Document:

Exhibit 10.1

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT is made effective as of the 12th day of August, 2004.

	

AMONG:

	

 
	

CARLO CIVELLI, of Gerbergasse 5, Postfach 7427,

8023, Zurich, Switzerland

("Civelli")

	
 
	

 
	

OF THE FIRST PART

	

AND:

	

 
	

BRUNO MOSIMANN, of Albisriederstrasse 164,

Postfach, 8040, Zurich, Switzerland

("Mosimann")

	
 
	

 
	

OF THE SECOND PART

	

AND:

	

 
	

TSI MEDICAL CORP.,

a Nevada corporation with its registered office at 3273

East Warm Springs Road, Las Vegas, NV 89120

("TSI Medical")

	
 
	

 
	

OF THE THIRD PART

	

AND:

	

 
	

RELAY MINES LIMITED,

a Nevada corporation with its principal office at 1040

West Georgia Street, Suite 1160, Vancouver, British

Columbia, Canada V6E 4H1

("Relay Mines")

	
 
	

 
	

OF THE FOURTH PART

	

AND:

	

 
	

TSI MED ACQUISITION CORP.,

a Nevada corporation with its registered office at 3273

East Warm Springs Road, Las Vegas, NV 89120

("Relay Sub")

	
 
	

 
	

OF THE FIFTH PART

WHEREAS:

A. Civelli and Mosimann (together, the "Principal Shareholders') are the controlling shareholders of Relay Mines;

B. The Boards of Directors of each of Relay Mines, Relay Sub and TSI Medical deem it desirable and in the best interests of their respective shareholders that TSI Medical be merged with and into Relay Sub with Relay Sub as the surviving corporation (the "Merger') on the terms and subject to the conditions of this Agreement; 

C. The Boards of Directors of each of Relay Mines, Relay Sub and TSI Medical have approved and adopted this Agreement;

D. Relay Sub is a wholly-owned subsidiary of Relay Mines and Relay Sub joins in the execution of this Agreement in order to provide certain representations, warranties and covenants to TSI Medical;

E. Relay Mines, as the sole shareholder of Relay Sub, has approved the Merger; and

F. The Principal Shareholders join in the execution of this Agreement in order to provide certain covenants in respect of cancellation of their share positions.

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of covenants and agreements set forth herein and of the sum of $10.00 paid by TSI Medical to each of the Principal Shareholders and to Relay Mines, the receipt of which is hereby acknowledged, the parties hereto agree each with the other as follows:

ARTICLE 1.

DEFINITIONS

1.1 Definitions. The following terms have the respective meanings specified in this Article, unless the context indicates otherwise.

(a) "Agreement" shall mean this Agreement, and all the exhibits, schedules and other documents attached to or referred to in the Agreement, and all amendments and supplements, if any, to this Agreement;

(b) "Exelar Medical" shall mean Exelar Medical Corporation, a Nevada corporation;

(c) "Exelar Medical Funding Agreement" shall mean the Technology Acquisition and Funding Agreement among TSI Medical, Exelar Corporation and Exelar Medical Corporation dated the 22nd day of March, 2004 whereby TSI Medical has agreed to acquire up to 60% of the issued and outstanding shares of Exelar Medical;

(d) "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended;

(e) "GAAP" shall mean United States generally accepted accounting principles applied in a manner consistent with prior periods;

(f) "SEC" shall mean the United States Securities and Exchange Commission;

(g) "Securities Act" shall mean the United States Securities Act of 1933, as amended; and

(h) "Taxes" shall include federal, state, provincial and local income taxes, capital gains tax, value-added taxes, franchise, personal property and real property taxes, levies, assessments, tariffs, duties (including any customs duty), business license or other fees, sales, use and any other taxes relating to the assets of the designated party or the business of the designated party for all periods up to and including the Closing Date, together with any related charge or amount, including interest, fines, penalties and additions to tax, if any, arising out of tax assessments.

(i) "TSI Option Plan" shall mean the 2004 Stock Option Plan dated May 31, 2004 adopted by the board of directors of TSI Medical.

1.2 Schedules. The following schedules are attached to and form part of this Agreement:

	
 
	
Schedule 
	
Description

	
 
	
2.1 

2.9A 

2.9B 

3.3 

3.4 

3.6 

3.9 

3.10 

3.12 

3.14 

3.17 

4.1 

5.3 

5.9 
	
 
	

Articles of Merger

Certificate of Non-U.S. Shareholder

Certificate of U.S. Shareholder

Capitalization of TSI Medical

TSI Medical Subsidiaries

Actions and Proceedings

TSI Medical Financial Statements

Undisclosed Liabilities of TSI

Undisclosed Changes

TSI Medical Employment and Consulting Agreements

Material Contracts

Principal Shareholders of Relay Mines

Capitalization of Relay Mines

Undisclosed Liabilities of Relay Mines

1.3 Currency. All dollar amounts referred to in this Agreement are in United States funds, unless expressly stated otherwise.

ARTICLE 2.

THE MERGER

2.1 The Merger. At the Effective Time (as defined in Section 2.3 below), TSI Medical will be merged with and into Relay Sub in accordance with this Agreement, the Articles of Merger substantially in the form of Schedule 2.1 attached to this Agreement (the "Articles of Merger'), and the applicable provisions of Chapter 92A of the Nevada Revised Statutes (the "Nevada Law'). Following the Merger, Relay Sub will continue as the surviving corporation (the "Surviving Corporation') and the separate existence of TSI Medical will cease, except insofar as it may be continued by Nevada Law.

2.2 Closing. As soon as practicable following the satisfaction or waiver of the conditions set forth in Section 6 of this Agreement, and provided that this Agreement has not been terminated pursuant to Section 9, the parties to this Agreement will hold a closing (the "Closing') for the purpose of confirming the consummation of the Merger at a time and date mutually agreed upon by the parties. Unless otherwise agreed by the parties, the Closing will take place at the offices of the lawyers for TSI Medical. Notwithstanding the location of the Closing, each party agrees that the Closing may be completed by the exchange of undertakings between the respective legal counsel for TSI Medical, Relay Mines and Relay Sub, provided such undertakings are satisfactory to each party's respective legal counsel. The date on which the Closing actually occurs is referred to as the "Closing Date.' At the Closing, the parties will execute and exchange all documents, certificates and instruments contemplated by this Agreement. The parties agree to use commercially reasonable efforts and all due diligence to cause the Closing to be consummated on or before August 31, 2004 unless such date is extended by the mutual agreement of the parties.

2.3 Effective Time of the Merger. The Merger will be effective at the time (the "Effective Time') of the filing of the Articles of Merger with the Secretary of State of the State of Nevada, which certificate is to be filed as soon as practicable on or after the Closing Date.

2.4 Effect of the Merger. The Merger will have the effect set forth in Section 92A.250 of Nevada Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of Relay Sub and TSI Medical will vest in the Surviving Corporation without further act or deed, and all debts, liabilities and duties of Relay Sub and TSI Medical will become the debts, liabilities and duties of the Surviving Corporation. As a result or the Merger, the Surviving Corporation will be the wholly-owned subsidiary of Relay Mines.

2.5 Certificate of Incorporation; Bylaws.

(a) The certificate of incorporation of Relay Sub as in effect immediately prior to the Effective Time will continue unchanged, except to the extent amended by the Articles of Merger, and will be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the terms thereof and in accordance with applicable law.

(b) At the Effective Time, the by -laws of Relay Sub, as in effect immediately prior to the Effective Time, will be the by-laws of the Surviving Corporation until thereafter amended in accordance with the terms thereof and in accordance with applicable law.

2.6 Directors and Officers. The directors and officers of the Surviving Corporation after the Effective Time will be the following persons: Logan B. Anderson, Harold C. Moll and Peter Hogendoorn. Relay Mines, as the sole shareholder of Relay Sub, by approving the Merger has approved these individuals as the directors of the Surviving Corporation and will take any further action in order to ensure the proper appointment of such directors to the board of directors of the Surviving Corporation.

2.7 Taking of Necessary Action. If after the Effective Time any further action is necessary to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all assets, rights, approvals, immunities and franchises of either Relay Sub or TSI Medical, the officers and directors, or the former officers and directors, as the case may be, of Relay Mines, Relay Sub and TSI Medical and the Surviving Corporation will take all such necessary action.

2.8 Merger Consideration. Each share of TSI Medical common stock, par value $0.001 per share ("TSI Medical Common Stock') issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares, as defined in Section 2.10) will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into one share of Relay Mines Common Stock (as defined in Section 5.3). All certificates representing the shares of Relay Mines Common Stock issued on effectiveness of the Merger will be endorsed with the following legend pursuant to the Securities Act in order to reflect that the fact that the shares of Relay Mines Common Stock will be issued to the shareholders of TSI Medical pursuant to exemptions or safe harbours from the registration requirements of the Securities Act:

For holders of TSI Medical Common Stock resident in the United States:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION D PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT."

For holders of TSI Medical Common Stock resident outside the United States:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."

2.9 Stock Certificate Conversion Procedure. After the Effective Time, each holder of TSI Medical Common Stock will be entitled to exchange his, her, or its certificate representing the TSI Medical Common Stock ("TSI Medical Stock Certificate') for a certificate representing the number of shares of Relay Mines Common Stock into which the number of shares of TSI Medical Common Stock previously represented by such certificate surrendered have been converted pursuant to Section 2.8 of this Agreement. Each holder of TSI Medical Common Stock may exchange his, her or its TSI Medical Stock Certificate by delivering such TSI Medical Stock Certificate to Relay Mines duly endorsed in blank (or accompanied by duly executed stock powers duly endorsed in blank), in each case in proper form for transfer, with signatures guaranteed, and, if applicable, with all stock transfer and any other required documentary stamps affixed thereto and with appropriate instructions to allow the transfer agent to issue certificates for the Relay Mines Common Stock to the holder thereof together with: (i) a Regulation S Investment Letter (if such holder is resident outside of the United States), a copy of which is attached hereto in Schedule 2.9A, or (ii) a Regulation D Investment Letter (if such holder is resident in the United States), a copy of which is attached hereto in Schedule 2.9B. Until surrendered as contemplated by this Section 2.9, each TSI Medical Stock Certificate will be deemed at any time after the Effective Time to represent only the right to receive Relay Mines Common Stock certificates representing the number of whole shares of Relay Mines Common Stock into which the shares of TSI Medical Common Stock formerly represented by such certificate have been converted.  Upon receipt of such duly endorsed TSI Medical Stock Certificates, Relay Mines will cause the issuance of the number of shares of Relay Mines Common Stock as converted pursuant to Section 2.8 of this Agreement.

2.10 Appraisal Rights. Notwithstanding any provision of this Agreement to the contrary, shares of TSI Medical Common Stock (the "Dissenting Shares') that are issued and outstanding immediately prior to the Effective Time and held by stockholders who did not vote in favor of the Merger and who comply with all of the relevant provisions of Sections 92A.300 to 92A.500 of Nevada Law (the "Dissenting Stockholders') will not be converted into or be exchangeable for the right to receive Relay Mines Common Stock, unless and until such holders have failed to perfect or have effectively withdrawn or lost their rights to appraisal under Nevada Law. TSI Medical will give Relay Mines (i) immediate oral notice followed by prompt written notice of any written demands for appraisal of any shares of TSI Medical Common Stock, attempted withdrawals of any such demands and any other instruments served pursuant to Nevada Law and received by TSI Medical relating to stockholders' rights of appraisal, and (ii) will keep Relay Mines informed of the status of all negotiations and proceedings with respect to demands for appraisal under Nevada Law. If any Dissenting Stockholder fails to perfect or will have effectively withdrawn or lost the right to appraisal, the shares of TSI Medical Common Stock held by such Dissenting Stockholder will thereupon be treated as though such shares had been converted into the right to receive Relay Mines Common Stock pursuant to Section 2.8 of this Agreement.

2.11 No Further Ownership Rights in TSI Medical Common Stock. The promise to exchange the TSI Medical Common Stock for shares of Relay Mines Common Stock in accordance with the terms of this Agreement will be deemed to have been given in full satisfaction of all rights pertaining to the TSI Medical Common Stock, and there will be no further registration of transfers on the stock transfer books of TSI Medical of the shares of TSI Medical Common Stock that were outstanding immediately prior to the Effective Time. From and after the Effective Time, the holders of TSI Medical Common Stock outstanding immediately prior to the Effective Time will cease to have any rights with respect to such TSI Medical Common Stock, except as otherwise provided in this Agreement or by law.

2.12 Distributions with Respect to Unsurrendered TSI Medical Common Stock. No dividends or other distributions by Relay Mines with a record date after the Effective Time will be paid to the holder of any unsurrendered TSI Medical Stock Certificate until the surrender of such TSI Medical Stock Certificate in accordance with Section 2.9 of this Agreement. Following surrender of any such TSI Medical Stock Certificate, Relay Mines will pay to the holder of the Relay Mines Common Stock certificate issued in exchange the TSI Medical Stock Certificate, without interest, (i) at the time of such surrender, the amount of any dividends or other distributions with a record date after the Effective Time and paid before the time of such surrender with respect to such Relay Mines Common Stock which such holder is entitled pursuant to Section 2.8 of this Agreement, and (ii) at the appropriate payment date, the amount of any dividends or other distributions with a record date after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such Relay Mines Common Stock.

2.13 No Liability. Neither Relay Mines, Relay Sub, nor the Surviving Corporation will be liable to any person in respect of shares of TSI Medical Common Stock, or dividends or distributions with respect thereto, pursuant to any applicable abandoned property, escheat or similar law. If any TSI Medical Stock Certificate has not have been surrendered prior to seven years after the Effective Time (or immediately prior to such earlier date on which any TSI Medical Stock Certificate, or any dividends or distributions payable to the holder of such TSI Medical Stock Certificate would otherwise escheat to or become the property of any governmental body or authority), any such Relay Mines Common Stock, dividends or distributions in respect of such TSI Medical Stock Certificate will, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled to such  certificate

2.14 Lost, Stolen or Destroyed Certificates. If any certificate representing TSI Medical Common Stock has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate or agreement to be lost, stolen or destroyed and, if required by Relay Mines, the posting by such person of a bond in such reasonable amount as Relay Mines may direct as indemnity against any claim that may be made against it with respect to such certificate, Relay Mines will cause to be issued in exchange for such lost, stolen or destroyed certificate, the applicable Relay Mines Common Stock deliverable in respect thereof, pursuant to Section 2.8 of this Agreement.

2.15 Existing TSI Medical Warrants. The holders of the outstanding warrants (the "TSI Warrants') to purchase shares of TSI Medical will be offered warrants entitling them to purchase the same number of shares of Relay at the same exercise dates and exercise prices in exchange for the surrender of the TSI Warrants, subject to delivery of declarations by the holders of the TSI Warrants, as applicable, substantially in the forms set out in Schedule 2.9A or Schedule 2.9B.

2.16 Existing TSI Medical Options. Relay will grant options to the holders of the existing options of TSI Medical (the "Existing TSI Options') entitling them to purchase shares under the option plan referred to in Section 6.2(i) of this Agreement on the same terms and conditions, including exercise price, as the Existing TSI Options.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF

TSI MEDICAL

TSI Medical represents and warrants to Relay Mines and Relay Sub, and acknowledges that Relay Mines and Relay Sub are relying upon such representations and warranties, in connection with the execution, delivery and performance of this Agreement, notwithstanding any investigation made by or on behalf of Relay Mines or Relay Sub, as follows:

3.1 Organization and Good Standing. TSI Medical is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease and to carry on its business as now being conducted. TSI Medical is duly qualified to do business and is in good standing as a foreign corporation in each of the jurisdictions in which it owns property, leases property, does business, or is otherwise required to do so, where the failure to be so qualified would have a material adverse effect on the business of TSI Medical taken as a whole.

3.2 Authority. TSI Medical has all requisite corporate power and authority to execute and deliver this Agreement and any other document contemplated by this Agreement (collectively, the "TSI Medical Merger Documents') to be signed by TSI Medical and to perform its obligations thereunder and to consummate the Merger contemplated thereby. The execution and delivery of each of the TSI Medical Merger Documents by TSI Medical and the consummation of the Merger contemplated thereby have been duly authorized by its Board of Directors. No other corporate or shareholder proceedings on the part of TSI Medical are necessary to authorize such documents or to consummate the Merger contemplated thereby other than the approval of the shareholders of TSI Medical of the Merger. This Agreement has been, and the other TSI Medical Merger Documents when executed and delivered by TSI Medical as contemplated by this Agreement will be, duly executed and delivered by TSI Medical and this Agreement is, and the other TSI Medical Merger Documents when executed and delivered by TSI Medical as contemplated hereby will be, the valid and binding obligation of TSI Medical enforceable in accordance with their respective terms, except (1) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (2) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (3) as limited by public policy.

3.3 Capitalization of TSI Medical. The entire authorized capital stock and other equity securities of TSI Medical consists of 100,000,000 shares of TSI Medical Common Stock, par value of $0.001 per share. There are 9,700,000 shares of TSI Medical Common Stock issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of TSI Medical Common Stock have been duly authorized, are validly issued, were not issued in violation of any pre-emptive rights and are fully paid and non-assessable, are not subject to pre-emptive rights and were issued in full compliance with all federal, state, and local laws, rules and regulations. Except as set forth on Schedule 3.3, there are no outstanding options, warrants, subscriptions, conversion rights, or other rights, agreements, or commitments obligating TSI Medical to issue any additional shares of TSI Medical Common Stock, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from TSI Medical any shares of TSI Medical Common Stock. Except as set forth on Schedule 3.3, there are no agreements purporting to restrict the transfer of the TSI Medical Common Stock, no voting agreements, voting trusts, or other arrangements restricting or affecting the voting of the TSI Medical Common Stock.

3.4 No Subsidiaries. Except as set forth on Schedule 3.4, TSI Medical does not have any subsidiaries or agreements of any nature to acquire any subsidiary or to acquire or lease any other business operations and will not prior to the Closing Date acquire, or agree to acquire, any subsidiary or business without the prior written consent of Relay Mines.

3.5 Non-contravention. Neither the execution, delivery and performance of this Agreement, nor the consummation of the Merger, will:

(1) conflict with, result in a violation of, cause a default under (with or without notice, lapse of time or both) or give rise to a right of termination, amendment, cancellation or acceleration of any obligation contained in or the loss of any material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the material properties or assets of TSI Medical under any term, condition or provision of any loan or credit agreement, note, debenture, bond, mortgage, indenture, lease or other agreement, instrument, permit, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TSI Medical, or any of its respective property or assets;

(2) violate any provision of the articles of incorporation or bylaws of TSI Medical; or

(3) violate any order, writ, injunction, decree, statute, rule, or regulation of any court or governmental or regulatory authority applicable to TSI Medical or any of its respective property or assets.

3.6 Actions and Proceedings. Except as described in Schedule 3.6, there is no claim, charge, arbitration, grievance, action, suit, investigation or proceeding by or before any court, arbiter, administrative agency or other governmental authority now pending or, to the best knowledge of TSI Medical or the Principal Shareholders, threatened against TSI Medical or which involves any of the business, or the properties or assets of TSI Medical that, if adversely resolved or determined, would have a material adverse effect on the business, operations, assets, properties, prospects, or conditions of TSI Medical taken as a whole (a "TSI Medical Material Adverse Effect'). There is no reasonable basis for any claim or action that, based upon the likelihood of its being asserted and its success if asserted, would have such a TSI Medical Material Adverse Effect. Schedule 3.6 lists all pending legal claims or proceedings, whether or not such claim or proceeding would result in a TSI Medical Material Adverse Effect.

3.7 Compliance.

(a) TSI Medical is in compliance with, is not in default or violation in any material respect under, and has not been charged with or received any notice at any time of any material violation by it of, any statute, law, ordinance, regulation, rule, decree or other applicable regulation to the business or operations of TSI Medical;

(b) TSI Medical is not subject to any judgment, order or decree entered in any lawsuit or proceeding applicable to its business and operations that would constitute a TSI Medical Material Adverse Effect;

(c) TSI Medical has duly filed all reports and returns required to be filed by it with governmental authorities and has obtained all governmental permits and other governmental consents, except as may be required after the execution of this Agreement. All of such permits and consents are in full force and effect, and no proceedings for the suspension or cancellation of any of them, and no investigation relating to any of them, is pending or to the best knowledge of TSI Medical, threatened, and none of them will be adversely affected by the consummation of the Merger contemplated hereby; and

(d) TSI Medical has operated in material compliance with all laws, rules, statutes, ordinances, orders and regulations applicable to its business. TSI Medical has not received any notice of any violation thereof, nor is TSI Medical aware of any valid basis therefore.

3.8 Filings, Consents and Approvals. Other than the approval of holders owning a majority of the TSI Medical Common Stock, no filing or registration with, no notice to and no permit, authorization, consent, or approval of any public or governmental body or authority or other person or entity is necessary for the consummation by TSI Medical of the Merger contemplated by this Agreement or to enable Relay Mines to continue to conduct TSI Medical's business after the Closing Date in a manner which is consistent with that in which it is presently conducted.

3.9 Financial Representations. Attached to this Agreement as Schedule 3.9 are true, correct, and complete copies of audited balance sheets for TSI Medical dated as of January 31, 2003 and 2002 and unaudited balance sheet dated as of January 31, 2004, together with related statements of operations and deficit, statements of shareholders' deficiency (equity), for the fiscal years then ended (collectively, the "Financial Statements'). The Financial Statements (a) are in accordance with the books and records of TSI Medical, (b) present fairly the financial condition of TSI Medical as of the respective dates indicated and the results of operations for such periods, and (c) have been prepared in accordance with GAAP. TSI Medical has not received any advice or notification from its independent certified public accountants that TSI Medical has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the Financial Statements or the books and records of TSI Medical, any properties, assets, liabilities, revenues, or expenses. The books, records, and accounts of TSI Medical accurately and fairly reflect, in reasonable detail, the Merger, assets, and liabilities of TSI Medical. TSI Medical has not engaged in any transaction, maintained any bank account, or used any funds of TSI Medical, except for transactions, bank accounts, and funds which have been and are reflected in the normally maintained books and records of TSI Medical.

3.10 Undisclosed Liabilities. Except as set forth in Schedule 3.10, TSI Medical has no liabilities or obligations either direct or indirect, matured or unmatured, absolute, contingent or otherwise, which:

(a) are not set forth in the Financial Statements or have not heretofore been paid or discharged;

(b) did not arise in the regular and ordinary course of business under any agreement, contract, commitment, lease or plan specifically disclosed (or are not required to be disclosed in accordance with GAAP); or

(c) have not been incurred in amounts and pursuant to practices consistent with past business practice, in or as a result of the regular and ordinary course of its business since the date of the last Financial Statements.

For purposes of this Agreement, the term "liabilities' includes, any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known or unknown, asserted choate or inchoate, liquidated or unliquidated, secured or unsecured.

3.11 Tax Matters.

(a) As of the date hereof, (i) TSI Medical has timely filed all tax returns in connection with any Taxes which are required to be filed on or prior to the date hereof, taking into account any extensions of the filing deadlines which have been validly granted to them; and (ii) all such returns are true and correct in all material respects.

(b) TSI Medical has paid all Taxes that have become or are due with respect to any period ended on or prior to the date hereof, and has established an adequate reserve therefore on its balance sheet for those Taxes not yet due and payable, except for any Taxes the nonpayment of which will not have a TSI Medical Material Adverse Effect.

(c) TSI Medical is not presently under and has not received notice of, any contemplated investigation or audit by the Internal Revenue Service or any foreign or state taxing authority concerning any fiscal year or period ended prior to the date hereof.

(d) All Taxes required to be withheld on or prior to the date hereof from employees for income Taxes, social security Taxes, unemployment Taxes and other similar withholding Taxes have been properly withheld and, if required on or prior to the date hereof, have been deposited with the appropriate governmental agency.

