pooling agreements, voting trusts or other similar agreements with respect to the ownership or voting of any of the shares of the Corporation.  The Vendor, the Shareholder and the Corporation have each waived their respective statutory pre-emptive right to acquire the Purchased shares.

 

(13)           Private Issuer  The Corporation is a private company and the sale of the Vendor Shares by the Vendor to the Purchaser will be made in compliance with applicable securities laws.

 

(14)           Regulatory and Contractual Consents There is no requirement under any contract or to make any filing with, give any notice to or obtain any Consent from any Regulatory Authority as a condition to the lawful consummation of the Transactions.

 

(15)           Financial Statements  The Financial Statements:

 

	
  

	
(a)

	
have been prepared in accordance with IFRS on a basis consistent with that of prior fiscal periods;

 

  

10

  

 

	
  

	
(b)

	
are complete and accurate; and

 

	
  

	
(c)

	
present fairly the assets, liabilities (whether accrued, absolute, contingent or otherwise) and financial condition of the Corporation at the respective balance sheet dates, and the results of operations of the Corporation.

 

(16)           Records  The Records have been duly maintained in accordance with all applicable legal requirements and contain full and accurate records of all material matters relating to the Business. All material financial transactions relating to the Business have been accurately recorded in the Records in accordance with IFRS.  No Records are in the possession of, recorded, stored, maintained by, or otherwise dependent on, any other person.

 

(17)           No Material Adverse Change Since the Financial Statements Date, no material adverse change has occurred in any of the assets, business, financial condition, earnings, results of operations or prospects of the Corporation nor has any other event, condition, or state of facts occurred or arisen which might have a material adverse effect on the assets, business, financial condition, earnings, results of operations or prospects of the Corporation.

 

(18)           Absence of Undisclosed Liabilities  Except to the extent reflected or reserved against in the balance sheet (including the notes thereto) forming part of the Financial Statements or incurred subsequent to the date thereof and except in respect of normal trade payables arising in the ordinary course of the Business, the Corporation does not have any outstanding indebtedness or any liabilities (whether accrued, absolute, contingent or otherwise) nor any outstanding commitments or obligations of any kind exceeding $10,000.

 

(19)           Consents The Corporation has conducted the Business in compliance with, and holds all Consents necessary for the lawful operation of the Business, pursuant to all applicable Laws, and all of which are valid and subsisting and in good standing with no violations as of the date of this Agreement. All such Consents are renewable by their terms or in the ordinary course of the Business without the need for the Corporation to comply with any special qualification or procedures or to pay any amounts other than routine filing fees.

 

(20)           Compliance with Laws  The Corporation has complied, and the Business is now being conducted in compliance, with all Laws applicable to the Business, and to the Corporation.

 

(21)           Conduct of Business in Ordinary Course  Since the Financial Statements Date the Business has been carried on in the ordinary course consistent with past practice. The Business is the only business operation carried on by the Corporation, and the property and assets owned or leased by the Corporation are sufficient to carry on the Business at the Closing Date.

 

(22)           Location of Tangible Personal Property  All the tangible and intangible assets of the Corporation are situate at the location of the jurisdiction of its incorporation.

 

(23)           Condition of Assets  All material tangible personal property used by the Corporation in or in connection with the Business or any part thereof is in good operating condition, repair and proper working order, having regard to its use and age, except only for reasonable wear and tear.

 

  

11

  

 

(24)           Title to Personal and Other Property  The property and assets of the Corporation (other than the Real Properties) are owned by the Corporation as the beneficial owner with a good and marketable title, free and clear of all Encumbrances other than the Permitted Encumbrances.

 

(25)           Litigation  There are no actions, suits or proceedings, judicial or administrative, (whether or not purportedly on behalf of the Corporation) pending or threatened, by or against or affecting the Corporation, at law or in equity, or before or by any Regulatory Authority. Further, there are no grounds on which any such action, suit or proceeding might be commenced with any reasonable likelihood of success and there is not presently outstanding against the Corporation any judgment, injunction or other order of any Regulatory Authority.

 

(26)           Capital Expenditures  Other than certain property payments not exceeding the aggregate of $100,000 due in June 2013, the Corporation is not committed to make any capital expenditures, nor have any capital expenditures been authorized by the Corporation at any time since the Financial Statements Date, except for capital expenditures made in the ordinary course of the Business which, in the aggregate, do not exceed $10,000.

 

(27)           Accounts Receivable The accounts receivable due or accruing to the Corporation reflected in the Financial Statements and all accounts receivable of the Corporation arising since the date of the Financial Statements arose from bona fide transactions in the ordinary course of the Business and are valid, enforceable and fully collectible accounts (subject to a reasonable allowance, consistent with past practice, for doubtful accounts as reflected in the Financial Statements in accordance with IFRS or as previously disclosed in writing to the Purchaser). Such accounts receivable are not subject to any defence, set-off or counterclaim.

 

(28)           Material Contracts The contracts listed in Schedule 3.1(28)(32)(33) constitutes all the material Contracts of the Corporation.  Without limiting the generality of the foregoing, and except as otherwise set out in Schedule 3.1(28)(32)(33), the Corporation is not a party to or bound by any:

 

	
  

	
(a)

	
distributor, sales, advertising, agency or manufacturer’s representative Contract;

 

	
  

	
(b)

	
collective bargaining agreement or other Contract with any labour union;

 

	
  

	
(c)

	
continuing Contract for the purchase of materials, supplies, equipment or services involving more than $10,000 in respect of any such Contract;

 

	
  

	
(d)

	
employment or consulting Contract or any other Contract with any officer, employee or consultant other than oral Contracts of indefinite hire terminable by the employer without cause on reasonable notice;

 

	
  

	
(e)

	
profit sharing, bonus, stock option, pension, retirement, disability, stock purchase, medical, dental, hospitalization, insurance or similar plan or agreement providing benefits to any current or former director, officer, employee or consultant;

 

	
  

	
(f)

	
trust indenture, mortgage, promissory note, loan agreement, guarantee or other Contract for the borrowing of money, the provision of financial assistance of any kind or a leasing transaction of a type required to be capitalized in accordance with IFRS, or any Contract creating an Encumbrance relating thereto;

 

  

12

  

 

	
  

	
(g)

	
commitment for charitable contributions;

 

	
  

	
(h)

	
Contract for capital expenditures in excess of $10,000 in the aggregate;

 

	
  

	
(i)

	
Contract for the sale of any assets, other than sales of inventory to customers in the ordinary course of the Business;

 

	
  

	
(j)

	
Contract pursuant to which the Corporation is a lessor of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property material to the Business;

 

	
  

	
(k)

	
Contract pursuant to which the Corporation is committed to process minerals or any other material;

 

	
  

	
(l)

	
Contract pursuant to which the Corporation is committed to transport minerals, concentrates, dumps, tailings or any other material;

 

	
  

	
(m)

	
Contract pursuant to which the Corporation is committed to sell or transfer any minerals or any other material;

 

	
  

	
(n)

	
Contract pursuant to which the Corporation is committed to store minerals, concentrates, leached solutions, drilling cores, machinery or any other material or equipment;

 

	
  

	
(o)

	
confidentiality, secrecy or non-disclosure Contract (whether the Corporation is a beneficiary or obligor thereunder) relating to any proprietary or confidential information or any non-competition or similar Contract;

 

	
  

	
(p)

	
agreement of guarantee, support, indemnification, assumption or endorsement of, or any other similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of, or any agreement to provide financial assistance of any kind to, any other person (except for cheques endorsed for collection);

 

	
  

	
(q)

	
Contract that expires, or may expire if the same is not renewed or extended at the option of any person other than the Corporation, more than one year after the date of this Agreement;

 

	
  

	
(r)

	
Contract with any officer, director, employee, shareholder or any other person not dealing at arm’s length with the Corporation (within the meaning of the ITA) except for Contracts of employment; or

 

	
  

	
(s)

	
Contract entered into by the Corporation other than in the ordinary course of the Business.

 

  

13

  

 

The Corporation has performed all of its obligations required to be performed by it and is entitled to all of the benefits under any Contract relating to the Business to which it is a party or by which it is bound. The Contracts listed in Schedule 3.1(28)(32)(33) are all in full force and effect unamended and, other than as disclosed to the Purchaser in writing or otherwise or other than as disclosed in the Financial Statements, no default nor pending obligation (even if at the time of this Agreement such pending obligation does not constitute an event of default) exists on the part of any of the parties thereto. The Corporation is not in default or in breach of any Contract to which it is a party and there exists no condition, event or act which, with the giving of notice or lapse of time or both would constitute such a default or breach and all such Contracts are in good standing and in full force and effect unamended and the Corporation is entitled to all benefits thereunder. The Vendor has provided to the Purchaser a true and complete copy of each Contract listed in Schedule 3.1(28)(32)(33) and all amendments.

 

(29)           Bank Accounts and Powers of Attorney  Schedule 3.1(29) is a correct and complete list showing (i) the name of each bank, trust company or similar institution in which the Corporation or a Subsidiary has an account or safe deposit box, the number or designation of each such account and safe deposit box and the names of all persons authorized to draw thereon or to have access thereto; and (ii) the names of any persons holding powers of attorney from the Corporation and a summary of the terms.

 

(30)           Brokers None of the Vendor, the Shareholder or the Corporation has engaged any broker or other agent in connection with the Transactions and, accordingly, there is no commission, fee or other remuneration payable to any broker or agent who purports or may purport to act or have acted for the Vendor or the Corporation.

 

(31)           Tax Matters

 

	
  

	
(a)

	
For purposes of this Section 3.1(31), the following definitions shall apply:

 

	
  

	
(i)

	
“Tax” and “Taxes” shall mean any or all national, federal, regional, provincial, local or foreign income, gross receipts, real property gains, goods and services, license, payroll, employment, excise, severance (including the “Compensación por Tiempo de Servicios”), workers profit sharing, mandatory workers insurances, indemnifications for layouts, pension premiums, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, mining concession fees, penalties for not meeting the annual minimum production or investment, or other taxes, levies, governmental charges or assessments of any kind whatsoever, including, without limitation, any estimated tax payments, interest, penalties or other additions, whether or not disputed.

 

  

14

  

 

	
  

	
(ii)

	
“Tax Return” shall mean any return, declaration, report, estimate, information return or statement, or claim for refund relating to, or required to be filed in connection with any Taxes, including information returns or reports with respect to withholding at source or payments to third parties, and any schedules or attachments or amendments of any of the foregoing.

 

	
  

	
(b)

	
The Corporation has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, all such Tax Returns are complete and accurate in all material respects, for all periods through December 31, 2011 for the Corporation.  All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, other than those which are being contested in good faith and in respect of which adequate reserves have been provided in the most recently published financial statements of the Corporation.  The Corporation’s Financial Statements reflect a reserve in accordance with IFRS for all Taxes payable by the Corporation for all taxable periods and portions thereof through the date of such financial statements.  No deficiency with respect to any Taxes has been proposed, asserted or assessed in writing against the Corporation, there are no actions, suits, proceedings, investigations or claims pending or threatened against the Corporation in respect of Taxes or any matters under discussion with any Regulatory Authority relating to Taxes, in each case which are likely to have a material adverse effect on the Corporation, and no waivers or written requests for waivers of the time to assess any such Taxes are outstanding or pending.  The Corporation has withheld from each payment made to any of their past or present employees, officers or directors, and to any non-resident of Canada, the amount of all Taxes required to be withheld therefrom and have paid the same to the proper tax or receiving officers within the time required under applicable legislation.  The Corporation, Vendor or Shareholder, as applicable, has remitted or will promptly remit upon completion of the transaction contemplated herein to the appropriate tax authorities all amounts collected by it in respect of Taxes payable with respect to the transaction contemplated by this Agreement or otherwise.  There are no liens for Taxes upon any asset of the Corporation except liens for taxes not yet due.

