Exhibit 10.1
AGENCY AGREEMENT
January 18, 2007
Sterling Mining Company
2201 Government Way
Suite E, Coeur d’Alene ID
83814 USA
Attention: Raymond De Motte,
President
Dear Sirs:
The undersigned, Blackmont Capital
Inc. and TD Securities Inc., Blackmont Capital Corp. and TD
Securities (USA) LLC (collectively, the “ Agents
”), understand that Sterling Mining Company (the “
Company ”) proposes to issue and sell up to 3,695,000
units (individually, a “Unit” and, collectively,
the “ Units ”) having the terms described
herein, at a price of US$2.30 per Unit (the “Issue
Price” ) for aggregate gross proceeds to the Company of
up to US$8,498,500. Each Unit is comprised of one Common Share (as
hereinafter defined) of the Company’s common stock, par value
US$0.05 per Common Share (the “ Unit Shares ”)
and one Series A Common Share purchase warrant (the “
Warrants ”). Each Warrant is exercisable for one
Common Share at an exercise price of US$4.25 for 24 months
following the Closing Date.
Upon and subject to the terms and
conditions set forth herein, the Agents hereby agree to act, and
upon acceptance hereof the Company hereby appoints the Agents, as
the Company’s exclusive agents to offer for sale the Units on
a “best efforts” agency basis, without any obligation
to purchase such Units, at the Issue Price, and agree to arrange
for purchasers for the Units resident in the Selling Jurisdictions
(as hereinafter defined).
The Purchasers (as hereinafter
defined), Agents and other holders (including subsequent
transferees) of the Units (and any holders of Registrable
Securities (as hereinafter defined) will be entitled to the benefit
of the registration rights agreement, to be dated as of the Closing
Date (the “ Registration Rights Agreement ”),
among the Company and the Agents, in the form attached hereto as
Exhibit A.
In consideration of the services to
be rendered by the Agents in connection with the Offering, the
Company shall pay to the Agents the Commission (as hereinafter
defined) and issue to the Agents the Compensation Options as set
out in section 14 hereof.
DEFINITIONS
In this Agreement, in addition to
the terms defined above, the following terms shall have the
following meanings:
“Act”
means the Securities Act
(Ontario).
“Affiliates” means the affiliates of the Agents, as such term
is defined in the Act.
“Agents”
means Blackmont Capital Inc., TD
Securities Inc., Blackmont Capital Corp. and TD Securities (USA)
LLC collectively.
“Agreement” means the agreement resulting from the
acceptance by the Company of the offer made by the Agents
hereby.
“Business
Day” means a day
which is not a Saturday, Sunday or statutory or civic holiday in
the city of Toronto, Ontario.
“Closing”
means the closing on the Closing
Date of the transaction of purchase and sale in respect of the
Units as contemplated by this Agreement and the Subscription
Agreements.
“Closing
Date” means
January 18, 2007 or such other date as the Agents and the
Company may agree.
“Closing
Time” means 10:00
a.m. (Toronto time) on the Closing Date or such other time on the
Closing Date as the Company and the Agents may agree.
“Commission” shall have the meaning ascribed to such term in
section 14 hereof.
“Common
Shares” means
shares of common stock, par value US$0.05 per share, in the capital
of the Company.
“Company”
means Sterling Mining Company and
includes any successor corporation to or of the Company.
“Company’s
Auditors” means
Williams and Webster, P.S., or such other firm of chartered
accountants as the Company may have appointed or may from time to
time appoint as auditors of the Company.
“Compensation
Options” shall have
the meaning ascribed to such term in section 14 hereto.
“Compensation Option
Certificate” means
the certificate evidencing the Compensation Options and containing
the terms thereof.
“Debt
Instrument” means
any loan, bond, debenture, promissory note or other instrument
evidencing indebtedness (demand or otherwise) for borrowed money or
other liability.
“Disclosure
Documents” means
collectively, the Corporation’s annual report on Form 10-K
for the year ended December 31, 2005, and all subsequent
documents filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14(a) or 15(d) of the Exchange Act prior
to the Closing Date, including the quarterly reports filed on Form
10-Q for the quarters ended March 31, 2005, June 30,
2005 and September 30, 2005, and the current reports filed on
Form 8-K since January 1, 2005;
“Environmental Laws”
has the meaning ascribed in section
4(a)(xxix) hereof.
“Exchange
Act” means the
United States Securities Exchange Act of 1934, as
amended.
“Financial
Statements” has the
meaning ascribed in section 4(a)(vi) hereof.
“Final
Prospectus” means
the (final) non-offering prospectus of the Company to be filed in
the Qualifying Province for the purpose of becoming a reporting
issue in such province.
“including” means including without limitation.
“Institutional Accredited
Investor” means an
“accredited investor”, as defined in Rule 501(a)(1),
(2), (3) and (7) of the U.S. Securities Act.