3.12 Changes. Except as set forth in Schedule 3.12, since January 31, 2004, TSI Medical has not:

(a) incurred any liabilities, other than liabilities incurred in the ordinary course of business consistent with past practice, or discharged or satisfied any lien or encumbrance, or paid any liabilities, other than in the ordinary course of business consistent with past practice, or failed to pay or discharge when due any liabilities of which the failure to pay or discharge has caused or will cause any material damage or risk of material loss to it or any of its assets or properties;

(b) sold, encumbered, assigned or transferred any fixed assets or properties which would have been included in the assets of TSI Medical if the closing had been held on January 31, 2004 or on any date since then, except for ordinary course of business transactions consistent with past practice;

(c) created, incurred, assumed or guaranteed any indebtedness for money borrowed, or mortgaged, pledged or subjected any of the assets or properties of TSI Medical to any mortgage, lien, pledge, security interest, conditional sales contract or other encumbrance of any nature whatsoever; 

(d) made or suffered any amendment or termination of any material agreement, contract, commitment, lease or plan to which it is a party or by which it is bound, or cancelled, modified or waived any substantial debts or claims held by it or waived any rights of substantial value, whether or not in the ordinary course of business;

(e) declared, set aside or paid any dividend or made or agreed to make any other distribution or payment in respect of its capital shares or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or acquire any of its capital shares or equity securities;

(f) suffered any damage, destruction or loss, whether or not covered by insurance, materially and adversely its business, operations, assets, properties or prospects;

(g) suffered any material adverse change in its business, operations, assets, properties, prospects or condition (financial or otherwise);

(h) received notice or had knowledge of any actual or threatened labor trouble, termination, resignation, strike or other occurrence, event or condition of any similar character which has had or might have an adverse effect on its business, operations, assets, properties or prospects;

(i) made commitments or agreements for capital expenditures or capital additions or betterments exceeding in the aggregate $10,000, except such as may be involved in ordinary repair, maintenance or replacement of its assets;

(j) other than in the ordinary course of business, increase the salaries or other compensation of, or made any advance (excluding advances for ordinary and necessary business expenses) or loan to, any of its employees or made any increase in, or any addition to, other benefits to which any of its employees may be entitled;

(k) changed any of the accounting principles followed or the methods of applying such principles;

(l) entered into any transaction other than in the ordinary course of business consistent with past practice; or

(m) agreed, whether in writing or orally, to do any of the foregoing.

3.13 Personal Property. TSI Medical does not own or lease any furniture, fixtures or other tangible personal property.

3.14 Employees and Consultants. All employees and consultants of TSI Medical have been paid all salaries, wages, income and any other sum due and owing to them by TSI Medical as at the end of the most recent completed pay period. TSI Medical is not aware of any labor conflict with any of TSI Medical employees that might reasonably be expected to have a TSI Medical Material Adverse Effect. Except as disclosed in Schedule 3.14, TSI Medical has not entered into any written contracts of employment or consulting agreements. All amounts required to be withheld by TSI Medical from employees salaries or wages and paid to any governmental or taxing authority have been so withheld and paid. No employee of TSI Medical is in violation of any term of any employment contract, non-disclosure agreement, noncompetition agreement or any other contract or agreement relating to the relationship of such employee with TSI Medical or any other nature of the business conducted or to be conducted by TSI Medical or the Surviving Corporation.

3.15 Intellectual Property. TSI Medical does not own any intellectual property. Exelar Medical owns the assets as represented by Exelar Medical in the Exelar Medical Funding Agreement.

3.16 Real Property. TSI Medical does not lease or own any real property.

3.17 Material Contracts and Transactions. Schedule 3.17 contains a list of all material contracts, agreements, licenses, permits, arrangements, commitments, instruments, understandings or contracts, whether written or oral, express or implied, contingent, fixed or otherwise, to which TSI Medical is a party (collectively, the "Contracts').

(a) Except as listed on Schedule 3.17, TSI Medical is not a party to any written or oral:

(1) agreement for the purchase, sale or lease of any capital assets, or continuing contracts for the purchase or lease of any materials, supplies, equipment, real property or services;

(2) agreement regarding, sales agency, distributorship, or the payment of commissions;

(3) agreement for the employment or consultancy of any person or entity;

(4) note, debenture, bond, trust agreement, letter of credit agreement loan agreement, or other contract or commitment for the borrowing or lending of money, or agreement or arrangement for a line of credit or guarantee, pledge, or undertaking of the indebtedness of any other person;

(5) agreement, contract, or commitment for any charitable or political contribution; 

(6) agreement, contract, or commitment limiting or restraining TSI Medical, their business or any successor thereto from engaging or competing in any manner or in any business or from hiring any employees, nor is any employee of TSI Medical subject to any such agreement, contract, or commitment;

(7) material agreement, contract, or commitment not made in the ordinary course of business;

(8) agreement establishing or providing for any joint venture, partnership, or similar arrangement with any other person or entity;

(9) agreement, contract or understanding containing a "change in control,' or similar provision; or

(10) power of attorney or similar authority to act.

(b) Each Contract is in full force and effect, and there exists no material breach or violation of or default by TSI Medical under any Contract including, without limiting the generality of the foregoing, the Exelar Medical Funding Agreement, or any event that with notice or the lapse of time, or both, will create a material breach or violation thereof or default under any Contract by TSI Medical. The continuation, validity, and effectiveness of each Contract will in no way be affected by the consummation of the Merger contemplated by this Agreement. Except as listed on Schedule 3.17, there exists no actual or threatened termination, cancellation, or limitation of, or any amendment, modification, or change to any Contract. A true, correct and complete copy (and if oral, a description of material terms) of each Contract, as amended to date, has been furnished to Relay Mines.

3.18 Certain Transactions. Except as disclosed in Schedule 3.18, TSI Medical is not indebted, directly or indirectly, to any of its officers, directors or shareholders or to their respective spouses or children, in any amount whatsoever and TSI Medical is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

3.19 No Brokers. TSI Medical has not incurred any obligation or liability to any party for any brokerage fees, agent's commissions, or finder's fees in connection with the Merger contemplated by this Agreement for which Relay Mines would be responsible.

3.20 Minute Books. The minute books of TSI Medical provided to Relay Mines contain a complete summary of all meetings of directors and shareholders since the time of incorporation of such entity and reflect all transactions referred to in such minutes accurately in all material respects.

3.21 Completeness of Disclosure. No representation or warranty by TSI Medical in this Agreement nor any certificate, schedule, statement, document or instrument furnished or to be furnished to Relay Mines pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated herein or therein or necessary to make any statement herein or therein not materially misleading.

ARTICLE 4.

COVENANTS, REPRESENTATIONS AND WARRANTIES

OF THE PRINCIPAL SHAREHOLDERS

The Principal Shareholders covenant with and jointly and severally represent and warrant to TSI Medical as follows, and acknowledge that TSI Medical is relying upon such covenants, representations and warranties in connection with the merger of TSI Medical with Relay Sub, as follows:

4.1 The Principal Shareholders are the legal and beneficial owners of the shares of Relay Mines set forth in Schedule 4.1.

4.2 No person, firm or corporation has any agreement or option or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement or option for the purchase from the Principal Shareholders of any of the shares of Relay Mines held by the Principal Shareholders.

4.3 This Agreement has been duly authorized, validly executed and delivered by the Principal Shareholders.

ARTICLE 5.

REPRESENTATIONS AND WARRANTIES

OF RELAY MINES

Relay Mines and Relay Sub jointly and severally represent and warrant to TSI Medical and acknowledge that TSI Medical is relying upon such representations and warranties in connection with the execution, delivery and performance of this Agreement, notwithstanding any investigation made by or on behalf of TSI Medical, as follows:

5.1 Organization and Good Standing. Relay Mines and Relay Sub are each duly organized, validly existing and in good standing under the laws of Nevada and have all requisite corporate power and authority to own, lease and to carry on its respective businesses as now being conducted. Relay Mines is duly qualified to do business and is in good standing as foreign corporations in each of the jurisdictions in which it owns property, leases property, does business, or is otherwise required to do so, where the failure to be so qualified would have a material adverse effect on the businesses, operations, or financial condition of Relay Mines. Relay Sub has not carried on any business or acquired any assets or incurred any liabilities since its incorporation, other than by reason of execution of this Agreement.

5.2 Authority. Relay Mines and Relay Sub have all requisite corporate power and authority to execute and deliver this Agreement and any other document contemplated by this Agreement (collectively, the "Relay Mines Merger Documents') to be signed by Relay Mines and Relay Sub and to perform their obligations thereunder and to consummate the Merger contemplated thereby. The execution and delivery of each of the Relay Mines Merger Documents by Relay Mines and Relay Sub and the consummation by Relay Mines and Relay Sub of the Merger contemplated thereby have been duly authorized by their respective Board of Directors and no other corporate or shareholder proceedings on the part of Relay Mines or Relay Sub are necessary to authorize such documents or to consummate the Merger contemplated thereby. This Agreement has been, and the other Relay Mines Merger Documents when executed and delivered by Relay Mines and Relay Sub as contemplated by this Agreement will be, duly executed and delivered by Relay Mines and Relay Sub and this 

Agreement is, and the other Relay Mines Merger Documents when executed and delivered by Relay Mines and Relay Sub, as contemplated hereby will be, the valid and binding obligations of Relay Mines and Relay Sub enforceable in accordance with their respective terms, except (1) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (2) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (3) as limited by public policy.

5.3 Capitalization of Relay Mines. The entire authorized capital stock of Relay Mines consists of 100,000,000 shares of common stock, par value $0.0001 ("Relay Mines Common Stock'). There are 36,683,604 shares of Relay Mines common stock issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of Relay Mines Stock have been duly authorized, are validly issued, were not issued in  violation of any pre-emptive rights and are fully paid and non-assessable, are not subject to pre-emptive rights and were issued in full compliance with all federal, state, and local laws, rules and regulations. Except as set forth on Schedule 5.3, there are no outstanding options, warrants, subscriptions, phantom shares, conversion rights, or other rights, agreements, or commitments obligating Relay Mines to issue any additional shares of Relay Mines Stock, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from Relay Mines any shares of Relay Mines Stock. Except as set forth on Schedule 5.3, there are no agreements purporting to restrict the transfer of the Relay Mines Stock, no voting agreements, voting trusts, or other arrangements restricting or affecting the voting of the Relay Mines Stock.

5.4 Capitalization of Relay Sub. The entire authorized capital stock and other equity securities of  Relay Sub ("Relay Sub Stock') consists of 100,000,000 shares of common stock, par value $0.00001 ("Relay Sub Common Stock'). There are 1,000 shares of Relay Sub common stock issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of Relay Sub Stock have been duly authorized, are validly issued, were not issued in violation of any pre-emptive rights and are fully paid and non-assessable, are not subject to pre-emptive rights and were issued in full compliance with all federal, state, and local laws, rules and regulations. There are no outstanding options, warrants, subscriptions, phantom shares, conversion rights, or other rights, agreements, or commitments obligating Relay Sub to issue any additional shares of Relay Sub Stock, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from Relay Mines any shares of Relay Sub Stock. There are no agreements purporting to restrict the transfer of the Relay Mines Stock, no voting agreements, voting trusts, or other arrangements restricting or affecting the voting of the Relay Mines Stock.

5.5 Validity of Relay Mines Common Stock Issuable upon the Merger. The shares of Relay Mines Common Stock to be issued upon consummation of the Merger in accordance with this Agreement will, upon issuance, have been duly and validly authorized and, when so issued in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and non-assessable.

5.6 Actions and Proceedings. There is no claim, charge, arbitration, grievance, action, suit, investigation or proceeding by or before any court, arbiter, administrative agency or other governmental authority now pending or, to the best knowledge of Relay Mines or Relay Sub, threatened against Relay Mines or Relay Sub which involves any of the business, or the properties or assets of Relay Mines or Relay Sub that, if adversely resolved or determined, would have a material adverse effect on the business, operations, assets, properties, prospects or conditions of Relay Mines or Relay Sub taken as a whole. There is no reasonable basis for any claim or action that, based upon the likelihood of its being asserted and its success if asserted, would have such a material adverse effect.

5.7 SEC Filings. Relay Mines has furnished or made available to TSI Medical a true and complete copy of each report, schedule, registration statement and proxy statement filed by Relay Mines with the SEC since the inception of Relay Mines (as such documents have since the time of their filing been amended, the "Relay Mines SEC Documents"). Relay Mines has timely filed with the SEC all documents required to have been filed pursuant to the Securities Act and the Exchange Act. As of their respective dates, Relay Mines SEC Documents complied in all material respects with the requirements of the Securities Act, or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Relay Mines SEC Documents, and none of Relay Mines SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

5.8 Financial Representations. Included with the Relay Mines SEC Documents are true, correct, and complete copies of audited balance sheets for Relay Mines dated as of June 30, 2003 and 2002 and unaudited balance sheet dated as of March 31, 2004, together with related statements of income, cash flows, and changes in shareholder's equity for the periods then ended (collectively, the "Relay Mines Financial Statements'). The Relay Mines Financial Statements (a) are in accordance with the books and records of Relay Mines, (b) present fairly the financial condition of Relay Mines as of the respective dates indicated and the results of operations for such periods, and (c) have been prepared in accordance with GAAP. Relay Mines has not received any advice or notification from its independent certified public accountants that Relay Mines has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the Relay Mines Financial Statements or the books and records of Relay Mines, any properties, assets, liabilities, revenues, or expenses. The books, records, and accounts of Relay Mines accurately and fairly reflect, in reasonable detail, the Merger, assets, and liabilities of Relay Mines. Relay Mines has not engaged in any transaction, maintained any bank account, or used any funds of Relay Mines, except for transactions, bank accounts, and funds which have been and are reflected in the normally maintained books and records of Relay Mines. Relay Sub has not carried on any business, entered into any agreements or incurred any liabilities since its incorporation, other than as expressly contemplated by this Agreement.

5.9 Undisclosed Liabilities. Except as set forth in Schedule 5.9, Relay Mines has no liabilities or obligations either direct or indirect, matured or unmatured, absolute, contingent or otherwise, which:

(a) are not set forth in the Relay Mines Financial Statements or have not heretofore been paid or discharged;

(b) did not arise in the regular and ordinary course of business under any agreement, contract, commitment, lease or plan specifically disclosed (or are not required to be disclosed in accordance with GAAP); or

(c) have not been incurred in amounts and pursuant to practices consistent with past business practice, in or as a result of the regular and ordinary course of its business since the date of the last Relay Mines Financial Statements.

For purposes of this Agreement, the term "liabilities' includes, any direct or indirect indebtedness,  guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known or unknown, asserted choate or inchoate, liquidated or unliquidated, secured or unsecured.

5.10 Certain Changes or Events. Except as and to the extent disclosed in the Relay Mines SEC Documents, there has not been (a) a material adverse effect to the business, operations or financial conditions of Relay Mines, or (b) any significant change by Relay Mines in its accounting methods, principles or practices.

5.11 Filings, Consents and Approvals. No filing or registration with, no notice to and no permit, authorization, consent, or approval of any public or governmental body or authority or other person or entity is necessary for the consummation by Relay Mines and Relay Sub of the Merger contemplated by this Agreement to continue to conduct its business after the Closing Date in a manner which is consistent with that in which it is presently conducted.

5.12 Personal Property. There are no material equipment, furniture, fixtures and other tangible personal property and assets owned or leased by Relay Mines or Relay Sub, except as disclosed in the Relay Mines SEC Documents.

5.13 Employees and Consultants. Neither Relay Mines nor Relay Sub have any employees or consultants, except as disclosed in the Relay Mines SEC Documents.

5.14 Material Contracts and Transactions. Other than as expressly contemplated by this Agreement, there are no material contracts, agreements, licenses, permits, arrangements, commitments, instruments, understandings or contracts, whether written or oral, express or implied, contingent, fixed or otherwise, to which Relay Mines or Relay Sub is a party except as disclosed in the Relay Mines SEC Documents.

5.15 No Brokers. Neither Relay Mines nor Relay Sub has incurred any obligation or liability to any party for any brokerage fees, agent's commissions, or finder's fees in connection with the Merger contemplated by this Agreement for which TSI Medical would be responsible.

5.16 Minute Books. The minute books of Relay Mines provided to TSI Medical contain a complete summary of all meetings of directors and shareholders since the time of incorporation of such entity and reflect all transactions referred to in such minutes accurately in all material respects.

5.17 Completeness of Disclosure. No representation or warranty by Relay Mines or Relay Sub in this Agreement nor any certificate, schedule, statement, document or instrument furnished or to be furnished to TSI Medical pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated herein or therein or necessary to make any statement herein or therein not materially misleading.

ARTICLE 6.

CLOSING CONDITIONS

6.1 Conditions Precedent to Closing by Relay Mines and Relay Sub. The obligations of Relay Mines and Relay Sub to consummate the Merger is subject to the satisfaction of the conditions set forth below, unless any such condition is waived Relay Mines and Relay Sub at the Closing. The Closing of the Merger contemplated by this Agreement will be deemed to mean a waiver of all conditions to Closing. These conditions of closing are for the benefit of Relay Mines and Relay Sub and may be waived by Relay Mines and Relay Sub in their discretion.

(a) Representations and Warranties. The representations and warranties of TSI Medical set forth in this Agreement will be true, correct and complete in all respects as of the Closing Date, as though made on and as of the Closing Date and TSI Medical will have delivered to Relay Mines a certificate dated as of the Closing Date, to the effect that the representations and warranties made by TSI Medical in this Agreement are true and correct.

(b) Performance. All of the covenants and obligations that TSI Medical is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been performed and complied with in all material respects.

(c) Merger Documents. This Agreement and all other TSI Medical Merger Documents necessary or reasonably required to consummate the Merger, all in form and substance reasonably satisfactory to Relay Mines or Relay Sub, will have been executed and delivered to Relay Mines and Relay Sub.

(d) Secretary's Certificate - TSI Medical. Relay Mines will have received a certificate of the Secretary of TSI Medical attaching (i) a copy of TSI Medical's articles of incorporation and bylaws, as amended through the Closing Date certified by the Nevada Secretary of State; (ii) certified copies of resolutions duly adopted by the Board of Directors of TSI Medical and the TSI Medical Stockholders approving the execution and delivery of this Agreement and the other Merger Documents and the consummation of the Merger and the other transactions contemplated hereby and thereby; and (iii) a certificate as to the incumbency and signatures of the officers of TSI Medical executing this Agreement and the Merger Documents executed on the Closing Date as contemplated by this Agreement.

(e) Supplement to Schedules. Any additional disclosures of TSI Medical made pursuant to Section 7.4 of this Agreement will be acceptable to Relay Mines and Relay Sub in their sole discretion.

(f) Third Party Consents. TSI Medical will have received duly executed copies of all third party consents and approvals contemplated by the Merger Documents, in form and substance reasonably satisfactory to Relay Mines.

(g) No Material Adverse Change. No TSI Medical Material Adverse Effect will have occurred since the date of this Agreement.

(h) No Action. No suit, action, or proceeding will be pending or threatened before any governmental or regulatory authority wherein an unfavorable judgment, order, decree, stipulation, injunction or charge would (i) prevent the consummation of any of the Merger contemplated by this Agreement, or (ii) cause the Merger to be rescinded following consummation.

(i) Due Diligence Review. Relay Mines and Relay Sub will be reasonably satisfied in all respects with their due diligence investigation and review of TSI Medical.

(j) Compliance with Securities Laws. Relay Mines will have received evidence satisfactory to Relay Mines that all shares of Relay Mines Common Stock issuable in the Merger will be issuable without registration pursuant to the Securities Act in reliance on the exemptions from the registration requirements of the Securities Act provided by Rule 506 of Regulation D or in reliance on the safe harbour from the registration requirements of the Securities Act provided by Regulation S. In order to establish the availability of an exemption or safe harbour from the registration requirements of the Securities Act for each issuance of Relay Mines Common Stock to each shareholder of TSI Medical, TSI Medical will deliver to Relay Mines on Closing investment representation letters executed by each shareholder of TSI Medical, other than Dissenting Shareholders as contemplated below:

(i) each shareholder of TSI Medical who is not a U.S. Person and who otherwise satisfies the eligibility requirements for issuance of Relay Mines Common Stock in accordance with Rule 903 of Regulation S of the Securities Act will deliver the Regulation S Investment Letter in a form reasonably acceptable to legal counsel for Relay Mines and for TSI Medical; and

(ii) each shareholder of TSI Medical resident in the United States will deliver the Regulation D Investment Letter in a form reasonably acceptable to legal counsel for Relay Mines and for Exelar Medical and TSI Medical.

(k) Delivery of Financial Statements. TSI Medical will have delivered to Relay such financial statements as, in the opinion of the auditors for Relay, are required to permit Relay to make the necessary filings under the Exchange Act in connection with the Merger.

(l) Exercise of Appraisal Rights. The holders of no more than two (2%) percent of the issued and outstanding shares of TSI Medical Common Stock will have exercised appraisal rights under Nevada Law as Dissenting Shareholders. TSI Medical and Relay Mines will have resolved all matters of appraisal and payment under Nevada Law for each Dissenting Shareholder to Relay Sub's satisfaction.

6.2 Conditions Precedent to Closing by TSI Medical. The obligation of TSI Medical to consummate the Merger is subject to the satisfaction of the conditions set forth below, unless such condition is waived by TSI Medical at the Closing. The Closing of the Merger will be deemed to mean a waiver of all conditions to Closing. These conditions precedent are for the benefit of TSI Medical and may be waived by TSI Medical in its discretion.

(a) Representations and Warranties. The representations and warranties of Relay Mines and Relay Sub and the Principal Shareholders set forth in this Agreement will be true, correct and complete in all respects as of the Closing Date, as though made on and as of the Closing Date and Relay Mines and Relay Sub will have delivered to TSI Medical a certificate dated the Closing Date, to the effect that the representations and warranties made by Relay Mines and Relay Sub in this Agreement are true and correct.

(b) Performance. All of the covenants and obligations that Relay Mines and Relay Sub are required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been performed and complied with in all material respects. Relay Mines and Relay Sub must have delivered each of the documents required to be delivered by them pursuant to this Agreement.

(c) Merger Documents. This Agreement and all Relay Mines Merger Documents, all in form and substance reasonably satisfactory to TSI Medical, will have been executed and delivered by Relay Mines and Relay Sub, as applicable.

(d) Secretary's Certificate - Relay Mines. TSI Medical will have received a certificate of the Secretary of Relay Mines attaching (a) a copy of Relay Mines' certificate of incorporation, as amended through the Closing Date certified by the Secretary of State of the State of Nevada; (b) a true and correct copy of Relay Mines' bylaws, as amended; (c) certified copies of resolutions duly adopted by the Board of Directors of Relay Mines and the sole stockholder of Relay Sub, approving the execution and delivery of this Agreement and the other Merger Documents and the consummation of the Merger and the ot her transactions contemplated hereby and thereby; and (d) a certificate as to the incumbency and signatures of the officers of Relay Mines executing this Agreement and the Merger Documents executed by Relay Mines on the Closing Date as contemplated by this Agreement.

(e) Exercise of Appraisal Rights. The holders of no more than two (2%) percent of the issued and outstanding shares of TSI Medical Common Stock will have exercised appraisal rights under Nevada Law as Dissenting Shareholders. TSI Medical and Relay Mines will have resolved all matters of appraisal and payment under Nevada Law for each Dissenting Shareholder to TSI Medical's satisfaction. 

(f) Supplement to Schedules. Any additional disclosures of Relay Mines made pursuant to Section 7.4 of this Agreement will be acceptable to TSI Medical in its sole discretion.

(g) Third Party Consents. Relay Mines and Relay Sub will have obtained duly executed copies of all third-party consents and approvals contemplated by the Merger documents, in form and substance reasonably satisfactory to TSI Medical.

(h) No Material Adverse. No event will have occurred since the date of this Agreement that has had a material adverse effect on the business, operations, assets, properties, prospects or conditions of Relay Mines and Relay Sub taken as a whole.

(i) No Action. No suit, action, or proceeding will be pending or threatened before any governmental or regulatory authority wherein an unfavorable judgment, order, decree, stipulation, injunction or charge would (i) prevent consummation of any of the Merger contemplated by this Agreement; or (ii) cause the Merger to be rescinded following consummation.

(j) Schedule 14F Filing. Relay will have made the filing required by Paragraph 7.10.

(k) Cancellation of Control Shares. The Principal Shareholders will have surrendered all 60,000,000 shares of Relay Mines Common Stock owned by them to Relay Mines for cancellation without consideration.

(l) Adoption of Option Plan. Relay Mines will have adopted an option plan substantially the same as the TSI Medical Option Plan.

ARTICLE 7.