 

	
  

	
(c)

	
The Corporation is not a party to any joint venture, partnership or other arrangement or Contract that could be treated as a partnership for Tax purposes.

 

(32)           Real Properties and Leased Premises

 

	
  

	
(a)

	
Schedule 3.1(28)(32)(33) lists all Real Properties owned in whole or in part by the Corporation and sets forth the legal descriptions. There are no Contracts to sell, transfer or otherwise dispose of any of the Real Properties, or to purchase or acquire any real properties other than the Real Properties, or which would restrict the ability of the Corporation to acquire or transfer any of the Real Properties.

 

	
  

	
(b)

	
The Corporation is the absolute beneficial owner of, and has good and marketable title in fee simple to each of the Real Properties, free and clear of any and all Encumbrances, except for the Permitted Encumbrances. Complete and correct copies of all documents creating those Permitted Encumbrances which affect the Real Properties have been provided to the Purchaser. Except as otherwise disclosed in Schedule 3.1(28)(32)(33), none of the Real Properties is leased, subject to an usufruct, subject to an easement, or licenced, in whole or in part, to any other person.

 

  

15

  

 

	
  

	
(c)

	
Schedule 3.1(28)(32)(33) describes all Leases under which the Corporation leases or subleases any real property as lessee or sublessee (hereinafter in this section referred to as the “Lessee”). Other than the Leases, the Corporation is not a party to or is not bound, as Lessee, by any lease, sublease, license or other instrument relating to real property. Complete and correct copies of the Leases have been provided to the Purchaser. The Leases are in full force and effect, unamended. The Lessee under each Lease is exclusively entitled to all rights and benefits as Lessee under such Lease, and no Lessee has sublet, assigned, licensed or otherwise conveyed any rights in any of the Leased Premises or in any of the Leases to any other person.

 

	
  

	
(d)

	
All rental and other payments and other obligations required to be paid and performed by the Lessee pursuant to each of the Leases have been duly paid and performed. The Lessee is not in default of any of its obligations under any of the Leases and none of the landlords or other parties to the Leases are in default of any of their obligations under any of the Leases. No waiver, indulgence or postponement of the Lessee’s obligations under any of the Leases has been granted by the landlord thereunder. There exists no event of default under any Lease or event, occurrence, condition or act which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default under the Lease. None of the terms and conditions of any of the Leases will be affected by, nor will any of the Leases be in default as a result of, the completion of the Transactions, and all Consents of landlords or other parties to the Leases required in order to complete the Transactions have been obtained, or will have been obtained by the Closing Time, and are, or once obtained will be, in full force and effect.

 

	
  

	
(e)

	
The use by the Corporation of each of the Real Properties and Leased Premises is not in breach of any Laws, including any building, zoning or other statutes or any official plan, or any covenants, restrictions, rights or easements, affecting such Real Property or Leased Premises.  All buildings, structures and improvements situated on any of the Real Properties, and those situated on any of the Leased Premises, are located wholly within the boundaries of such Real Property or Leased Premises, as applicable, and comply with all Laws, covenants, restrictions, rights and easements affecting the same. There are no outstanding work orders, non-compliance orders, deficiency notices or other such notices relative to any of the Real Properties or Leased Premises. No part of any of the Real Properties or Leased Premises has been condemned, taken or expropriated by any Regulatory Authority, nor has any notice or proceeding in respect thereof been given, commenced or threatened.  Each of the Real Properties and Leased Premises is fully serviced by utilities having adequate capacities for the normal operations of the Business. Each of the Real Properties and Leased Premises has adequate rights of access to and from public streets or highways for the normal operations of the Business and there is no fact or circumstance which could result in the termination or restriction of such access. There is no defect or condition affecting any of the Real Properties or Leased Premises (or the soil or subsoil thereof) or any adjoining property which would impair the current use of such Real Property or Leased Premises.

 

  

16

  

 

	
  

	
(f)

	
No amounts including, without limitation, municipal property Taxes, local improvement Taxes, levies or assessments, are owing by the Corporation in respect of any of the Real Properties or the Leased Premises to any Regulatory Authority or public utility, other than current accounts which are not in arrears. There are no outstanding appeals on assessments which have been issued or raised by any Regulatory Authority or by the Corporation concerning any realty, business or other Taxes with respect to any of the Real Properties or Leased Premises. All amounts for labour or materials supplied to or on behalf of the Corporation relating to the construction, alteration or repair of or on any of the Real Properties or Leased Premises have been paid in full and no one has filed or has a right to file any construction, builders’, mechanics’ or similar liens.

 

	
  

	
(g)

	
The buildings and structures comprising the Real Properties and the Leased Premises are free of any structural defect. The heating, ventilating, plumbing, drainage, electrical and air conditioning systems and all other systems used in any of the Real Properties or the Leased Premises are in good working order, fully operational and free of any defect, except for normal wear and tear.

 

(33)           Interest in Mineral Rights

 

	
  

	
(a)

	
All of the Corporation’s material mineral interests and rights (including any material claims, concessions, exploration licenses, exploitation licenses, prospecting permits, mining leases and mining rights, in each case, either existing under contract, by operation of Law or otherwise) (collectively, the “Mineral Rights”), are set out in Schedule 3.1(28)(32)(33).  Other than the Mineral Rights set out in Schedule 3.1(28)(32)(33), the Corporation does not own, lease or have any interest in any material mineral interests and rights, including rights upon ore processing facilities.

 

	
  

	
(b)

	
Except as set forth in Schedule 3.1(28)(32)(33), the Corporation is the sole legal and beneficial owner or all right, title and interest in and to the Mineral Rights, free and clear of any Encumbrances.

 

	
  

	
(c)

	
All of the Mineral Rights have been properly located and recorded in compliance with applicable Law, including the registry of their UTM coordinates at the registry file of each of the rights comprising the Mineral Rights, and are comprised of valid and subsisting mineral claims, with full authority to explore and mine on them.

 

	
  

	
(d)

	
The Mineral Rights are in good standing under applicable law and any and all work and investment required to be performed and filed in respect thereof has been performed and filed, all Taxes, rentals, fees, expenditures and other payments in respect thereof have been paid or incurred and all filings in respect thereof have been made.

 

  

17

  

 

	
  

	
(e)

	
There is no overlapping or material adverse claim against or challenge to the title to or ownership of the Mineral Rights.

 

	
  

	
(f)

	
The Corporation has the exclusive right to deal with the Mineral Rights.

 

	
  

	
(g)

	
Other than the Royalty Agreement and the Pilot Gold NSR, no Person other than the Corporation has any interest in the Mineral Rights or the production or profits therefrom or any royalty in respect thereof or any right to acquire any such interest.

 

	
  

	
(h)

	
Other than the right of first refusal granted to Pilot Gold pursuant to the Termination Agreement, there are no options, back-in rights, earn-in rights, rights of first refusal or similar provisions or rights which would affect the Corporation’s interest in the Mineral Rights.

 

	
  

	
(i)

	
The Mineral Rights are not located within any natural protected area or its buffering zone, any town or its expansion zone, or any area banned for mining activities.  There are not material restrictions on the ability of the Corporation to use, transfer, explore, develop, construct or exploit the Mineral Rights, except pursuant to the applicable Law.

 

	
  

	
(j)

	
The Corporation has not received any notice, whether written or oral, from any Regulatory Authority of any revocation or intention to revoke any interest of the Corporation in any of the Mineral Rights.

 

	
  

	
(k)

	
The Corporation has all surface rights, including fee simple estates, leases, easements, right of way and permits or licences for operations from landowners or Regulatory Authorities permitting the use of surface land by the Corporation, and mineral interests for development and current exploration of the Mineral Rights and no third party, local community or group holds any such rights that are required by the Corporation to develop and currently exploit the Mineral Rights.

 

	
  

	
(l)

	
All mines located in or on the lands of the Corporation or lands pooled or unitized therewith, which have been abandoned by the Corporation, have been abandoned in accordance with good mining practices and in compliance with all applicable Laws, and all future abandonment, remediation and reclamation obligations known to the Corporation as of the date hereof have been accurately set forth in Schedule 3.1(28)(32)(33) without omission of information necessary to make the disclosure not misleading.

 

(34)           Environmental Matters

 

	
  

	
(a)

	
For the purposes of this Agreement, the following terms and expressions shall have the following meanings:

 

  

18

  

 

	
  

	
(i)

	
“Environmental Laws” means all Laws applicable to the environment, occupational health and safety, product safety, product liability and public safety.

 

	
  

	
(ii)

	
“Environmental Consents” includes all Consents issued by or issuable by any Regulatory Authority under Environmental Laws.

 

	
  

	
(iii)

	
“Hazardous Substance” means, any material or substance that may impair the quality of the environment or which under Environmental Laws is deemed to be “hazardous”, a “pollutant”, “toxic”, “deleterious”, “caustic”, “dangerous”, a “waste”, a “hazardous material”, a “source of contamination” or analogous substance including, without limitation, petroleum and petroleum products, asbestos, polychlorinated biphenyls, and flammable and radioactive materials.

 

	
  

	
(iv)

	
“Release” means any release, spill, leak, emission, discharge, leach, dumping, migration, pumping, pouring, emitting, emptying, injecting, spraying, burying, abandoning, incinerating, seeping, escape, disposal or similar or analogous act as defined in any Environmental Laws.

 

	
  

	
(b)

	
The Corporation, the operation of the Business and the assets owned or used by the Corporation have been and are in compliance with all Environmental Laws, including all Environmental Consents.

 

	
  

	
(c)

	
The Corporation has not been charged with or convicted of any offence for non-compliance with Environmental Laws, or been fined or otherwise sentenced or settled any prosecution short of conviction; and (ii) there are no notices of judgment or commencement of proceedings of any nature and the Corporation has never been investigated relating to any breach or alleged breach of Environmental Laws.

 

	
  

	
(d)

	
The Corporation has obtained all Environmental Consents necessary to conduct the initial exploration activities and to own, use and operate their respective properties and assets.

 

	
  

	
(e)

	
There are no Hazardous Substances located on or in or under the surface of the Mineral Rights or any Real Properties or Leased Premises of the Corporation, and no Release of any Hazardous Substances has occurred on, in or from any of the Mineral Rights, Real Properties or Leased Premises or has resulted from the operation of the Business and the conduct of activities thereon.

 

	
  

	
(f)

	
The Corporation has not used the area of the Mineral Rights or any of its Real Properties or Leased Premises to produce, generate, manufacture, treat, store, handle, transport or dispose of any Hazardous Substances except in compliance with Environmental Laws.

 

  

19

  

 

3.2           Representations and Warranties of the Purchaser

 

The Purchaser hereby makes the following representations and warranties to the Vendor and acknowledges that the Vendor is relying on such representations and warranties in entering into this Agreement and completing the Transactions:

 

(1)           Incorporation and Existence  It is a corporation duly organized, and is validly subsisting, under the laws of the Cayman Islands and is up-to-date in the filing of all corporate and similar returns under the laws of that jurisdiction.

 

(2)           Validity of Agreement

 

	
  

	
(a)

	
The Purchaser has all necessary corporate power to own the Purchased Shares. The Purchaser has all necessary corporate power to enter into and perform its obligations under this Agreement and any other agreements or instruments to be delivered or given by it pursuant to this Agreement.

 

	
  

	
(b)

	
The execution, delivery and performance by the Purchaser of this Agreement and the consummation of the Transactions have been duly authorized by all necessary corporate action on the part of the Purchaser.

 

	
  

	
(c)

	
This Agreement or any other agreements entered into pursuant to this Agreement to which the Purchaser is a party constitute legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.