“Investment Company
Act” means the
United States Investment Company Act of 1940, as
amended.
“Issue
Price” shall have
the meaning ascribed to such term on the face page of the
Agreement.
“Leased
Premises” means all
premises which are material to the Company and which the Company or
a Material Subsidiary occupies as tenant.
“Material
Agreement” means
any material note, indenture, mortgage or other form of
indebtedness and any contract, commitment, agreement (written or
oral), instrument, lease or other document, including licence
agreements and agreements relating to intellectual property, to
which the Company is a party and which is material to the
Company.
“Material
Subsidiaries” shall
have the meaning ascribed thereto in section 4(a)(ii)
hereof.
“MRRS”
means the mutual reliance review
system procedures provided for under National Policy 43-201 –
Mutual Reliance Review System for Prospectuses and Annual
Information Forms.
“misrepresentation”,
“material fact”, “material change”,
“subsidiary”, “affiliate”,
“associate”, and “distribution” have the
respective meanings ascribed thereto in the Act or the U.S.
Securities Act, as applicable.
“Offering”
means the offering of Units pursuant
to the Subscription Agreement and the Agency Agreement.
“person”
means any individual (whether acting
as an executor, trustee, administrator, legal representative or
otherwise), corporation, firm, partnership, sole proprietorship,
syndicate, joint venture, trustee, trust, unincorporated
organization or association, and pronouns have a similar extended
meaning.
“Preliminary
Prospectus” means
the Canadian preliminary prospectus of the Company filed in
accordance with the MRRS.
“Prospectus” shall mean, collectively, the Preliminary
Prospectus and the Final Prospectus.
“Public
Record” means the
Company’s annual report on Form 10-K for the year ended
December 31, 2005, as amended, the quarterly reports filed on
Form 10-Q for the quarters ended March 31,
2006, June 30, 2006 and September 30, 2006, as
amended, and the current reports filed on Form 8-K since
January 1, 2006.
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“Purchasers” means the persons who, as purchasers, acquire
Units by duly completing, executing and delivering Subscription
Agreements and any other required documentation and permitted
assignees or transferees of such persons from time to
time.
“Qualifying
Province” means the
Province of Ontario.
“Registration Rights
Agreement” shall
have the meaning ascribed to such term on the face page of this
Agreement.
“Registration
Statement” means
the registration statement or statements of the Company that may be
filed with the SEC in order to register the Registerable
Securities.
“Registerable
Securities” means
the Common Shares comprising part of the Units and the Warrant
Shares underlying the Warrants and the Common Shares and Warrants
comprising the Units underlying the Compensation
Options.
“Regulation
D” means Regulation
D under the U.S. Securities Act.
“Regulation
S” means Regulation
S under the U.S. Securities Act.
“Rule 144”
means Rule 144 under the U.S.
Securities Act.
“Rule
144A” means Rule
144A under the U.S. Securities Act.
“SEC”
means the United States Securities
and Exchange Commission.
“Securities
Laws” means, as
applicable, the securities laws, regulations, rules, rulings and
orders in the Selling Jurisdictions, the applicable policy
statements issued by the securities regulators in the Selling
Jurisdictions, the securities laws of the United States, any
applicable States and any jurisdictions outside of Canada and the
United States, the regulations and rules thereunder and the forms
prescribed thereby and the rules of any applicable stock
exchange.
“Securities
Regulators” means
the securities commissions or other securities regulatory
authorities of the Selling Jurisdictions, including the SEC, or, as
the context may require, any one or more of Selling
Jurisdictions.
“Selling
Jurisdictions” means the Province of Ontario and such other
jurisdictions outside of Canada (including the United States) as
may be agreed to by the Agents and the Company as evidenced by the
Company’s acceptance of a Subscription Agreements with
respect thereto.
“State”
means any one of the 50 states of
the United States of America or the District of
Columbia.
“Subscription
Agreements” means
the subscription agreements in the form agreed upon by the Agents
and the Company pursuant to which Purchasers agree to subscribe for
and purchase the Units herein contemplated and shall include, for
greater certainty, all schedules thereto.
“Sunshine
Mine” means the
patented and unpatented mining claims forming part of the sunshine
mine property of the Company in the Coeur d’Alene Mining
District of northern Idaho, United States.
“Supplementary
Material” means,
collectively, any amendment to the Preliminary Prospectus, the
Final Prospectus, the Registration Statement, or any amended or
supplemental prospectus or ancillary material required to be filed
with any of the Securities Regulators pursuant to the Canadian
Securities Laws.
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“Taxes” shall have the meaning ascribed thereto in
section 4(a)(viii).
“Transaction
Documents” means,
collectively, this Agreement, the Subscription Agreements, the
Registration Rights Agreement, the Warrant Certificate and the
Compensation Option Certificate.