ADDITIONAL COVENANTS OF THE PARTIES

7.1 Access and Investigation. Between the date of this Agreement and the Closing Date, TSI Medical, on the one hand, and Relay Mines, on the other hand, will, and will cause each of their respective representatives to, (a) afford the other and its representatives full and free access to its personnel, properties, contracts, books and records, and other documents and data, (b) furnish the other and its representatives with copies of all such contracts, books and records, and other existing documents and data as required by this Agreement and as the other may otherwise reasonably request, and (c) furnish the other and its representatives with such additional financial, operating, and other data and information as the other may reasonably request. All of such access, investigation and communication by a party and its representatives will be conducted during normal business hours and in a manner designed not to interfere unduly with the normal business operations of the other party. Each party will instruct its auditors to cooperate with the other party and its representatives in connection with such investigations.

7.2 Confidentiality. All information regarding the business of TSI Medical including, without limitation, financial information that TSI Medical provides to Relay Mines during Relay Mines' due diligence investigation of TSI Medical will be kept in strict confidence by Relay Mines and will not be used (except in connection with due diligence), dealt with, exploited or commercialized by Relay Mines or disclosed to any third party (other than Relay Mines' professional accounting and legal advisors) without the prior written consent of TSI Medical. If the Merger contemplated by this Agreement does not proceed for any reason, then upon receipt of a written request from the TSI Medical, Relay Mines will immediately return to TSI Medical any information received regarding TSI Medical's business. Likewise, all information regarding the business of Relay Mines including, without limitation, financial information that Relay Mines provides to TSI Medical during its due diligence investigation of Relay Mines will be kept in strict confidence by TSI Medical and will not be used (except in connection with due diligence), dealt with, exploited or commercialized by TSI Medical or disclosed to any third party (other than TSI Medical's professional accounting and legal advisors) without Relay Mines' prior written consent. If the Merger contemplated by this Agreement do not proceed for any reason, then upon receipt of a written request from Relay Mines, TSI Medical will immediately return to Relay Mines (or as directed by Relay Mines) any information received regarding Relay Mines' business.

7.3 Notification. Between the date of this Agreement and the Closing Date, each of the parties to this Agreement will promptly notify the other parties in writing if it becomes aware of any fact or condition that causes or constitutes a material breach of any of its representations and warranties as of the date of this Agreement, if it becomes aware of the occurrence after the date of this Agreement of any fact or condition that would cause or constitute a material breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Schedules relating to such party, such party will promptly deliver to the other parties a supplement to the Schedules specifying such change. During the same period, each party will promptly notify the other parties of the occurrence of any material breach of any of its covenant in this Agreement or of the occurrence of any event that may make the satisfaction of such conditions impossible or unlikely.

7.4 Exclusivity. Until such time, if any, as this Agreement is terminated pursuant to this Agreement, TSI Medical will not, directly or indirectly solicit, initiate, entertain or accept any inquiries or proposals from, discuss or negotiate with, provide any nonpublic information to, or consider the merits of any unsolicited inquiries or proposals from, any person or entity (other than Relay Mines ) relating to any transaction involving the sale of the business or assets (other than in the ordinary course of business), or any of the capital stock of TSI Medical, or any merger, consolidation, business combination, or similar transaction.

7.5 Conduct of TSI Medical Business Prior to Closing. From the date of this Agreement to the Closing Date, and except to the extent that Relay Mines otherwise consents in writing, TSI Medical will operate its business substantially as presently operated and only in the ordinary course and in compliance with all applicable laws, and use its best efforts to preserve intact its good reputation and present business organization and to preserve its relationships with persons having business dealings with it.

7.6 Certain Acts Prohibited - TSI Medical. Except as expressly contemplated by this Agreement, between the date of this Agreement and the Closing Date, TSI Medical will not, without the prior written consent of Relay Mines:

(a) amend its memorandum and articles, by-laws or other organizational documents;

(b) incur any liability or obligation other than in the ordinary course of business or encumber or permit the encumbrance of any properties or assets of TSI Medical, except as disclosed in a Schedule to this Agreement;

(c) dispose of or contract to dispose of any TSI Medical property or assets except in the ordinary course of business consistent with past practice;

(d) issue, deliver, sell, pledge or otherwise encumber or subject to any lien any shares of the TSI Medical Common Stock, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities;

(e) (i) declare, set aside or pay any dividends on, or make any other distributions in respect of the TSI Medical Common Stock, or (ii) split, combine or reclassify any TSI Medical Common Stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of TSI Medical Common Stock; or

(f) materially increase benefits or compensation expenses of TSI Medical, other than as contemplated by the terms of any employment agreement in existence on the date of this Agreement, increase the cash compensation of any director, executive officer or other key employee or pay any benefit or amount not required by a Plan or arrangement as in effect on the date of this Agreement to any such person.

7.7 Certain Acts Prohibited - Relay Mines. Except as expressly contemplated by this Agreement and the Exelar Medical Funding Agreement, between the date of this Agreement and the Closing Date, Relay Mines will not, without the prior written consent of TSI Medical:

(a) amend its certificate of incorporation, by-laws or other organizational documents;

(b) incur any liability or obligation other than in the ordinary course of business or encumber or permit the encumbrance of any properties or assets of Relay Mines, except as disclosed in a Schedule to this Agreement;

(c) dispose of or contract to dispose of any Relay Mines property or assets except in the ordinary course of business consistent with past practice;

(d) issue or sell shares of Relay Mines Stock, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than in the Relay Mines Private Placement;

(e) (i) declare, set aside or pay any dividends on, or make any other distributions in respect of the Relay Mines Stock, or (ii) split, combine or reclassify any Relay Mines Stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of Relay Mines Stock; or

(f) materially increase benefits or compensation expenses of Relay Mines, other than as contemplated by the terms of any employment agreement in existence on the date of this Agreement, increase the cash compensation of any director, executive officer or other key employee or pay any benefit or amount not required by a Plan or arrangement as in effect on the date of this Agreement to any such person.

7.8 Shareholders Meeting. As soon as is practical after execution of this Agreement, TSI Medical will prepare and deliver a Notice of Meeting in connection with the approval of the shareholders of TSI Medical of the Merger (the "Notice of Meeting'). Relay Mines will provide to TSI Medical all information relating to Relay Mines and Relay Sub as reasonably required to prepare the Notice of Meeting in compliance with applicable corporate laws. TSI Medical will provide a copy of the Notice of Meeting to Relay Mines and its legal counsel for their review and comment prior to delivery to the shareholders of TSI Medical. TSI Medical will use its commercially reasonable efforts to finalize the Notice of Meeting and obtain the approval of the shareholders of TSI Medical to the Merger. TSI Medical will ensure the meeting is conducted in accordance with applicable laws.

7.9 Public Announcements. Relay Mines and TSI Medical each agree that they will not release or issue any reports or statements or make any public announcements relating to this Agreement or the Merger contemplated herein without the prior written consent of the other party, except as may be required upon written advice of counsel to comply with applicable laws or regulatory requirements after consulting with the other party hereto and seeking their consent to such announcement.

7.10 Relay Mines Board of Directors. Immediately upon the Closing, the current directors of Relay Mines will adopt resolutions appointing a new board of directors for Relay Mines consisting of three (3) members, Logan B. Anderson, Harold C. Moll and Peter Hogendoorn. Relay Mines will prepare and file a Schedule 14F information statement with the SEC as required under the Exchange Act in connection with the change of directors arising in connection with the completion of the Merger.

7.11 Relay Mines Name Change. Relay Mines agrees that it will change its corporate name to "XLR Medical Corp. ', which name change will be effected by merging the Relay Sub into Relay Mines. If the Merger is not consummated for any reason, Relay Mines will not proceed with the change of its corporate name to "XLR Medical Corp.'. TSI Medical acknowledges that completion of the name change is not a condition precedent to completion of the Merger.

ARTICLE 8.

CLOSING

8.1 Closing. The Closing shall take place on the Closing Date at the offices of the lawyers for TSI Medical or at such other location as agreed to by the parties. Notwithstanding the location of the Closing, each party agrees that the Closing may be completed by the exchange of undertakings between the respective legal counsel for TSI Medical and Relay Mines, provided such undertakings are satisfactory to each party's respective legal counsel.

8.2 Closing Deliveries of TSI Medical. At Closing, TSI Medical will deliver or cause to be delivered the following, fully executed and in form and substance reasonably satisfactory to Relay Mines: (a) copies of all resolutions and/or consent actions adopted by or on behalf of the boards of directors of TSI Medical evidencing approval of this Agreement and the Merger; (b) the certificate and attached documents required by Section 6.1(d) of this Agreement; (c) a certificate of an officer of TSI Medical, dated as of Closing, certifying that (a) each covenant and obligation of TSI Medical has been complied with, and (b) each representation, warranty and covenant of TSI Medical is true and correct at the Closing as if made on and as of the Closing;

(d) the Articles of Merger duly executed by TSI Medical and any other TSI Medical Merger Documents, each duly executed by TSI Medical, as required to give effect to the Merger; and

(e) a copy of the Minutes of the Shareholders Meeting agreeing to the Merger.

8.3 Closing Deliveries of Relay Mines. At Closing, Relay Mines will deliver or cause to be delivered the following, fully executed and in form and substance reasonably satisfactory to TSI Medical:

(a) copies of all resolutions and/or consent actions adopted by or on behalf of the boards of directors of Relay Mines and the shareholder and directors of Relay Sub evidencing approval of this Agreement and the Merger;

(b) a certificate of an officer of Relay Mines, dated as of Closing, certifying that (a) each covenant and obligation of Relay Mines has been complied with, and (b) each representation, warranty and covenant of Relay Mines is true and correct at the Closing as if made on and as of the Closing;

(c) a certificate of an officer of Relay Sub, dated as of Closing, certifying that (a) each covenant and obligation of Relay Sub has been complied with, and (b) each representation, warranty and covenant of Relay Sub is true and correct at the Closing as if made on and as of the Closing;

(d) the certificate and attached documents required by Section 6.2(d) of this Agreement;

(e) the Articles of Merger duly executed by Relay Sub and any other Relay Mines Merger Documents, each duly executed by Relay Mines and Relay Sub, as required to give effect to the Merger;

(f) the resolution required by Section 6.2(n) of this Agreement;

(g) evidence of the surrender of stock as required by Section 6.2(o) of this Agreement;

(h) the minute books and all corporate records of Relay Mines; and

(i) a list of all bank, trust, savings, checking or other accounts of Relay Mines.

ARTICLE 9.

TERMINATION

9.1 Termination. This Agreement may be terminated at any time prior to the Closing Date contemplated hereby by:

(a) mutual agreement of Relay Mines, Relay Sub and TSI Medical;

(b) Relay Mines, if there has been a breach by TSI Medical of any material representation, warranty, covenant or agreement set forth in this Agreement on the part of TSI Medical that is not cured, to the reasonable satisfaction of Relay Mines, within ten business days after notice of such breach is given by Relay Mines (except that no cure period will be provided for a breach by TSI Medical that by its nature cannot be cured);

(c) TSI Medical, if there has been a breach by Relay Mines or the Principal Shareholders of any material representation, warranty, covenant or agreement set forth in this Agreement on the part of Relay Mines or the Principal Shareholders that is not cured by the breaching party, to the reasonable satisfaction of TSI Medical, within ten business days after notice of such breach is given by TSI Medical (except that no cure period will be provided for a breach by Relay Mines or the Principal Shareholders that by its nature cannot be cured);

(d) Relay Mines or TSI Medical, if the Merger contemplated by this Agreement has not been consummated prior to August 31, 2004, unless the parties agree to extend such date; or

(e) Relay Mines or TSI Medical if any permanent injunction or other order of a governmental entity of competent authority preventing the consummation of the Merger contemplated by this Agreement has become final and nonappealable.

9.2 Effect of Termination. In the event of the termination of this Agreement as provided in Section 9.1, this Agreement will be of no further force or effect, provided, however, that no termination of this Agreement will relieve any party of liability for any breaches of this Agreement that are based on a wrongful refusal or failure to perform any obligations.

ARTICLE 10.

INDEMNIFICATION; REMEDIES; SURVIVAL

10.1 Certain Definitions. For the purposes of this Article 10, the terms "Loss' and "Losses' means any and all demands, claims, actions or causes of action, assessments, losses, damages. liabilities, costs, and expenses, including without limitation, interest, penalties, fines and reasonable attorneys, accountants and other professional fees and expenses, but excluding any indirect, consequential or punitive damages suffered by Relay Mines or TSI Medical including damages for lost profits or lost business opportunities.

10.2 Agreement of TSI Medical to Indemnify. TSI Medical will indemnify, defend, and hold harmless Relay Mines and Relay Sub, its respective officers, directors, shareholders, employees and affiliates from, against, and in respect of any and all Losses asserted against, relating to, imposed upon, or incurred by Relay Mines and Relay Sub by reason of, resulting from, based upon or arising out of:

(a) the breach by TSI Medical of any representation or warranty of TSI Medical contained in or made pursuant to this Agreement, or certificate or instrument delivered pursuant to this Agreement;

(b) the breach or partial breach by TSI Medical of any covenant or agreement of TSI Medical made in or pursuant to this Agreement, or other certificate or instrument delivered pursuant to this Agreement.

10.3 Agreement of Relay Mines to Indemnify. Relay Mines and Relay Sub will indemnify, defend, and hold harmless TSI Medical from, against, for, and in respect of any and all Losses asserted against, relating to, imposed upon, or incurred by TSI Medical by reason of, resulting from, based upon or arising out of:

(a) the breach by Relay Mines or Relay Sub of any representation or warranty of Relay Mines or Relay Sub contained in or made pursuant to this Agreement, any Relay Mines Merger Document or certificate or instrument delivered pursuant to this Agreement;

(b) the breach or partial breach by Relay Mines or Relay Sub of any covenant or agreement of Relay Mines or Relay Sub made in or pursuant to this Agreement, or any Relay Mines Merger Document or other certificate or instrument delivered pursuant to this Agreement.

ARTICLE 11.

MISCELLANEOUS PROVISIONS

11.1 Effectiveness of Representations; Survival. Each party is entitled to rely on the representations, warranties and agreements of each of the other parties and all such representation, warranties and agreement will be effective regardless of any investigation that any party has undertaken or failed to undertake. The representation, warranties and agreements will survive the Closing Date and continue in full force and effect until six (6) months after the Closing Date.

11.2 Further Assurances. Each of the parties hereto will cooperate with the others and execute and deliver to the other parties hereto such other instruments and documents and take such other actions as may be reasonably requested from time to time by any other party hereto as necessary to carry out, evidence, and confirm the intended purposes of this Agreement.

11.3 Amendment. This Agreement may not be amended except by an instrument in writing signed by each of the parties.

11.4 Expenses. Each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Merger contemplated hereby, including all fees and expenses of agents, representatives, counsel, and accountants.

11.5 Entire Agreement. This Agreement, the exhibits, schedules attached hereto and the other Merger Documents contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior arrangements and understandings, both written and oral, expressed or implied, with respect thereto. Any preceding correspondence or offers are expressly superseded and terminated by this Agreement.

11.6 Notices. All notices and other communications required or permitted under to this Agreement must be in writing and will be deemed given if sent by personal delivery, faxed with electronic confirmation of delivery, internationally-recognized express courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as will be specified by like notice):

If to TSI Medical:

TSI MEDICAL CORP.

Suite 202, 810 Peace Portal Drive

Blaine, Washington 98230

Attention: Derek R. Van Laare, President

Telephone: (604) 726-0880

Facsimile: (508) 632-7694

E-Mail: dvanlaare@telus.net

With a copy (which will not constitute notice) to:

Stephen F.X. O'Neill, Esq.

O'Neill Law Group PLLC

Suite 1010, 435 Martin Street

Blaine, Washington 98230

Telephone: (330) 360-3300

Facsimile: (330) 332-2291

E-Mail: son@stockslaw.com

If to Relay Mines:

RELAY MINES LIMITED

1040 West Georgia Street, Suite 1160

Vancouver, British Columbia

Canada V6E 4H1

Attention: Carlo Civelli, President

Telephone: (604) 605-0885

Facsimile: (604) 605-0886

E-Mail: maryna@callinan.com

With a copy (which will not constitute notice) to:

Conrad C. Lysiak, Esq.

601 West First Avenue, Suite 503

Spokane, Washington 99201

Telephone: (509) 624-1475

Facsimile: (509) 747-1770

E-mail: cclysiak@qwest.net

All such notices and other communications will be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a fax, when the party sending such fax has received electronic confirmation of its delivery, (c) in the case of delivery by internationally-recognized express courier, on the business day following dispatch and (d) in the case of mailing, on the fifth business day following mailing.

11.7 Headings. The headings contained in this Agreement are for convenience purposes only and will not affect in any way the meaning or interpretation of this Agreement.

11.8 Benefits. This Agreement is and will only be construed as for the benefit of or enforceable by those persons party to this Agreement.

11.9 Assignment. This Agreement may not be assigned (except by operation of law) by any party without the consent of the other parties.

11.10 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the Province of British Columbia applicable to contracts made and to be performed therein.

11.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party.

11.12 Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

11.13 Fax Execution. This Agreement may be executed by delivery of executed signature pages by fax and such fax execution will be effective for all purposes.

11.14 Schedules and Exhibits. The schedules and exhibits are attached to this Agreement and incorporated herein.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written.

RELAY MINES LIMITED

a Nevada corporation by its authorized signatory:

/s/ Carlo Civelli

Signature of Authorized Signatory

Carlo Civelli

Name of Authorized Signatory

Director

Position of Authorized Signatory

TSI MEDICAL CORP.

a Nevada corporation by its authorized signatory:

/s/ Derek Van Laare

Signature of Authorized Signatory

Derek Van Laare

Name of Authorized Signatory

President

Position of Authorized Signatory

SIGNED, SEALED AND DELIVERED

BY CARLO CIVELLI in the presence of:

/s/ Alba Grasso

Signature of Witness

	
Alba Grasso 

Name of Witness 
	

/s/ Carlo Civelli

CARLO CIVELLI

Collefresco 210

Address of Witness

Montalcino, Italy

SIGNED, SEALED AND DELIVERED

BY BRUNO MOSIMANN in the presence of:

/s/ Regine Schoch

Signature of Witness

	
Regine Schoch 

Name of Witness 
	

/s/ Bruno Mosimann

BRUNO MOSIMANN

Albisriederstr. 164

Address of Witness

CH-8040 Zurich / Switzerland

TSI MED ACQUISITION CORP.

a Nevada corporation by its authorized signatory:

/s/ Reg Handford

Signature of Authorized Signatory

Reg Handford

Name of Authorized Signatory

President

Position of Authorized Signatory

SCHEDULE 2.1

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

ARTICLES OF MERGER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEAN HELLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

Articles of Merger

(PURSUANT TO NRS 92A.200)

Page 1

Important: Read attached instructions before completing form.

(Pursuant to Nevada Revised Statutes Chapter 92A)

(excluding 92A.200(4b))

SUBMIT IN DUPLICATE

1) Name and jurisdiction of organization of each constituent entity (NRS 92A.200). If there are more and attach an 81/2" x 11'' blank sheet containing the than four merging entities, check box required information for each additional entity.

	

TSI MEDICAL CORP.

Name of merging entity

	

 

	
Nevada

Jurisdiction
	
Corporation 

Entity type *

	
 

	

Name of merging entity

	
 
	
 

	
Jurisdiction
	
Entity type *

	
 

	

Name of merging entity

	

 

	
Jurisdiction
	
Entity type *

	
 

	

Name of merging entity

	

 

	
Jurisdiction
	
Entity type *

	
 

	
and,

	

TSI MED ACQUISITION CORP.

	

Name of surviving entity

	

 

	
Nevada

Jurisdiction
	
Corporation

Entity type *

* Corporation, non-profit corporation, limited partnership, limited-liability company or business trust.

This form must be accompanied by appropriate fees. See attached fee schedule. 

DEAN HELLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

Articles of Merger

(PURSUANT TO NRS 92A.200)

Page 2

Important: Read attached instructions before completing form.

2) Forwarding address where copies of process may be sent by the Secretary of State of Nevada (if a foreign entity is the survivor in the merger - NRS 92A.1 90):

Attn:

c/o:

3) (Choose one)

	
[ x ] 
	
The undersigned declares that a plan of merger has been adopted by each constituent entity (NRS 92A.200).

	
[   ]  
	
The undersigned declares that a plan of merger has been adopted by the parent domestic entity (NRS 92A.180)

4) Owner's approval (NRS 92A.200)(options a, b, or c must be used, as applicable, for each entity) (if and attach an 8 1/2" x 11'' blank sheet there are more than four merging entities, check box containing the required information for each additional entity):

(a) Owner's approval was not required from

Name of merging entity, if applicable

Name of merging entity, if applicable

Name of merging entity, if applicable

Name of merging entity, if applicable

and, or;

Name of surviving entity, if applicable

This form must be accompanied by appropriate fees. See attached fee schedule. 

 

 

 

 

DEAN HELLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

Articles of Merger

(PURSUANT TO NRS 92A.200)

Page 3

Important: Read attached instructions before completing form.

Important., Read attached instructions before completing form. 

(b) The plan was approved by the required consent of the owners of *:

TSI MEDICAL CORP.

Name of merging entity, if applicable

Name of merging entity, if applicable

Name of merging entity, if applicable

Name of merging entity, if applicable

and, or;

TSI MED ACQUISITION CORP.

Name of surviving entity, if applicable

* Unless otherwise provided in the certificate of trust or governing instrument of a business trust, a merger must be approved by all the trustees and beneficial owners of each business trust that is a constituent entity in the merger.

This form must be accompanied by appropriate fees. See attached fee schedule. 

 

 

 

 

 

DEAN HELLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

Articles of Merger

(PURSUANT TO NRS 92A.200)

Page 4

Important: Read attached instructions before completing form.

(c) Approval of plan of merger for Nevada non-profit corporation (NRS 92A.160):

The plan of merger has been approved by the directors of the corporation and by each public officer or other person whose approval of the plan of merger is required by the articles of incorporation of the domestic corporation.

Name of merging entity, if applicable

Name of merging entity, if applicable

Name of merging entity, if applicable

Name of merging entity, if applicable

and, or;

Name of surviving entity, if applicable

This form must be accompanied by appropriate fees. See attached fee schedule. 

 

 

 

 

 

 

 

DEAN HELLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

Articles of Merger

(PURSUANT TO NRS 92A.200)

Page 5

Important: Read attached instructions before completing form.

5) Amendments, if any, to the articles or certificate of the surviving entity. Provide article numbers, if available. (NRS 92A.200)*:

 

 

 

6) Location of Plan of Merger (check a or b):

	
[   ] 
	
(a) The entire plan of merger is attached;

	
 
	
or,

	
[ x ] 
	
(b) The entire plan of merger is on file at the registered office of the surviving corporation, limited-liability company or business trust, or at the records office address if a limited partnership, or other place of business of the surviving entity (NRS 92A.200).

7) Effective date (optional)":

* Amended and restated articles may be attached as an exhibit or integrated into the articles of merger. Please entitle them ''Restated'' or ''Amended and Restated,'' accordingly. The form to accompany restated articles prescribed by the secretary of state must accompany the amended and/or restated articles. Pursuant to NRS 92A.180 (merger of subsidiary into parent - Nevada parent owning 90% or more of subsidiary), the articles of merger may not contain amendments to the constituent documents of the surviving entity except that the name of the surviving entity may be changed.

** A merger takes effect upon filing the articles of merger or upon a later date as specified in the articles, which must not be more than 90 days after the articles are filed (NRS 92A.240). 

This form must be accompanied by appropriate fees. See attached fee schedule. 

 

 

 

 

DEAN HELLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

Articles of Merger

(PURSUANT TO NRS 92A.200)

Page 6

Important: Read attached instructions before completing form.

8) Signatures - Must be signed by: An officer of each Nevada corporation; All general partners of each Nevada limited partnership; All general partners of each Nevada limited partnership; A manager of each Nevada limited-liability company with managers or all the members if there are no managers; A trustee of each Nevada business trust (NRS 92A.230)* and attach an 8 %'' x 1 1 '' blank 

(if there are more than four merging entities, check box sheet containing the required information for each additional entity.):

	
TSI MEDICAL CORP.

	
Name of merging entity 

	
 
	
President

	
Signature
	
Title 
	
Date

	
 

	
Name of merging entity 

	
 
	
 

	
Signature
	
Title 
	
Date

	
 

	
Name of merging entity 

	
 
	
 

	
Signature
	
Title 
	
Date

	
TSI MED ACQUISITION CORP.