 

(3)           No Violation  The execution and delivery of this Agreement by the Purchaser, the consummation of the Transactions and the fulfilment by the Purchaser of the terms, conditions and provisions hereof will not (with or without the giving of notice or lapse of time, or both):

 

	
  

	
(a)

	
contravene or violate or result in a breach or a default under or give rise to a right of termination, amendment or cancellation or the acceleration of any obligations of the Purchaser, under:

 

	
  

	
(i)

	
any applicable Law;

 

	
  

	
(ii)

	
any judgment, order, writ, injunction or decree of any Regulatory Authority having jurisdiction over the Purchaser;

 

	
  

	
(iii)

	
the articles, by-laws or any resolutions of the board of directors or shareholders of the Purchaser;

 

	
  

	
(iv)

	
any Consent held by the Purchaser; or

 

  

20

  

 

	
  

	
(v)

	
the provisions of any Contract to which the Purchaser is a party or by which it is, or any of its properties or assets are, bound.

 

(4)           Subsidiary of a Reporting Issuer  The Purchaser is a wholly-owned subsidiary of Universal Tech Corp, a reporting issuer, as such term is defined under the provisions of U.S. securities Laws.  Universal Tech Corp is not listed on the list of defaulting reporting issuers maintained by applicable Regulatory Authorities. Universal Tech Corp is not in default of any of the provisions of applicable securities Laws, the regulations made thereunder and all applicable policy statements promulgated in respect thereof.

 

(5)           Brokers  The Purchaser has not engaged any broker or other agent in connection with the Transactions and, accordingly, there is no commission, fee or other remuneration payable to any broker or agent who purports or may purport to have acted for the Purchaser.

 

(6)           Consents  There is no requirement for the Purchaser to make any filing with, give any notice to or obtain any Consent from any Regulatory Authority as a condition to the lawful consummation of the Transactions.

 

(7)           Bankruptcy  The Purchaser is not an insolvent person within the meaning of the Bankruptcy and Insolvency Act (Canada) and has not made an assignment in favour of its creditors or proposal in bankruptcy to its creditors or any class thereof, and no petition for a receiving order has been presented in respect of it.  The Purchaser has not initiated proceedings with respect to a compromise or arrangement with its creditors or for its winding up, liquidation or dissolution.  No receiver or interim receiver has been appointed in respect of it or any of its undertakings, property or assets and no execution or distress has been levied on any of its undertakings, property or assets, nor have any proceedings been commenced in connection with any of the foregoing.

 

3.3           Survival of Covenants, Representations and Warranties of the Parties

 

All covenants, representations and warranties made herein or in any agreement, certificate or other document delivered or given pursuant to this Agreement (other than those which are expressly waived in writing as part of the Closing herein) shall survive the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement and, notwithstanding such completion or any investigation made by or on behalf of the Party to whom or in whose favour such covenants, representations and warranties were made, shall continue in full force and effect for the respective benefit of the Purchaser, the Vendor, or the Shareholder, as the case may be, for a period of two years following the Closing Date, after which period the respective Parties shall be released from their respective obligations and liabilities hereunder, except in respect of claims made in writing prior to expiry of such period, provided that:

 

(1)           all covenants, representations and warranties relating to Taxes, tax liability or other tax matters for any period ending prior to or on the Closing Date shall survive the Closing for any period during which any taxing authority may make any claim or assessment based on any return filed or failed to be filed plus a period of six months, after which period the Purchaser and Vendor shall be released from their respective obligations and liabilities hereunder, except in respect of claims made in writing prior to the expiry of such period,

 

  

21

  

 

(2)           any claim based on or with respect to the inaccuracy or non-performance or non-fulfillment or breach of any representation, warranty or covenant of a Party respecting Taxes, tax liability or other tax matters set out herein may be brought by the Purchaser, Vendor, or the Shareholder, as the case may be, at any time, if such claim is based upon any failure or omission to file a return or any misrepresentation made or fraud committed in filing a return or in supplying information under any legislation pursuant to which a Tax is imposed,

 

(3)           any claim based upon any misrepresentation, or breach or inaccuracy in any of the representations and warranties of a Party set out herein may be brought against such Party at any time if such Party knew of such misrepresentation, breach or inaccuracy at the time such representation or warranty was made by such Party,

 

(4)           any claim based upon a defect in title of or the inability of the Vendor to sell the Purchased Shares may be brought by the Purchaser at any time; and

 

(5)           no claim for any breach of any of the covenants, representations and warranties contained in this Agreement or in any agreement, instrument, certificate or other document executed or delivered pursuant to this Agreement may be made after the applicable expiration time set out in this Section 3.3 notwithstanding that such breach was not objectively discoverable.

 

ARTICLE 4

COVENANTS

 

4.1           Conduct During Interim Period

 

During the Interim Period, without in any way limiting any other obligations of the Vendor and the Shareholder in this Agreement:

 

(1)           Conduct Business in the Ordinary Course  The Vendor shall cause the Corporation to conduct the Business and the operations and affairs of the Corporation only in the ordinary course of the Business consistent with past practice, and the Vendor shall ensure that the Corporation shall not, without the prior written consent of the Purchaser, enter into any transaction or refrain from doing any action that would constitute a breach of any representation, warranty, covenant or other obligation of the Vendor or the Shareholder contained herein, and provided further that, without limiting the generality of the foregoing, the Vendor shall cause the Corporation to ensure that the Corporation does not:

 

	
  

	
(i)

	
amends its articles, by-laws, constating documents or other organizational documents;

 

	
  

	
(ii)

	
amalgamates, merges, reorganizes or consolidates with, or acquires all or substantially all the shares or assets of any person; or

 

	
  

	
(iii)

	
transfers, leases, licenses, sells or otherwise disposes of any of its assets, or permits any Encumbrance to attach to or affect any of its assets, or does any act or thing other than in the ordinary course of the Business consistent with past practice;

 

  

22

  

 

(2)           Continue Insurance  The Vendor shall cause the Corporation to continue to maintain in full force and effect all policies of insurance or renewals now in effect, and shall take out, at the expense of the Purchaser, such additional insurance as may be reasonably requested by the Purchaser, and shall give all notices and present all claims under all policies of insurance in a timely fashion.

 

(3)           Contractual Consents  The Vendor shall use its best efforts to make, give or obtain or cause the Corporation to make, give or obtain, as applicable, at or prior to the Closing Time the filings, notifications and Consents described in Schedule 3.1(14) in respect of Contracts, on such terms as are acceptable to the Purchaser, acting reasonably.

 

(4)           Preserve Goodwill  The Vendor shall use its best efforts to preserve intact, and cause the Corporation to preserve intact, the Business and the property, assets, operations and affairs of the Corporation and to carry on the Business and the affairs of the Corporation as currently conducted, and to promote and preserve for the Purchaser the goodwill of suppliers, customers and others having business relations with the Corporation.

 

(5)           Discharge Liabilities  The Vendor shall cause the Corporation to pay and discharge the liabilities of the Corporation in the ordinary course of the Business in accordance and consistent with the past practice of the Corporation, except those contested in good faith by the Corporation.

 

(6)           Corporate Action  The Shareholder and the Vendor shall take and cause the Corporation to take all necessary corporate action, steps and proceedings to approve or authorize, validly and effectively, the execution and delivery of this Agreement and the other agreements and documents contemplated by this Agreement and to complete the transfer of the Purchased Shares to the Purchaser free and clear of all Encumbrances except for the Permitted Encumbrances and to cause all necessary meetings of directors and shareholders of the Vendor and the Corporation to be held for such purpose, including the waiver by the Corporation of its right of first refusal to acquire any of the Purchased Shares.

 

(7)           Exclusive Dealing  Neither the Vendor nor the Shareholder shall take any action, directly or indirectly, to encourage, initiate or engage in discussions or negotiations with, or provide any information to any person, other than the Purchaser, concerning any purchase of any shares in the capital of the Corporation, the material assets of the Corporation, a controlling interest in the Vendor or the Corporation or any merger, sale of substantial assets or similar transaction involving the Corporation or the Business, and the Vendor shall ensure that the Corporation does not take any such action.

 

  

23

  

 

4.2           Access to Information

 

The Vendor shall at all times during the Interim Period make available to the Purchaser and its representatives and advisers for examination all Records and corporate records of the Corporation in its possession or under its control, including environmental and health and safety reports. The Vendor shall at all times during the Interim Period give the Purchaser and its representatives and advisers access to the premises of the Corporation during normal business hours and upon reasonable notice, in order to make such investigations as the Purchaser shall deem necessary or advisable, including for purposes of conducting any environmental audits, environmental site assessments (including soil and groundwater testing) or other investigations. The Vendor shall give such persons all means necessary to effect such examinations and investigations and shall cause its agents, employees, officers and directors to use their best efforts to aid such persons in such examinations and investigations. The Vendor authorizes and consents to the release by any Regulatory Authority having jurisdiction of any information, and shall sign any documents or forms of consent incidental thereto. The exercise of any rights of access, inspection or examination by or on behalf of the Purchaser shall not affect or mitigate the Vendor’s covenants, representations and warranties in this Agreement. The Vendor shall provide the Purchaser and its representatives and advisers at all times during the Interim Period with an opportunity to meet with the auditors and any employees, advisers or personnel of the Corporation.

 

4.3           Satisfaction of Closing Conditions

 

The Vendor and the Shareholder jointly and severally agree to use their best efforts to ensure that the conditions set forth in Section 5.1, and the Purchaser agrees to use its best efforts to ensure that the conditions set forth in Section 5.3, are fulfilled at or prior to the Closing Time. Each of the Parties agrees use its best efforts to ensure that the conditions set forth in Section 5.5 are fulfilled at or prior to the Closing Time.

 

4.4           Delivery of Records

 

At the Closing Time, the Vendor and the Shareholder shall deliver to the Purchaser all the Records and corporate records of the Corporation. The Purchaser agrees that it will preserve such records so delivered to it for a period of six years from the Closing Date, or for such longer period as is required by any applicable Law, and will permit the Vendor or its authorized representatives reasonable access thereto in connection with the affairs of the Vendor, but the Purchaser shall not be responsible or liable to the Vendor for or as a result of any accidental loss or destruction of or damage to any such records.

 

ARTICLE 5

CONDITIONS OF CLOSING

 

5.1           Conditions for the Benefit of the Purchaser

 

The obligation of the Purchaser to complete the Transactions will be subject to the fulfilment of the following conditions at or prior to the Closing Time:

 

(1)           Representations, Warranties and Covenants  The representations and warranties of the Vendor and the Shareholder made in or pursuant to this Agreement shall be true and accurate at the Closing Time with the same force and effect as though such representations and warranties had been made as of the Closing Time. The Vendor and the Shareholder shall have complied with all covenants and agreements in this Agreement to be performed or caused to be performed by them at or prior to the Closing Time. In addition, the Vendor and the Shareholder shall have delivered to the Purchaser a certificate confirming the foregoing. The receipt of such certificate and the completion of the Transactions shall not be deemed to constitute a waiver of any of the representations, warranties or covenants of the Vendor and the Shareholder contained in this Agreement. Such representations, warranties and covenants shall continue in full force and effect as provided in Section 3.3.

 

  

24

  

 

(2)           No Material Adverse Change  Except as has been specifically permitted in this Agreement, since the date of this Agreement there shall not have been:

 

	
  

	
(a)

	
any material adverse change in any of the assets, business, financial condition, earnings, results of operations or prospects of the Corporation that has, or threatens to have, a material adverse effect on the assets, business, financial condition, earnings, results of operations or prospects of the Corporation on a consolidated basis or which might materially adversely affect the ability of the Corporation to carry on the Business after the Closing substantially as such Business is being conducted upon the date of this Agreement; or

 

	
  

	
(b)

	
any damage, destruction or loss, or other event, development or condition of any character (whether or not covered by insurance) which would have a material adverse effect on the assets, business, financial condition, earnings, results of operations or prospects of the Corporation on a consolidated basis.

