Purchase Agreement with Green Star Energies, Inc. dated February 10, 2009

1.1

Subject to the terms of this Agreement, the Buyer agrees to purchase the Seller’s interest in the joint venture with Bialy Gas Production LLC (“Bialy”), as set out in the Joint Venture Agreement between Bialy and Titan Oil and Gas Inc. attached hereto as  Schedule 5 (the “JV Interest”)

1.2

At the Closing (as defined below), as consideration for the JV Interest, the Buyer shall issue and deliver to the Seller:

 

(a)

9,000,000 shares of the Buyer’s common stock;

 

(b)

warrants to purchase 2,000,000 shares of the Buyer’s common stock at a price of $0.10 per share, exercisable within two (2) years of the Closing;

 

(c)

warrants to purchase 4,000,000 shares of the Buyer’s common stock at a price of $0.15 per share, exercisable within two (2) years of the Closing; and

 

(d)

warrants to purchase 1,000,000 shares of the Buyer’s common stock at a price of $0.20 per share, exercisable within two (2) years of the Closing.

1.3

Immediately prior to the Closing, as additional consideration for the JV Interest, the Buyer shall enter into a Management Agreement with the Seller which shall include the following terms:

 

(a)

the Seller shall manage all operations of the Buyer for a term of not less than three (3) years (the “Term”), including managing projects, acquisitions, financing, corporate structuring and administrative work, as well as any outstanding legal or accounting needs (the “Services”);

 

(b)

the Seller shall acknowledge that the Buyer is a fully reporting public company in the United States and is subject to the filing requirements of British Columbia Instrument 51-509 and shall covenant to ensure that the Buyer remains current with all applicable securities laws and regulations;

 

(c)

the Seller shall ensure that if the Buyer files a Registration Statement on Form S-8 with the United States Securities and Exchange Commission (the “SEC”) that the Buyer shall not issue any S-8 shares of its common stock except in accordance with all applicable securities laws and regulations;

 

(d)

the Seller shall file a Schedule 13D and a Form 3 with the SEC within two (2) days of the Closing, and shall arrange for the filing of Personal Information Forms for each of the Seller’s officers and directors on SEDAR within ten (10) days of the Closing;

 

(e)

the Buyer shall, after the Closing, issue 1,000,000 shares of the Buyer’s preferred stock to the Seller as compensation for providing the Services over the course of the Term;

 

(f)

the Buyer shall, after the Closing, submit for shareholder approval resolutions that establish the following rights and restrictions of shares of the Buyer’s preferred stock:

 

(i)

conversion rights to shares of the Buyer’s common stock at a one (1) to one (1) ratio;

 

(ii)

voting rights for each share of the Buyer’s preferred stock equivalent to fifty (50) shares of the Buyer’s common stock; and

 

(iii)

no dividend or liquidation rights.

1.4

The Buyer shall issue the following shares of its common stock as consideration for arranging and negotiating the transaction contemplated by this Agreement:

 

(a)

350,000 restricted shares to Tunbridge-Cluny Management Corp. (“TCMC”), certificates representing 150,000 of which shall be delivered six (6) months from the Closing and certificates representing 200,000 of which shall be delivered nine (9) months from the Closing; and

 

(b)

350,000 restricted shares to 676793 BC Ltd. (“BCL”), certificates representing 150,000 of which shall be delivered six (6) months from the Closing and certificates representing 200,000 of which shall be delivered (9) months from the Closing.

1.5

The Buyer shall consent to removing the restrictive legends on any shares of the Buyer’s common stock held by TCMC or BCL, or any permitted transferee thereof, six (6) months after the Closing, in accordance with applicable U.S. securities laws.

1.6

At the Closing, the Buyer shall transfer certain of its assets to its wholly-owned subsidiary Novori Jewelry Inc. (the “Subsidiary”), as described in Schedule 2 attached hereto. The Subsidiary shall assume all outstanding debt obligations of the Buyer except:

 

(a)

those described in Schedule 1 attached hereto;

 

(b)

$48,125 owed to CX Digital as of the Effective Date, payable by the Buyer in fourteen (14) monthly installments of $3,437.50 per month on the tenth (10th) day of each month, with the first installment due not less than thirty (30) days after the Closing; and

 

(c)

$20,900 owed to the Buyer’s auditor as of the Effective Date, payable by the Buyer as soon as is reasonably practicable.

1.7

At the Closing, the Buyer shall execute convertible promissory notes covering $180,975 of the Buyer’s outstanding debt obligations as described in Schedule 1 attached hereto, in substantially in the form attached hereto as Schedule 3 and Schedule 4.

1.8

At the Closing, the Buyer shall sell the Subsidiary to Harold Schaffrick and Mark Neild (collectively the “Founders”), in exchange for which:

 

(a)

the Buyer shall agree to cancel all issued and outstanding shares of its preferred stock held by the Founders, including any rights to purchase or otherwise receive shares of such preferred stock;

 

(b)

the Founders shall resign from their positions as officers of the Buyer;

 

(c)

the Founders shall tender their resignations as directors of the Buyer, to become effective once Brandon Toth and Vic Devlaeminck are duly appointed as directors of the Buyer;

 

(d)

each Founder shall agree not to transfer shares of the Buyer’s common stock for gross proceeds that exceed $8,000 in any calendar month within four (4) months of the Effective Date, or gross proceeds that exceed $16,000 in any calendar month thereafter, if the Buyer fails to make any payment required under the convertible promissory note attached hereto as Schedule 3 (the “Note”). The Buyer acknowledges that any transfer made pursuant to this paragraph shall not reduce the amount owed by the Buyer to the Subsidiary under the Note;

 

(e)

the Founders shall, upon request, provide copies of their trading account statements to the Buyer to demonstrate their compliance with paragraph 1.8(d) of this Agreement.

2.1

The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur as soon as practicable after this Agreement is executed by the parties hereto, following the name change of the Buyer to Aeon Holdings Inc. and approval by NASDAQ of the symbol change of the Buyer.