	
Name of merging entity 

	
 
	
President

	
Signature
	
Title 
	
Date

* The articles of merger must be signed by each foreign constituent entity in the manner provided by the law governing it (NRS 92A.230). Additional signature blocks may be added to this page or as an attachment, as needed.

IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected.

This form must be accompanied by appropriate fees. See attached fee schedule. 

SCHEDULE 2.9A

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

CERTIFICATE OF NON-U.S. SHAREHOLDER

OF RELAY MINES LIMITED

In connection with the issuance of common stock ("Relay Mines Common Stock") of Relay Mines Limited, a Nevada corporation (" Relay Mines"), to the undersigned, pursuant to that certain Agreement and Plan of Merger dated August 12, 2004 among Relay Mines, TSI Med Acquisition Corp., a Nevada corporation, Carlo Civelli, Bruno Mosimann and TSI Medical Corp., a Nevada corporation (the "Target"), the undersigned hereby agrees, represents and warrants that he, she or it:

1. is not a "U.S. Person" as such term is defined by Rule 902 of Regulation S under the United States Securities Act of 1933, as amended ("U.S. Securities Act") (the definition of which includes, but is not limited to, an individual resident in the U.S. and an estate or trust of which any executor or administrator or trust, respectively is a U.S. Person and any partnership or corporation organized or incorporated under the laws of the U.S.);

2. was outside the U.S. when the shareholders of the Target approved of the Merger (as such is defined in the Agreement and Plan of Merger);

3. the Relay Mines Common Stock is not being acquired, directly or indirectly, for the account or benefit of a U.S. Person or a person in the United States;

4. acknowledges and agrees not to engage in hedging transactions with regard to the Relay Mines Common Stock prior to the expiration of the one (1) year distribution compliance period set forth in Rule 903(b)(3) of Regulation S under the U.S. Securities Act; 

5. acknowledges and agrees that Relay Mines shall refuse to register any trans fer of the Relay Mines Common Stock not made in accordance with the provisions of Regulation S, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration under the U.S. Securities Act;

6. understands and agrees that the Relay Mines Common Stock will bear the following legends:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."

IN WITNESS WHEREOF, I have executed this Certificate of Non-U.S. Shareholder.

	
Signature 
	
Date

	
Print Name 
	
Title (if Applicable)

	
Address
	
 

 

 

SCHEDULE 2.9B

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

CERTIFICATE OF U.S. SHAREHOLDER

OF RELAY MINES LIMITED

In connection with the issuan ce of common stock ("Relay Mines Common Stock") of Relay Mines Limited, a Nevada corporation (" Relay Mines"), to the undersigned, pursuant to that certain Agreement and Plan of Merger dated August 12, 2004 among Relay Mines, TSI Med Acquisition Corp., a Nevada corporation, Carlo Civelli, Bruno Mosimann and TSI Medical Corp., a Nevada corporation (the "Target"), the undersigned hereby agrees, represents and warrants that he, she or it:

1. Acquired Entirely for Own Account.

The undersigned represents and warrants that he, she or it is acquiring the Relay Mines Common Stock solely for the undersigned's own account for investment and not with a view to or for sale or distribution of the Relay Mines Common Stock or any portion thereof and without any present intention of selling, offering to sell or otherwise disposing of or distributing the Relay Mines Common Stock or any portion thereof in any transaction other than a transaction complying with the registration requirements of the U.S. Securities Act of 1933, as amended (the "Securities Act"), and applicable state and provincial securities laws, or pursuant to an exemption therefrom. The undersigned also represents that the entire legal and beneficial interest of the Relay Mines Common Stock that he, she or it is acquiring is being acquired for, and will be held for, the undersigned's account only, and neither in whole nor in part for any other person or entity.

2. Information Concerning Relay Mines.

The undersigned acknowledges that he, she or it has received all such information as the undersigned  deems necessary and appropriate to enable him, her or it to evaluate the financial risk inherent in making an investment in the Relay Mines Common Stock, including but not limited to Relay Mines' Form 10-KSB filed with the U.S. Securities and Exchange Commission, and the documents and materials included therewith, which includes a description of the risks inherent in an investment in Relay Mines and an Information Statement in connection with the Merger (as such term is defined in the Agreement and Plan of Merger) (the "Disclosure Documents"). The undersigned further acknowledges that he, she or it has received satisfactory and complete information concerning the business and financial condition of Relay Mines in response to all inquiries in respect thereof.

3. Economic Risk and Suitability.

The undersigned represents and warrants as follows:

(a) the undersigned realizes that the Relay Mines Common Stock involves a high degree of risk and are a speculative investment, and that he, she or it is able, without impairing the undersigned's financial condition, to hold the Relay Mines Common Stock for an indefinite period of time;

(b) the undersigned recognizes that there is no assurance of future profitable operations and that investment in Relay Mines involves substantial risks, and that the undersigned has taken full cognizance of and understands all of the risk factors related to the Relay Mines Common Stock;

(c) the undersigned has carefully considered and has, to the extent the undersigned believes such discussion necessary, discussed with the undersigned's professional legal, tax and financial advisors the suitability of an investment in Relay Mines for the particular tax and financial situation of the undersigned and that the undersigned and/or the undersigned's advisors have determined that the Relay Mines Common Stock is a suitable investment for the undersigned;

(d) the financial condition and investment of the undersigned are such that he, she or it is in a financial position to hold the Relay Mines Common Stock for an indefinite period of time and to bear the economic risk of, and withstand a complete loss of, the value of the Relay Mines Common Stock;

(e) the undersigned alone, or with the assistance of professional advisors, has such knowledge and experience in financial and business matters that the undersigned is capable of evaluating the merits and risks of acquiring the Relay Mines Common Stock, or has a pre-existing personal or business relationship with Relay Mines or any of its officers, directors, or controlling persons of a duration and nature that enables the undersigned to be aware of the character, business acumen and general business and financial circumstances of Relay Mines or such other person;

(f) the undersigned has carefully read the Disclosure Documents and Relay Mines has made available to the undersigned or the undersigned's advisors all information and documents requested by the undersigned relating to investment in the Relay Mines Common Stock, and has provided answers to the undersigned's satisfaction to all of the undersigned's questions concerning Relay Mines;

(g) if the undersigned is a partnership, trust, corporation or other entity: (1) it was not organized for the purpose of acquiring the Relay Mines Common Stock (or all of its equity owners are "accredited investors" as defined in Section 6 below); (2) it has the power and authority to execute this Certificate and the person executing said document on its behalf has the necessary power to do so; (3) its principal place of business and principal office are located within the state set forth in its address below; and (4) all of its trustees, partners and/or shareholders, whichever the case may be, are bona fide residents of said state;

(h) the undersigned understands that neither Relay Mines nor any of its officers or directors has any obligation to register the Relay Mines Common Stock under any federal or other applicable securities act or law;

(i) the undersigned has relied solely upon the Disclosure Documents, advice of his or her representatives, if any, and independent investigations made by the undersigned and/or his or her the undersigned representatives, if any, in making the decision to acquire the Relay Mines Common Stock and acknowledges that no representations or agreements other than those set forth in the Disclosure Documents have been made to the undersigned in respect thereto;

(j) all information which the undersigned has provided concerning the undersigned himself, herself or itself is correct and complete as of the date set forth below, and if there should be any material change in such information prior to the issuance of the Relay Mines Common Stock, he, she or it will immediately provide such information to Relay Mines;

(k) the undersigned confirms that the undersigned has received no general solicitation or general advertisement and has attended no seminar or meeting (whose attendees have been invited by any general solicitation or general advertisement) and has received no advertisement in any newspaper, magazine, or similar media, broadcast on television or radio regarding acquiring the Relay Mines Common Stock; and

(l) the undersigned is at least 21 years of age and is a citizen of the United States residing at the address indicated below.

4. Restricted Securities.

The undersigned acknowledges that Relay Mines has hereby disclosed to the undersigned in writing:

(a) the Relay Mines Common Stock that the undersigned is acquiring have not been registered under the Securities Act or the securities laws of any state of the United States, and such securities must be held indefinitely unless a transfer of them is subsequently registered under the Securities Act or an exemption from such registration is available; and

(b) Relay Mines will make a notation in its records of the above described restrictions on transfer and of the legend described below.

5. Legends.

The undersigned agrees that the Relay Mines Common Stock will bear the following legends:

 

 

 

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION D PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT."

6. Suitable Investor.

In order to establish the qualification of the undersigned to acquire the Relay Mines Common Stock, the information requested in either subsection 6(a) or (b) below must be supplied.

(a) The undersigned is an "accredited investor," as defined in Securities and Exchange Commission (the "SEC") Rule 501. An "accredited investor" is one who meets any of the requirements set forth below. The undersigned represents and warrants that the undersigned falls within the category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED INVESTOR THAT YOU, THE UNDERSIGNED, SATISFY, BY PLACING AN "X" ON THE APPROPRIATE LINE BELOW.

	
_____ 
	
Category 1. 
	
A bank, as defined in Section 3(a)(2) of the Securities Act, whether acting in its individual or fiduciary capacity; or

	
_____ 
	
Category 2. 
	
A savings and loan association or other institution as defined in Section 3(a) (5) (A) of the Securities Act, whether acting in its individual or fiduciary capacity; or

	
_____ 
	
Category 3. 
	
A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; or

	
_____ 
	
Category 4. 
	
An insurance company as defined in Section 2(13) of the Securities Act; or

	
_____ 
	
Category 5. 
	
An investment company registered under the Investment Company Act of 1940; or

	
_____ 
	
Category 6. 
	
A business development company as defined in Section 2(a) (48) of the Investment Company Act of 1940; or

	
_____ 
	
Category 7. 
	
A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; or

	
_____ 
	
Category 8. 
	
A plan established and maintained by a state, its political subdivision or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with assets in excess of $5,000,000; or

	
_____ 
	
Category 9. 
	
An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment advisor, or an employee benefit plan with total assets in excess of $5,000,000 or, if a self-directed plan, the investment decisions are made solely by persons who are accredited investors; or

	
_____ 
	
Category 10. 
	
A private business development company as defined in Section 202(a) (22) or the Investment Advisers Act of 1940; or

	
_____ 
	
Category 11. 
	
An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Interest, with total assets in excess of $5,000,000; or

	
_____ 
	
Category 12. 
	
A director or executive officer of Relay Mines; or

	
_____ 
	
Category 13. 
	
A natural person whose individual net worth, or joint net worth with that person's spouse, at the time of this purchase exceeds $1,000,000; or

	
_____ 
	
Category 14. 
	
A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;or

	
_____ 
	
Category 15. 
	
A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Interest, whose purchase is directed by a sophisticated person as described in SEC Rule 506(b)(2)(ii); or

	
_____ 
	
Category 16. 
	
An entity in which all of the equity owners are accredited investors. 

(b) The undersigned is not an accredited investor and meets the requirements set forth below. PLEASE INDICATE THAT YOU, THE UNDERSIGNED, SATISFY THESE REQUIREMENTS BY PLACING AN "X" ON THE LINE BELOW.

	
_____ 
	

The undersigned, either alone or with the undersigned's representative, has such knowledge, skill and experience in business, financial and investment matters so that the undersigned is capable of evaluating the merits and risks of an investment in the Relay Mines Common Stock. To the extent necessary, the undersigned has retained, at the undersigned's own expense, and relied upon, appropriate professional advice regarding the investment, tax and legal merits and consequences of owning the Relay Mines Common Stock. In addition, the amount of the undersigned's investment in the Relay Mines Common Stock does not exceed ten percent (10%) of the undersigned's net worth. The undersigned agrees to furnish any additional information requested to assure compliance with applicable federal and state securities laws in connection with acquiring the Relay Mines Common Stock.

7. Understandings.

The undersigned understands, acknowledges and agrees that:

(a) no federal or state agency has made any finding or determination as to the accuracy or adequacy of the Disclosure Documents or as to the fairness of the terms of this offering for investment nor any recommendation or endorsement of the Relay Mines Common Stock;

(b) this offering is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act, which is in part dependent upon the truth, completeness and accuracy of the statements made by the undersigned herein;

(c) the Relay Mines Common Stock is "restricted securities" in the U.S. under the Securities Act. There can be no assurance that the undersigned will be able to sell or dispose of the Relay Mines Common Stock. It is understood that in order not to jeopardize this offering's exempt status under Section 4(2) of the Act, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder; 

(d) the representations, warranties and agreements of the undersigned contained herein and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on and as of the date the Relay Mines Common Stock is acquired as if made on and as of such date; and

(e) THE RELAY MINES COMMON STOCK MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE UNDERSIGNED SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

IN WITNESS WHEREOF, I have executed this Certificate of U.S. Shareholder.

	
Signature 
	
Date

	
Print Name 
	
Title (if Applicable)

	
Address
	
 

 

SCHEDULE 3.3

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

CAPITALIZATION OF TSI MEDICAL

The aggregate number of shares which TSI Medical Corp. shall have authority to issue shall consist of 100,000,000 shares of common stock, par value $0.001.

There are 9,492,667 shares of common stock are issued and outstanding.

There are 1,450,000 outstanding options to purchase shares of common stock at an exercise price of $0.50 per share expiring May 31, 2009 and 54,367 outstanding warrants to purchase shares of common stock at a price of $0.75 per share expiring October 1, 2006.

The Company has entered into a Technology Acquisition and Funding Agreement dated March 22, 2004 (the "TFA Agreement') with Exelar Corporation ("Exelar') and Exelar Medical Corporation ("EMC') with respect to the funding of EMC. Under the terms of the TFA Agreement following completion of certain funding by TSI Medical, Exelar will have the right to transfer its interest in EMC to TSI Medical in exchange for shares of TSI Medical's common stock representing 49% of the outstanding shares of TSI Medical.

TSI Medical is obligated to issue 300,000 shares of its common stock to Imaging Technology Ventures, Inc. of Hillsborough, California by way of finder's fee in connection with its agreement with Exelar.

Other than the above, there are no outstanding options, warrants, subscriptions, conversion rights, or other rights, agreements or commitments obligating TSI Medical Corp. to issue additional shares of common stock or preferred stock, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from TSI Medical Corp. any shares of common stock or preferred stock.

There are no agreements purporting to restrict the transfer of any shares of TSI Medical Corp., no voting agreement, voting trusts, or other arrangements restricting or affecting the voting of the shares of TSI Medical Corp.

 

 

 

 

 

 

 

SCHEDULE 3.4

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

TSI MEDICAL SUBSIDIARIES

TSI Medical has a wholly-owned subsidiary incorporated in the Province of British Columbia, Canada called 689158 B.C. Ltd.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 3.6

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

ACTIONS AND PROCEEDINGS

TSI Medical's subsidiary, 689158 B.C. Ltd., received a default notice from The Charles F. White Corporation ("CFW') dated July 14, 2004 in connection with a loan agreement dated as of March 8, 2004 between 689158 B.C. Ltd. and CFW. CFW demands payment of the total indebtedness outstanding as at July 2, 2004, being $602,121.24, plus interest accrued from July 2, 2004. The loan is guaranteed by TSI Medical. Management of TSI Medical have been in discussions with the principal of CFW, who has indicated to management of TSI Medical that he will be willing to extend the payment terms for the loan. A formal extension has not yet been concluded. TSI Medical's guarantee of the loan is secured by its 826,240 common shares of Techniscan, Inc. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 3.9

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

TSI MEDICAL FINANCIAL STATEMENTS

Unaudited Financial Statements as of January 31, 2004.

Audited Financial Statements as of January 31, 2003 and 2002.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

FINANCIAL STATEMENTS

JANUARY 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

BALANCE SHEET

(Unaudited)

(Stated in U.S. Dollars)

	

 

	
JANUARY 31

2004 

	

  

	
JANUARY 31

2003 

	
ASSETS
	

 
	

 
	

 

	

Current
	

 
	

 
	

 

	
Cash 
	
$ 
	
6,077 
	
 
	
$ 
	
32
	
 

	
Investment (Note 3)
	
 
	
385,568
	
 
	
 
	
-
	
 

	
Loan Receivable(Note 4)
	
  

	
345,000 

	
  

	
  

	
  

	
  

	

  

	
$ 

	

736,645 

	
  

	
$ 

	
32 

	
  

	
LIABILITIES
	
 
	
 
	
 
	
 
	
 
	
 

	
Current
	
 
	
 
	
 
	
 
	
 
	
 

	
Accounts payable 
	
$ 
	
88,875 
	
 
	
$ 
	
14,705
	
 

	
Loans and advances payable (Notes 4 and 6)
	
 
	
120,000
	
 
	
 
	
49,100
	
 

	
Loan-C.F.White (Note 4)
	
 
	
500,000
	
 
	
 
	
 
	
 

	
Other Advances
	
  

	
79,047 

	
  

	
  

	
  

	
  

	
 
	
  

	
787,922 

	
  

	
  

	
63,805 

	
  

	
SHAREHOLDERS' EQUITY (DEFICIENCY)
	
 
	
 
	
 
	
 
	
 
	
 

	
Share Capital
	
 
	
 
	
 
	
 
	
 
	
 

	
Authorized:
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
100,000,000 common shares, par value $0.001 per share
	
 
	
 
	
 
	
 
	
 
	
 

	
Issued and outstanding:
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
8,512,500 common shares at January 31, 2003 and
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
9,492,667 common shares at January 31, 2004 
	
 
	
9,492 
	
 
	
 
	
8,513
	
 

	
Additional paid-in capital 
	
 
	
810,824 
	
 
	
 
	
282,737
	
 

	
Deficit Accumulated During The Development Stage 
	
  

	
(871,593) 

	
  

	
  

	
(355,023) 

	
  

	
 
	
  

	
(51,277) 

	
  

	
  

	
(63,773) 

	
  

	
  

	
$ 

	
736,645 

	
  

	
$ 

	
32 

	
  

2

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

STATEMENT OF OPERATIONS AND DEFICIT

(Unaudited)

(Stated in U.S. Dollars)

	

  

	

YEAR 

ENDED 

JANUARY 31 

2004 

	

  

	

YEAR 

ENDED 

JANUARY 31 

2003 

	

  

	
INCEPTION

DECEMBER 21

2000 TO

JANUARY 31

2004 

	
Expenses
	
 
	
 
	
 
	
 
	
 
	
 

	
Consulting
	
$ 
	
134,550
	
 
	
$ 
	
44,500
	
 
	
$
	
188,050

	
Management fees
	
 
	
90,000
	
 
	
 
	
60,000
	
 
	
 
	
150,000

	
Office administration Fees 
	
 
	
 
	
 
	
 
	
1,500 
	
 
	
 
	
1,500

	
Office and sundry
	
 
	
14,669
	
 
	
 
	
10,839 
	
 
	
 
	
25,508

	
Interest
	
 
	
15,759
	
 
	
 
	
 
	
 
	
 
	
15,759

	
Professional fees 
	
 
	
87,587 
	
 
	
 
	
33,674 
	
 
	
 
	
126,834

	
Public relations 
	
 
	
35,992 
	
 
	
 
	
 
	
 
	
 
	
35,992

	
Rent 
	
 
	
 
	
 
	
 
	
750 
	
 
	
 
	
750

	
Travel and promotion
	
 
	
133,128
	
 
	
 
	
66,187 
	
 
	
 
	
199,315

	
Transfer Agent Fees
	
  

	
4885 

	
  

	
  

	
  

	
  

	
  

	
4885 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Loss Before The Following 
	
 
	
516,570 
	
 
	
 
	
217,450 
	
 
	
 
	
748,593

	
Write Off Of Advances To Joint Venture (Note 1(b))
	

  

	

  

	

  

	

  

	

123,000 

	

  

	

  

	

123,000 

	
Net Loss For The Period 
	
 
	
 
	
 
	
 
	
340,450 
	
 
	
 

	
871,593 

	
Deficit Accumulated During The Development Stage, Beginning Of Period
	

  

	

355,023 

	

  

	

  

	

14,573 

	
  
	
 
	
 

	
Deficit Accumulated During The Development Stage, End Of Period 

	

$ 

	

 871,593 

	

  

	

$ 

	

355,023 

	
 
	
 
	
 

	
Basic And Diluted Loss Per Share 

	
$ 

	
0.97 

	
  

	
$ 

	
0.01 

	
  
	
 
	

 

	
Weighted Average Number Of Common Shares Outstanding 

	

  

	

8,990,024 

	

  

	

  

	

8,422,721 

	
 
	
 
	
 

3

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

STATEMENT OF STOCKHOLDERS' (DEFICIENCY) EQUITY

January 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

	
 
	

COMMON STOCK

 	

 
	

 
	

 

	

 
	

NUMBER OF SHARES 

	

AMOUNT 

	

ADDITIONAL PAID-IN CAPITAL 

	

DEFICIT 

	

 
TOTAL 

	

Balance, January 31, 2001 

	

 
	

- 
	

$
	

- 
	

$
	

- 
	

$
	

- 
	

$
	

-

	

January 11, 2002 - Shares issued for cash at $0.001 

	

 
	

5,000,000
	

 
	

 
5,000
	

 
	

-
	

 
	

-
	

 
	

5,000

	

January 29, 2002 - Shares issued for cash at $0.01 

	

 
	

3,000,000
	

 
	

3,000
	

 
	

27,000
	

 
	

-
	

 
	

30,000

	

Net loss for the year 
	

 
	

- 

	

  

	

- 

	

  

	

- 

	

  

	

(14,573) 

	

  

	

(14,573) 

	

Balance, January 31, 2002 

	

 
	

8,000,000 
	

 
	

8,000 
	

 
	

27,000 
	

 
	

(14,573) 
	

 
	

20,427

	

March 15, 2002 - Shares issued for cash at $0.50 

	

 
	

 250,000
	

 
	

 250
	

 
	

 124,750
	

 
	

 -
	

 
	

 125,000

	

April 30, 2002 - Shares issued for cash at $0.50 

	

 
	

140,000
	

 
	

140
	

 
	

 69,860
	

 
	

 -
	

 
	

 70,000

	

May 31, 2002 - Shares issued for cash at $0.50 

	

 
	

 60,500 
	

 
	

 61 
	

 
	

 30,189 
	

 
	

 - 
	

 
	

 30,250

	

June 25, 2002 - Shares issued for cash at $0.50 

	

 
	

 62,000
	

 
	

 62
	

 
	

 30,938
	

 
	

 -
	

 
	

 31,000

	

Net loss for the year 
	

  
	

- 

	

  

	

- 

	

  

	

- 

	

  

	

(340,450) 

	

  

	

(340,450) 

	

Balance, January 31, 2003 

	

 
	

8,512,500 
	

 
	

8,513 
	

 
	

282,737 
	

 
	

(355,023) 
	

 
	

(63,773)

	
June 23, 2003 - Shares issued for cash at $0.50 

	
	

 432,500
	
	

 432
	
	

 215,818
	
	

 -
	
	

 216,250

	
September 30, 2003 Shares issued for cash at $0.75 

	

 
	

 547,667 
	

 
	

 547
	

 
	

 312,269
	

 
	

 
	

 
	

 312,816

	

Net loss for the period 
	

 
	

- 

	

  

	

- 

	

  

	

- 

	

  

	

(516,570) 

	

  

	

(516,570) 

	

Balance, January 31, 2004 
	

 
	

9,492,667 

	

$ 

	

9,492 

	

$ 

	

810,824 

	

$ 

	

(871,593) 

	

$ 

	

(51,277) 

 

 

 

4

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

January 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

1. NATURE OF OPERATIONS

	
a) 
	
Organization

	
 
	
The Company was incorporated in the state of Nevada, U.S.A., on December 21, 2000. On June 19, 2003, the Company changed its name from Purcell Ventures, Inc. to TSI Medical Corp.

	
b) 
	
Development Stage Activities

	
 
	
The Company was originally organized to seek business opportunities in the high technology field. In January of 2002, the Company entered into a joint venture letter agreement for the development and marketing of a technology for automobile air bag inflation as more particularly described below (the "Airbag Technology').The Airbag Technology is a patented technology for automotive airbag inflation using cool gases. The Company provided initial funding to the Airbag Technology of $123,000 but decided not to proceed and has written the off those advances.

	
 
	
The Company subsequently negotiated the terms of a proposed joint venture with TechniScan, Inc. ("TechniScan') to develop, market and sell medical devices including a breast cancer imaging system (the "SafeScan Imaging System') employing TechniScan's proprietary inverse scattering technology (the "Technology').The Company decided not to proceed with the TechniScan Joint Venture and has converted the advances made into equity of TechniScan, Inc.