 

(3)           No Action to Restrain/No Adverse Law No Law shall have been made, and no action or proceeding shall be pending or threatened, which is likely to result in an order, decision or ruling imposing any limitations or conditions which may have a material adverse effect on the Transactions, the right of the Purchaser to own the Purchased Shares, or the assets, business, financial condition, earnings, results of operations or prospects of the Corporation on a consolidated basis.

 

(4)           Consents All filings, notifications and Consents with, to or from Regulatory Authorities and third parties, including the parties to the material Contracts and the lessors of the Leased Premises listed on Schedule 3.1(28)(32)(33), required to permit the change of ownership of the Purchased Shares contemplated hereby without resulting in the violation of or a default under or any termination, amendment or acceleration of any obligation under any licence, permit, lease, or material Contract affecting the Business or otherwise adversely affecting the Business, the Corporation, shall have been made, given or obtained on terms acceptable to the Purchaser acting reasonably.

 

(5)           Deliveries  The Vendor shall have delivered to the Purchaser the following in form and substance satisfactory to the Purchaser:

 

	
  

	
(a)

	
duly executed resignations effective as at the Closing Time of each director and officer of the Corporation specified by the Purchaser;

 

	
  

	
(b)

	
all Records and all corporate records of the Corporation and other documents referred to in this Agreement or any Schedule;

 

  

25

  

 

	
  

	
(c)

	
certificates representing the Vendor Shares, accompanied by a notarized copy of the entry of the share ledger of the Corporation duly signed by an authorized officer of the Corporation showing the transfer of the Vendor Shares to the Purchaser, and all such other assurances, consents and other documents as the Purchaser may reasonably request to effectively transfer to the Purchaser title to the Vendor Shares free and clear of all Encumbrances;

 

	
  

	
(d)

	
a certificate representing the Shareholder Share, accompanied by a notarized copy of the entry of the share ledger of the Corporation duly signed by an authorized officer of the Corporation showing the transfer of the Shareholder Share to the Purchaser, and all such other assurances, consents and other documents as the Purchaser may reasonably request to effectively transfer to such person as the Purchaser so directs title to the Shareholder Share free and clear of all Encumbrances;

 

	
  

	
(e)

	
a waiver from the Vendor with respect to its right of first refusal on the transfer of the Shareholder Share by the Shareholder;

 

	
  

	
(f)

	
a waiver from the Shareholder with respect to his right of first refusal on the transfer of the Vendor Shares held by the Vendor;

 

	
  

	
(g)

	
a waiver from the Corporation with respect to its right of first refusal on the transfer of the Purchased Shares;

 

	
  

	
(h)

	
a written confirmation of no interest and quit claim from Pilot Gold whereby Pilot Gold releases, discharges, and quit claims any rights in and to the Mineral Rights, subject to the Pilot Gold NSR; and

 

	
  

	
(i)

	
all documentation and other evidence reasonably requested by the Purchaser in order to establish the due authorization and consummation of the Transactions, including the taking of all corporate proceedings by the boards of directors and shareholders of the Vendor and the Corporation required to effectively carry out the obligations of the Vendor and the Corporation pursuant to this Agreement.

 

5.2           Waiver or Termination by the Purchaser

 

The conditions contained in Section 5.1 are inserted for the exclusive benefit of the Purchaser and may be waived in whole or in part by the Purchaser at any time without prejudice to any of its rights of termination in the event of non-performance of any other condition in whole or in part. If any of the conditions contained in Section 5.1 are not fulfilled or complied with by the time provided for, the Purchaser may, at or prior to the Closing Time, terminate this Agreement by notice in writing after such time required to the Vendor and the Shareholder. In such event the Purchaser shall be released from all obligations in this Agreement (except as set out in Section 5.6) and, unless the condition or conditions which have not been fulfilled are reasonably capable of being fulfilled or caused to be fulfilled by the Vendor, the Shareholder or the Corporation, then the Vendor and the Shareholder shall also be released from all obligations in this Agreement (except as set out in Section 5.6).

 

  

26

  

 

5.3           Conditions for the Benefit of the Vendor and the Shareholder

 

The obligations of the Vendor and the Shareholder to complete the Transactions will be subject to the fulfilment of the following conditions at or prior to the Closing Time:

 

(1)           Representations, Warranties and Covenants  The representations and warranties of the Purchaser made in or pursuant to this Agreement shall be true and accurate at the Closing Time with the same force and effect as though such representations and warranties had been made as of the Closing Time. The Purchaser shall have complied with all covenants and agreements in this Agreement to be performed or caused to be performed by it at or prior to the Closing Time. In addition, the Purchaser shall have delivered to the Vendor and the Shareholder a certificate confirming the foregoing. The receipt of such certificate and the completion of the Transactions shall not be deemed to constitute a waiver of any of the representations, warranties or covenants of the Purchaser contained in this Agreement. Such representations, warranties and covenants shall continue in full force and effect as provided in Section 3.3.

 

(2)           Deliveries  The Purchaser shall have delivered to the Vendor the following in form and substance satisfactory to the Vendor:

 

	
  

	
(a)

	
payment of the Purchase Price to be paid under Section 2.3;

 

	
  

	
(b)

	
receipt for the certificates representing the Purchased Shares;

 

	
  

	
(c)

	
a certificate of status or the equivalent under the laws of the jurisdiction governing the corporate existence of the Purchaser;

 

	
  

	
(d)

	
a written confirmation and acknowledgement of the Pilot Gold NSR in accordance with Section 4(b)(ii) of the Termination Agreement; and

 

	
  

	
(e)

	
all documentation and other evidence reasonably requested by the Vendor in order to establish the due authorization and consummation of the Transactions, including the taking of all corporate proceedings by the boards of directors and shareholders of the Purchaser required to effectively carry out the obligations of the Vendor and the Corporation pursuant to this Agreement.

 

5.4           Waiver or Termination by the Vendor and the Shareholder.

 

The conditions contained in Section 5.3 are inserted for the exclusive benefit of the Vendor and the Shareholder and may be waived in whole or in part by the Vendor and the Shareholder at any time without prejudice to any of their rights of termination in the event of non-performance of any other condition in whole or in part. If any of the conditions contained in Section 5.3 are not fulfilled or complied with by the time provided for, the Vendor may, on behalf of itself and the Shareholder, at or prior to the Closing Time, terminate this Agreement by notice in writing after such time to the Purchaser. In such event the Vendor and the Shareholder shall be released from all obligations in this Agreement (except as set out in Section 5.6) and, unless the condition or conditions which have not been fulfilled are reasonably capable of being fulfilled or caused to be fulfilled by the Purchaser or the Corporation, then the Purchaser shall also be released from all obligations in this Agreement (except as set out in Section 5.6).

 

  

27

  

 

5.5           Conditions Precedent

 

The purchase and sale of the Purchased Shares is subject to the following conditions to be fulfilled at or prior to the Closing Time, which conditions are true conditions precedent to the completion of the Transactions:

 

(1)           No Legal Action  No action or proceeding shall be pending or threatened by any person to enjoin, restrict or prohibit any of the Transactions or the right of the Corporation to conduct the Business after Closing on substantially the same basis as heretofore conducted.

 

If any conditions precedent shall not have been fulfilled at or prior to the Closing Time, this Agreement shall be terminated and the Parties shall be released from all obligations under this Agreement, except as set out in Section 5.6.

 

5.6           Survival following Termination

 

In the event of termination of this Agreement at or prior to the Closing Time pursuant to Sections 5.2, 5.3(1) or 5.5, the provisions of Article 1, Article 7 and Article 8 and Sections 5.2, 5.4 and 5.5 shall survive such termination indefinitely. Upon such termination, the Purchaser shall promptly deliver to the Vendor all copies of all Records and corporate records of the Corporation and other written material obtained by the Purchaser from the Vendor or the Corporation in connection with this Agreement.

 

ARTICLE 6

CLOSING ARRANGEMENTS

 

6.1           Place of Closing

 

The Closing shall take place at the Closing Time at the offices of Irwin Lowy LLP, 130 Adelaide Street West, Suite 1010, Toronto, Ontario, M5H 3P5.

 

6.2           Deliveries at the Closing

 

At the Closing Time, upon fulfillment of all the conditions set out in Article 5 that have not been waived in writing by the Purchaser, the Vendor, or the Shareholder, as applicable, the Parties or Parties’ counsel shall deliver such deliveries as provided in Sections 5.1(b)(5) and 5.3(2).

 

ARTICLE 7

INDEMNIFICATION

 

7.1           Indemnification by the Vendor

 

Subject to Section 3.3, the Vendor shall indemnify and save the Purchaser harmless for and from:

 

(1)           all debts and liabilities of the Corporation, including liabilities for any Taxes, existing at the Closing Time and not disclosed on or included in the Financial Statements, except liabilities accruing or incurred subsequent to the Financial Statements Date in the ordinary course of the Business, consistent with past practice and except liabilities disclosed in this Agreement or any Schedule;

 

  

28

  

 

(2)           all contingent liabilities which the Corporation becomes obligated to pay and which exist at the Closing Time whether or not disclosed or reflected in the Financial Statements, and whether or not the Vendor or the Corporation or any of them have notice thereof or of the facts or circumstances which give rise thereto;

 

(3)           any assessment for Taxes for any period up to the Closing Date for which no adequate reserve has been provided and disclosed in the Financial Statements;

 

(4)           any loss, damages or deficiencies suffered by the Purchaser or by the Corporation as a result of any breach of representation, warranty or covenant on the part of the Vendor contained in this Agreement or in any certificate or document delivered pursuant to or contemplated by this Agreement;

 

(5)           any warranty, damage or similar claim made against the Corporation for or arising from defects in any goods, materials, service or workmanship, in each case provided by the Corporation on or prior to the Closing Date for which the Corporation is or is alleged to be liable; and

 

(6)           all claims, demands, costs and expenses, including legal fees, in respect of the foregoing.

 

7.2           Indemnification by the Purchaser

 

Subject to Section 3.3, the Purchaser shall indemnify and save the Vendor and the Shareholder harmless for and from:

 

(1)           any loss, damages or deficiencies suffered by the Vendor as a result of any breach of representation, warranty or covenant on the part of the Purchaser contained in this Agreement or in any certificate or document delivered pursuant to or contemplated by this Agreement; and

 

(2)           all claims, demands, costs and expenses, including legal fees, in respect of the foregoing.

 

7.3           Notice of Claim

 

A Party entitled to and seeking indemnification pursuant to the terms of this Agreement (the “Indemnified Party”) shall promptly give written notice to the Party or Parties, as applicable, responsible for indemnifying the Indemnified Party (the “Indemnifying Party”) of any claim for indemnification pursuant to Sections 7.1 or 7.2 (a “Claim”, which term shall include more than one Claim).  Such notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a “Third Party Claim”) or whether the Claim does not so arise (a “Direct Claim”), and shall also specify with reasonable particularity (to the extent that the information is available):

 

(1)           the factual basis for the Claim; and

 

  

29

  

 

(2)           the amount of the Claim, or, if any amount is not then determinable, an approximate and reasonable estimate of the likely amount of the Claim.

 

7.4           Procedure for Indemnification

 

(1)           Direct Claims  With respect to Direct Claims, following receipt of notice from the Indemnified Party of a Claim, the Indemnifying Party shall have 30 days to make such investigation of the Claim as the Indemnifying Party considers necessary or desirable.  For the purpose of such investigation, the Indemnified Party shall make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate the Claim.  If the Indemnified Party and the Indemnifying Party agree at or prior to the expiration of such 30 day period (or any mutually agreed upon extension thereof) to the validity and amount of such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the full agreed upon amount of the Claim.