2.2

In addition to the covenants of the Buyer set out in section 1, at the Closing:

 

(a)

the Buyer shall purchase the JV Interest held by the Seller;

 

(b)

the Seller shall transfer the JV Interest to the Buyer, free of any liens, encumbrances, or restrictions;

 

(c)

the Buyer shall appoint Brandon Toth as its President, Chief Executive Officer and Secretary;

 

(d)

the Buyer shall appoint Vic Devlaeminck as its Chief Financial Officer, Principal Accounting Officer and Treasurer;

 

(e)

the Buyer shall file a Schedule 14F with the SEC disclosing the appointments of Brandon Toth and Vic Devlaeminck as directors of the Buyer, each of whom shall be appointed approximately ten (10) days after the Schedule 14F is distributed to all of the Buyer’s shareholders of record;

 

(f)

the Buyer shall make available to its new officers all corporate books and documents and any and all property or material agreements to which it is a party; and

 

(g)

the Buyer shall consent to removing the restrictive legends on 450,000 shares of the Buyer’s common stock held by the Founders, in accordance with applicable U.S. securities laws.

2.3

At the Closing, the Seller shall provide the Buyer with a certificate, signed by an authorized signatory of the Seller, stating that each of the representations and warranties made by the Seller in this Agreement is true and correct in all material respects as of the Closing, except for changes contemplated, permitted, or required by this Agreement, and that the Buyer has performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it before the Closing.

2.4

At the Closing, the Buyer shall provide the Seller with a certificate, signed by an authorized signatory of the Buyer, stating that each of the representations and warranties made by the Buyer in this Agreement is true and correct in all material respects as of the Closing except for changes contemplated, permitted, or required by this Agreement and that the Buyer has performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it before the Closing.

3.1 

Representations and Warranties of the Seller

 

(a)

Organization; Power. The Seller is a corporation incorporated and legally existing under the laws of the state of Nevada, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

 

(b)

Authorization. The execution, delivery and performance of this Agreement and all other agreements contemplated by this Agreement to which the Seller is a party have been duly and validly authorized by all necessary corporate action of the Seller. This Agreement and all other agreements contemplated by this Agreement, when executed and delivered by the parties thereto, shall constitute legal, valid, and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or judicial limits on equitable remedies.

 

(c)

JV Interest. The JV Interest consists of the following:

 

(i)

thirteen (13) mineral leases covering sixty-one (61) oil and gas wells, including twenty-seven (27) productive oil and gas wells, located on 500 acres in the Crows Run Field in western Pennsylvania;

 

(ii)

the option to purchase two (2) mineral leases covering sixteen (16) oil and gas wells, located in the Crows Run Field in western Pennsylvania;

 

(collectively, the “Leases”)

a twelve-and-a-half percent (12.5%) overriding royalty on the production of oil and gas from the Leases in favour of Bialy, calculated as a percentage of gross revenue.

 

(d)

JV Interest Production. The Leases produced the following number of barrels of oil:

 

(i)

659.4 in 2007; and

 

(ii)

1,117.54 in 2006.

 

(e)

JV Interest Production Cost. The average cost of producing each barrel of oil from the Leases, including contracting and electrical expenses, was:

 

(i)

$20.71 in 2007; and

 

(ii)

$19.88 in 2006.

 

(f)

Conduct of Business; Liabilities. The Seller is not in default under, and no condition exists that with notice or lapse of time or both would constitute a default of the Seller under:

 

(i)

any mortgage, loan agreement, indenture, evidence of indebtedness, or other instrument evidencing borrowed money to which the Seller is a party or by which the Seller or the JV Interest is bound; or

 

(ii)

any judgment, order or injunction of any court, arbitrator or governmental agency that would reasonably be expected to affect materially and adversely the JV Interest or the Seller’s business, financial condition or results of operations.

 

(g)

No Adverse Consequences. The execution, delivery and performance of this Agreement by the Seller will not:

 

(i)

result in the creation or imposition of any lien, security interest, charge or encumbrance on the JV Interest;

 

(ii)

violate or conflict with, or result in a breach of, any provision of the Seller’s Articles of Incorporation or Bylaws;

 

(iii)

violate any law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority applicable to the Seller or the JV Interest; or

 

(iv)

conflict with, constitute grounds for termination or acceleration of, result in the breach of the terms, conditions, or provisions of, result in the loss of any benefit to the Seller under, or constitute a default under (whether by virtue of the application of a “change of control” provision or otherwise) any agreement, instrument, license or permit to which either the Seller is a party or by which the Seller is bound.

 

(h)

No Undisclosed Liabilities. The JV interest is not subject to any material liability or obligation.

 

(i)

Litigation. There are no actions, suits, proceedings, orders, investigations, or claims pending or, to the Seller’s knowledge, threatened against the Seller or the JV Interest, at law or in equity, and the Seller is not subject to any arbitration proceedings or, to the Seller’s knowledge, any governmental investigations or inquiries.

 

(j)

Tax Matters. The Seller has filed all United States, state, local and foreign tax returns and reports required to be filed and has paid all taxes shown as due thereon, and no taxing authority has asserted any deficiency in the payment of any tax or has informed the Seller that it intends to assert any such deficiency or to make any audit or other investigation of the Seller for the purpose of determining whether such a deficiency should be asserted against the Seller.

 

(k)

Compliance with Laws. The Seller is in material compliance with all laws, statutes, ordinances, regulations, orders, judgments or decrees applicable to it, the enforcement of which, if the Seller were not in compliance therewith, would have a material adverse effect on the business and operations of the Seller. The Seller has not received any notice of any asserted present or past failure by the Seller to comply with such laws, statutes, ordinances, regulations, orders, judgments or decrees.

 

(l)

Environmental, Health and Safety Matters. The Seller has obtained, has complied with, and is in compliance with, in each case in all material respects, all permits, licenses and other authorizations that are required pursuant to applicable environmental, health and safety legislation for the JV Interest. The Seller has not received any written or oral notice, report or other information regarding any actual or alleged material violation of any applicable environmental, health and safety legislation, or any material liabilities or potential material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any material investigatory, remedial or corrective obligations, relating to the JV Interest arising under applicable environmental, health and safety legislation.

 

(m)

Permits and Licenses. The Seller holds, and at all times has held, all permits necessary to operate the JV Interest pursuant to all applicable statutes, laws, ordinances, rules and regulations of all government bodies, agencies and other authorities, except when the failure to hold any permit would not have a material adverse effect on the JV Interest. The Seller is in material compliance with all the terms of each permit, and there are no claims of material violation by the Seller of any permit. All applicable government entities and agencies that have issued any permits have consented or, prior to the Closing, shall have consented (when such consent is necessary) to the transfer of the JV Interest without requiring any modification of the Seller’s rights or obligations under such permits.