	
 
	
The Company on January 14, 2004 entered into a Letter of Intent with Exelar Corporation to provide funding for the continued development of Exelar's technology which utilizes small super conducting magnets to control therapeutic radiation doses delivered by photon linear accelerators.The Company entered into final agreement on March 25, 2004.(See subsequent events)

	
 
	
Since inception, the Company has suffered recurring losses and net cash outflows from operations. The Company expects to continue to incur substantial losses to complete the development of its business. Since its inception, the Company has funded operations through common stock issuances and related party loans in order to meet its strategic objectives. Management believes that sufficient funding will be available to meet its business objectives, including anticipated cash needs for working capital, and is currently pursuing several financing options. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of a business. As a result of the foregoing, there exists substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

 

 

 

5

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

January 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement.

The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:

	
a) 
	
Development Stage Company

	
 
	
The Company is a development stage company as defined in the Statements of Financial Accounting Standards No. 7. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.

	
b) 
	
Use of Estimates

	
 
	
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates.

	
c) 
	
Income Taxes

	
 
	
The Company has adopted Statement of Financial Accounting Standards No. 109 - "Accounting for Income Taxes' (SFAS 109). This standard requires the use of an asset and liability approach for financial accounting and reporting on income taxes. If it is more likely than not that some portion or all if a deferred tax asset will not be realized, a valuation allowance is recognized.

	
d) 
	
Stock Based Compensation

	
 
	
The Company measures compensation cost for stock based compensation using the intrinsic value method of accounting as prescribed by A.P.B. Opinion No. 25 - "Accounting for Stock Issued to Employees'. The Company has adopted those provisions of Statement of Financial Accounting Standards No. 123 - "Accounting for Stock Based Compensation',

 

 

 

 

 

6

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

January 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

	
 
	
which require disclosure of the pro-forma effect on net earnings and earnings per share as if compensation cost had been recognized based upon the estimated fair value at the date of grant for options awarded.

	
e) 
	
Financial Instruments

	
 
	
The Company's financial instruments consist of cash, accounts payable, and loans and advances payable.

	
 
	
Unless otherwise noted, it is management's opinion that this Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted.

	
f) 
	
Net Loss Per Share

	
 
	
In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 - "Earnings Per Share' ("SFAS 128'). Under SFAS 128, basic and diluted earnings per share are to be presented. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares.

3. INVESTMENT (PROPOSED JOINT VENTURE AGREEMENT)

The Company and TechniScan, Inc. ("TechniScan') have executed an operating agreement (the "Operating Agreement') to effect a joint venture. The material provisions of the Operating Agreement, as amended July 31, 2003, can be summarized as follows:

	
a) 
	
The parties have formed a Utah limited liability company called SafeScan Medical Systems, LLC ("SafeScan') for the purposes of commercializing TechniScan's Proprietary Inverse Scattering Technology (the "Technology'). 

	
b) 
	
SafeScan will commercialize the Technology in the form initially of a medical device for breast cancer diagnosis and/or screening (the "SafeScan Imaging System'), and subsequently may pursue other medical products employing the Technology.

 

 

 

 

 

7

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

January 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

3. INVESTMENT (PROPOSED JOINT VENTURE AGREEMENT) (Continued)

	
c) 
	
TechniScan will grant SafeScan an exclusive worldwide royalty-free license for all medical uses of the Technology and will transfer, to the joint venture, all rights to medical specific patents and provisional patents held by it. In addition, TechniScan will contribute all hardware, software, equipment, supplies, including breast scanner prototypes and other items of property held by it that pertain directly and exclusively to the SafeScan Imaging System. SafeScan will also purchase from TechniScan, at its depreciated book value, other capital equipment, furniture and assets not directly and exclusively related to the breast scanner.

	
d) 
	
The Company will provide financing direction and financial expertise to the joint venture. The financing to be provided by the Company to the joint venture will be $15,650,000 on the following schedule:

	
 
	
i) 
	
$165,000 by July 31, 2003, $80,000 of which had been contributed to that date;

	
 
	
ii) 
	
$500,000 on or before November 15, 2003;

	
 
	
iii) 
	
$500,000 on or before December 15, 2003;

	
 
	
iv) 
	
$500,000 on or before January 15, 2004;

	
 
	
v) 
	
$2,000,000 on or before February 15, 2004;

	
 
	
vi) 
	
$5,485,000 on or before April 15, 2004; and

	
 
	
vii) 
	
an additional $6,500,000 on the later of June 30, 2004 or 90 days following FDA approval of the breast imaging device for sale in the United States.

	
e) 
	
SafeScan will be managed by a management board consisting of up to seven persons including two representatives of each of the Company and TechniScan, and up to three other mutually agreed persons. The management board will control major decisions, approve budgets and major contracts.

	
f) 
	
SafeScan will enter into a development contract with TechniScan for continuing research and development, and technical support of the Technology, and technical support for commercialization of the SafeScan Imaging System.

	
g) 
	
TechniScan will have the right to merge its interest in the joint venture into the Company at any time following FDA approval or full financing by the Company on terms to be agreed.

	
h) 
	
The Company will also purchase 875,000 common shares of TechniScan at $0.40 per share (the "Share Purchase') by December 15, 2003 for total purchase of $350,000, of which $100,000 has been advanced at July 31, 2003. The Share Purchase will represent approximately 3% of the shares of TechniScan (on a fully diluted basis). With the Share Purchase, the Company's direct and indirect interest in SafeScan will be in excess of 51%.

 

 

 

 

 

7

TSI MEDICAL CORP.

(Formerly Purcell Ventures, Inc.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

January 31, 2004

(Unaudited)

(Stated in U.S. Dollars)

3. INVESTMENT (PROPOSED JOINT VENTURE AGREEMENT) (Continued)

	
i) 
	
The Operating Agreement and transfers of assets by TechniScan will close on February 15, 2004 provided the Company has completed all funding required to that date.

	
j) 
	
In the event that the Company shall default in making any required contributions, TechniScan shall acquire the Company's interest in SafeScan by issuing its common shares to the Company at the lower of $0.60 per share or 150% of the last price at which TechniScan has sold its common shares.

	
k) 
	
The Company did not proceed with the proposed Joint Venture and converted the funds advanced ($385,568.00) into shares of TechniScan as follows, 

	
 
	
-
	
551,420 shares at $0.40 per share and,

	
 
	
-
	
275,000 shares at $0.60 per share

4. LOANS AND ADVANCES PAYABLE

The loans and advances payable in the amount of $37,913 (January 31, 2003 - $49,100) are interest free with no specific terms of repayment and are owing to a director. 

The Company obtained a short term loan from a shareholder for $500,000.00 which is due July 2, 2004.As at year end $155,000.00 had been received and the balance was received after year end. The interest rate is 12%pa.

5. RELATED PARTY TRANSACTIONS

	

a) 
	

During the period ended July 31, 2004, the Company paid $59,550 (2003 - $24,500) in consulting fees to directors and officers of the Company and management fees to a director of $90,000 (2003 - $60,000).

	

b) 
	

During the period ended July 31, 2004 the Company incurred $Nil (2003-$1,500) in office administration fees and $Nil (2003- $1,500) in rent with companies with common directors.

6. DIRECTORS LOAN

A director and shareholder of the Company has made an advance to the Company of $100,000.00. The loan is repayable on demand along with $20,000.00 for interest.

 

 

9

7. SUBSEQUENT EVENTS

On January 14, 2004 the Company entered into a letter of intent with Exelar Corporation to fund the development of its propriety technology which utilizes super conducting magnets to control therapeutic radiation doses delivered by photon linear accelerators. Subsequent to the year end (March 22,2004) the Company entered into a Technology Acquisition and Funding Agreement with Exelar Corporation (a Delaware Company) whereby the Company agreed to finance Exelar Medical Corporation (a Nevada corporation which is the operating company that holds the technology developed by Exelar Corporation) for a total of $4,750,000.00 as follows,

	

a) 
	

$325,000 upon closing (March 25, 2004), paid subsequent to the year end

	

b) 
	

$575,000 on or before the date that is 90 days following closing

	

c) 
	

$1,550,000 on or before the date that is 180 days following closing

	

d) 
	

$1,000,000 on or before the date that is 270days following closing, and

	

e) 
	

$1,300,000 on or before the date that is 360 days following closing

Upon completion of the above advances the Company will have acquired 51% of Exelar Medical Corporation. The Company may acquire an additional 10% for $1,500,000 subject to the acceptance of both parties.

The Company has agreed to pay a finder's fee of 300,000 shares to a third party as part of the acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS

JANUARY 31, 2003 AND 2002

(Stated in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

AUDITORS' REPORT

To the Shareholders and Directors

Purcell Ventures, Inc.

(A development stage company)

We have audited the balance sheets of Purcell Ventures, Inc. (a development stage company) as at January 31, 2003 and 2002, and the statements of operations and deficit accumulated during the development stage, cash flows, and stockholders' equity for the years ended January 31, 2003 and 2002, and for the period from December 21, 2000 (date of inception) to January 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with United States generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at January 31, 2003 and 2002, and the results of its operations and cash flows for the years ended January 31, 2003 and 2002, and for the period from December 21, 2000 (date of inception) to January 31, 2003, in accordance with United States generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and net cash outflows from operations since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

	
Vancouver, B.C. 

June 20, 2003 
	
"Morgan & Company"

Chartered Accountants

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

BALANCE SHEETS

(Stated in U.S. Dollars)

	
 
	
JANUARY 31
	
 

	
  

	
2003 

	
  

	
2002 

	
  

	
ASSETS
	
 
	
 
	
 
	
 
	
 

	
Current
	
 
	
 
	
 
	
 
	
 

	
Cash 

	
$ 

	
32 

	
  

	
$ 

	
32,027 

	
  

	
LIABILITIES
	
 
	
 
	
 
	
 
	
 
	
 

	
Current
	
 
	
 
	
 
	
 
	
 
	
 

	
Accounts payable 
	
$ 
	
14,705 
	
 
	
$ 
	
11,500
	
 

	
Loans and advances payable (Note 3) 
	
  

	
49,100 

	
  

	
  

	
100 

	
  

	
 
	
  

	
63,805 

	
  

	
  

	
11,600 

	
  

	
SHAREHOLDERS' (DEFICIENCY) EQUITY
	
 
	
 
	
 
	
 
	
 
	
 

	
Share Capital
	
 
	
 
	
 
	
 
	
 
	
 

	
Authorized:
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
100,000,000 common shares, par value $0.001 per share
	
 
	
 
	
 
	
 
	
 
	
 

	
Issued and outstanding:
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
8,512,500 common shares (2002 - 8,000,000) 
	
 
	
8,513 
	
 
	
 
	
8,000
	
 

	
Additional paid-in capital 
	
 
	
282,737 
	
 
	
 
	
27,000
	
 

	
Deficit Accumulated During The Development Stage 
	
  

	
(355,023) 

	
  

	
  

	
(14,573) 

	
  

	
 
	
  

	
(63,773) 

	
  

	
  

	
20,427 

	
  

	
 
	
$ 

	
32 

	
  

	
$ 

	
32,027 

	
  

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS AND DEFICIT

(Stated in U.S. Dollars)

	
 
	

YEARS ENDED 

JANUARY 31 
	
INCEPTION

DECEMBER 21

2000 TO

JANUARY 31

2003 

	
  

	
2003 

	
   

	
2002 

	
Expenses
	
 
	
 
	
 

	
Consulting 
	
$ 
	
113,500 
	
 
	
$ 
	
- 
	
 
	
$
	
113,500

	
Office administration 
	
 
	
6,000 
	
 
	
 
	
- 
	
 
	
 
	
6,000

	
Office and sundry 
	
 
	
4,627 
	
 
	
 
	
462 
	
 
	
 
	
5,089
	
 

	
Professional fees 
	
 
	
25,136 
	
 
	
 
	
14,111 
	
 
	
 
	
39,247

	
Rent 
	
 
	
3,000 
	
 
	
 
	
- 
	
 
	
 
	
3,000

	
Travel and promotion 
	
 
	
65,187 

	
  

	
  

	
- 

	
  

	
  

	
65,187 

	
Loss Before The Following 
	
 
	
217,450 
	
 
	
 
	
14,573 
	
 
	
 
	
232,023

	
Write Off Of Advances To Joint Venture 
	
 
	
123,000 
	
 
	
 
	
- 
	
 
	
 
	
123,000

	
Net Loss For The Year 
	
 
	
340,450 
	
 
	
 
	
14,573 
	
 
	
$ 

	
355,023 

	
Deficit Accumulated During The Development Stage, Beginning Of Year
	

  

	

14,573 

	

  

	

  

	

- 

	

 
	

 
	

 

	
Deficit Accumulated During The Development Stage, End Of Year 

	

$ 

	

355,023 

	

  

	

$ 

	

14,573 

	
 
	
 
	
 

	
Basic And Diluted Loss Per Share 

	
$ 

	
0.04 

	
  

	
$ 

	
0.05 

	
 
	
 
	
 

	
Weighted Average Number Of Common Shares Outstanding 

	

   

	

8,404,390 

	

  

	

  

	

312,329 

	
 
	
 
	
 

 

 

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Stated in U.S. Dollars)

	
 
	

YEARS ENDED 

JANUARY 31 

	

 
	
INCEPTION

DECEMBER 21

2000 TO

JANUARY 31

	
  

	
2003 

	
  

	
2002 

	
  

	
2003 

	
Cash Flows From Operating Activities
	

 
	

 
	

 
	

 
	

 
	

 
	

 

	

Net loss for the year 
	

$ 
	

(340,450) 
	

 
	

$ 
	

(14,573) 
	

 
	

$ 
	

(355,023)

	

Adjustments To Reconcile Net Loss To Net
	

 
	

 
	

 
	

 
	

 
	

 
	

 
	

 

	

Cash By Operating Activities
	

 
	

 
	

 
	

 
	

 
	

 
	

 
	

 

	

Write off of advances to joint venture 
	

 
	

123,000 
	

 
	

 
	

- 
	

 
	

 
	

123,000

	

Accounts payable 
	

 
	

3,205 
	

 
	

 
	

11,500 
	

 
	

 
	

14,705

	

Loan and advances payable 
	

 

	

49,000 

	

  

	

  

	

100 

	

  

	

  

	

49,100 

	

 
	

  

	

(165,245) 

	

  

	

  

	

(2,973) 

	

  

	

  

	

(168,218) 

	

Cash Flows From Investing Activity
	

 
	

 
	

 
	

 
	

 
	

 
	

 
	

 

	

Advances to joint venture 
	

  

	

(123,000) 

	

  

	

  

	

- 

	

  

	

  

	

(123,000) 

	

Cash Flows From Financing Activity
	

 
	

 
	

 
	

 
	

 
	

 
	

 
	

 

	

Common stock issued 
	

  

	

256,250 

	

  

	

  

	

35,000 

	

  

	

  

	

291,250 

	

Increase (Decrease) In Cash 

	

 
	

(31,995) 
	

 
	

 
	

32,027 
	

 
	

 
	

32

	

Cash, Beginning Of Year 
	

  

	

32,027 

	

  

	

  

	

- 

	

  

	

  

	

- 

	

Cash, End Of Year 

	

$ 

	

32 

	

  

	

$ 

	

32,027 

	

  

	

$ 

	

32 

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

STATEMENT OF STOCKHOLDERS' (DEFICIENCY) EQUITY

JANUARY 31, 2003

(Stated in U.S. Dollars)

	

 
	

COMMON STOCK 

	

 
	

 
	

 

	

 
	

NUMBER OF SHARES 

	

AMOUNT 

	

ADDITIONAL PAID-IN CAPITAL 

	

DEFICIT 

	

TOTAL 

	

Balance, January 31, 2001 

	

- 
	

$
	

- 
	

$
	

- 
	

$
	

- 
	

$
	

-

	

January 11, 2002 - Shares issued for cash at $0.001 

	

5,000,000
	
 
	

5,000
	
 
	

-
	
 
	

-
	
 
	

5,000

	
January 29, 2002 - Shares issued for cash at $0.01 

	

 3,000,000
	
 
	

 3,000
	
 
	

 27,000
	
 
	

 -
	
 
	

30,000

	
Net loss for the year 
	
- 

	
  

	
- 

	
  

	
- 

	
  

	
(14,573) 

	
  

	
(14,573) 

	
Balance, January 31, 2002 

	
8,000,000 
	
 
	
8,000 
	
 
	
27,000 
	
 
	
(14,573) 
	
 
	
20,427

	
March 15, 2002 - Shares issued for cash at $0.50 

	

250,000
	
 
	

250
	
 
	

124,750
	
 
	

-
	
 
	

125,000

	
April 30, 2002 - Shares issued for cash at $0.50 

	

140,000
	
 
	

140
	
 
	

69,860
	
 
	

-
	
 
	

70,000

	
May 31, 2002 - Shares issued for cash at $0.50 

	

60,500
	
 
	

61
	
 
	

 30,189
	
 
	

-
	
 
	

30,250

	
June 25, 2002 - Shares issued for cash at $0.50 

	

 62,000
	
 
	

 62
	
 
	

 30,938
	
 
	

 -
	
 
	

 31,000

	
Net loss for the year 
	
- 

	
 

	
- 

	
  

	
- 

	
  

	
(340,450) 

	
  

	
(340,450) 

	
Balance, January 31, 2003 
	
8,512,500 

	
  

	
8,513 

	
  

	
282,737 

	
  

	
(355,023) 

	
  

	
(63,773) 

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2003 AND 2002

(Stated in U.S. Dollars)

1. NATURE OF OPERATIONS

	

a) 
	

Organization

	

 
	

The Company was incorporated in the state of Nevada, U.S.A., on December 21, 2000. 

	

b) 
	

Development Stage Activities

	

 
	

The Company was originally organized to seek business opportunities in the high technology field. In January of 2002, the Company entered into a joint venture letter agreement for the development and marketing of a technology for automobile air bag inflation as more particularly described below (the "Airbag Technology'). The Company has decided not to proceed with the Airbag Technology and has negotiated the terms of a proposed joint venture with TechniScan, Inc. ("TechniScan') to develop, market and sell medical devices including a breast cancer imaging system (the "SafeScan Imaging System') employing TechniScan's proprietary inverse scattering technology (the "Technology'). The Airbag Technology is a patented technology for automotive airbag inflation using cool gases. The Company provided initial funding to the Airbag Technology of $123,000 but decided not to proceed and has written off those advances. 

	

 
	

Since inception, the Company has suffered recurring losses and net cash outflows from operations. The Company expects to continue to incur substantial losses to complete the development of its business. Since its inception, the Company has funded operations through common stock issuances and related party loans in order to meet its strategic objectives. Management believes that sufficient funding will be available to meet its business objectives, including anticipated cash needs for working capital, and is currently pursuing several financing options. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of a business. As a result of the foregoing, there exists substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement.

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2003 AND 2002

(Stated in U.S. Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:

	
a) 
	
Development Stage Company

	
 
	
The Company is a development stage company as defined in the Statements of Financial Accounting Standards No. 7. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities. 

	

b) 
	

Use of Estimates

	

 
	

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues  and expenses for the reporting period. Actual results could differ from these estimates. 

	

c) 
	

Income Taxes

	

 
	

The Company has adopted Statement of Financial Accounting Standards No. 109 - "Accounting for Income Taxes' (SFAS 109). This standard requires the use of an asset and liability approach for financial accounting and reporting on income taxes. If it is more likely than not that some portion or all if a deferred tax asset will not be realized, a valuation allowance is recognized. 

	

d) 
	

Stock Based Compensation

	

 
	

The Company measures compensation cost for stock based compensation using the intrinsic value method of accounting as prescribed by A.P.B. Opinion No. 25 - "Accounting for Stock Issued to Employees'. The Company has adopted those provisions of Statement of Financial Accounting Standards No. 123 - "Accounting for Stock Based Compensation', which require disclosure of the pro-forma effect on net earnings and earnings per share as if compensation cost had been recognized based upon the estimated fair value at the date of grant for options awarded.

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2003 AND 2002

(Stated in U.S. Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

	

e) 
	

Financial Instruments

	

 
	

The Company's financial instruments consist of cash, accounts receivable and loans payable. 

	

 
	

Unless otherwise noted, it is management's opinion that this Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted. 

	

f) 
	

Net Loss Per Share

	

 
	

In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 - "Earnings Per Share' ("SFAS 128'). Under SFAS 128, basic and diluted earnings per share are to be presented. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares.

3. LOANS AND ADVANCES PAYABLE

The loans and advances payable in the amount of $49,100 (2002 - $100) are interest free with no specific terms of repayment and are owing to a director.

4. RELATED PARTY TRANSACTIONS

	

a) 
	

During the year ended January 31, 2003, the Company paid $84,000 in consulting fees to directors and officers of the Company. 

	

b) 
	

During the year ended January 31, 2003, the Company incurred $6,000 in office administration fees and $3,000 in rent with companies with common directors.

 

 

 

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2003 AND 2002

(Stated in U.S. Dollars)

5. SUBSEQUENT EVENTS

	
a) 
	
Proposed Joint Venture Agreement

	
 
	
The Company and TechniScan have executed a term sheet (the "Term Sheet') outlining the terms of the proposed joint venture. The material provisions of the Term Sheet, as amended, can be summarized as follows: 

	

 
	

1. 
	

The parties will form a Utah limited liability company for the purposes of commercializing the medical applications of the Technology. 

	

 
	

2. 
	

The joint venture will commercialize the Technology in the form initially of a medical device for breast cancer diagnosis and/or screening (the "SafeScan Imaging System'), and subsequently may pursue other medical products employing the Technology. 

	

 
	

3. 
	

TechniScan will grant the joint venture an exclusive worldwide royalty free license for all medical uses of the Technology and will transfer, to the joint venture, all rights to medical specific patents and provisional patents held by it. In addition, TechniScan will contribute all hardware, software, equipment, supplies, including breast scanner prototypes and other items of property held by it that pertain directly and exclusively to the SafeScan Imaging System. The joint venture will also purchase from TechniScan, at its depreciated book value, other capital equipment, furniture and assets not directly and exclusively related to the breast scanner. 

	

 
	

4. 
	

Purcell will provide financing direction and financial expertise to the joint venture. The financing to be provided by Purcell to the joint venture will be $15,650,000 on the following schedule: 

	

 
	

 
	

i) 
	

$50,000 by June 30, 2003; 

	

 
	

 
	

ii) 
	

$100,000 by July 15, 2003; 

	

 
	

 
	

iii) 
	

$500,000 by July 31, 2003; 

	

 
	

 
	

iv) 
	

an additional $500,000 by August 31, 2003; 

	

 
	

 
	

v) 
	

an additional $500,000 by September 30, 2003; 

	

 
	

 
	

vi) 
	

an additional $3.5 million by December 15, 2003; 

	

 
	

 
	

vii) 
	

an additional $4.0 million by March 31, 2004; and 

	

 
	

 
	

viii) 
	

an additional $6.5 million on the later of June 30, 2004 or 90 days following FDA approval of the breast imaging device for sale in the United States. 

	

 
	

5. 
	

The joint venture will be managed by a management board consisting of up to seven persons including two representatives of each of Purcell and TechniScan, and up to three other mutually agreed persons. The management board will control major decisions, approve budgets and major contracts.

 

 

 

PURCELL VENTURES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2003 AND 2002

(Stated in U.S. Dollars)

5. SUBSEQUENT EVENTS (Continued)

	
a) 
	

Proposed Joint Venture Agreement (Continued) 

	
 
	

6. 
	

The joint venture will enter into a development contract with TechniScan for continuing research and development, and technical support of the Technology, and technical support for commercialization of the SafeScan Imaging System. 

	

 
	

7. 
	

TechniScan will have the right to merge its interest in the joint venture into Purcell at any time following FDA approval or full financing by Purcell on terms to be agreed. 

	

 
	

8. 
	

The Company will also purchase 875,000 common shares of TechniScan at $0.40 per share (the "Share Purchase') by July 15, 2003. The Share Purchase will represent approximately 3% of the shares of TechniScan (on a fully diluted basis). With the Share Purchase, the Company's direct and indirect interest in the joint venture will be in excess of 51%. 

	

 
	

9. 
	

The joint venture will be established when all required filings have been made, all agreements have been formalized and executed, and the Company has completed the Share Purchase and the initial funding of $150,000 to the joint venture. 

	

 
	

10. 
	