 

If the Indemnified Party and the Indemnifying Party do not agree within such period (or any mutually agreed upon extension), the Indemnified Party and the Indemnifying Party agree that the dispute shall be submitted to arbitration pursuant to the Arbitration Act, 1991 (Ontario).  Such dispute shall not be made the subject matter of an action in a court by either the Indemnified Party or the Indemnifying Party unless the dispute has first been submitted to arbitration and finally determined pursuant to the provisions of the Arbitration Act, 1991 (Ontario). Any such action commenced thereafter shall only be for judgment in accordance with the decision of the arbitrators and the costs incidental to the action. In any such action the decision of the arbitrators shall be conclusively deemed to determine the rights and liabilities as between the Parties to the arbitration in respect of the matter in dispute.

 

(2)           Third Party Claims  With respect to any Third Party Claim, the Indemnifying Party shall have the right, at its own expense, to participate in or assume control of the negotiation, settlement or defence of such Third Party Claim and, in such event, the Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified Party’s out-of-pocket expenses incurred as a result of such participation or assumption. If the Indemnifying Party elects to assume such control, the Indemnified Party shall cooperate with the Indemnifying Party, shall have the right to participate in the negotiation, settlement or defence of such Third Party Claim at its own expense and shall have the right to disagree on reasonable grounds with the selection and retention of counsel, in which case counsel satisfactory to the Indemnifying Party and the Indemnified Party shall be retained by the Indemnifying Party. If the Indemnifying Party, having elected to assume such control, thereafter fails to defend any such Third Party Claim within a reasonable time, the Indemnified Party shall be entitled to assume such control and the Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect to such Third Party Claim.

 

7.5           General Indemnification Rules

 

The obligations of the Indemnifying Party to indemnify the Indemnified Party in respect of Claims shall also be subject to the following:

 

  

30

  

 

(1)           Any Claim arising as a result of a breach of a representation or warranty shall be made not later than the date on which, pursuant to Sections 3.3, such representation and warranty terminated;

 

(2)           If any Third Party Claim is of a nature such that the Indemnified Party is required by applicable law to make a payment to any person (a “Third Party”) with respect to such Third Party Claim before the completion of settlement negotiations or related legal proceedings, the Indemnified Party may make such payment and the Indemnifying Party shall, forthwith after demand by the Indemnified Party, reimburse the Indemnified Party for any such payment. If the amount of any liability of the Indemnified Party under the Third Party Claim in respect of which such a payment was made, as finally determined, is less than the amount which was paid by the Indemnifying Party to the Indemnified Party, the Indemnified Party shall, forthwith after receipt of the difference from the Third Party, pay the amount of such difference to the Indemnifying Party;

 

(3)           Except in the circumstance contemplated by Section 7.5(4), and whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of any Third Party Claim, the Indemnified Party shall not negotiate, settle, compromise or pay any Third Party Claim except with the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld);

 

(4)           The Indemnified Party shall not permit any right of appeal in respect of any Third Party Claim to terminate without giving the Indemnifying Party notice and an opportunity to contest such Third Party Claim;

 

(5)           The Indemnified Party and the Indemnifying Party shall cooperate fully with each other with respect to Third Party Claims and shall keep each other fully advised with respect thereto (including supplying copies of all relevant documentation promptly as it becomes available); and

 

(6)           Notwithstanding Section 7.4(2), the Indemnifying Party shall not settle any Third Party Claim or conduct any related legal or administrative proceeding in a manner which would, in the opinion of the Indemnified Party, acting reasonably, have a material adverse impact on the Indemnified Party.

 

(7)           The provisions of this Article 7 shall constitute the sole remedy available to a Party against another Party with respect to any and all breaches of any agreement, covenant, representation or warranty made by such other Party in this Agreement.

 

(8)           The amount of any Claim due under this Agreement shall be reduced by:

 

	
  

	
(a)

	
the amount of any insurance or other reimbursement received by the Indemnifying Party in relation to the breach or other event giving rise to the Claim; and

 

	
  

	
(b)

	
the amount expected to be recovered under any counterclaims against third parties in relation to the breach or other event giving rise to the Claim.

 

  

31

  

 

(9)           Notwithstanding any provision contained herein to the contrary:

 

	
  

	
(a)

	
there shall be no liability of an Indemnifying Party for any Claim unless an individual Claim group or series of Claims exceed $10,000, it being understood that such Claims shall accumulate until such time or times as the aggregate of all such Claims exceed $10,000, whereupon the Indemnified Party shall be entitled to claim indemnification hereunder for all such Claims including such accumulated $10,000amount; and

 

	
  

	
(b)

	
the maximum cumulative amount of Claims recoverable from the Indemnified Party under this Agreement shall in no event exceed $700,000.

 

ARTICLE 8

GENERAL

 

8.1           Confidentiality

 

The Purchaser covenants and agrees that, except as otherwise authorized by the Vendor, neither the Purchaser nor its representatives, agents or employees will disclose to third parties, directly or indirectly, any confidential information or confidential data relating to the Vendor, the Corporation or the Business discovered or received by the Purchaser or its representatives, agents or employees as a result of the Vendor and the Corporation making available to the Purchaser and its representatives, agents or employees the information requested by them in connection with the Transactions.

 

8.2           Notices

 

(1)           Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered in person, transmitted by facsimile or similar means of recorded electronic communication or sent by registered mail, charges prepaid, addressed as follows:

 

	
  

	
(a)

	
if to the Vendor or the Shareholder:

 

Rae-Wallace Mining Company

c/o Irwin Lowy LLP

130 Adelaide St. West, Suite 1010

Toronto, Ontario

M5H 3P5

Attention:        Chris Irwin

Fax No.:            416-361-2519

	
  

	
(b)

	
if to the Purchaser:

 

Address: __________________________________________

 

__________________________________________________

 

__________________________________________________

 

  

32

  

 

Attention:        ______________________________

 

Fax No.:            ______________________________

 

 

	
  

	
(c)

	
if to the Corporation:

 

Av Larco 1301- 1203, Miraflores,

Lima, Perú

Attention:        Jenny Egusquiza

Tel/Fax No.:     715-0931  715-0932

 

(2)           Any such notice or other communication shall be deemed to have been given and received on the day on which it was delivered or transmitted (or, if such day is not a Business Day, on the next following Business Day) or, if mailed, on the third Business Day following the date of mailing; provided, however, that if at the time of mailing or within three Business Days thereafter there is or occurs a labour dispute or other event that might reasonably be expected to disrupt the delivery of documents by mail, any notice or other communication hereunder shall be delivered or transmitted by means of recorded electronic communication as described.

 

(3)           Any Party may at any time change its address for service from time to time by giving notice to the other Parties in accordance with this Section 8.2.

 

8.3           Public Announcements and Disclosure

 

The Parties shall consult with each other before issuing any press release or making any other public announcement with respect to this Agreement or the Transactions and, except as required by any applicable Law or stock exchange having jurisdiction, no Party shall issue any such press release or make any such public announcement without the prior written consent of the others, which consent shall not be unreasonably withheld or delayed. Prior to any such press release or public announcement, none of the Parties shall disclose this Agreement or any aspect of the Transactions except to its board of directors, its senior management, its legal, accounting, financial or other professional advisors, any financial institution contacted by it with respect to any financing required in connection with the Transactions and counsel to such institution, or as may be required by any applicable Law or stock exchange having jurisdiction.

 

8.4           Assignment

 

The Purchaser may assign the Agreement or its rights under this Agreement in whole or in part to any other person; provided, however, that any such assignment shall not relieve the Purchaser from any of its obligations hereunder. Neither the Vendor nor the Shareholder may assign its rights under this Agreement.

 

8.5           Best Efforts

 

The Parties acknowledge and agree that, for all purposes of this Agreement, an obligation on the part of any Party to use its “best efforts” to obtain any waiver, Consent or other document shall not require such Party to make any payment to any person for the purpose of procuring the same, other than payments for amounts due and payable to such person, payments for incidental expenses incurred by such person and payments required by any applicable law or regulation.

 

  

33

  

 

8.6           Expenses

 

Unless otherwise provided, each of the Vendor, the Shareholder and the Purchaser shall be responsible for the expenses (including fees and expenses of legal advisers, accountants and other professional advisers) incurred by them, respectively, in connection with the negotiation and settlement of this Agreement and the completion of the Transactions. In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party.

 

8.7           Further Assurances

 

Each of the Parties shall promptly do, make, execute, deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other Parties may reasonably require from time to time after Closing at the expense of the requesting Party for the purpose of giving effect to this Agreement and shall use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

8.8           Entire Agreement

 

This Agreement, including all Schedules, constitutes the entire agreement between the Parties with respect to the subject matter and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter except provided in this Agreement. No reliance is placed by any Party on any warranty, representation, opinion, advice or assertion of fact made by any Party or its directors, officers, employees or agents, to any other Party or its directors, officers, employees or agents, except to the extent that it has been reduced to writing and included in this Agreement.

 

8.9           Waiver, Amendment

 

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the Party to be bound. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

 

8.10           Rights Cumulative

 

The rights and remedies of the Parties are cumulative and not alternative.

 

8.11           Arbitration

 

All disputes arising out of or in connection with this Agreement, including as to its existence, formation, validity or termination, shall be finally settled under the provisions of the Arbitration Act, 1991 (Ontario) by one arbitrator appointed by mutual agreement of the Parties or in accordance with the provisions of the Arbitration Act, 1991 (Ontario).  The seat of arbitration shall be Toronto, Ontario, Canada.  The language of the arbitration shall be English.

 

  

34

  

 

8.12           Counterparts

 

This Agreement may be executed in any number of counterparts, and/or by facsimile or e-mail transmission of PDF files, each of which shall constitute an original and all of which, taken together, shall constitute one and the same instrument. Any Party executing this Agreement by fax or PDF file shall, immediately following a request by any other Party, provide an originally executed counterpart of this Agreement provided, however, that any failure to so provide shall not constitute a breach of this Agreement except to the extent that such electronic execution is not otherwise permitted under the Electronic Commerce Act, 2000 (Ontario).

 

IN WITNESS WHEREOF this Agreement has been executed by the Parties.

 

 

	 	 
INTI HOLDINGS LIMITED

	 
	 	 	 	 
	 	
 
Per: 

	/s/ James Davidson	 
	 	 	 
Authorized Representative

	 
	 	 	 	 
	 	 	 	 
	 	 
RAE WALLACE PERU S.A.C.

	 
	 	 	 	 
	 	 
Per:

	 	 
	 	 	 
Authorized Representative

	 
	 	 	 	 
	 	 	 	 
	 	 
RAE-WALLACE MINING COMPANY

	 
	 	 	 	 
	 	 
Per:

	 	 
	 	 	 
Authorized Representative

	 

 

 

	

SIGNED, SEALED AND DELIVERED 

	

) 

	 	 
	

in the presence of 

	

) 

	 	 
	 	

) 

	 	 
	 	

) 

	 	 
	 	

) 

	 	 
	 	 	

) 

	

/s/ George Cole

	 
	

Witness 

	

)    

	

GEORGE COLE

	 

 

  

35

  

 

Schedule 1.1(hh)

Peruvian Documents

(SUNAT documents to be Provided)

 

  

 

  

 

Schedule 3.1(15)

Financial Statements

(Financial Statements to be Provided)

 

  

 

  

 

Schedule 3.1(28)(32)(33)

Material Contracts, Real and Leased Properties, Authorizations and Mineral Rights

	
  

	
1.

	
Escritura Pública de Transferencia de Concesiones Mineras y Bienes de Geologix (Peru) S.A. a Rae Wallace Perú S.A.C;

	
  

	
2.

	
the Royalty Agreement (as defined and further described above) and the according two percent (2%) net smelter return royalty for precious metals and a one percent (1%) net smelter return royalty for all other minerals from the sale or other disposition of all minerals produced from the properties granted by Geologix in favour of Newmont Peru S.R.L.;

	
  

	
3.

	
the Termination Agreement (as defined and further described above) and the according Pilot Gold NSR;

	
  

	
4.