 

(n)

Accuracy of Representations and Warranties. None of the representations and warranties of the Seller contain any untrue statement of material fact or omit any material fact necessary to the statements contained in this Agreement not misleading.

3.2 

Representations and Warranties of the Buyer

 

(a)

Organization; Power. The Buyer is a corporation incorporated and legally existing under the laws of the state of Delaware, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

 

(b)

Authorization. The execution, delivery and performance of this Agreement and all other agreements contemplated by this Agreement to which the Buyer is a party have been duly and validly authorized by all necessary corporate action of the Buyer. This Agreement and all other agreements contemplated by this Agreement, when executed and delivered by the parties thereto, shall constitute legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or judicial limits on equitable remedies.

 

(c)

No Conflict with Other Instruments or Agreements. The execution, delivery and performance of this Agreement by the Buyer shall not:

 

(i)

violate or conflict with, or result in a breach of, any provision of the Buyer’s Articles of Incorporation or Bylaws;

 

(ii)

violate any law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority applicable to the Buyer; or

 

(iii)

conflict with, constitute grounds for termination or acceleration of, result in a breach of the terms, conditions, or provisions of, result in the loss of any benefit to the Buyer under, or constitute a default under (whether by virtue of the application of a “change of control” provision or otherwise) any agreement, instrument, license or permit to which either the Buyer is a party or by which the Buyer is bound.

 

(d)

Governmental Authorities. The Buyer is not required to submit any notice, report, or other filing with any government or regulatory authority in connection with the Buyer’s execution, delivery and performance of this Agreement, and no consent, approval, or authorization of any government or regulatory authority is required to be obtained by the Buyer in connection with the Buyer’s execution, delivery and performance of this Agreement.

 

(e)

Litigation. There are no actions, suits, proceedings, orders, investigations or claims pending or, to the Buyer’s knowledge, threatened against the Buyer or its properties, assets, operations or businesses, at law or in equity, and the Buyer is not subject to any arbitration proceedings or, to the Buyer’s knowledge, any governmental investigations or inquiries.

 

(f)

Investment Representations.  The Buyer is primarily using public equity as a means to finance its operations but reserves the right to partner, joint venture and/or otherwise finance the JV Interest as it sees fit.

 

(g)

Commencing Operations.  The Buyer represents that it will begin work on the JV Interest within a reasonable amount of time. Plans and operations shall be disclosed to the Seller on an ongoing basis.

 

(h)

Accuracy of Representations and Warranties.  None of the representations or warranties of the Buyer contain any untrue statement of material fact or omit any material fact necessary to make the statements contained in this Agreement not misleading.

3.3

All representations, warranties, covenants and agreements made in this Agreement or in any exhibit, schedule, certificate or agreement delivered in accordance with this Agreement shall survive the Closing. The Seller’s representations and warranties shall survive the Closing for a period of not less than two (2) years, with the exception of warranties of title, which shall survive in accordance with the provisions of applicable laws.

4.1 

Conditions Precedent to the Buyer’s Obligations

 

(a)

Available Information. The Seller shall have provided the Buyer with all available information regarding the JV Interest.

 

(b)

Transfer of Shares. The Founders shall have entered into agreements to transfer 500,000 of the 950,000 shares of the Buyer’s common stock held by the Founders into the names of Petro Lucre LLC and Eric Schinderman, equally.

 

(c)

Representations and Warranties. Each of the representations and warranties made by the Seller in this Agreement shall be true and correct in all material respects at the Closing with the same effect as though such representations and warranties were made at that time, except for changes contemplated, permitted or required by this Agreement. The Seller shall have performed and complied with all agreements, covenants and conditions required of the Seller under this Agreement.

 

(d)

No Proceeding or Litigation. No action, investigation, suit or proceeding by or before any court, government or regulatory authority shall have been commenced and be continuing against the Seller, and no action, investigation, suit or proceeding shall have been threatened against the Seller or any of its affiliates, associates, officers or directors, seeking to restrain, prevent or alter the terms of this Agreement, questioning the validity or legality of this Agreement or seeking damages in connection with this Agreement.

 

(e)

Material Change. The Seller shall not have suffered any material adverse change in its business, prospects, financial condition, working capital, assets, liabilities (absolute, accrued, contingent, or otherwise) or operations.

 

(f)

Corporate Action. The Seller shall have furnished the Buyer with a copy, certified by an authorized signatory of the Seller, of the Seller’s resolutions authorizing the execution, delivery and performance of this Agreement.

4.2 

Conditions Precedent to the Seller’s Obligations

 

(a)

Debt Obligations. The Buyer shall have outstanding debt obligations to no more than four (4) creditors, with the aggregate outstanding debt obligations not exceeding $250,000. The Subsidiary shall assume all outstanding debt obligations of the Buyer as described in subsection 1.5.

 

(b)

Shares. Immediately prior to the Closing, there shall be no more than 2,160,000 issued and outstanding shares of the Buyer’s common stock.

 

(c)

Representations and Warranties. Each of the representations and warranties made by the Buyer in this Agreement shall be true and correct in all material respects at the Closing with the same effect as though such representations and warranties were made at that time, except for changes contemplated, permitted or required by this Agreement. The Buyer shall have performed and complied with all agreements, covenants, and conditions required of the Buyer under this Agreement.

 

(d)

No Proceeding or Litigation. No action, investigation, suit or proceeding by or before any court, government or regulatory authority shall have been commenced and be continuing against the Buyer, and no action, investigation, suit or proceeding shall have been threatened against the Buyer or any of its affiliates, associates, officers or directors, seeking to restrain, prevent or alter the terms of this Agreement, questioning the validity or legality of this Agreement or seeking damages in connection with this Agreement.

 

(e)

Corporate Action. The Buyer shall have furnished the Seller with a copy, certified by an authorized signatory of the Buyer, of the Buyer’s resolutions authorizing the execution, delivery and performance of this Agreement.

5.1

Prior to the Closing, the Seller shall operate the JV Interest in a manner consistent with past practice, and the Seller shall continue to use its reasonable efforts to keep available the services of current management and to preserve its current relationships with persons having business dealings with it.

5.2

Prior to the Closing, the Seller shall use, preserve and maintain, as far as practicable, in the ordinary course of business, the JV Interest to the same extent and in the same condition as on the date of this Agreement. Without the Buyer’s prior written consent, the Seller shall not sell, transfer or encumber the JV Interest or make any commitments relating to the JV Interest, except in the ordinary course of business.