In the event that the Company shall default in making any required contributions after formation of the joint venture, TechniScan shall have the right to acquire the Company's interest in the joint venture by issuing its common shares to the Companyat the lower of $0.60 per share or 150% of the last price at which TechniScan has sold its common shares. 

	

 
	

The Term Sheet is not a binding agreement and no binding agreement will exist with respect to the proposed joint venture until the definitive agreements described in the Term Sheet have been negotiated and executed. The Company is in the final stages of negotiating and completing the formal agreements with TechniScan. 

	

b) 
	

Offering of Securities

	

 
	

The Company is offering for sale, pursuant to Regulation S, up to 500,000 common shares at US$0.50 per share. 

	

c) 
	

Name Change

	

 
	

The Company's name was changed to TSI Medical Corp.

 

 

 

 

 

SCHEDULE 3.10

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

UNDISCLOSED LIABILITIES OF TSI MEDICAL

TSI Medical received advances of $725,000 from Relay Mines.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 3.12

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

UNDISCLOSED CHANGES

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 3.14

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

EMPLOYEES AND CONSULTING AGREEMENTS

TSI Medical pays annual management fees to its officers as follows:

	
Name 

	
Position Held 
	
Annual Compensation

	
Harold C. Moll 
	
Chairman & Director 
	
$
	
120,000
	
 

	
Derek R. Van Laare 
	
President, Secretary, Treasurer & Director
	
$
	
72,000
	
 

The management fees are paid pursuant to oral agreements. No written agreements have been entered into with respect to the payment of the management fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 3.17

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

MATERIAL CONTRACTS

	
1. 
	
Technology Acquisition and Funding Agreement dated March 22, 2004 among TSI Medical, Exelar Corporation and Exelar Medical Corporation. 

	
2. 
	
Shareholders Agreement dated March 25, 2004 among TSI Medical, Exelar Corporation and Exelar Medical Corporation. 

	
3. 
	

Management fee agreements referred to in Schedule 3.14 to this Agreement and Plan of Merger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 4.1

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

PRINCIPAL SHAREHOLDERS OF RELAY MINES

	
Name of Principal Shareholder 

	
Number of Shares Held 
	
Percentage of Beneficial Ownership

	
Carlo Civelli 
	
30,000,000 
	
 
	
40.9%
	
 

	
Bruno Mosimann 
	
30,000,000 
	
 
	
40.9%
	
 

	
 

Based on 73,367,208 issued and outstanding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 5.3

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

CAPITALIZATION OF RELAY MINES

The entire authorized capital stock and other equity securities of Relay Mines ("Relay Mines Stock') consists of 100,000,000 shares of common stock, par value $0.00001 ("Relay Mines Common Stock'). There are 73,367,208 shares of Relay Mines common stock issued and outstanding as of the date of this Agreement.

Relay Mines received subscription funds for an issuance of a total of 2,500,000 units at a price of $0.25 per unit. Each unit consists of one share of common stock and one-half of one share purchase warrant, with each warrant entitling the holder to purchase an additional share of common stock at a price of $0.25 per share for a period of one year. The shares will be issued to European investors in reliance of Regulation S.

Other than the above, there are no outstanding options, warrants, subscriptions, phantom shares, conversion rights, or other rights, agreements, or commitments obligating Relay Mines to issue any additional shares of Relay Mines Stock, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from Relay Mines any shares of Relay Mines Stock. There are no agreements purporting to restrict the transfer of the Relay Mines Stock, no voting agreements, voting trusts, or other arrangements restricting or affecting the voting of the Relay Mines Stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 5.9

TO THE AGREEMENT AND PLAN OF MERGER

AMONG CIVELLI, MOSIMANN, TSI MEDICAL CORP.,

RELAY MINES LIMITED AND TSI MED ACQUISITION CORP.

UNDISCLOSED LIABILITES OF RELAY MINES

Relay Mines is indebted to Aton Select Fund Ltd. in the amount of $100,000.Exhibit 10.1

 

	
 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

Between

ABERDENE MINES, LTD.

and

LANGLEY PARK INVESTMENTS PLC 

July 29, 2004

(Aberdene)

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

ARTICLE I   CERTAIN DEFINITIONS   ..............................................................................1

1.1   Certain Definitions   ................................................................................................1

ARTICLE II   PURCHASE AND SALE OF SHARES   .........................................................4

2.1   Purchase and Sale; Purchase Price   ........................................................................4

2.2   Execution and Delivery of Documents; The Closing   ...............................................5

ARTICLE III   REPRESENTATIONS AND WARRANTIES   ..............................................6

3.1   Representations, Warranties and Agreements of the Target Company   ....................6

3.2   Representations and Warranties of Langley   ...........................................................9

ARTICLE IV   OTHER AGREEMENTS OF THE PARTIES   ..............................................12

4.1   Manner of Offering   .............................................................................................12

4.2   Notice of Certain Events   .....................................................................................13

4.3   Blue Sky Laws   ...................................................................................................13

4.4   Integration   ..........................................................................................................13

4.5   Furnishing of Rule 144(c) Materials   .....................................................................13

4.6   Solicitation Materials   ...........................................................................................13

4.7   Listing of Common Stock   ....................................................................................13

4.8   Indemnification   ....................................................................................................14

4.9   Attorney-in-Fact   .................................................................................................16

4.10   Sale of Langley Consideration Shares   ................................................................16

4.11   Lock-up by Langley   ..........................................................................................16

4.12   Langley Ownership of Common Stock   ..............................................................16

4.13   No Violation of Applicable Law   ........................................................................17

4.14   Redemption Restrictions   ....................................................................................17

ARTICLE V   MISCELLANEOUS   ......................................................................................17

5.1   Fees and Expenses.   .............................................................................................17

5.2   Entire Agreement   .................................................................................................18

5.3   Notices.   ..............................................................................................................18

5.4   Amendments; Waivers   .........................................................................................19

5.5   Headings   .............................................................................................................19

5.6   Successors and Assigns.   ......................................................................................19

5.7   No Third Party Beneficiaries   ................................................................................19

5.8   Governing Law; Venue; Service of Process.   .........................................................19

5.9   Survival.   ..............................................................................................................20

5.10   Counterpart Signatures.   .....................................................................................20

5.11   Publicity.   ...........................................................................................................20

5.12   Severability.   ......................................................................................................20

5.13   Limitation of Remedies.   .....................................................................................20

 

 

 

 

LIST OF SCHEDULES:

Schedule 3.1(a)   Subsidiaries

Schedule 3.1(c)   Capitalization and Registration Rights

Schedule 3.1(e)   Conflicts

Schedule 3.1(f)   Consents and Approvals

Schedule 3.1(g)    Litigation

Schedule 3.1(h)   Defaults and Violations

LIST OF EXHIBITS:

Exhibit A   Certificate of Designation

Exhibit B   Power of Attorney

Exhibit C   Officer's Certificate

 

 

 

 

 

 

 

 

 

 

THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of July 29, 2004, between Aberdene Mines, Ltd., a corporation organized and existing under the laws of the State of Nevada (the "Target Company"), and Langley Park Investments PLC, a corporation organized under the laws of England and Wales with its offices at 30 Farringdon Street, London EC4A 4HJ ("Langley").

WHEREAS, subject to the terms and conditions set forth in this Agreement, the Target Company desires to issue and sell to Langley and Langley desires to acquire from the Target Company five hundred thousand (500,000) shares of the Target Company's Series A 0% Convertible Preferred Stock, $0.00001 par value (the "Series A Preferred Stock"), with a Stated Value of ten dollars ($10) per share, and an aggregate Stated Value of five million dollars ($5,000,000) for an aggregate purchase price of five million dollars ($5,000,000).  

IN CONSIDERATION of the mutual covenants contained in this Agreement, the Target Company and Langley agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

1.1   Certain Definitions.  As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

"Affiliate" means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person.  For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

"Agreement" shall have the meaning set forth in the introductory paragraph of this Agreement.

"Attorney-in-Fact" means Gottbetter & Partners, LLP, 488 Madison Avenue, 12 Floor, New York, NY 10022; Tel: 212-400-6900; Fax: 212-400-6901.

"Business Day" means any day except Saturday, Sunday, any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government actions to close.

"Certificate of Designation" means the Certificate of Designation of the Series A Preferred Stock annexed as Exhibit A hereto. 

 

 

"Change of Control" means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Target Company.

"Closing" shall have the meaning set forth in Section 2.2(a) hereof.

"Closing Date" shall have the meaning set forth in Section 2.2(a) hereof.

"Common Stock" means shares now or hereafter authorized of the class of common stock $0.00001 par value of the Target Company.

"Consideration Stock" shall have the meaning set forth in Section 2.1(a) hereof.

"Control Person" shall have the meaning set forth in Section 4.8(a) hereof.

"Conversion Date" shall have the meaning set forth in the Certificate of Designation.

"Conversion Price" shall have the meaning set forth in the Certificate of Designation.

"Default" means any event or condition which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

"Disclosure Documents" means the Target Company's reports filed under the Exchange Act with the SEC.

"Event of Default" shall have the meaning set forth in Section 5.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Execution Date" means the date of this Agreement first written above.

"Indemnified Party" shall have the meaning set forth in Section 4.8(b) hereof.

"Indemnifying Party" shall have the meaning set forth in Section 4.8(b) hereof.

"G&P" means Gottbetter & Partners, LLP.

"Langley" shall have the meaning in the introductory paragraph.

"Langley Consideration Shares" shall have the meaning in Section 2.1(c) hereof.

"Langley Shares" shall mean ordinary shares of 1.0p each in Langley.

"Limitation on Conversion" shall have the meaning set forth in Section 4.12 hereof.

 

 

"Losses" shall have the meaning set forth in Section 4.8(a) hereof.

"Material" shall mean having a financial consequence in excess of $25,000.

"Material Adverse Effect" shall have the meaning set forth in Section 3.1(a).

"NASD" means the National Association of Securities Dealers, Inc.

"Nasdaq" shall mean the Nasdaq Stock Market, Inc.®

"Original Issue Date" shall have the meaning set forth in the Certificate of Designation.

"OTCBB" shall mean the NASD over-the counter Bulletin Board®.

"Per Share Market Value" of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser (as defined in the Certificate of Designation) selected in good faith by the holders of a majority of the Series A Preferred Stock; provided, however, that the Target Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser.

"Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

"Power of Attorney" means the power of attorney in the form of Exhibit B annexed hereto.

"Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

 

"Redemption Price" shall mean an amount equal to the Stated Value of the shares of Consideration Stock outstanding that are subject to redemption.

"Reporting Issuer" means a company that is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.

"Required Approvals" shall have the meaning set forth in Section 3.1(f).

"Securities" means the Series A Preferred Stock, the Common Stock and the Underlying Shares and stock of any other class into which such shares may hereafter have been reclassified or changed.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Stated Value" means the sum of ten dollars ($10) per share of Consideration Stock or five million dollars ($5,000,000) for all of the shares of Consideration Stock.

"Series A Preferred Stock" shall have the meaning set forth in the recital.

"Subsidiaries" shall have the meaning set forth in Section 3.1(a).

"Target Company" shall have the meaning set forth in the introductory paragraph.

"Total Purchase Price" shall have the meaning set forth in Section 2.1(b) hereof.

"Trading Day" means (a) a day on which the Common Stock is quoted on Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices).

"Transaction Documents" means this Agreement and all exhibits and schedules hereto and all other documents, instruments and writings required pursuant to this Agreement.

"Underlying Shares" means the shares of the Target Company's Common Stock into which the shares of Consideration Stock are convertible as provided in the Certificate of Designation.

"U.S." means the United States.

 

 

 

ARTICLE II

PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES 

2.1     Purchase and Sale; Purchase Price.

(a)   Subject to the terms and conditions set forth herein, the Target Company shall issue and sell and Langley shall purchase five hundred thousand (500,000) shares of the Target Company's Series A 0% Convertible Preferred Stock, $._____ par value per share (the "Consideration Stock").  The Series A Preferred Stock shall have the respective rights, preferences and privileges as set forth in the Certificate of Designation to be filed by the Target Company with the Secretary of State of Nevada prior to the Closing Date.

(b)   The purchase price for each share of Series A Preferred Stock shall be Ten Dollars ($10) (the "Per Share Consideration").  The Per Share Consideration multiplied by the number of shares of Series A Preferred Stock to be purchased by Langley is referred to as the "Total Purchase Price."

(c)   The Total Purchase Price shall be paid by delivery to the Target Company of the number of Langley Shares (the "Langley Consideration Shares") equal to the Total Purchase Price divided by the conversion rate of the British Pound Sterling to purchase US Dollars as determined below on July 30, 2004, as quoted by Coutts & Co. as the commercial rate it gives to purchase US Dollars.  The Langley Shares shall have a value of L1 per share.  For example, if the effective conversion rate is $1.80/L 1 and the Total Purchase Price is $5,000,000, then the number of Langley Consideration Shares the Target Company will receive shall equal the $5,000,000/$1.80, or 2,777,777 Langley Consideration Shares.  

2.2     Execution and Delivery of Documents; The Closing.

(a)   The Closing of the purchase and sale of the shares of Consideration Stock (the "Closing") shall take place within sixty (60) days from the date hereof (the "Closing Date").  On the Closing Date,

(i)   the Target Company shall execute and deliver to Langley the certificates representing the shares of Consideration Stock, which shares of Consideration Stock shall have the respective rights, preferences and privileges as set forth in the Certificate of Designation annexed as Exhibit A hereto;

(ii)   the Target Company shall execute and deliver the Power of Attorney annexed as Exhibit B hereto, provided that the Target Company may execute the Power of Attorney upon the execution of this Agreement, in which case it will be held in escrow by G&P and delivered at Closing;

 

 

 

(iii)   the Target Company shall execute and deliver to Langley a certificate of its President, in the form of Exhibit C annexed hereto, certifying that attached thereto is a copy of resolutions duly adopted by the Board of Directors of the Target Company authorizing the Target Company to execute and deliver the Transaction Documents and to enter into the transactions contemplated thereby, provided that the Target Company may execute such certificate upon the execution of this Agreement, in which case it will be held in escrow by G&P and delivered at Closing;

(iv)   Langley shall execute and deliver a certificate in the name of the Target Company or a provisional letter of allotment for a trading account in the name of the Target Company representing the Langley Consideration Shares; and

(v)   the Target Company shall wire the monies owed to G&P pursuant to Section 5.1 hereof for legal fees with the following wire instructions:

Citibank, N.A.

488 Madison Avenue

New York, NY

ABA Routing No.: 021000089

Account Name: Gottbetter & Partners, LLP

Account No. 49061322

Reference:  [Target Company]

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1     Representations, Warranties and Agreements of the Target Company.  The Target Company hereby makes the following representations and warranties to Langley, all of which shall survive the Closing:

(a)   Organization and Qualification.  The Target Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its formation, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted.  The Target Company has no subsidiaries other than as set forth on Schedule 3.1(a) attached hereto (collectively, the "Subsidiaries").  Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Each of the Target Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Target Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").

 

 

 

(b)   Authorization, Enforcement.  The Target Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and by each other Transaction Document and to otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement and each of the other Transaction Documents by the Target Company and the consummation by it of the transactions contemplated hereby and thereby has been duly authorized by all necessary action on the part of the Target Company.  Each of this Agreement and each of the other Transaction Documents has been or will be duly executed by the Target Company and when delivered in accordance with the terms hereof or thereof will constitute the valid and binding obligation of the Target Company enforceable against the Target Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

(c)   Capitalization.  The authorized, issued and outstanding capital stock of the Company is set forth on Schedule 3.1(c).  No shares of the Series A Preferred Stock have been issued as of the date hereof.  No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Target Company by virtue of this Agreement.  Except as disclosed in Schedule 3.1(c), there are no outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the Series A Preferred Stock hereunder, securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Target Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock.  Neither the Target Company nor any Subsidiary is in violation of any of the provisions of its Certificate of Incorporation, bylaws or other charter documents.

(d)   Issuance of Securities.  The shares of Consideration Stock have been duly and validly authorized for issuance, offer and sale pursuant to this Agreement and, when issued and delivered as provided hereunder against payment in accordance with the terms hereof, shall be valid and binding obligations of the Target Company enforceable in accordance with their respective terms.  The Target Company has and at all times while the shares of Consideration Stock are outstanding will continue to maintain an adequate reserve of shares of Common Stock to enable it to perform its obligations under this Agreement and the Certificate of Designation.  When issued in accordance with the terms hereof, the Underlying Shares will be duly authorized, validly issued, fully paid and non-assessable.  

 

 

 

(e)   No Conflicts.  The execution, delivery and performance of this Agreement and the other Transaction Documents by the Target Company and the consummation by the Target Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of its Certificate of Incorporation or bylaws (each as amended through the date hereof) or (ii) be subject to obtaining any consents except those referred to in Section 3.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Target Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Target Company or its Subsidiaries is subject (including, but not limited to, those of other countries and the federal and state securities laws and regulations), or by which any property or asset of the Target Company or its Subsidiaries is bound or affected, except in the case of clause (ii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.  The business of the Target Company and its Subsidiaries is not being conducted in violation of any law, ordinance or regulation of any governmental authority.

(f)   Consents and Approvals.  Except as specifically set forth in Schedule 3.1(f), neither the Target Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Target Company of this Agreement and each of the other Transaction Documents except for  the filing of the Certificate of Designation with respect to the Series A Preferred Stock with the Secretary of State of the State of Nevada, which filing shall be effected prior to the Closing Date (together with the consents, waivers, authorizations, orders, notices and filings referred to in Schedule 3.1(f), the "Required Approvals").

(g)   Litigation; Proceedings.  Except as specifically disclosed in Schedule 3.1(g), there is no action, suit, notice of violation, proceeding or investigation pending or, to the best knowledge of the Target Company, threatened against or affecting the Target Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) relates to or challenges the legality, validity or enforceability of any of the Transaction Documents, the Underlying Shares or the shares of Consideration Stock, (ii) could, individually or in the aggregate, have a Material Adverse Effect or (iii) could, individually or in the aggregate, materially impair the ability of the Target Company to perform fully on a timely basis its obligations under the Transaction Documents.

 

 

 

(h)   No Default or Violation.  Except as set forth in Schedule 3.1(h) hereto, neither the Target Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) (a) adversely affect the legality, validity or enforceability of this Agreement, (b) have a Material Adverse Effect or (c) adversely impair the Target Company's ability or obligation to perform fully on a timely basis its obligations under this Agreement.

(i)   Disclosure Documents.  The Disclosure Documents are accurate in all material respects and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)   Non-Registered Offering.  Neither the Target Company nor any Person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Target Company under circumstances which would require the integration of such offering with the offering of the Securities under the Securities Act) which might subject the offering, issuance or sale of the Securities to the registration requirements of Section 5 of the Securities Act.

(k)   Placing Agent.  The Target Company accepts and agrees that Dungarvon Associates, Inc. ("Dungarvon") is acting for Langley and does not regard any Person other than Langley as its customer in relation to this Agreement, and that it has not made any recommendation to the Target Company, in relation to this Agreement and is not advising the Target Company, with regard to the suitability or merits of the Langley Consideration Shares and in particular Dungarvon has no duties or responsibilities to the Target Company for the best execution of the transaction contemplated by this Agreement. 

(l)   Private Placement Representations. The Target Company (i) has received and carefully reviewed such information and documentation relating to Langley that the Target Company has requested, including, without limitation, Langley's Confidential Private Offering Memorandum dated June 17, 2004; (ii) has had a reasonable opportunity to ask questions of and receive answers from Langley concerning the Langley Consideration Shares, and all such questions, if any, have been answered to the full satisfaction of the Target Company; (iii) has such knowledge and expertise in financial and business matters that it is capable of evaluating the merits and risks involved in an investment in the Langley Consideration Shares; (iii) understands that Langley is not subject to U.S. securities laws and the issuance of the Langley Consideration Shares to the Target Company complies with the securities laws of England and Wales; and (iv) except as provided herein and in the Private Placement Memorandum, dated June 17, 2004, no representations or warranties have been made to the Target Company by Langley or any agent, employee or affiliate of Langley and in entering into this transaction the Target Company is not relying upon any information, other than the results of independent investigation by the Target Company.

 

 

 

Langley acknowledges and agrees that the Target Company makes no representation or warranty with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.1 hereof.

3.2     Representations and Warranties of Langley.  Langley hereby represents and warrants to the Target Company as follows: 

(a)   Organization; Authority.  Langley is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation with the requisite power and authority to enter into and to consummate the transactions contemplated hereby and by the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The acquisition of the shares of Consideration Stock to be purchased by Langley hereunder has been duly authorized by all necessary action on the part of Langley.  This Agreement has been duly executed and delivered by Langley and constitutes the valid and legally binding obligation of Langley, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to, or affecting generally the enforcement of, creditors rights and remedies or by other general principles of equity.

(b)   Issuance of Langley Consideration Shares.  The Langley Consideration Shares have been duly and validly authorized for issuance, offer and sale pursuant to this Agreement and, when issued and delivered as provided hereunder against payment in accordance with the terms hereof, shall be valid and binding obligations of Langley enforceable in accordance with their terms.

(c)   Investment Intent.  Langley is acquiring the shares of Consideration Stock to be purchased by it hereunder, and will acquire the Underlying Shares relating to such shares of Consideration Stock for its own account for investment purposes only and not with a view to or for distributing or reselling such shares of Consideration Stock, or Underlying Shares or any part thereof or interest therein, without prejudice, however, to Langley's right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such shares of Consideration Stock or Underlying Shares in compliance with applicable federal and state securities laws.  

(d)   Experience of Langley.  Langley, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Securities to be acquired by it hereunder, and has so evaluated the merits and risks of such investment.

(e)   Ability of Langley to Bear Risk of Investment.  Langley is able to bear the economic risk of an investment in the Securities to be acquired by it hereunder and, at the present time, is able to afford a complete loss of such investment.

(f)   Access to Information.  Langley acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Target Company concerning the terms and conditions of the Securities offered hereunder and the merits and risks of investing in the Securities; (ii) access to information about the Target Company and the Target Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment in the Securities; (iii) all reports filed with the U.S. Securities and Exchange Commission; and (iv) the opportunity to obtain such additional information which the Target Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information that it has received about the Target Company.  All questions have been answered to the full satisfaction of Langley, and all information and documents pertaining to the investment in the Securities that Langley has requested have been made available to it.

 

 

 

(g)   Reliance.  Langley understands and acknowledges that (i) the shares of Consideration Stock and the Underlying Shares being offered and sold to it hereunder are being offered and sold without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) and/or Regulation S of the Securities Act and (ii) the availability of such exemption depends in part on, and that the Target Company will rely upon the accuracy and truthfulness of, the foregoing representations and Langley hereby consents to such reliance.

(h)   No Registrations.  Langley understand and acknowledge that (A) the Securities have not been registered under the Securities Act, are being sold as a restricted security as that term is defined in Rule 144 of the Securities Act in reliance upon an exemption from registration afforded by Regulation S and/or Section 4(2) of the Securities Act; and that such shares of Securities have not been registered with any state securities commission or authority; (B) the shares of Securities may not be transferred, sold or otherwise exchanged unless pursuant to registration under the Securities Act, or pursuant to an available exemption hereunder; and (C) the Target Compny is under no obligation, and has no present intention, to register the Securities under the Securities Act or any state securities law, or to take any action to make any exemption from any such registration provisions available.

 Langley is not a U.S. Person and is not acquiring the Securities for the account of any U.S. Person; (B) no director or executive officer of Langley is a national or citizen of the United States; and (C) it is not otherwise deemed to be a "U.S. Person" within the meaning of Regulation S.

Langley was not formed specifically for the purpose of acquiring the Securities purchased pursuant to this Agreement.

Langley is purchasing the shares of Consideration Stock, and will purchase the Underlying Shares relating to such shares of Consideration Stock, for its own account and risk and not for the account or benefit of a U.S. Person as defined in Regulation S and no other Person has or will have any interest in or participation in the shares of Consideration Stock or the Underlying Shares or any right, option, security interest, pledge or other interest in or to the shares of Consideration Stock or the Underlying Shares.  Langley understands, acknowledges and agrees that it must bear the economic risk of its investment in the Securities for an indefinite period of time and that prior to any such offer or sale, the Target Company may require, as a condition to effecting a transfer of the shares of Consideration Stock or the Underlying Shares, an opinion of counsel, acceptable to the Target Company, as to the registration or exemption therefrom under the Securities Act and any state securities acts, if applicable.