	
Autorización de Uso y Servidumbre para Uso de Terrenos de la Comunidad Indígena de Ccarhuancho de fecha 12 de Febrero del 2011;

	
  

	
5.

	
Contrato de Arrendamiento del inmueble ubicado en cale los lirios Mz K -24-Urbanización Alpamayo, Ate Vitarte, Lima Perú; and

	
  

	
6.

	
Constancia de Aprobación de Declaracion de Impacto Ambiental Proyecto Toro Blanco de fecha 11 de Julio del 2011.

MINERAL RIGTHS

LISCAY PROYECT

	
No

	
Name

	
Code

	
Area

	
Public Registry Entry

	
1

	
Liscay 1

	
01-05978-07

	
1000 Has.

	
12195849

	
2

	
Liscay 2

	
01-06190-07

	
1000 Has.

	
12195366

	
3

	
Liscay G3

	
01-06191-07

	
1000 Has.

	
12195746

	
4

	
Liscay 4

	
01-06230-07

	
1000 Has.

	
12195717

	
5

	
Liscay 5

	
01-06231-07

	
1000 Has.

	
12195697

	
6

	
Liscay 6

	
01-06431-07

	
1000 Has.

	
12437912

	
7

	
Liscay 7

	
01-06432-07

	
800 Has.

	
12196815

	
8

	
Liscay 8 1000

	
01-00399-08

	
1000 Has.

	
12438282

	
9

	
Liscay 9 1000

	
01-02352-08

	
1000 Has.

	
12437777

	
10

	
Liscay S 1 1000

	
01-00798-08

	
1000 Has.

	
12194178

	
11

	
Liscay S 2 1000

	
01-00800-08

	
1000 Has.

	
12190152

	
12

	
Liscay S 3 1000

	
01-00799-08

	
1000 Has.

	
12190327

 

TORO BLANCO PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public registry Entry

	
1

	
Tambo Nuevo 15

	
01-02803-04

	
900 Has.

	
11048698

CAYHUA PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public Registry Entry

	
1

	
Tambo Nuevo 11

	
01-00443-04

	
400 Has.

	
11028687

LACHOC PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public Registry Entry

	
1

	
Lachoc

	
01-01132-07

	
1000 Has.

	
11111717

	
2

	
Los Osos 2006

	
01-02150-06

	
600 Has.

	
11098035

LAGARTIJA PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public Registry Entry

	
1

	
Lagartija 1

	
01-02097-06

	
1000 Has.

	
12139565

	
2

	
Los Lagartos 1 1000

	
01-01910-08

	
1000 Has.

	
12194143

	
3

	
Los Lagartos 2 1000

	
01-01911-08

	
1000 Has.

	
12540787

MIRKO PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public Registry Entry

	
1

	
Hermosita

	
01-01353-07

	
1000 Has.

	
11111698

	
2

	
Hermosita 500

	
01-01484-07

	
500 Has.

	
11111712

	
3

	
Hermosita 1000

	
01-01485-07

	
1000 Has.

	
11111700

SAN FELIPE PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public Registry Entry

	
1

	
Tambo Nuevo 4

	
01-00094-04

	
400 Has.

	
11028676

SURA PROJECT

	
No

	
Name

	
Code

	
Area

	
 Public Registry Entry

	
1

	
Tambo Nuevo 5

	
01-00106-04

	
1000 Has.

	
11028837

	
2

	
Tambo Nuevo 6

	
01-00107-04

	
500 Has.

	
11028675

	
3

	
Tambo Nuevo 13

	
01-00920-04

	
400 Has.

	
11111690

 

  

 

  

 

Schedule 3.1(29)

Bank Accounts and Powers of Attorney

Bank Accounts:

	
  

	
1.

	
Banco de Credito del Peruú BCP  Soles  No 011-0387-0100019405-88; and

	
  

	
2.

	
Banco de Credito del Peruú BCP   US$  No 0011-0387-0100019391-80.JFM 13 Exhibit 10-1

Exhibit 10-1

The Procter & Gamble Stock & Incentive Plan (as amended on August 14, 2007)

________________________________________________________________________________________________
The Procter & Gamble Company
Executive Offices
1 Procter & Gamble Plaza, Cincinnati, Ohio 45202-3315

August 14, 2007

To:    Participants in The Procter & Gamble 2001 Stock and Incentive Compensation Plan

This document provides a copy of The Procter & Gamble 2001 Stock and Incentive Compensation Plan followed by important Additional Information.  Please save this with your stock option materials.

Very truly yours,

James J. Johnson
Secretary

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

  R e w a r d s   o f   L e a d e r s h i p

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN
(as adjusted for stock split on May 21, 2004 and amended on August 14, 2007)

ARTICLE A -- Purpose.

The purposes of The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the "Plan") are to strengthen the alignment of interests between those employees of The Procter & Gamble Company (the "Company") and its subsidiaries who are largely responsible for the success of the business  (the “Participants”) and the Company's shareholders through ownership behavior and the increased ownership of shares of the Company's common stock (the “Common Stock”), and to encourage the Participants to remain in the employ of the Company and its subsidiaries.  This will be accomplished through the granting of options to purchase shares of Common Stock, the granting of performance related awards, the payment of a portion of the Participants' remuneration in shares of Common Stock, the granting of deferred awards related to the increase in the price of Common Stock, and the granting of restricted stock units (“RSUs”) or other awards that are related to the price of Common Stock.

ARTICLE B -- Administration.

1.    The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"), or such other committee as may be designated by the Board.  The Committee shall consist of not fewer than three (3) members of the Board who are "Non-Employee Directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor rule or definition adopted by the Securities and Exchange Commission, to be appointed by the Board from time to time and to serve at the discretion of the Board.  The Committee may establish such regulations, provisions, and procedures within the terms of the Plan as, in its opinion, may be advisable for the administration and operation of the Plan, and may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration and operation of the Plan and may grant authority to such persons to execute documents on behalf of the Committee.  The Committee shall report to the Board on the administration of the Plan not less than once each year.

2.    Subject to the express provisions of the Plan, the Committee shall have authority: to grant nonstatutory and incentive stock options; to grant stock appreciation rights either freestanding or in tandem with simultaneously granted stock options; to grant Performance Awards (as defined in Article J); to award a portion of a Participant's remuneration in shares of Common Stock subject to such conditions or restrictions, if any, as the Committee may determine; to award RSUs or other awards that are related to the price of Common Stock; to determine all the terms and provisions of the respective stock option, stock appreciation right, stock award, RSU, or other award agreements including setting the dates when each stock option or stock appreciation right or part thereof may be exercised and determining the conditions and restrictions, if any, of any shares of Common Stock acquired through the exercise of any stock option; to provide for special terms for any stock options, stock appreciation rights, stock awards, RSUs or other awards granted to Participants who are foreign nationals or who are employed by the Company or any of its subsidiaries outside of the United States of America in order to fairly accommodate for differences in local law, tax policy or custom and to approve such supplements to or amendments, restatements or alternative versions of the Plan as the Committee may consider necessary or appropriate for such purposes (without affecting the terms of the Plan for any other purpose); and to make all other determinations it deems necessary or advisable for administering the Plan.  In addition, at the time of grant the Committee shall have the further authority to:

(a)    waive the provisions of Article F, Paragraph 1(a);

(b)    waive the provisions of Article F, Paragraph 1(b);

(c)    waive the provisions of Article G, Paragraph 4(a), 4(b) and 4(c); and

(d)    impose conditions in lieu of those set forth in Article G, Paragraphs 4 through 7, for nonstatutory stock options, stock appreciation rights, stock awards, RSUs, or Performance Awards which do not increase or extend the rights of the Participant.

ARTICLE C -- Participation.

The Committee shall select as Participants those employees of the Company and its subsidiaries who, in the opinion of the Committee, have demonstrated a capacity for contributing in a substantial manner to the success of such companies.

ARTICLE D -- Limitation on Number of Shares Available Under the Plan.

1.    Unless otherwise authorized by the shareholders and subject to Paragraph 2 of this Article D, the maximum aggregate number of shares available for award under the Plan shall be one hundred ninety million (190,000,000) shares.  Any of the authorized shares may be used for any of the types of awards described in the Plan, except that no more than fifteen percent (15%) of the authorized shares may be awarded as restricted or unrestricted stock.

2.    In addition to the shares authorized for award by Paragraph 1 of this Article, the following shares may be awarded under the Plan:

(a)    shares that were authorized to be awarded under The Procter & Gamble 1992 Stock Plan (the “1992 Plan”), but that were not awarded under the 1992 Plan;

(b)    shares awarded under the Plan or the 1992 Plan that are subsequently forfeited in accordance with the Plan or the 1992 Plan, respectively;

(c)    shares tendered by a Participant in payment of all or part of the exercise price of a stock option awarded under the Plan or the 1992 Plan;

(d)    shares tendered by or withheld from a Participant in satisfaction of withholding tax obligations with respect to a stock option awarded under the Plan or the 1992 Plan.

ARTICLE E -- Shares Subject to Use Under the Plan.

1.    The shares to be delivered by the Company upon exercise of stock options or stock appreciation rights shall be determined by the Board and may consist, in whole or in part, of authorized but unissued shares or treasury shares.  In the case of redemption of stock appreciation rights by one of the Company's subsidiaries, such shares shall be shares acquired by that subsidiary.

2.    For purposes of the Plan, restricted or unrestricted stock awarded or issued following redemption of RSUs under the terms of the Plan shall be authorized but unissued shares, treasury shares, or shares acquired in the open market by the Company or a subsidiary, as determined by the Board.

ARTICLE F -- Stock Options and Stock Appreciation Rights.

1.    In addition to such other conditions as may be established by the Committee, in consideration of the granting of stock options or stock appreciation rights under the terms of the Plan, each Participant agrees as follows:

(a)    The right to exercise any stock option or stock appreciation right shall be conditional upon certification by the Participant at time of exercise that the Participant intends to remain in the employ of the Company or one of its subsidiaries for at least one (1) year following the date of the exercise of the 

stock option or stock appreciation right (provided that termination of employment due to Retirement or Special Separation shall not constitute a breach of such certification), and,

(b)    In order to better protect the goodwill of the Company and its subsidiaries and to prevent the disclosure of the Company's or its subsidiaries' trade secrets and confidential information and thereby help insure the long-term success of the business, the Participant, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of three (3) years following the date of the Participant's termination of employment with the Company, in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of the Company or its subsidiaries (including both existing products as well as products known to the Participant, as a consequence of the Participant's employment with the Company or one of its subsidiaries, to be in development):

		
	(1)
	with respect to which the Participant's work has been directly concerned at any time during the two (2) years preceding termination of employment with the Company or one of its subsidiaries or

		
	(2)
	with respect to which during that period of time the Participant, as a consequence of the Participant's job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company or its subsidiaries.

For purposes of this paragraph, it shall be conclusively presumed that Participants have knowledge of information they were directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.

(c)    The provisions of this Article are not in lieu of, but are in addition to the continuing obligation of the Participant (which Participant hereby acknowledges) to not use or disclose the Company's or its subsidiaries' trade secrets and confidential information known to the Participant until any particular trade secret or confidential information become generally known (through no fault of the Participant), whereupon the restriction on use and disclosure shall cease as to that item.  Information regarding products in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company or one of its subsidiaries is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented.  As used in this Article, "generally known" means known throughout the domestic U. S. industry or, in the case of Participants who have job responsibilities outside of the United States, the appropriate foreign country or countries' industry. As used in this Article, "trade secrets and other confidential information" also includes personnel knowledge about a manager, or managers, of the Company or its subsidiaries gained in the course of Participant's employment with the Company or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords the Participant a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of the Company or any subsidiary to terminate his or her relationship with the Company or that subsidiary.   