5.3

The Seller shall comply in all material respects with all statutes, laws, ordinances, rules and regulations applicable to the Seller and the JV Interest in the ordinary course of business.

5.4

Prior to the Closing, the Seller shall notify the Buyer promptly of any material any material adverse change in the JV Interest.

6.1

Without limiting any other obligations of the Seller and the Buyer herein, the Seller and the Buyer shall each use their best efforts to comply with all applicable securities laws and to satisfy the conditions set forth in this Agreement.

6.2

No press releases, other public announcements or notices to customers concerning the transactions contemplated by this Agreement shall be made by the Buyer or the Seller without the prior written consent of the other party, which consent shall not be unreasonably withheld; provided, however, that nothing herein shall prevent the parties from supplying information or making statements as required by any government authority or in order for the parties to satisfy their legal obligations (prompt notice of which shall, in any such case, be given to the parties).

6.3

On the reasonable request of any party after the Closing, the other parties shall take all action and execute all documents and instruments necessary or desirable to consummate and give effect to this Agreement.

7.1

This Agreement may only be terminated in writing with the mutual consent of the parties hereto.

8.1

Notwithstanding any investigation by the Buyer, from and after the Closing, the Seller shall indemnify, hold harmless, and defend the Buyer and its subsidiaries, shareholders, affiliates, officers, directors, employees, agents, successors and permitted assigns (collectively, the “Buyer’s Indemnified Persons”) from and against, and reimburse each of the Buyer’s Indemnified Persons with respect to, any and all losses, damages, liabilities, costs, and expenses, including interest from the date of such loss to the time of payment, penalties, and reasonable attorney fees (collectively, “Damages”) incurred by any of the Buyer’s Indemnified Persons by reason of or arising out of or in connection with any breach or inaccuracy of any surviving representation or warranty of the Seller made in this Agreement, and any failure by the Seller to perform any covenant required to be performed by the Seller pursuant to this Agreement. This indemnification extends to any Damages suffered by any of the Buyer’s Indemnified Persons, whether or not a claim is made against any of the Buyer’s Indemnified Persons by any third party.  The Seller’s liability pursuant to this indemnification shall not exceed the consideration the Seller shall receive pursuant to this Agreement.

8.2

Notwithstanding any investigation by the Seller, from and after the Closing, the Buyer shall indemnify, hold harmless, and defend the Seller and its subsidiaries, shareholders, affiliates, officers, directors, employees, agents, successors and permitted assigns (collectively, the “Seller’s Indemnified Persons”) from and against, and reimburse each of the Seller’s Indemnified Persons with respect to, any and all Damages incurred by any of the Seller’s Indemnified Persons by reason of or arising out of or in connection with any breach or inaccuracy of any representation or warranty of the Buyer made in this Agreement, and any failure by the Buyer to perform any covenant required to be performed by the Buyer pursuant to this Agreement. This indemnification extends to any Damages suffered by any of the Seller’s Indemnified Persons, whether or not a claim is made against any of the Seller’s Indemnified Persons by any third party. The Buyer’s liability pursuant to this indemnification shall not exceed the consideration the Buyer shall receive pursuant to this Agreement.

9.1

Waiver. The failure of any party to comply with any obligation, covenant, agreement or condition in this Agreement may be waived by the party entitled to the performance of such obligation, covenant or agreement or by the party who has the benefit of such condition, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

9.2

Amendment. This Agreement may not be amended unless consented to in writing by the Buyer, the Seller and each of the Founders.

9.3

Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party hereto.

9.4

Stock Splits. The parties to this agreement agree that no forward or reverse splits of the Buyer’s common stock shall be permitted for a period of not less than two (2) years unless agreed upon in writing by the parties.

9.5

Notices. Any notice or communication required or permitted to be given under this Agreement shall be given in writing and shall be considered to have been given if delivered by hand, transmitted by facsimile transmission or mailed by prepaid registered post in Canada or in the United States, to the address or facsimile transmission number of each party set out below:

 

Any notice or communication shall be considered to have been received:

 

(a)

if delivered by hand during business hours on a business day, upon receipt by a responsible representative of the receiving party, and if not delivered during business hours, upon the commencement of business on the next business day;

 

(b)

if sent by facsimile transmission during business hours on a business day, upon the sender receiving confirmation of the transmission, and if not transmitted during business hours, upon the commencement of business on the next business day; and

 

(c)

if mailed by prepaid registered post in Canada or the United States, upon the fifth business day following posting; except that, in the case of a disruption or an impending or threatened disruption in postal services every notice or communication shall be delivered by hand or sent by facsimile transmission.

9.6

Arbitration. All disputes arising under this Agreement shall be arbitrated by a mediator agreed upon by the parties prior to commencing any litigation.

9.7

Currency. All references to currency in this Agreement are to U.S. dollars unless otherwise stated.

9.8

Time of the Essence. Time shall be of the essence of this Agreement.

9.9

Invalidity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision and any such invalid or unenforceable provision shall be deemed to be severable.

9.10

Entire Agreement. The provisions of this Agreement constitute the entire agreement between the parties and supersede all previous communications, representations and agreements, whether oral or written, between the parties with respect to the subject matter of this Agreement.

9.11

Enurement. This Agreement shall enure to the benefit of and be binding upon the parties and, except as otherwise provided or as would be inconsistent with the provisions of this Agreement, their respective heirs, executors, administrators, successors and assigns.

9.12

Independent Legal Advice. Each of the parties to this Agreement confirms and acknowledges that it has been provided with an opportunity to seek independent legal advice with respect to its rights, entitlements, liabilities and obligations hereunder and understands that it has been recommended that such advice be sought prior to entering into this Agreement.

9.13

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that this Agreement is signed by one party and faxed to another, the parties agree that a faxed signature shall be binding upon the parties as though the signature was an original.

1.

Convertible Promissory Note 1 ($100,000)

 

Payable to the Subsidiary as follows until the outstanding Principal Balance, together with any accrued interest and any fees or charges, has been paid:

 

(a)

ownership of the Buyer’s website URL;

 

(b)

customer lists relating to the current and past business of the Buyer;

 

(c)

vendor lists and supplier contacts of the Buyer;

 

(d)

current business phone and fax numbers of the Buyer;

 

(e)

all website code, graphics, images, content, text and logos used by the Buyer;

 

(f)

all current online jewelry advertising agreements to which the Buyer is a party;

 

(g)

the merchant account associated with the Buyer’s website;

 

(h)

all bank accounts currently held by the Buyer;

 

(i)

the Buyer’s Canadian subsidiary, Novori Marketing Inc., and all bank accounts associated with such subsidiary;

 

(j)

all bank accounts associated with the Subsidiary;

 

(k)

the Buyer’s leases for its Canadian and U.S. offices; and

 

(l)

all office equipment, desks, computers, furniture, phones and other office furnishings of which the Buyer is the beneficial owner.