 

 

 

Langley will, after the expiration of the Restricted Period, as set forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or otherwise transfer the shares of Consideration Stock and the Underlying Shares only pursuant to an effective registration statement or an available exemption under the Securities Act and, in any case, in accordance with applicable federal and state securities laws.  The transactions contemplated by this Agreement have neither been pre-arranged with a purchaser who is in the U.S. or who is a U.S. Person, nor are they part of a plan or scheme to evade the registration provisions of the United States federal securities laws.

The offer leading to the sale evidenced hereby was made in an "offshore transaction."  For purposes of Regulation S, Langley understands that an "offshore transaction" as defined under Regulation S is any offer or sale not made to a Person in the United States and either (A) at the time the buy order is originated, the purchaser is outside the United States, or the seller or any Person acting on his behalf reasonably believes that the purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through a physical trading floor of an established foreign exchange that is located outside the United States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the facilities of a designated offshore securities market, and neither the seller nor any Person acting on its behalf knows that the transaction has been prearranged with a buyer in the U.S.

Neither Langley nor any affiliate or any Person acting on Langley's behalf, has made or is aware of any "directed selling efforts" in the United States, which is defined in Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the shares of Consideration Stock or the Underlying Shares being purchased hereby.

Langley understands that the Target Company is the seller of the shares of Consideration Stock and the Underlying Shares which are the subject of this Agreement, and that, for purpose of Regulation S, a "distributor" is any underwriter, dealer or other Person who participates, pursuant to a contractual arrangement, in the distribution of securities offered or sold in reliance on Regulation S and that an "affiliate" is any partner, officer, director or any Person directly or indirectly controlling, controlled by or under common control with any Person in question.  Langley agrees that Langley will not, during the Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor, either directly or though any affiliate, nor shall it sell, transfer, hypothecate or otherwise convey the shares of Consideration Stock or the Underlying Shares other than to a non-U.S. Person. 

Langley acknowledges that the shares of Consideration Stock and, if applicable, the Underlying Shares will bear a legend in substantially one of the following forms:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF THE HOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.

 

 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE TRANSFERRED OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED BY AN OPINION OF THE HOLDER'S COUNSEL, IN FORM ACCEPTABLE THE COMPANY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT.

or

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED ONLY (1) TO THE COMPANY; (2) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT; (3) IN COMPLIANCE WITH THE EXEMPTION FORM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT PROVIDED BY RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (4) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS, PRIOR TO ANY SUCH SALE, TRANSFER, OR ASSIGNMENT, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY.  THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT.

(i)   Risk Factors.  Langley recognizes that investment in the Securities involves substantial risks and has taken full cognizance of and understands all of the risks related to the purchase of the Securities, including without limitation those set forth under the caption "Risk Factors" in the Target Company's annual report on Form 10-KSB and other Disclosure Documents filed with the SEC pursuant to the Exchange Act.

 

 

 

The Target Company acknowledges and agrees that Langley makes no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1     Manner of Offering.  The Consideration Stock is being issued pursuant to section 4(2) of the Securities Act and or Regulation S thereunder.  The Langley Consideration Shares are being issued pursuant to section 4(2) of the Securities Act .

4.2     Notice of Certain Events.  The Target Company shall, on a continuing basis, (i) advise Langley promptly after obtaining knowledge of, and, if requested by Langley, confirm such advice in writing, of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the shares of Consideration Stock, for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, or (B) any event that makes any statement of a material fact made by the Target Company in Section 3.1 or in the Disclosure Documents untrue or that requires the making of any additions to or changes in Section 3.1 or in the Disclosure Documents in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of the Securities under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Securities under any such laws, and use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time.

4.3     Blue Sky Laws.  The Target Company agrees that it will execute all necessary documents and pay all necessary state filing or notice fees to enable the Target Company to sell the Securities to Langley.

4.4     Integration.  The Target Company shall not, and shall use its best efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to Langley.

4.5     Furnishing of Rule 144(c) Materials.  The Target Company shall, for so long as any of the Securities remain outstanding and during any period in which the Target Company is not subject to Section 13 of the Exchange Act, make available to any registered holder of the Securities ("Holder" or "Holders") in connection with any sale thereof and any prospective purchaser of such Securities from such Person, such information in accordance with Rule 144(c) promulgated under the Securities Act as is required to sell the Securities under Rule 144 promulgated under the Securities Act.

 

 

 

4.6     Solicitation Materials.  The Target Company shall not (i) distribute any offering materials in connection with the offering and sale of the shares of Consideration Stock and the Underlying Shares other than the Disclosure Documents and any amendments and supplements thereto prepared in compliance herewith or (ii) solicit any offer to buy or sell the shares of Consideration Stock by means of any form of general solicitation or advertising.

4.7     Listing of Common Stock.  The Target Company's Common Stock is listed on the OTCBB and the Target Company shall (a) use its best efforts to maintain the listing of its Common Stock on the OTCBB or such other exchange on which the Common Stock is then listed until two years from the date hereof, and (b) shall provide to Langley evidence of such listing.

4.8     Indemnification.

(a)   Indemnification.

(i)   The Target Company shall, notwithstanding termination of this Agreement and for a period of six (6) years, indemnify and hold harmless Langley and its officers, directors, agents, employees and affiliates, each Person who controls or Langley (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each such Person, a "Control Person") and the officers, directors, agents,  employees and affiliates of each such Control Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Target Company under this Agreement or any other Transaction Document.

(ii)   Langley shall, notwithstanding termination of this Agreement and for a period of six (6) years, indemnify and hold harmless the Target Company, its officers, directors, agents, employees and affiliates, each Control Person and the officers, directors, agents, employees and affiliates of each Control Person, to the fullest extent permitted by applicable law, from and against any and all Losses, as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by Langley under this Agreement or the other Transaction Documents, except for Losses solely arising out of negligence, bad faith or breach of this Agreement by the Target Company.

(iii)    The Target Company and Langley acknowledge that in the SEC's opinion, directors, officers and persons controlling a company subject to the Securities Act can not be indemnified for liabilities arising under the Securities Act by such company.

 

 

 

(b)   Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but will retain the right to control the overall Proceedings out of which the claim arose and such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled hereunder (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party.

No right of indemnification under this Section shall be available as to a particular Indemnified Party if the Indemnifying Party obtains a non-appealable final judicial determination that such Losses arise solely out of the negligence or bad faith of such Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its obligations under this Agreement.

 

 

 

(c)   Contribution.  If a claim for indemnification under this Section is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other and the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions or omissions that resulted in such Losses as well as any other relevant equitable considerations.   The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether there was a judicial determination that such Losses arise in part out of the negligence or bad faith of the Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or the Indemnified Party's breach of its obligations under this Agreement.  The amount paid or payable by a party as a result of any Losses shall be deemed to include any attorneys' or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party.

(d)   Non-Exclusivity.  The indemnity and contribution agreements contained in this Section are in addition to any obligation or liability that the Indemnifying Parties may have to the Indemnified Parties.

4.10     Attorney-in-Fact.  For the sole purpose of effectuating the terms and provisions of this Agreement and the Certificate of Designation, the Target Company hereby agrees to give a power of attorney to G&P as is evidenced by Exhibit B annexed hereto.  All acts done under such power of attorney are hereby ratified and approved and neither the Attorney-in-Fact nor any designee or agent thereof shall be liable for any acts of commission or omission, for any error of judgment or for any mistake of fact or law, as long as the Attorney-in-Fact is operating within the scope of the power of attorney and this Agreement and its exhibits.  The power of attorney, being coupled with an interest, shall be irrevocable while any of the shares of Consideration Stock remain unconverted, or any portion of this Agreement remains unsatisfied.  In addition, the Target Company shall give the Attorney-in-Fact resolutions executed by the Board of Directors of the Target Company which authorize transfers of the shares of Consideration Stock in accordance with this Agreement and applicable foreign, federal and state securities laws, and future issuances of the Underlying Shares for the shares of Consideration Stock upon due conversion of the shares of Consideration Stock, and which resolutions state that they are irrevocable while any of the shares of Consideration Stock remain unconverted, or any portion of this Agreement remains unsatisfied.

4.10     Sale of Langley Consideration Shares. Langley shall assist the Target Company in setting up and maintaining a trading account at a registered broker in the United Kingdom to facilitate the sale of the Langley Consideration Shares.  Broker's commissions in the trading account shall not exceed one half percent (0.5%).

4.11     Lock Up by Langley. Langley shall not sell, transfer or assign all or any of the shares of Consideration Stock or the Underlying Shares for a period of one (1) year following the Closing, without the written consent of the Target Company, which consent may be withheld in the Target Company's sole discretion.

 

 

 

4.12     London Stock Exchange.  If the Langley Consideration Shares become listed on the London Stock Exchange plc (the "LSE") by September 30, 2004, Langley shall provide to the Target Company written evidence of such listing

4.13     Langley's Ownership of Common Stock.  In addition to and not in lieu of the limitations on conversion set forth in the Certificate of Designation, the conversion and exercise rights of Langley set forth in the Certificate of Designation shall be limited, solely to the extent required, from time to time, such that, unless Langley gives written notice seventy five (75) days in advance to the Target Company of Langley's intention to exceed the Limitation on Conversion as defined herein, with respect to all or a specified amount of the shares of Consideration Stock and the corresponding number of the Underlying Shares, in no instance shall the maximum number of Underlying Shares which Langley (singularly, together with any Persons who in the determination of Langley, together with Langley, constitute a group as defined in Rule 13d-5 of the Exchange Act) may receive in respect of any conversion of the shares of Consideration Stock, exceed, at any one time, an amount equal to four and ninety nine one hundredths percent  (4.99%) of the then issued and outstanding shares of Common Stock of the Target Company following such conversion (the foregoing being herein referred to as the "Limitation on Conversion"); provided, however, that the Limitation on Conversion shall not apply to any forced or automatic conversion pursuant to this Agreement or the Certificate of Designation; and  provided, further that if Langley shall have declared an Event of Default and, if a cure period is provided, the Target Company shall not have properly and fully cured such Event of Default within any such cure period, the provisions of this Section 4.12 shall be null and void from and after such date.  The Target Company shall, promptly upon its receipt of a Notice of Conversion tendered by Langley (or its sole designee) for the Consideration Stock, as applicable, notify Langley by telephone and by facsimile of the number of shares of Common Stock outstanding on such date and the number of Underlying Shares which would be issuable to Langley (or its sole designee, as the case may be) if the conversion requested in such Notice of Conversion were effected in full, whereupon, in accordance with the Certificate of Designation and notwithstanding anything to the contrary set forth therein, Langley may within one (1) Business Day of its receipt of the Target Company notice required by this Section 4.12 by facsimile revoke such conversion to the extent (in whole or in part) that Langley determines that such conversion would result in the ownership by Langley of shares of Common Stock in excess of the Limitation on Conversion.

4.14     No Violation of Applicable Law.  Notwithstanding any provision of this Agreement to the contrary, if the redemption of the Consideration Stock otherwise required under this Agreement or the Certificate of Designation would be prohibited by the relevant provisions of Nevada law, such redemption shall be effected as soon as it is permitted under such law; provided, however, that interest payable by the Target Company with respect to any such redemption shall accrue at ten percent (10%) per annum.

4.15     Redemption Restrictions.  Notwithstanding any provision of this Agreement to the contrary, if any redemption of the shares of Consideration Stock otherwise required under this Agreement or the Certificate of Designation would be prohibited in the absence of consent from any lender to the Target Company or any of the Subsidiaries, or by the holders of any class of securities of the Target Company, the Target Company shall use its best efforts to obtain such consent as promptly as practicable after any such redemption is required.  Interest payable by the Target Company with respect to any such redemption shall accrue at ten percent (10%) per annum until such consent is obtained.  Nothing contained in this Section 4.15 shall be construed as a waiver by Langley of any rights they may have by virtue of any breach of any representation or warranty of the Target Company herein as to the absence of any requirement to obtain any such consent. 

 

 

 

ARTICLE V

MISCELLANEOUS

5.1     Fees and Expenses.  Except as set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Target Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the shares of Consideration Stock (and, upon conversion thereof, the Underlying Shares) pursuant hereto.  Langley shall be responsible for any taxes payable by Langley that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement or any other Transaction Document.  The Target Company agrees to pay a total $7,500 for legal fees of Langley's counsel associated with the transactions contemplated by this Agreement at Closing. The Target Company shall pay all costs, expenses, fees and all taxes incident to and in connection with:  (A) the issuance and delivery of the Securities, and the filing of the Certificate of Designation, (B) the exemption from registration of the Securities for offer and sale to Langley under the securities or Blue Sky laws of the applicable jurisdictions, and (C) the preparation of certificates for the Securities (including, without limitation, printing and engraving thereof), and (D) all fees and expenses of counsel and accountants of the Target Company.

5.2     Entire Agreement  This Agreement, together with all of the Exhibits and Schedules annexed hereto, and any other Transaction Document contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters.  This Agreement shall be deemed to have been drafted and negotiated by both parties hereto and no presumptions as to interpretation, construction or enforceability shall be made by or against either party in such regard.

5.3     Notices.  Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given upon facsimile transmission (with written transmission confirmation report) at the number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) whichever shall first occur.  The addresses for such communications shall be:

If to the Target Company:

Aberdene Mines Limited

409 Granville Street, Suite 1450

Vancouver, British Columbia  V6C 1T2

Attention: President

With copies to:

Boughton Peterson Yang Anderson Law    Corporation

Suite 1000, 595 Burrard Street, P.O. Box 49290

Vancouver, British Columbia  V7X 1S8

Attn: Claudia L. Losie

Tel:  (604) 647-4149

Fax:  (604) 683-5317

 

 

 

If to Langley: 

Langley Park Investments PLC

30 Farringdon Street

London EC4A 4HJ

Attn: Harry Pearl

Tel: 44.207.569.0044

Fax: 44.207.724.0090   

With copies to:

Gottbetter & Partners, LLP[

488 Madison Avenue, 12th Floor

New York, NY 10022

Attn:  Adam S. Gottbetter, Esq.

Tel:  (212) 400-6900

Fax:  (212) 400-6901

or such other address as may be designated hereafter by notice given pursuant to the terms of this Section 5.3.

5.4     Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Target Company and Langley, or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

5.5     Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.6     Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  The assignment by a party of this Agreement or any rights hereunder shall not affect the obligations of such party under this Agreement.

5.7     No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

 

 

5.8     Governing Law; Venue; Service of Process.  The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the State of New York.  The parties hereto agree that the internal laws of the State of New York shall govern this Agreement and the exhibits hereto, including, but not limited to, all issues related to usury.  Any action to enforce the terms of this Agreement or any of its exhibits, or any other Transaction Document shall be brought exclusively in the state and/or federal courts situated in the County and State of New York.  If and only if New York declines jurisdiction within the State of New York, such action shall be brought in the State and County where the Target Company's principal place of business is situated.  Service of process in any action by Langley or the Target Company to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at its principal address set forth in this Agreement.

5.9     Survival.  The representations and warranties of the Target Company and Langley contained in Article III and the agreements and covenants of the parties contained in Article IV and this Article V shall survive the Closing.

5.10     Counterpart Signatures.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.

5.11     Publicity.  The Target Company and Langley shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, unless counsel for the disclosing party deems such public statement to be required by applicable federal and/or state securities laws.  Except as otherwise required by applicable law or regulation, the Target Company will not disclose to any third party (excluding its legal counsel, accountants and representatives) the name of Langley.

5.12     Severability.  In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

5.13     Limitation of Remedies.  With respect to claims by the Target Company or any person acting by or through the Target Company, or by Langley or any Person acting through Langley, for remedies at law or at equity relating to or arising out of a breach of this Agreement, liability, if any, shall, in no event, include loss of profits or incidental, indirect, exemplary, punitive, special or consequential damages of any kind.

[   SIGNATURE PAGE FOLLOWS   ]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first indicated above.

Target Company:

Aberdene Mines, Ltd.

 

By:   ________________________

Name:   ______________________

Title:   _______________________

 

Langley:

Dungarvon Associates, Inc. on behalf of

Langley Park Investments Plc.

By:   __________________________

Name:   ________________________

Title:   _________________________

 

 

 

 

 

 

 

 

Schedule 3.1(a)

Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(c)

Capitalization and Registration Rights

 

	
Common Stock

	 	 
	 	 
	
Total
	 
	
Options and Warrants

	 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(e)

Conflicts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(f)

Consents and Approvals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(g)

Litigation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(h)

Defaults and Violations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT A

CERTIFICATE OF DESIGNATION,

OF THE RIGHTS AND PREFERENCES

OF

SERIES A 0% CONVERTIBLE PREFERRED STOCK

OF

[TARGET COMPANY]

[Target Company] , a corporation organized and existing under the laws of the State of Nevada (the "Company"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the authority of the Board of Directors as required by Section 78.1955 of the Nevada General Corporation Act (the "NGCA").

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Company (the "Board of Directors" or the "Board") in accordance with the provisions of its Articles of Incorporation and Bylaws, each as amended through the date hereof, the Board of Directors hereby authorizes a series of the Company's previously authorized Preferred Stock, no par value (the "Preferred Stock"), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

I.  CERTAIN DEFINITIONS

For purposes of this Certificate of Designation, capitalized terms are defined in this Certificate of Designation or shall have the following meanings:

"Business Day" means any day except Saturday, Sunday, any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government actions to close.

"Common Stock" means the common stock of the Company, par value _____ per share.

"Conversion Period" means the one (1) year period commencing on the second anniversary of the Issuance Date.

"Fixed Conversion Price" means one dollar seventy five cents ($1.75).

"Holder" or "Holders" means a holder or holders of the shares of Series A Preferred Stock as they appear on the stock records of the Company.

"Issuance Date" means the date of the closing under the Purchase Agreement with respect to the initial issuance of the Series A Preferred Stock.

 

 

 

"Per Share Market Value" means on any particular date (a) the closing bid price per share of the Common Stock on such date on The Over-The-Counter Bulletin Board, the OTC Bulletin Board® ("OTCBB") or other stock exchange on which the Common Stock has been listed or if there is no such price on such date, then the last bid price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not listed on OTCBB or any stock exchange, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. ("NASD") at the close of business on such date, or (c) if the Common Stock is not quoted by the NASD, the closing bid price for a share of Common Stock in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices), or (d) if the Common Stock is no longer publicly traded, the fair market value of a share of Common Stock as determined by an Appraiser (as defined in Section IV(c)(iv)) selected in good faith by the Holders of a majority of the outstanding Series A Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser, in each case as reported by Bloomberg Financial Markets, or if not available, a comparable reporting service chosen by the Company reasonably acceptable to the Holders of a majority of the outstanding shares of Series A Preferred Stock.

"Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

"Purchase Agreement" means the Convertible Preferred Stock Purchase Agreement dated July __, 2004, by and between the Company and Langley Park Investments PLC (the "Purchaser").

"Stated Value" means ten ($10.00) dollars per Series A Preferred Stock.

"Trading Day" means (a) a day on which the Common Stock is quoted on the OTCBB or principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the NASD, or (c) if the Common Stock is not quoted on the NASD, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices).

II.     DESIGNATION AND AMOUNT

The designation of this series, which consists of five hundred thousand (500,000) shares of Preferred Stock, is the Series A 0% Convertible Preferred Stock (the "Series A Preferred Stock") and the Stated Value shall be U.S. ten dollars ($10.00) per share (the "Stated Value").

III.     DIVIDENDS

The Holders of the shares of Series A Preferred Stock shall not be entitled to receive any dividends 

 

 

 

   IV.     CONVERSION

(a)   Subject to Section VI(b), the outstanding shares of Series A Preferred Stock shall be convertible into shares of Common Stock as is determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing on the second anniversary of the Issuance Date and through the expiration of the Conversion Period.  Any conversion under this Section IV(a) shall be for a minimum aggregate Stated Value of $10,000.00 of Series A Preferred Stock.  The Holder shall effect conversions by sending the form of conversion notice attached hereto as Appendix I (the "Notice of Conversion") in the manner set forth in Section IV(j).  Each Notice of Conversion shall specify the Stated Value of Series A Preferred Stock to be converted.  The date on which such conversion is to be effected (the "Conversion Date") shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof.  Except as provided herein, each Notice of Conversion, once given, shall be irrevocable.  If the Holder is converting less than all of the Stated Value represented by a certificate for the Series A Preferred Stock(s) tendered by the Holder in the Notice of Conversion, the Company shall deliver to the Holder a new Series A Preferred Stock certificate for such Stated Value as has not been converted within five (5) Business Days of the Company's receipt of the original Series A Preferred Stock and Notice of Conversion.  Upon the entire conversion of the Series A Preferred Stock or the redemption of the Series A Preferred Stock, Series A Preferred Stock shall be returned to the Company for cancellation.

(b)   On the first Business Day occurring after the expiration of the Conversion Period (the "Automatic Conversion Date"), for each share of Series A Preferred Stock that has not previously been converted, such share of Series A Preferred Stock shall be automatically convertible into shares of Common Stock at the Conversion Price; provided, however, that no shares of Series A Preferred Stock shall be converted (i) unless the Company shall have duly reserved for issuance to the Holder a sufficient number of shares of Common Stock to issue upon such conversion or (ii) if an Event of Default as defined in Section V(a) hereof shall have occurred hereunder and is continuing.  In connection with such conversion, the Company shall deliver to the Holder of such shares of Series A Preferred Stock a written notice (the "Company Conversion Notice").  The Company Conversion Notice shall specify the number of shares of Series A Preferred Stock that will be subject to automatic conversion on the Company Conversion Date.  The Company shall deliver or cause to be delivered the Company Conversion Notice at least two (2) Business Days before the Company Conversion Date.  The Holder of the Series A Preferred Stock shall surrender the certificates representing such shares at the office of the Company not later than five (5) Business Days after the Company Conversion Date.  Each of a Notice of Conversion and a Company Conversion Notice is sometimes referred to herein as a Notice of Conversion, and each of a Conversion Date and a Company Conversion Date is sometimes referred to herein as a Conversion Date.

 

 

 

(c)   Not later than five (5) Business Days after the Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of Series A Preferred Stock and (ii) once received from the Company, Series A Preferred Stock in principal amount equal to the principal amount of Series A Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series A Preferred Stock until the Series A Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Series A Preferred Stock or Common Stock, or the Holder notifies the Company that such Series A Preferred Stock have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith; and provided further, however, that the Company has not exercised its right of redemption pursuant to Section VI(b).  In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates representing the Common Stock are not delivered by the date required under this Section IV(c), the Holder shall be entitled by providing written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the Series A Preferred Stock tendered for conversion.

(d) 

(i)   The Conversion Price for each share of Series A Preferred Stock in effect on any Conversion Date shall be the lesser of (a) the Fixed Conversion Price or (b) eighty percent (80%) of the average of the three (3) lowest Per Share Market Values for the Common Stock over the ten (10) Trading Days preceding the date of conversion, but in no event less than five percent (5%) of the Fixed Conversion Price (the "Floating Conversion Price").  For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTCBB, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

(ii)   If the Company, at any time while any Series A Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities as defined in Article VII payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Fixed Conversion Price designated in Section IV(d)(i) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event.  Any adjustment made pursuant to this Section IV(d)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

 

 

(iii)   If the Company, at any time while any Series A Preferred Stock are outstanding, shall issue or sell shares of Common Stock, or options, warrants or other rights to subscribe for or purchase shares of Common Stock, (excluding shares of Common Stock issuable upon exercise of options, warrants or conversion rights granted prior to the date hereof) and at a price per share less than the Per Share Market Value of Common Stock at the issue date mentioned below, the Fixed Conversion Price designated in Section IV(d)(i) shall be multiplied by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such shares, options, warrants or rights plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value.  Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants.  However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Conversion Price designated in Section IV(d)(i) pursuant to this Section IV(d)(iii), if any such right or warrant shall expire and shall not have been exercised, the Fixed Conversion Price designated in Section IV(d)(i) shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Article IV after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants actually exercised.

(iv)   If the Company, at any time while Series A Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series A Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Section IV(d)(iii) above) then in each such case the Conversion Price at which each Series A Preferred Stock shall thereafter be convertible shall be determined by multiplying the Fixed Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "Appraiser") selected in good faith by the Holders of a majority of the principal amount of the Series A Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser.  In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series A Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 

 

(v)   All calculations under this Article IV shall be made to the nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may be.  Any calculation over .005 shall be rounded up to the next cent or share and any calculation less than .005 shall be rounded down to the previous cent or share.