(d)    By acceptance of any offered stock option or stock appreciation rights granted under the terms of the Plan, the Participant acknowledges that if the Participant were, without authority, to use or disclose the Company's or any of its subsidiaries' trade secrets or confidential information or threaten to do so, the Company or one of its subsidiaries would be entitled to injunctive and other appropriate relief to prevent the Participant from doing so.  The Participant acknowledges that the harm caused to the Company by the breach or anticipated breach of this Article is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue.  The 

Participant consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company or one of its subsidiaries, be entered on consent and enforced by any court having jurisdiction over the Participant, without prejudice to any rights either party may have to appeal from the proceedings which resulted in any grant of such relief.

(e)    If any of the provisions contained in this Article F shall for any reason, whether by application of existing law or law which may develop after the Participant's acceptance of an offer of the granting of stock appreciation rights or stock options, be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the Participant agrees to join the Company or any of its subsidiaries in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then applicable law.  If any one or more of the terms, provisions, covenants, or restrictions of this Article shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, and restrictions of this Article shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

2.    The fact that a Participant has been granted a stock option or a stock appreciation right under the Plan shall not limit the right of the employer to terminate the Participant's employment at any time.  

Because a main purpose of the Plan is to strengthen the alignment of interests between employees of the Company (including all subsidiaries) and its shareholders to ensure the continued success of the Company, the Committee is authorized to suspend or terminate any outstanding stock option or stock appreciation right of a Participant if the Committee determines the Participant has acted significantly contrary to the best interests of the Company or its subsidiaries.  For purposes of this paragraph, an action taken “significantly contrary to the best interests of the Company or its subsidiaries” includes without limitation any action taken or threatened by the Participant that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of the Company or any subsidiary.  This paragraph is in addition to any remedy the Company or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

3.    The maximum number of shares with respect to which stock options or stock appreciation rights may be granted to any Participant in any calendar year shall not exceed 2,000,000 shares.

4.    The aggregate fair market value (determined at the time when the incentive stock option is exercisable for the first time by a Participant during any calendar year) of the shares for which any Participant may be granted incentive stock options under the Plan and all other stock option plans of the Company and its subsidiaries in any calendar year shall not exceed $100,000 (or such other amount as reflected in the limits imposed by Section 422(d) of the Internal Revenue Code of 1986, as it may be amended from time to time).

5.    If the Committee grants incentive stock options, all such stock options shall contain such provisions as permit them to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time.

6.    With respect to stock options granted in tandem with stock appreciation rights, the exercise of either such stock options or such stock appreciation rights will result in the simultaneous cancellation of the same number of tandem stock appreciation rights or stock options, as the case may be.

7.    The exercise price for all stock options and stock appreciation rights shall be established by the Committee at the time of their grant and shall be not less than one hundred percent (100%) of the fair market value of the Common Stock on the date of grant.

8.    Unless otherwise authorized by the shareholders of the Company, neither the Board nor the Committee shall authorize the amendment of any outstanding stock option or stock appreciation right to reduce the exercise price.

9.    No stock option or stock appreciation right shall be cancelled and replaced with awards having a lower exercise price without the prior approval of the shareholders of the Company.  This Article F, Paragraph 9 is intended to prohibit the repricing of “underwater” stock options and stock appreciation rights and shall not be construed to prohibit the adjustments permitted under Article K of the Plan.

10.    The Committee may require any Participant to accept any stock options or stock appreciation rights by means of electronic signature.

ARTICLE G -- Exercise of Stock Options and Stock Appreciation Rights.

1.    All stock options and stock appreciation rights granted hereunder shall have a maximum life of no more than ten (10) years from the date of grant.

2.    No stock options or stock appreciation rights shall be exercisable within one (1) year from their date of grant, except in the case of the death of the Participant.

3.    Unless a transfer has been duly authorized by the Committee pursuant to Article G, Paragraph 6 of the Plan, during the lifetime of the Participant, stock options and stock appreciation rights may be exercised only by the Participant personally, or, in the event of the legal incompetence of the Participant, by the Participant's duly appointed legal guardian.

4.    In the event that a Participant ceases to be an employee of the Company or any of its subsidiaries while holding an unexercised stock option or stock appreciation right:

(a)    Any unexercisable portions thereof are then void, except in the case of: (1) death of the Participant; (2) Retirement or Special Separation that occurs more than six months from the date the options were granted; or (3) any option as to which the Committee has waived, at the time of grant, the provisions of this Article G, Paragraph 4(a).

		
	(b)
	Any exercisable portions thereof are then void, except in the case of:  (1) death of the Participant; (2) Retirement or Special Separation; or (3) any option as to which the Committee has waived, at the time of grant, the provisions of this Article G, Paragraph 4(b).

		
	(c)
	In the case of a Special Separation which occurs prior to October 2, 2007, any stock option or stock appreciation right must be exercised within the time specified in the original grant or five (5) years from the date of Special Separation, whichever is shorter.  For a Special Separation which occurs on or after October 2, 2007, any stock option or stock appreciation right must be exercised within the time specified in the original grant.

5.    In the case of the death of a Participant, the persons to whom the stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising remaining stock options, stock appreciation rights or parts thereof, whether or not exercisable on the date of death of such Participant, at any time prior to the expiration date of the stock options or stock appreciation rights.
 
6.    Stock options and stock appreciation rights are not transferable other than by will or by the laws of descent and distribution.  For the purpose of exercising stock options or stock appreciation rights after the death of the Participant, the duly appointed executors and administrators of the estate of the deceased Participant shall have the same rights with respect to the stock options and stock appreciation rights as legatees or distributees would have after distribution to them from the Participant's estate.  Notwithstanding the foregoing, the Committee may authorize the transfer of stock options and stock appreciation rights upon such terms and conditions as the Committee may require.  Such transfer shall become effective only upon the Committee's complete satisfaction that the proposed transferee has strictly complied with such terms and conditions, and both the original Participant and the transferee shall be subject to the same terms and conditions hereunder as the original Participant.

7.    Upon the exercise of stock appreciation rights, the Participant shall be entitled to receive a redemption differential for each such stock appreciation right which shall be the difference between the then fair market value of one share of Common Stock and the exercise price of one stock appreciation right then being exercised.  In the case of the redemption of stock appreciation rights by a subsidiary of the Company not located in the United States, the redemption differential shall be calculated in United States dollars and converted to the appropriate local currency on the exercise date.  As determined by the Committee, the redemption differential may be paid in cash, Common Stock to be valued at its fair market value on the date of exercise, any other mode of payment deemed appropriate by the Committee or any combination thereof.

8.    Time spent on leave of absence shall be considered as employment for the purposes of the Plan.  Leave of absence means any period of time away from work granted to any employee by his or her employer because of illness, injury, or other reasons satisfactory to the employer.

9.    The Company reserves the right from time to time to suspend the exercise of any stock option or stock appreciation right where such suspension is deemed by the Company as necessary or appropriate for corporate purposes.  No such suspension shall extend the life of the stock option or stock appreciation right beyond its expiration date, and in no event will there be a suspension in the five (5) calendar days immediately preceding the expiration date.

10.    The Committee may require any Participant to exercise any stock options or stock appreciation rights by means of electronic signature.

ARTICLE H -- Payment for Stock Options and Tax Withholding.

Upon the exercise of a stock option, payment in full of the exercise price shall be made by the Participant.  As determined by the Committee, the stock option exercise price may be paid by the Participant either in cash, shares of Common Stock valued at their fair market value on the date of exercise, a combination thereof, or such other method as determined by the Committee.  In addition to payment of the exercise price, the Committee may authorize the Company to charge a reasonable administrative fee for the exercise of any stock option.  Furthermore, to the extent the Company is required to withhold federal, state, local or foreign taxes in connection with any Participant's stock option exercise, the Committee may require the Participant to make such arrangements as the Company may deem necessary for the payment of such taxes required to be withheld (including, without limitation, relinquishment of a portion of such stock options or relinquishment of a portion of the proceeds received by the Participant in a simultaneous exercise and sale of stock during a “cashless” exercise).  In no event, however, shall the Committee be permitted to require payment from a Participant in excess of the maximum required tax withholding rates.

ARTICLE I -- Grant of Unrestricted Stock, Restricted Stock or RSUs.

The Committee may grant Common Stock or RSUs to Participants under the Plan subject to such conditions or restrictions, if any, as the Committee may determine.  To the extent the Company is required to withhold federal, state, local or foreign taxes in connection with the lapse of restrictions on any Participant's shares of Common Stock, the Committee may require the Participant to make such arrangements as the Company may deem necessary for the payment of such taxes required to be withheld (including, without limitation, relinquishment of a portion of such shares of Common Stock).  In no event, however, shall the Committee be permitted to require payment from a Participant in excess of the maximum required tax withholding rates.

ARTICLE J -- Performance Related Awards.

1.    The Committee, in its discretion, may establish performance goals for selected Participants and authorize the granting of cash, stock options, stock appreciation rights, Common Stock, RSUs or other awards that 

are related to the price of Common Stock, other property, or any combination thereof (“Performance Awards”) to such Participants upon achievement of such established performance goals during a specified time period (the “Performance Period”).  The Committee, in its discretion, shall determine the Participants eligible for Performance Awards, the performance goals to be achieved during each Performance Period, the amount of any Performance Awards to be paid, and the method of payment for any Performance Awards.  Performance Awards may be granted either alone or in addition to other grants made under the Plan.

2.    Notwithstanding the foregoing, any Performance Awards granted under Article J, Paragraph 1 to any Participant subject to the restrictions set forth in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) shall comply with all of the following requirements:

(a)    Each grant shall specify the specific performance objectives (the “Performance Objectives”) which, if achieved, will result in payment or early payment of the Performance Award.  The Performance Objectives may be described in terms of Company-wide objectives that are related to the individual Participant or objectives that are related to a subsidiary, division, department, region, function or business unit of the Company in which the Participant is employed, and may consist of one or more or any combination of the following criteria:  stock price, market share, sales revenue, cash flow, earnings per share, return on equity, total shareholder return, gross margin, stock price growth measures, operating total shareholder return, net earnings or net income (before or after taxes), return on assets or capital, earnings (before or after interest, taxes, depreciation and/or amortization), operating margin, acquisition integration metrics, economic value added, and/or costs.  The Performance Objectives may be made relative to the performance of other corporations.  The Committee, in its discretion, may change or modify these criteria, however, at all times the criterion must be valid performance criterion for purposes of Section 162(m) of the Code.  The Committee may not change the criteria or Performance Objectives for any Performance Period that has already been approved by the Committee.  The Committee may cancel a Performance Period or replace a Performance Period with a new Performance Period, provided that any such cancellation or replacement shall not cause the Performance Award to fail to meet the requirements of Section 162(m) of the Code.

(b)    Each grant shall specify the minimum level of achievement required by the Participant relative to the Performance Objectives to qualify for a Performance Award.  In doing so, the grant shall establish a formula for determining the percentage of the Performance Award to be awarded if performance is at or above the minimum level, but falls short of full achievement of the specified Performance Objectives.  Each grant may also establish a formula for determining an additional award above and beyond the Performance Award to be granted to the Participant if performance is at or above the specified Performance Objectives.  Such additional award shall also be established as a percentage of the Performance Award.  The Committee may decrease a Performance Award as determined by the Performance Objectives, but in no case may the Committee increase any Performance Award as determined by the Performance Objectives.

(c)    The maximum Performance Award that may be granted to any Participant for any one-year Performance Period shall not exceed $20,000,000 or 800,000 shares of Common Stock (the “Annual Maximum”).  The maximum Performance Award that may be granted to any Participant for a Performance Period greater than one year shall not exceed the Annual Maximum multiplied by the number of full years in the Performance Period.

ARTICLE K -- Adjustments.

In the event of any future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off or other change affecting the corporate structure, capitalization or Common Stock of the Company occuring after the date of approval of the Plan by the Company's shareholders, (i) the amount of shares authorized to be issued under the Plan and (ii) the number of shares and/or the exercise prices covered by outstanding stock options, stock appreciation rights or RSUs shall be adjusted appropriately and equitably to prevent dilution or enlargement of rights under the Plan.  Following any such change, the term "Common Stock" shall be deemed to refer to such class of shares or other securities as may be applicable.