A.

WHEREAS pursuant to an Assignment and Assumption of Debt Agreement among Maker and Payee dated February 10, 2009 (the “Agreement”), Payee has agreed to assume certain debts of Maker, and in consideration, Maker has agreed to pay to Payee the sum of $80,975 in principal, plus interest pursuant to and in accordance with the terms and conditions of this Note; and

B.

WHEREAS pursuant to the terms of this Note, Maker is agreeing to settle all outstanding debts owed to Payee.

1.

Promise to Pay.  In consideration for Payee assuming certain debt obligations of Maker, Maker promises to pay to the order of Payee, at Payee’s address set out above or at such other place as Payee may designate by written notice to Maker, the principal sum of $80,975 (the “Principal Balance”), together with any accrued interest and any fees or charges under this Note. Any accrued interest and any fees or charges under this Note shall become part of the Principal Balance. This Note reflects all monies due by Maker to Payee as of the date of the Agreement.

2.

Interest.  The Principal Balance shall be repaid by Maker to Payee with interest, which shall accrue on the outstanding Principal Balance at the rate of six percent (6%) per year, beginning nine (9) months from the Effective Date, and shall continue to accrue until all sums due under this Note are paid in full. Interest on the outstanding Principal Balance shall be calculated on the basis of actual days elapsed and a 365 or 366 day year (as applicable) to the due date of the payment.

3.

Terms of Repayment.  The Principal Balance, together with any accrued interest and any fees or charges, shall be payable as follows until the outstanding Principal Balance has been paid:

 

(a)

The “Immediate Debts” shall be payable in one (1) installment of $5,000, due ten (10) days after the Effective Date;

 

(b)

The “Short-Term Debts” shall be payable in three (3) installments of $15,625 every (30) days, with the first installment due thirty (30) days after the Effective Date; and

 

(c)

The “Mid-Term Debts” shall be payable in sixteen (16) monthly installments of $1,818.75 per month with the first installment due on May 1, 2009, and the rest of the installments due every month thereafter on the first (1st) day of each month for a period of fifteen (15) months.

4. 

Acknowledgements.  Maker and Payee each acknowledge that as of the Effective Date:

 

(a)

the total amount owed of the “Short-Term Debts” owed by Maker to Payee is $46,875;

 

(b)

the total amount owed of the “Mid-Term Debts” owed by Maker to Payee is $29,100.

5.

Late Charge.  Maker shall pay to Payee a late charge of ten percent (10%) of any payment under this Note that is not received by Payee within five (5) days after Maker receives notice from Payee of failure to timely make such payment (the “Late Charge”). Maker recognizes that any late payment shall result in Payee incurring additional expense in servicing the loan evidenced by this Note, in terms of the loss of use of funds due to Payee and in frustration of Payee’s commitments. Maker agrees that Payee shall be entitled to damages for the detriment caused by any late payment, but that it is extremely difficult and impractical to ascertain the extent of such damages. Therefore, Maker and Payee hereby agree that the Late Charge is a reasonable estimate of such damages to Payee. Any Late Charge shall be applied on a one-time-only basis with respect to each delinquency.

6.

Conversion Rights.

 

(a)

For each payment under this Note is not received by Payee within five (5) days of its due date, Payee shall have the option to convert up to $16,195 of the outstanding Principal Balance, together with any accrued interest and any fees or charges (a “Conversion”), into shares of Maker’s common stock (the " Conversion Shares"), at a twenty percent (20%) discount to market on the day of such Conversion.

 

(b)

Payee shall give written notice of any Conversion to Maker, substantially in the form attached hereto as Appendix 1 (the "Conversion Notice"), at Maker’s address specified above. Such Conversion shall be deemed to have been effected at the close of business on the date on which such Conversion Notice, duly completed and executed, shall have been sent in accordance with section 16 of this Note.

 

(c)

As promptly as practicable but in no event later than ten (10) Business Days after any Conversion, Maker, at its expense, shall cause Payee's name to be entered in the register of the shareholders of Maker in respect of the Conversion Shares and shall issue to Payee certificates evidencing same and deliver them to Payee at Payee’s address set out in the Conversion Notice, at Maker’s expense. "Business Day" for this purpose means any day other than a Saturday, Sunday or other day on which banks in the city of Vancouver, Washington are required or authorized to be closed.

7.

Legend Removal.  Upon Payee’s written request, Maker agrees to arrange for legal opinions and to give instructions to Maker’s transfer agent and to cover all costs to remove all restrictive legends on the share certificates representing any Conversion Shares held by Payee more than six (6) months after the Effective Date.

8.

Transfer of Conversion Shares.  All Conversion Shares shall be sold only in accordance with the Lock-Up Agreement, attached hereto as Appendix 2, which the parties agree to execute as of the Effective Date.

9.

Prepayment.  Maker may prepay this Note at any time, in whole or in part, without penalty or premium.

10.

Costs and Attorneys’ Fees.  Maker agrees to pay Payee any costs Payee may incur in filing any type of court action or suit as a result of Maker’s failure to make the payments provided for in this Note, including Payee’s attorneys’ fees. If  Payee files a court action or suit and wins, Maker agrees to pay, in addition to the amounts due under this Note, Payee’s court costs and its reasonable attorneys’ fees as determined by the trial court and any appellate court or courts in the event the case is appealed, and on any petition for review.

11.

Consent and Waiver.  All suretyship defenses, including presentment, notice of dishonor and protest, are hereby waived by Maker and any endorsers of this Note. Any extension, waiver or renewal shall not affect the liability of Maker or any endorser.

12.

Controlling Law.  The parties agree to attorn to the non-exclusive jurisdiction of the courts of British Columbia to resolve any dispute relating to this Note.

13.

Security.  Pursuant to the terms of this Note, the convertible option of this Note shall provide the security for Payee.

14.

Stock Splits. Maker and Payee agree that no forward or reverse splits of Maker’s common stock shall be permitted for a period of not less than two (2) years after the Effective Date unless agreed upon in writing by the parties.

15.