(vi)   In the event the Fixed Conversion Price is not adjusted pursuant to Section IV(d)(ii), (iii), (iv), or (v), within ten (10) Business Days following the occurrence of an event described therein, the Holder shall have the right to require the Company to redeem all of the Holder's Series A Preferred Stock at 130% of the Stated Value of such Holder's Series A Preferred Stock and the Company shall pay such amount to the holder pursuant to the written instructions provided by the Holder.

(vii)   Whenever the Fixed Conversion Price is adjusted pursuant to Section IV(d)(ii),(iii), (iv) or (v), or redeemed pursuant to Section IV(d)(vi), the Company shall within five (5) Business Days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series A Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(viii)   In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another Person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series A Preferred Stock then outstanding shall have the right thereafter to convert such Series A Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series A Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series A Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled.  The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)

(viii) upon any conversion following such consolidation, merger, sale, transfer or share exchange.  This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

(ix)   If:

(A)   the Company shall declare a dividend (or any other distribution) on its Common Stock; or

(B)   the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or

(C)   the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or

 

 

 

(D)   the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or

(E)   the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company;

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Series A Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series A Preferred Stock at their last addresses as it shall appear upon the Series A Preferred Stock Register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

(e)   If at any time conditions shall arise by reason of action or inaction taken by the Company which in the opinion of the Board of Directors are not adequately covered by the other provisions hereof and which might materially and adversely affect the rights of the Holders of Series A Preferred Stock (different than or distinguished from the effect generally on rights of holders of any class of the Company's capital stock), the Company shall, at least thirty (30) calendar days prior to the effective date of such action, mail and fax a written notice to each Holder of Series A Preferred Stock briefly describing the action contemplated and the material adverse effects of such action on the rights of such Holders and an Appraiser selected by the Holders of majority of the outstanding Series A Preferred Stock shall give its opinion as to the adjustment, if any (not inconsistent with the standards established in this Article IV), of the Fixed Conversion Price (including, if necessary, any adjustment as to the securities into which Series A Preferred Stock may thereafter be convertible) and any distribution which is or would be required to preserve without diluting the rights of the Holders of Series A Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case the adjustment shall be equal to the average of the adjustments recommended by each such Appraiser.  The Board of Directors shall make the adjustment recommended forthwith upon the receipt of such opinion or opinions or the taking of any such action contemplated, as the case may be; provided, however, that no such adjustment of the Fixed Conversion Price shall be made which in the opinion of the Appraiser(s) giving the aforesaid opinion or opinions would result in an increase of the Fixed Conversion Price to more than the Fixed Conversion Price then in effect.

 

 

 

(f)   The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Series A Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Series A Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section IV(d) and Section IV(e) hereof) upon the conversion of the aggregate principal amount of all outstanding Series A Preferred Stock.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

(g)    No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share.  If a fractional share interest arises upon any conversion hereunder, the Company shall eliminate such fractional share interest by issuing Holder an additional full share of Common Stock.

(h)   The issuance of certificates for shares of Common Stock on conversion of Series A Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(i)   Series A Preferred Stock converted into Common Stock shall be canceled upon conversion.

(j)   Each Notice of Conversion shall be given by facsimile to the Company no later than 4:00 pm New York time.  Each Company Notice of Conversion shall be given by facsimile  addressed to each Holder of Series A Preferred Stock at the facsimile telephone number and address of such Holder appearing on the books of the Company as provided to the Company by such Holder for the purpose of such Company Notice of Conversion.  Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number specified in this Section IV(j) (with printed confirmation of transmission).  In the event that the Company receives the Notice of Conversion after 4:00 p.m. New York time, the Conversion Date shall be deemed to be the next Business Day.  In the event that the Company receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

 

 

V.     EVENTS OF DEFAULT AND REMEDIES

(a)   "Event of Default", wherever used herein, means any one of the following events:

(i)   the Company shall fail to observe or perform any material covenant, agreement or warranty contained in this Series A Preferred Stock Certificate of Designation, and such failure shall not have been remedied within twenty (20) Business Days after the date on which written notice of such failure shall have been given;

(ii)   the occurrence of any event or breach or default of a material nature by the Company under the Purchase Agreement or any other Transaction Document (as defined in the Purchase Agreement) and such failure or breach shall not have been remedied within the applicable cure period provided for therein, if any; 

(iii)   the Company or any of its subsidiaries shall commence a voluntary case under the United States Bankruptcy Code as now or hereafter in effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Company under the Bankruptcy Code and the Company fails to pursue dismissal of the case within sixty (60) days after commencement of the case; or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or there is commenced against the Company any such proceeding and the Company fails to pursue dismissal of the case within sixty (60) days after commencement of the case; or the Company suffers any appointment of any custodian or the like for it or any substantial part of its property and the Company fails to pursue dismissal of the custodian within sixty (60) days after the appointment; or the Company makes a general assignment for the benefit of creditors; or any corporate or other action is taken by the Company for the purpose of effecting any of the foregoing;

(iv)   trading in the common stock of the Company shall have been suspended, delisted, or otherwise ceased by the Securities and Exchange Commission or the NASD or other exchange or the Nasdaq (whether the National Market or otherwise), and trading is not reinstated within twenty (20) Trading Days, except for (i) any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company, and trading is reinstated promptly after such dissemination and (ii) any general suspension of trading for all companies trading on such exchange or market or OTCBB; 

(v)   the Company shall issue a press release, or otherwise make publicly known, that it is not honoring properly executed Notice of Conversions for any reason whatsoever, unless the Company is disputing in good faith the Conversion Price or the due compliance by the Holder of the terms and conditions for conversion of the Series A Preferred Stock; or

(vi)   the Company shall issue or enter into an agreement to issue any equity or equity equivalent security with a floating conversion price substantially similar to the Series A Preferred Stock.

 

 

 

(b)   If any Event of Default occurs and continues, beyond any cure period, if any, then so long as such Event of Default shall then be continuing, any Holder may, by notice to the Company demand redemption of the Shares of Series A Preferred Stock at the Redemption Price (as defined herein), and such Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such declaration may be rescinded and annulled by such Holder at any time prior to payment hereunder.  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.  This shall include, but not be limited to the right to temporary, preliminary and permanent injunctive relief without the requirement of posting any bond or undertaking.

(c)   Such Holder may thereupon proceed to protect and enforce its rights either by suit in equity, or by action at law, or by other appropriate proceedings whether for the specific performance (to the extent permitted by law) of any covenant or agreement contained in this Series A Preferred Stock Certificate of Designation or in aid of the exercise of any power granted in this Series A Preferred Stock Certificate of Designation, and proceed to enforce the redemption of any of the Series A Preferred Stock held by it, and to enforce any other legal or equitable right of such Holder.

(d)   As a non-exclusive remedy, in the Event of a Default, the Holder can convert the outstanding shares of Series A Preferred Stock at the lesser of the Fixed Conversion Price or the Floating Conversion Price upon giving a Notice of Conversion to the Company.  The Company shall not have the right to object to the conversion, except with respect to the calculation of the applicable Conversion Price.

(e)   To effectuate the terms and provisions of this Certificate of Designation of Series A Preferred Stock, the Holder may send notice of any default to the Attorney-in-Fact (as defined in the Purchase Agreement) and send a copy of such notice to the Company and its counsel, simultaneously, and request the Attorney-in-Fact, to comply with the terms of this Certificate of Designation of Series A Preferred Stock and the Purchase Agreement and all agreements entered into pursuant to the Purchase Agreement on behalf of the Company.

VI.     REDEMPTION

(a)   Except as provided in this Section VI(a) and Section VI(b), neither the Holder nor the Company may demand that the Series A Preferred Stock be redeemed.  Until all of the Series A Preferred Stock has been converted, in the event that the Company engages in a single transaction or a series of related transactions that cause it to (i) consolidate with or merge with or into any other Person, (ii) permit any other Person to consolidate with or merge into it, or (iii) undergo a Change in Control, then at the option of the Company exercisable by giving thirty (30) days written notice to the Holder, the Company may request that the Holder convert all shares of Series A Preferred Stock then held by the Holder into Common Stock upon the terms and conditions set forth in this Certificate of Designation.  If the Holder does not comply with such request, the Company may redeem all Series A Preferred Stock held by the Holder at their Stated Value (the "Redemption Price"). The Company is not obligated to provide for redemption of the Series A Preferred Stock through a sinking fund.

 

 

 

(b)   In the event that the Holder delivers to the Company a Notice of Conversion to convert all or any portion of the Series A Preferred Stock into shares of Common Stock and the Conversion Price in respect of such conversion is less than the Fixed Conversion Price, then at the option of the Company exercisable by giving thirty (30) days written notice to the Holder, the Company may redeem all or any portion of the Series A Preferred Stock sought to be converted by the Holder at the Redemption Price.

(c)   Shares of Series A Preferred Stock which have been redeemed or converted shall be deemed retired pursuant to the GCA and shall thereafter resume the status of authorized and unissued shares of Preferred Stock, undesignated as to series, and may be redesignated and reissued as part of any new series of Preferred Stock other than Series A Preferred Stock.

(c)   No redemption under Article VI shall be made and no sum set aside for such redemption unless at the time thereof (i)  all required mandatory redemptions on Senior Securities as defined in Section VII have been made in full and (ii) all optional redemptions of Senior Securities, if any, previously declared, have been made in full.  No redemption under this Article VI shall be made and no sum set aside for such redemption at any time that the terms or provisions of any indenture or agreement of the Company, including any agreement relating to indebtedness, specifically prohibits such redemption or setting aside or provides that such redemption or setting aside would constitute a breach or default thereunder (after notice or lapse of time or both), except with the written consent of the lender or other parties to said agreement as the case may be.

(d)   If any redemption under this Article VI shall at any time be prohibited by the GCA, the same shall be deferred until such time as the redemption can occur in full compliance with such statute.

(e)   In the event the Company shall redeem shares of Series A Preferred Stock under this Article VI, notice of such redemption shall be given by first class mail, postage prepaid, or by confirmed facsimile transmission, not less than thirty (30) business days prior to the date fixed by the Board for redemption to each holder of Series A Preferred Stock at the address that appears on the Company's stock record books; provided, however, that no failure to provide such notice nor any defect therein shall affect the validity of the redemption proceeding except as to the holder to whom the Company has failed to send such notice or whose notice was defective.  Each notice shall state (i) the redemption date, (ii) the number of shares of Series A Preferred Stock to be redeemed; (iii) the Redemption Price; and (iv) the place or places where certificates for shares of Series A Preferred Stock are to be surrendered for payment.  When notice has been provided as aforesaid then from and after the redemption date (unless default shall be made by the Company in providing money for the payment of the Redemption Price of the shares called for redemption) said shares of Series A Preferred Stock shall no longer be deemed to be outstanding and all rights of the Holders thereof shall cease (other than the right to receive the Redemption Price or Common Stock with respect to converted Series A Preferred Stock).  Upon surrender of the certificates for Series A Preferred Stock accompanied by appropriate stock powers, the shares shall be redeemed by the Company at the Redemption Price.  In case fewer than all shares represented by any such certificate are redeemed, a new certificate representing the shares of Series A Preferred Stock not so redeemed shall be issued to the Holder without cost.

 

 

 

VII.     RANK

The Series A Preferred Stock shall, as to redemptions and the distribution of assets upon liquidation, dissolution or winding up of the Company, rank (i) prior to the Company's Common Stock; (ii) prior to any class or series of capital stock of the Company hereafter created that, by its terms, ranks junior to the Series A Preferred Stock ("Junior Securities"); (iii) junior to any class or series of capital stock of the Company hereafter created (with the consent of the Holders of a majority of the outstanding Series A Preferred Stock) which by its terms ranks senior to the Series A Preferred Stock ("Senior Securities"); and (iv) pari passu with any other series of preferred stock of the Company hereafter created (with the consent of the Holders of a majority of the outstanding Series A Preferred Stock) which by its terms ranks on a parity ("Pari Passu Securities") with the Series A Preferred Stock.

VIII.     LIQUIDATION PREFERENCE

If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company's assets in one transaction or in a series of related transactions (a "Liquidation Event"), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series A Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share.  If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series A Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series A Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares.  The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company.  Neither the consolidation or merger of the Company with or into any other entity nor the sale or transfer by the Company of less than substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company.  The "Liquidation Preference" with respect to a share of Series A Preferred Stock means an amount equal to the Stated Value thereof.  The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

 

 

IX.     VOTING RIGHTS

The Holders of the Series A Preferred Stock have no voting power whatsoever, except as otherwise provided by the NGCA.  To the extent that under the NGCA the vote of the Holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Series A Preferred Stock (except as otherwise may be required under the NGCA) shall constitute the approval of such action by the class.  To the extent that under the NGCA Holders of the Series A Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series A Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated.

X.     MISCELLANEOUS

(a)   If any shares of Series A Preferred Stock are converted pursuant to Article IV, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series A Preferred Stock.

(a)   Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, the Preferred Stock certificate(s) surrendered for cancellation, the Company shall execute and deliver new Preferred Stock certificate(s) of like tenor and date.  However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Series A Preferred Stock.

(b)   Upon submission of a Notice of Conversion by a Holder of Series A Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder's rights as a Holder of such converted shares of Series A Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Certificate of Designation.  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the delivery period with respect to a conversion of Series A Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company within five (5) Business Days after the expiration of such ten (10) Business Day period) the Holder shall regain the rights of a Holder of Series A Preferred Stock with respect to such unconverted shares of Series A Preferred Stock and the Company shall, as soon as practicable, return such unconverted shares to the Holder.  In all cases, the Holder shall retain all of its rights and remedies for the Company's failure to convert Series A Preferred Stock.

 

 

(c)   The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of Series A Preferred Stock and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees, in the event of any such breach or threatened breach, that the Holders of Series A Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the President and Secretary of Aberdene Mines, Ltd. hereby declares under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series A 0% Convertible Preferred Stock of Aberdene Mines, Ltd. duly adopted by the Board of Directors of Aberdene Mines, Ltd.  on       , _____, and this Certificate of Designation is executed by the undersigned on behalf of ____________ this __th day of       , ____.

Aberdene Mines, Ltd .

 

By:   ______________________________

_____________________, President 

 

By:   ______________________________

____________________, Secretary

 

 

 

 

 

 

 

 

 

 

APPENDIX I

 

NOTICE OF CONVERSION

AT THE ELECTION OF THE HOLDER

(To be Executed by the Registered Holder

in order to Convert the Series A Preferred Stock of ABERDENE MINES, INC. 

The undersigned hereby irrevocably elects to convert the Series A Preferred Stock into shares of Common Stock, par value $.____ per share (the "Common Stock"), of Aberdene Mines, Ltd.  (the "Company") according to the provisions of the Certificate of Designation hereof, as of the date written below.  If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  

	
Conversion calculations:
	

	
 
	
Date to Effect Conversion

	
 
	
 

	
 
	
 

	
 
	

	
 
	
Number of Shares to be Converted

	
 
	
 

	
 
	
 

	
 
	

	
 
	
Applicable Conversion Price

	
 
	
 

	
 
	
 

	
 
	

	
 
	
Number of Shares to be Issued Upon Conversion

	
 
	
 

	
 
	
 

	
 
	

	
 
	
Signature

	
 
	
 

	
 
	
 

	
 
	

	
 
	
Name

	
 
	
 

	
 
	
 

	
 
	

	
 
	Address

 

 

 

 

 

 

 

EXHIBIT B

Power of Attorney; Statutory Short Form, Revised 1/1/97 * (with Affidavit of Effectiveness 

CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT - THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY

DURABLE GENERAL POWER OF ATTORNEY

NEW YORK STATUTORY SHORT FORM

THE POWERS YOU GRANT BELOW CONTINUE TO BE EFFECTIVE

SHOULD YOU BECOME DISABLED OR INCOMPETENT

CAUTION:   THIS IS AN IMPORTANT DOCUMENT IT GIVES THE PERSON WHOM YOU DESIGNATE (YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY DURING YOUR LIFETIME WHICH MAY INCLUDE POWERS TO MORTGAGE, SELL, OR OTHERWISE DISPOSE OF ANY REAL OR PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU.  THESE POWERS WILL CONTINUE TO EXIST EVEN AFTER YOU BECOME DISABLED OR INCOMPETENT. THESE POWERS ARE EXPLAINED MORE FULLY IN NEW YORK GENERAL OBLIGATIONS LAW, ARTICLE 5, TITLE 15, SECTION 5-1502A THROUGH 5-1503 WHICH EXPRESSLY PERMIT THE USE OF ANY OTHER OR DIFFERENT FORM OF POWER OF ATTORNEY.

THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE DECISIONS.  YOU MAY EXECUTE A HEALTH CARE PROXY TO DO THIS.

(IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK A LAWYER TO EXPLAIN IT TO YOU.)

THIS is intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to Article 5, Title 15 of the New York General Obligations Law:

ABERDENE MINES, INC. with an address at 409 Granville Street, Suite 140 Vqncouver, British Columbia V6C 1T2

(insert your name and address)

does hereby appoint:______________________________                                ____________________________________

(If 1  person is to be appointed agent, insert the name and address of your agent above)

Adam S. Gottbetter   residing at   488 Madison Avenue, 12th Floor, New York, NY 10022

   Paul B. Gottbetter     residing at    488 Madison Avenue, 12th Floor, New York, NY 10022   

(If 2 or more persons are to be appointed agents by you insert their names and addresses above.)

my attorney(s)-in-fact TO ACT (If more than one agent is designated, CHOOSE ONE of the following two choices by putting your initials in ONE of the blank spaces to the left of your choice;)

( X )   Each agent may SEPARATELY act.

(    )   All agents must act TOGETHER.

(If neither blank space is initialed, the agents will be required to act TOGETHER)

IN MY NAME, PLACE AND STEAD in any way which I myself could do, if I were personally present, with respect to the following matters as each of them is defined in Title 15 of Article 5 of the New York General Obligations Law to the extent that I am permitted by law to act through an agent:

(DIRECTIONS:  Initial in the blank space to the left of your choice any one or more of the following lettered subdivisions as to which you WANT to give your agent authority.  If the blank space to the left of any particular lettered subdivision is NOT initialed, NO AUTHORITY WILL BE GRANTED for matters that are included in that subdivision.  Alternatively, the letter corresponding to each power you wish to grant may be written or typed on the blank line in subdivision "(Q)", and you may then put your initials in the blank space to the left of subdivision "(Q)" in order to grant each of the powers so indicated)

(   )   (A)   real estate transactions;

(   )   (B)   chattel and goods transactions;

(X)   (C)   bond, share and commodity transactions;

(   )   (D)   banking transactions;

(   )   (E)   business operating transactions;

(   )   (F)   insurance transactions;

(   )   (G)   estate transactions;

(   )   (H)   claims and litigation;

(   )   (I)   personal relationships and affairs;

(   )   (J)   benefits from military service;

(   )   (K)   records, reports and statements;

(   )   (L)   retirement benefit transactions;

(   )   (M)   making gifts to my spouse, children and more remote descendants, and parents, not to exceed in the aggregate $10,000 to each of such persons in any year;

(   )   (N)   tax matters;

(   )   (O)   all other matters;

(   )   (P)   full and unqualified authority to my attorney(s)-in-fact to delegate any or all of the foregoing powers to any person or persons whom my attorney(s)-in-fact shall select;

(X)   (Q)   each of the matters identified by the following letters:  C

(Special provisions and limitations may be included in the statutory short form durable power of attorney only if they conform to the requirements of Section 5-1503 of the New York General Obligations Law.)

SEE ATTACHMENT A

Special Additional Provisions:  The powers granted under (A) through (C) above shall include the sale of a cooperative housing unit and are enlarged so that all fixtures and articles of personal property which at the time of such transaction are or which may thereafter be attached to or used in connection with the real or personal property may be included in the agreements or other instruments to be executed and delivered in connection with any transactions and which may be described in said instruments with more particularity.  This Power of Attorney is not subject to question because an instrument executed hereunder fails to recite or recites only nominal consideration paid therefore and any person dealing with the subject matter of such instrument may do so as if full consideration had been expressed therein.

This durable power of attorney shall not be affected by my subsequent disability or incompetence.

If every agent named above is unable or unwilling to serve, I appoint 

residing at
(insert name and address of successor)

to be my agent for all purposes hereunder.   JUD 134

 

 

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, I HEREBY AGREE THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND I FOR MYSELF AND FOR MY HEIRS, EXECUTORS, LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY AGREE TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

THIS DURABLE GENERAL POWER OF ATTORNEY MAY BE REVOKED BY ME AT ANY TIME. 

IN WITNESS WHEREOF I have hereunto signed my name this 29th  day of  July, 2004.

ABERDENE MINES, INC 

(YOU SIGN HERE:)   By:  ______________________________________,  President

(Signature of principal)

The statute requires that this instrument be acknowledged by the principal.  No express provision is made for proof by subscribing witness.

	
STATE OF       COUNTY OF           ) ss.:
	
STATE OF       COUNTY OF           ) ss.:

	
On the    day of          , 20   , before me personally came

	
On the    day of          , 20   , before me personally came

	
	

	
to me known to be the individual described in and who executed the

foregoing instrument and acknowledged that he executed same.

	
to me known to be the individual described in and who executed the

foregoing instrument and acknowledged that he executed same.

AFFIDAVIT OF EFFECTIVENESS 

 STATE OF COUNTY OF      ) ss.:

, residing at

being duly sworn does depose and

Adam S. Gottbetter and Paul B. Gottbetter, residing at 488 Madison Avenue, 12th Floor, New York, New York 10022, being duly sworn does depose and say that I am the Attorney-in-Fact under the above Power of Attorney.  That said Power of Attorney is a valid and subsisting Power which has not been revoked by the death of the principal(s) or otherwise; that I have no actual knowledge of a revocation of the foregoing Power; and, I warrant and represent that I have full and unqualified authority to execute the documents relating to the issuance of common stock of [Target Company] knowing that [TransferAgent], as transfer agent , will rely upon the representations made herein as inducement to accept such instrument(s) and this Power of Attorney as evidence of my authority to act.

 

Attorney in Fact

Sworn and Subscribed to before me this   day of          , 2004

(Notary Affix Stamp at Right)

Durable General Power of Attorney

REVISED STATUTORY SHORT FORM

Title No.

DISTRICT

SECTION

BLOCK

LOT

COUNTY OR TOWN

RECORDED AT THE REQUEST OF

............................................................................................................

RETURN BY MAIL TO:

 

 

 

 

RESERVED FOR RECORDING OFFICE USE

 

 

 

 

 

 

DURABLE POWER OF ATTORNEY

NEW YORK STATUTORY SHORT FORM

DATED ____, 2004

BY ABERDENE MINES, INC 

ATTACHMENT A

The attached power of attorney is limited by and subject to the terms and conditions of the Convertible Preferred Stock Purchase Agreement by and between the Company and Langley Park Investments PLC (the "Purchaser") dated July 29, 2004 (the "Purchase Agreement") and the Certificate of Designation in respect of the Company's Series A Preferred Stock and such power of attorney can only be acted upon to enforce the rights of the Purchaser and its successors and assigns under Section 4.9 of the Purchase Agreement and Article IV of the Certificate of Designation, all including, but not limited to, the issuance and delivery of shares of Common Stock and removing stop transfer orders and restrictions, (as defined in the Purchase Agreement) under the aforementioned documents.

This power of attorney shall expire upon the full and complete satisfaction of all of the Company's obligations under the Purchase Agreement and the Certificate of Designation.

IN WITNESS WHEREOF I have hereunto signed my name this 29th day of July, 2004.

ABERDENE MINES, INC.

By:   ________________________, 

_____________________President

Signed and sworn to before me on

____________________, 2004

 

____________________________

Notary Public

 

 

 

 

 

EXHIBIT C

OFFICER'S CERTIFICATE

I, ____________________, being the President of ABERDENE MINES, INC.  a Nevada corporation (the "Target Company"), pursuant to Section 2.2(a)(ii) of that certain Convertible Preferred Stock Purchase Agreement (the "Purchase Agreement"), dated as of July 29, 2004, by and between the Target Company and Langley Park Investments PLC, do hereby certify on behalf of the Target Company that attached hereto is a copy of the resolutions duly adopted by the Board of Directors of the Target Company authorizing the Target Company to execute and deliver the Transaction Documents, as such term is defined in the Purchase Agreement and to enter into the transactions contemplated thereby.

   IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf of the Target Company this 29th day of July, 2004.

 

[Target Company]

By: _______________________________

      [                               ], President

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