ARTICLE L -- Additional Provisions and Definitions.

1.    The Board may, at any time, repeal the Plan or may amend it except that no such amendment may amend this paragraph, increase the total aggregate number of shares subject to the Plan, reduce the price at which stock options or stock appreciation rights may be granted or exercised, alter the class of employees eligible to receive stock options, or increase the percentage of shares authorized to be transferred as restricted or unrestricted stock.  Participants and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding stock options or stock appreciation rights are materially affected adversely, notice thereof shall be given to the Participants holding such stock options and stock appreciation rights and such amendments shall not be applicable without such Participant's written consent.  If the Plan is repealed in its entirety, all theretofore granted unexercised stock options or stock appreciation rights shall continue to be exercisable in accordance with their terms and shares subject to conditions or restrictions granted pursuant to the Plan shall continue to be subject to such conditions or restrictions.

2.    In the case of a Participant who is an employee of a subsidiary of the Company, performance under the Plan, including the granting of shares of the Company, may be by the subsidiary.  Nothing in the Plan shall affect the right of the Company or any subsidiary to terminate the employment of any employee with or without cause.  None of the Participants, either individually or as a group, and no beneficiary, transferee or other person claiming under or through any Participant, shall have any right, title, or interest in any shares of the Company purchased or reserved for the purpose of the Plan except as to such shares, if any, as shall have been granted or transferred to him or her.  Nothing in the Plan shall preclude the awarding or granting of shares of the Company to employees under any other plan or arrangement now or hereafter in effect.

3.    "Subsidiary" means any company in which more than fifty percent (50%) of the total combined voting power of all classes of stock is owned, directly or indirectly, by the Company or, if the company does not issue stock, more than fifty percent (50%) of the total combined ownership interest is owned, directly or indirectly, by the Company.  In addition, the Board may designate for participation in the Plan as a "subsidiary," except for the granting of incentive stock options, those additional companies affiliated with the Company in which the Company's direct or indirect stock ownership is fifty percent (50%) or less of the total combined voting power of all classes of such company's stock, or, if the company does not issue stock, the Company's direct or indirect ownership is fifty percent (50%) or less of the company's total combined ownership interest.

4.    Notwithstanding anything to the contrary in the Plan, stock options and stock appreciation rights granted hereunder shall vest immediately and any conditions or restrictions on Common Stock shall lapse upon a “Change in Control.”  A “Change in Control” shall mean the occurrence of any of the following:

		
	(a)
	An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding shares or the combined voting power of the Company's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Paragraph 4(a), shares or Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control.  A "Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a "Related Entity"), (ii) the Company or any Related Entity, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined);

		
	(b)
	The individuals who, as of July 10, 2001 are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least half of the members of the Board; or, following a 

Merger (as hereinafter defined) which results in a Parent Corporation (as hereinafter defined), the board of directors of the ultimate Parent Corporation; provided, however, that if the election, or nomination for election by the Company's common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or 
		
	(c)
	The consummation of:

		
	(i)
	A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued (a “Merger”), unless such Merger is a "Non-Control Transaction."  A "Non-Control Transaction" shall mean a Merger where:

		
	(A)
	the stockholders of the Company, immediately before such Merger own directly or indirectly immediately following such Merger at least fifty percent (50%) of the combined voting power of the outstanding voting securities of (x) the corporation resulting from such Merger (the "Surviving Corporation") if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly by another Person (a "Parent Corporation"), or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation; 

		
	(B)
	the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Merger constitute at least half of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation; and

		
	(C)
	no Person other than (1) the Company, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such Merger was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or shares, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Corporation if there is no Parent Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation;

		
	(ii)
	A complete liquidation or dissolution of the Company; or

		
	(iii)
	The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Related Entity or under conditions that would constitute a Non-Control Transaction with the disposition of assets being regarded as a Merger for this purpose or the distribution to the Company's stockholders of the stock of a Related Entity or any other assets).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding shares or Voting Securities as a result of the acquisition of shares or Voting Securities by the Company 

which, by reducing the number of shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional shares or Voting Securities which increases the percentage of the then outstanding shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

5.    The term “Special Separation” shall mean any termination of employment that occurs prior to the time a Participant is eligible to retire, except a termination for cause or a voluntary resignation that is not initiated or encouraged by the Company.

6.    The term “Retirement” shall mean:  (a) retirement in accordance with the provisions of any appropriate retirement plan of the Company or any of its subsidiaries; or (b) termination of employment under the permanent disability provision of any retirement plan of the Company or any of its subsidiaries.

ARTICLE M -- Consent.

Every Participant who receives a stock option, stock appreciation right, RSU, or grant of shares pursuant to the Plan shall be bound by the terms and provisions of the Plan and of the stock option, stock appreciation right, RSU, or grant of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, RSU, or grant of shares pursuant to the Plan shall constitute a binding agreement between the Participant and the Company and its subsidiaries and any successors in interest to any of them.  Every Person who receives a stock option, stock appreciation right, RSU, or grant of shares from a Participant pursuant to the Plan shall, in addition to such terms and conditions as the Committee may require upon such grant, be bound by the terms and provisions of the Plan and of the stock option, stock appreciation right, RSU, or grant of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, RSU, or grant of shares by such Person shall constitute a binding agreement between such Person and the Company and its subsidiaries and any successors in interest to any of them.   The Plan shall be governed by and construed in accordance with the laws of the State of Ohio, United States of America.

ARTICLE N - Purchase of Shares or Stock Options.

The Committee may authorize any Participant to convert cash compensation otherwise payable to such Participant into stock options or shares of Common Stock under the Plan upon such terms and conditions as the Committee, in its discretion, shall determine.  Notwithstanding the foregoing, in any such conversion the shares of Common Stock shall be valued at no less than one hundred percent (100%) of their fair market value.
 
ARTICLE O -- Duration of Plan.

The Plan will terminate on July 10, 2011 unless a different termination date is fixed by the shareholders or by action of the Board of Directors, but no such termination shall affect the prior rights under the Plan of the Company (or any subsidiary) or of anyone to whom stock options or stock appreciation rights were granted prior thereto or to whom shares or RSUs have been transferred prior to such termination.
ADDITIONAL INFORMATION

		
	1.
	Shares Awarded as a Portion of Remuneration

Any shares of Common Stock of the Company awarded as a portion of a participant's remuneration shall be valued at not less than one hundred percent (100%) of the fair market value of the Company's Common Stock on the date of the award.  These shares may be subject to such conditions or restrictions as the Committee may determine, including a requirement that the participant remain in the employ of the Company or one of its subsidiaries for a set period of time, or until retirement.  Failure to abide by any applicable restriction will result in forfeiture of the shares.

2.    U.S. Tax Effects

Incentive Stock Options

With regard to tax effects which may accrue to the optionee, counsel advises that if the optionee has continuously been an employee from the time an option has been granted until at least three months before it is exercised, under existing law no taxable income results to the optionee from the exercise of an incentive stock option at the time of exercise.  However, the spread at exercise is an "adjustment" item for alternative minimum tax purposes.

Any gain realized on the sale or other disposition of stock acquired on exercise of an incentive stock option is considered as long-term capital gain for tax purposes if the stock has been held more than two years after the date the option was granted and more than one year after the date of exercise of the option.  If the stock is disposed of within one year after exercise, the lesser of any gain on such disposition or the spread at exercise (i.e., the excess of the fair market value of the stock on the date of exercise over the option price) is treated as ordinary income, and any appreciation after the date of exercise is considered long-term or short-term capital gain to the optionee depending on the holding period prior to sale.  However, the spread at exercise (even if greater than the gain on the disposition) is treated as ordinary income if the disposition is one on which a loss, if sustained, is not recognized--e.g., a gift, a "wash" sale or a sale to a related party.  The amount of ordinary income recognized by the optionee is treated as a tax deductible expense to the Company.  No other amount relative to an incentive stock option is a tax deductible expense to the Company.

Nonstatutory Stock Options

With regard to tax effects which may accrue to the optionee, counsel advises that under existing tax law gain taxable as ordinary income to the optionee is deemed to be realized at the date of exercise of the option, the gain on each share being the difference between the market price on the date of exercise and the option price.  This amount is treated as a tax deductible expense to the Company at the time of the exercise of the option.  Any appreciation in the value of the stock after the date of exercise is considered a long-term or short-term capital gain to the optionee depending on whether or not the stock was held for the appropriate holding period prior to sale.

Stock Appreciation Rights

With regard to tax effects which may accrue to the recipient, counsel advises that "United States persons," as defined in the Internal Revenue Code of 1986 (the "I.R.C."), must recognize ordinary income as of the date of exercise equal to the amount paid to the recipient, i.e., the difference between the grant price and the value of the shares on the date of exercise.  

Shares Awarded as a Portion of Remuneration

With regard to tax effects which may accrue to the recipient, counsel advises that "United States persons" as defined in the Internal Revenue Code of 1986 (the "I.R.C."), must recognize ordinary income in the first taxable year in which the recipient's rights to the stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. Recipients who are "United States persons" may also elect to include the income in their tax returns for the taxable year in which they receive the shares by filing an election to do so with the appropriate office of the Internal Revenue Service within 30 days of the date the shares are transferred to them.

The amount includable in income is the fair market value of the shares as of the day the shares are transferable or not subject to a substantial risk of forfeiture, whichever is applicable; if the recipient has elected to include the income in the year in which the shares are received, the amount of income includable is the fair market value of the shares at the time of transfer.

For non-United States persons, the time when income is realized, its measurement and its taxation, will depend on the laws of the particular countries in which the recipients are residents and/or citizens at the time of transfer or when the shares are first transferable and not subject to a substantial risk of forfeiture, as the case may be.  "United States persons" who receive shares awarded as a portion of remuneration may also have tax consequences with respect to the receipt of shares or the expiration of restrictions or substantial risk of forfeiture on such shares under the laws of the particular country other than the United States of which such person is a resident or citizen.

Notwithstanding the above advice received by the Company, it is each individual recipient's responsibility to check with his or her personal tax adviser as to the tax effects and proper handling of stock options, stock appreciation rights, restricted stock units and Common Stock acquired.  The above advice relates specifically to the U.S. consequences of stock options, stock appreciation rights and Common Stock acquired, including the U.S. consequences to "United States persons" whether or not resident in the U.S.  In addition to U.S. tax consequences, for all persons who are not U.S. residents, the time when income, if any, is realized, the measurement of such income and its taxation will also depend on the laws of the particular country other than the U.S. of which such persons are resident and/or citizens at the time of grant or the time of exercise, as the case may be.

The Plan is not subject to the qualification requirements of Section 401(a) of the I.R.C.

3.    Employee Retirement Income Security Act of 1974

The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended.

4.    Incorporation of Certain Documents by Reference

The following documents filed by the Company with the Securities and Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated into this document by reference:

		
	1.
	The Company's Annual Report on Form 10-K for the most recent fiscal year ended June 30;

		
	2.
	The Company's Quarterly Report on Form 10-Q for the most recent quarter(s); and

		
	3.
	All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold.

The Company will provide without charge to each participant in the Plan, upon oral or written request, a copy of any or all of these documents other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents.  In addition, the Company will provide without charge to such participants a copy of the Company's most recent annual report to shareholders, proxy statement, and other communications distributed generally to security holders of the Company.  Requests for such copies should be directed to Mr. Jay A. Ernst, Manager, Shareholder Services, The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio  45201, (513) 983-3413.

5.    Additional Information

Additional information about the Plan and its administrators may be obtained from Mr. E.J. Wunsch, Assistant Secretary, The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4370.

2001 stock plan.doc

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