Authority of Signatories.  Maker (and the undersigned representative of Maker, if any) represents that Maker has the full power, authority and legal right to execute and deliver this Note, and that this Note constitutes a valid and binding obligation of Maker.

16.

Notices. Any notice or communication required or permitted to be given under this Note shall be in writing and shall be considered to have been given if delivered by hand or mailed by prepaid registered post in Canada or in the United States, to the address of each party set out above, or to such other address as either party may designate in the manner set out above.

 

Any notice or communication shall be considered to have been received:

 

(a)

if delivered by hand during business hours on a business day, upon receipt by a responsible representative of the receiving party, and if not delivered during business hours, upon the commencement of business on the next business day; and

 

(b)

if mailed by prepaid registered post in Canada or the United States, upon the fifth (5th) business day following posting; except that, in the case of a disruption or an impending or threatened disruption in postal services every notice or communication shall be delivered by hand or sent by facsimile transmission.

17.

General Provisions.  With respect to this Note, time shall be of the essence. Payments received on this Note may be applied by Payee in such manner and in such amounts and at such time or times and in such order and priority as Payee may see fit to the payment or reduction of such portion of this Note and/or such indebtedness, as Payee may elect. The words “Payee” and “Maker” shall include their respective successors, assigns, heirs, executors and administrators.

18.

Successors; Assigns; Third-Party Beneficiaries. The provisions of this Note shall be binding upon the parties hereto and their respective heirs, successors and permitted assigns. Neither this Note nor the rights or obligations of any party may be assigned without the prior written consent of the other party. Any attempted assignment in contravention of this Note shall be null and void and of no effect. This Note is for the sole benefit of the parties hereto and their respective heirs, successors and permitted assigns and no provision hereof, whether express or implied, is intended, or shall be construed, to give any other person any rights or remedies, whether legal or equitable, hereunder.

19.

Amendments.  This Note may not be amended, modified or supplemented except in writing signed by Maker and Payee.

20.

Currency.  All references to currency in this Note are to U.S. dollars.

1.1

The Shareholder shall only be permitted to transfer shares of the Stock, or any securities convertible into or exchangeable or exercisable for shares of the Stock, as follows:

 

(a)

to the Company pursuant to a redemption initiated by the Company;

 

(b)

to any transferee so long as such transferee has executed a joinder to this Agreement pursuant to which such transferee agrees to be bound by the terms and conditions of this Agreement;

 

(c)

to any beneficiary of the Shareholder or a trust for the benefit of any beneficiary of the Shareholder during the Shareholder’s lifetime or upon the Shareholder’s death by will or intestacy. For the purposes of this Agreement, “beneficiary” shall mean the Shareholder and the immediate family of the Shareholder, including any relationship by blood, marriage or adoption, not more remote than first cousin; or

 

(d)

to any other transferee the gross proceeds of which do not exceed $16,000 in any thirty (30) day period.

2.1

This Agreement shall be effective as of the Effective Date and shall terminate upon the earlier of:

 

(a)

fifteen (15) months after the Effective Date; or

 

(b)

once the Company has paid the Note in full.

3.1

The Company shall consent to removing the restrictive legends on any shares of the Stock held by the Shareholder or any permitted transferee six (6) months after the Effective Date, in accordance with applicable U.S. securities laws.

3.2

The unreasonable failure of the Company to comply with the provisions of subsection 3.1 shall require the Company to pay the Shareholder liquidated damages in the amount equal to the value of the Stock on the date of issuance.

4.1

Upon request by the Company, the Shareholder agrees to deliver to the Company, within five (5) business days following the sale of any shares of the Stock, a signed report signed from the Shareholder’s broker that includes the following information:

 

(a)

the name of the Shareholder;

 

(b)

the number of shares of the Stock sold;

 

(c)

the selling price applicable to the shares of the Stock sold;

 

(d)

a statement as to whether the sale of the shares of the Stock was made pursuant to a private resale or via a brokerage transaction;

 

(e)

the name of the securities exchange on which the shares of the Stock were sold, if applicable; and

 

(f)

if derivatives of the Stock were transferred, the exercise price, term, and other standard terms of the derivatives.

5.1

In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share combination, or other change in the corporate structure of Company affecting the Stock, the new securities replacing the Stock shall be subject to all of the conditions and restrictions applicable to the Stock pursuant to this Agreement.

6.1

In the event of:

 

(a)

a sale of substantially all of the assets of the Company;

 

(b)

a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation in which the shareholders of the Company immediately before the merger or consolidation have, immediately after the merger or consolidation, greater stock voting power);

 

(c)

a merger in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise (other than a reverse merger in which the shareholders of the Company immediately before the merger have, immediately after the merger, greater stock voting power);

 

(d)

any transaction or series of related transactions in which in excess of fifty percent (50%) of the Company’s voting power is transferred; or

 

(e)

the acquisition by the Company of financing equal to or in excess of an aggregate of $10,000,000

 

(collectively, a “Corporate Transaction”),

 

then immediately prior to effecting any such Corporate Transaction the restrictions set forth in this Agreement shall terminate as to all shares of the Stock owned by the Shareholder immediately and without any action on the part of the Company or the Shareholder.

7.1

Except as otherwise provided in this Agreement, the Shareholder shall exercise all rights and privileges of a shareholder of the Company with respect to the Stock, and the Company shall list the Shareholder as a shareholder on its corporate books and records.

8.1

Definitions.  Capitalized terms used but not defined in this Agreement shall have the same meaning assigned to such terms in the Note.

8.2

Notices.  Any notice or communication required or permitted under this Agreement shall be given in writing and shall be considered to have been given if delivered by hand or mailed by prepaid registered post in Canada or in the United States, to the address of each party set out below:

 

or to such other address as either party may designate in the manner set out above.

8.3

Amendment.  This Agreement may not be amended, modified or revoked, in whole or in part, except by an agreement in writing signed by each of the parties hereto.

8.4

Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party hereto.

8.5

Successors and Assigns.  This Agreement shall enure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon the Shareholder, the Shareholder’s successors and the Shareholder’s permitted assigns.

8.6

Time of the Essence. Time shall be of the essence of this Agreement.

8.7

Governing Law.  The parties agree to attorn to the non-exclusive jurisdiction of the courts of British Columbia to resolve any dispute related to this Agreement.

8.8

Independent Legal Advice.  The Shareholder acknowledges that this Agreement has been prepared on behalf of the Company by legal counsel to the Company, and that the Company’s legal counsel does not represent, and is not acting on behalf of, the Shareholder.  The Shareholder has been advised and provided with an opportunity to consult with the Shareholder’s own counsel with respect to this Agreement.

8.9

Entire Agreement.  The provisions of this Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral.

8.10

Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then:

 

(a)

such provision shall be excluded from this Agreement;

 

(b)

the balance of this Agreement shall be interpreted as if such provision were so excluded; and

 

(c)

the balance of this Agreement shall be enforceable in accordance with its terms.

8.11

Currency.  All references to currency in this Agreement are to U.S. dollars unless otherwise stated.

8.12

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that this Agreement is signed by one party and faxed to another, the parties agree that a faxed signature shall be binding upon the parties as though the signature was an original.

A.

WHEREAS Maker has agreed to pay to Payee the sum of $100,000 in principal, plus interest pursuant to and in accordance with the terms and conditions of this Note, in consideration of Payee cancelling Maker’s outstanding debt to Payee.

1.

Promise to Pay.  In consideration for Payee cancelling Maker’s outstanding debt to Payee, Maker promises to pay to the order of Payee or Payee’s designee the principal sum of $100,000 (the “Principal Balance”), together with any accrued interest and any fees or charges under this Note. Any accrued interest and any fees or charges under this Note shall become part of the Principal Balance. This Note reflects all monies due by Maker to Payee as of the Effective Date.

2.

Interest.  The Principal Balance shall be repaid by Maker to Payee with interest, which shall accrue on the outstanding Principal Balance at the rate of six percent (6%) per year, beginning nine (9) months from the Effective Date, and shall continue to accrue until all sums due under this Note are paid in full. Interest on the outstanding Principal Balance shall be calculated on the basis of actual days elapsed and a 365 or 366 day year (as applicable) to the due date of the payment.

3.

Terms of Repayment.  The Principal Balance, together with any accrued interest and any fees or charges, shall be payable in sixteen (16) monthly installments of $6,250 per month with the first installment due on May 1, 2009, and the rest of the installments due every month thereafter on the first (1st) day of each month for a period of fifteen (15) months or until the outstanding Principal Balance, together with any accrued interest and any fees or charges, has been paid. All payments under this Note shall be made in Vancouver, British Columbia and shall be delivered by wire transfer to a bank account designated by Payee.

4.

Late Charge.  Maker shall pay to Payee a late charge of ten percent (10%) of any payment under this Note that is not received by Payee within five (5) days after Maker receives notice from Payee of failure to timely make such payment (the “Late Charge”). Maker recognizes that any late payment shall result in Payee incurring additional expense in servicing the loan evidenced by this Note, in terms of the loss of use of funds due to Payee and in frustration of Payee’s commitments. Maker agrees that Payee shall be entitled to damages for the detriment caused by any late payment, but that it is extremely difficult and impractical to ascertain the extent of such damages. Therefore, Maker and Payee hereby agree that the Late Charge is a reasonable estimate of such damages to Payee. Any Late Charge shall be applied on a one-time-only basis with respect to each delinquency.

5.

Conversion Rights.

 

(a)

For each payment under this Note not received by Payee within five (5) days of its due date, Payee shall have the option to convert  up to $20,000 of the outstanding Principal Balance, together with any accrued interest and any fees or charges (a “Conversion”), into shares of Maker’s common stock (the "Conversion Shares") at a twenty percent (20%) discount to market on the day of such Conversion.

 

 (b)

Payee shall give written notice of any Conversion to Maker, substantially in the form attached hereto as Appendix 1 (the "Conversion Notice"), at Maker’s address specified above. Such Conversion shall be deemed to have been effected at the close of business on the date on which such Conversion Notice, duly completed and executed, shall have been sent in accordance with section 15 of this Note.

 

(c)

As promptly as practicable but in no event later than ten (10) Business Days after any Conversion, Maker, at its expense, shall cause Payee's name to be entered in the register of the shareholders of Maker in respect of the Conversion Shares and shall issue to Payee certificates evidencing same and deliver them to Payee at Payee’s address set out in the Conversion Notice, at Maker’s expense. "Business Day" for this purpose means any day other than a Saturday, Sunday or other day on which banks in the city of Vancouver, Washington are required or authorized to be closed.

6.

Legend Removal.  Upon Payee’s written request, Maker agrees to arrange for legal opinions and to give instructions to Maker’s transfer agent and to cover all costs to remove all restrictive legends on the share certificates representing any Conversion Shares held by Payee more than six (6) months after the Effective Date.

7.

Transfer of Conversion Shares.  All Conversion Shares shall be sold only in accordance with the Lock-Up Agreement, attached hereto as Appendix 2, which the parties agree to execute as of the Effective Date.

8.

Prepayment.  Maker may prepay this Note at any time, in whole or in part, without penalty or premium.

9.

Costs and Attorneys’ Fees.  Maker agrees to pay Payee any costs Payee may incur in filing any court action or suit as a result of Maker’s failure to make the payments provided for in this Note, including Payee’s attorneys’ fees. If  Payee files a court action or suit and wins, Maker agrees to pay, in addition to the amounts due under this Note, Payee’s court costs and its reasonable attorneys’ fees as determined by the trial court and any appellate court or courts in the event the case is appealed, and on any petition for review.

10.

Consent and Waiver.  All suretyship defenses, including presentment, notice of dishonor and protest, are hereby waived by Maker and any endorsers of this Note. Any extension, waiver or renewal shall not affect the liability of Maker or any endorser.

11.

Controlling Law.  The parties agree to attorn to the non-exclusive jurisdiction of the courts of British Columbia to resolve any dispute relating to this Note.

12.

Security.  Pursuant to the terms of this Note, the convertible option of this Note shall provide the security for Payee.

13.

Stock Splits. Maker and Payee agree that no forward or reverse splits of Maker’s common stock shall be permitted for a period of not less than two (2) years after the Effective Date unless agreed upon in writing by the parties.

14.

Authority of Signatories.  Maker (and the undersigned representative of Maker, if any) represents that Maker has the full power, authority and legal right to execute and deliver this Note, and that this Note constitutes a valid and binding obligation of Maker.

15.

Notices. Any notice or communication required or permitted to be given under this Note shall be in writing and shall be considered to have been given if delivered by hand or mailed by prepaid registered post in Canada or in the United States, to the address of each party set out above, or to such other address as either party may designate in the manner set out above.

 

Any notice or communication shall be considered to have been received:

 

(a)

if delivered by hand during business hours on a business day, upon receipt by a responsible representative of the receiving party, and if not delivered during business hours, upon the commencement of business on the next business day; and

 

(b)

if mailed by prepaid registered post in Canada or the United States, upon the fifth (5th) business day following posting; except that, in the case of a disruption or an impending or threatened disruption in postal services every notice or communication shall be delivered by hand or sent by facsimile transmission.

16.

General Provisions.  With respect to this Note, time shall be of the essence. Payments received on this Note may be applied by Payee in such manner and in such amounts and at such time or times and in such order and priority as Payee may see fit to the payment or reduction of such portion of this Note and/or such indebtedness, as Payee may elect. The words “Payee” and “Maker” shall include their respective successors, assigns, heirs, executors and administrators.

17.

Successors; Assigns; Third-Party Beneficiaries. The provisions of this Note shall be binding upon the parties hereto and their respective heirs, successors and permitted assigns. Neither this Note nor the rights or obligations of any party may be assigned without the prior written consent of the other party. Any attempted assignment in contravention of this Note shall be null and void and of no effect. This Note is for the sole benefit of the parties hereto and their respective heirs, successors and permitted assigns and no provision hereof, whether express or implied, is intended, or shall be construed, to give any other person any rights or remedies, whether legal or equitable, hereunder.

18.

Amendments.  This Note may not be amended, modified or supplemented except in writing signed by Maker and Payee.

19.

Currency.  All references to currency in this Note are to U.S. dollars.

1.1

The Shareholder shall only be permitted to transfer shares of the Stock, or any securities convertible into or exchangeable or exercisable for shares of the Stock, as follows:

 

(a)

to the Company pursuant to a redemption initiated by the Company;

 

(b)

to any transferee so long as such transferee has executed a joinder to this Agreement pursuant to which such transferee agrees to be bound by the terms and conditions of this Agreement;

 

(c)

to any beneficiary of the Shareholder or a trust for the benefit of any beneficiary of the Shareholder during the Shareholder’s lifetime or upon the Shareholder’s death by will or intestacy. For the purposes of this Agreement, “beneficiary” shall mean the Shareholder and the immediate family of the Shareholder, including any relationship by blood, marriage or adoption, not more remote than first cousin; or

 

(d)

to any other transferee the gross proceeds of which do not exceed $16,000 in any thirty (30) day period.

2.1

This Agreement shall be effective as of the Effective Date and shall terminate upon the earlier of:

 

(a)

fifteen (15) months after the Effective Date; or

 

(b)

once the Company has paid the Note in full.

3.1

The Company shall consent to removing the restrictive legends on any shares of the Stock held by the Shareholder or any permitted transferee six (6) months after the Effective Date, in accordance with applicable U.S. securities laws.

3.2

The unreasonable failure of the Company to comply with the provisions of subsection 3.1 shall require the Company to pay the Shareholder liquidated damages in the amount equal to the value of the Stock on the date of issuance.

4.1

Upon request by the Company, the Shareholder agrees to deliver to the Company, within five (5) business days following the sale of any shares of the Stock, a signed report signed from the Shareholder’s broker that includes the following information:

 

(a)

the name of the Shareholder;

 

(b)

the number of shares of the Stock sold;

 

(c)

the selling price applicable to the shares of the Stock sold;

 

(d)

a statement as to whether the sale of the shares of the Stock was made pursuant to a private resale or via a brokerage transaction;

 

(e)

the name of the securities exchange on which the shares of the Stock were sold, if applicable; and

 

(f)

if derivatives of the Stock were transferred, the exercise price, term, and other standard terms of the derivatives.

5.1

In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share combination, or other change in the corporate structure of Company affecting the Stock, the new securities replacing the Stock shall be subject to all of the conditions and restrictions applicable to the Stock pursuant to this Agreement.

6.1

In the event of:

 

(a)

a sale of substantially all of the assets of the Company;

 

(b)

a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation in which the shareholders of the Company immediately before the merger or consolidation have, immediately after the merger or consolidation, greater stock voting power);

 

(c)

a merger in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise (other than a reverse merger in which the shareholders of the Company immediately before the merger have, immediately after the merger, greater stock voting power);

 

(d)

any transaction or series of related transactions in which in excess of fifty percent (50%) of the Company’s voting power is transferred; or

 

(e)

the acquisition by the Company of financing equal to or in excess of an aggregate of $10,000,000

 

(collectively, a “Corporate Transaction”),

 

then immediately prior to effecting any such Corporate Transaction the restrictions set forth in this Agreement shall terminate as to all shares of the Stock owned by the Shareholder immediately and without any action on the part of the Company or the Shareholder.

7.1

Except as otherwise provided in this Agreement, the Shareholder shall exercise all rights and privileges of a shareholder of the Company with respect to the Stock, and the Company shall list the Shareholder as a shareholder on its corporate books and records.

8.1

Definitions.  Capitalized terms used but not defined in this Agreement shall have the same meaning assigned to such terms in the Note.

8.2

Amendment.  This Agreement may not be amended, modified or revoked, in whole or in part, except by an agreement in writing signed by each of the parties hereto.

8.3

Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party hereto.

8.4

Successors and Assigns.  This Agreement shall enure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon the Shareholder, the Shareholder’s successors and the Shareholder’s permitted assigns.

8.5

Time of the Essence. Time shall be of the essence of this Agreement.

8.6

Governing Law.  The parties agree to attorn to the non-exclusive jurisdiction of the courts of British Columbia to resolve any dispute related to this Agreement.

8.7

Independent Legal Advice.  The Shareholder acknowledges that this Agreement has been prepared on behalf of the Company by legal counsel to the Company, and that the Company’s legal counsel does not represent, and is not acting on behalf of, the Shareholder.  The Shareholder has been advised and provided with an opportunity to consult with the Shareholder’s own counsel with respect to this Agreement.

8.8

Entire Agreement.  The provisions of this Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral.

8.9

Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then:

 

(a)

such provision shall be excluded from this Agreement;

 

(b)

the balance of this Agreement shall be interpreted as if such provision were so excluded; and

 

(c)

the balance of this Agreement shall be enforceable in accordance with its terms.

8.10

Currency.  All references to currency in this Agreement are to U.S. dollars unless otherwise stated.

8.11

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that this Agreement is signed by one party and faxed to another, the parties agree that a faxed signature shall be binding upon the parties as though the signature was an original.