“Transfer
Agent” means
Columbia Stock Transfer Company.
“Unit”
shall have the meaning ascribed to
such term on the face page of this Agreement.
“Unit
Shares” shall have
the meaning ascribed to such term on the face page of this
Agreement.
“United
States” means the
United States of America, its territories and possessions, any
state of the United States, and the District of
Columbia.
“U.S. Securities
Act” means the
United States Securities Act of 1933, as amended.
“Warrant
Certificate” means
the warrant certificates dated as of the Closing Date representing
the Warrants.
“Warrants”
shall have the meaning ascribed to
such term on the face page of the Agreement.
“Warrant
Shares” means the
Common Shares of the Company issuable upon exercise of the
Warrants.
“$”
as used herein means Canadian
dollars, unless otherwise defined.
TERMS AND
CONDITIONS
1. (a) Sale on Exempt
Basis. The Agents will
offer for sale and sell the Units in the Selling Jurisdictions on a
“private placement” basis in those jurisdictions where
they may lawfully be offered for sale or sold and only at the Issue
Price. The Agents will offer the Units to persons who they
reasonably believe are Institutional Accredited Investors, or
“accredited investors” as defined in the Act, in
transactions which comply with the exemptions from registration or
do not require the filing of a prospectus or offering memorandum
with respect to those Units under the laws of any Selling
Jurisdiction. The Agents are duly registered to effect the sale of
the Units in the Selling Jurisdictions.
(b) Filings.
The Company undertakes to file or
cause to be filed all forms or undertakings required to be filed by
the Company in the Selling Jurisdictions in connection with the
purchase and sale of the Units so that (assuming compliance by the
Agents with section 1(a) above), the distribution of the Units and
the issuance of the Units may lawfully occur without the necessity
of filing a prospectus, a registration statement or an offering
memorandum in Canada or the United States (but on terms that will
permit the Units acquired by the Purchasers in the Selling
Jurisdictions to be sold by such Purchasers at any time in the
Selling Jurisdictions subject to the terms of this Agreement and
applicable securities laws, including, but not limited to,
compliance with applicable hold periods), and the Agents undertake
to cause Purchasers of Units to complete any forms reasonably
requested by the Company in order to comply with the Securities
Laws. All fees payable in connection with such filings shall be at
the expense of the Company.
(c) No Offering
Memorandum. Neither the
Company nor the Agents shall: (i) provide to prospective
purchasers of the Units any document or other material that would
constitute an offering memorandum or future oriented financial
information within the meaning of Securities Laws in Canada
or
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in the United States or any State or territory
thereof; or (ii) engage in any form of general solicitation or
general advertising in connection with the offer and sale of the
Units, including, but not limited to, causing the sale of the Units
to be advertised in any newspaper, magazine, printed public media,
printed media or similar medium of general and regular paid
circulation, broadcast over radio, television or
telecommunications, including electronic display, or conduct any
seminar or meeting relating to the offer and sale of the Units
whose attendees have been invited by general solicitation or
advertising.
2. Description of the
Units.
Each Unit is comprised of one Unit
Share and one Warrant. Each Warrant is exercisable for one Common
Share at an exercise price of US$4.25 for 24 months following the
Closing Date.
3. (a) Covenants.
The Company hereby covenants to the
Agents and to the Purchasers and their permitted assigns, and
acknowledges that each of them is relying on such covenants, that
the Company shall:
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(i)
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cause the Final
Prospectus and any other related documents required to be filed in
connection with the Final Prospectus to be prepared and filed in
accordance with the Securities Laws of the Qualifying Province,
within 120 days after the Closing Date;
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(ii)
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file a resale
Registration Statement and use its best efforts to have such
registration statement declared effective by the SEC within 180
days of closing to register the resale of the Common Shares and the
Common Shares underlying the Warrants;
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(iii)
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the Company
shall not take any action which would be reasonably expected to
result in the delisting or suspension of its Common Shares on the
over-the-counter bulletin board system or from any other securities
exchange, market or trading or quotation facility on which its
Common Shares become listed or quoted (including the Toronto Stock
Exchange or the TSX Venture Exchange) and the Company shall comply,
in all material respects, with the rules and regulations
thereof;
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(iv)
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allow the
Agents and their representatives the opportunity to conduct all due
diligence which the Agents may reasonably require to be conducted
prior to the Closing Time in order to fulfil their obligations as
Agents under Securities Laws;
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(v)
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duly execute
and deliver the Transaction Documents at the Closing Time, and
comply with and satisfy all terms, conditions and covenants therein
contained to be complied with or satisfied by the
Company;
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(vi)
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use its best
efforts to fulfil or cause to be fulfilled, at or prior to the
Closing Date, each of the conditions set out in section 8
hereof;
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(vii)
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ensure that the
Unit Share and Warrants shall be duly and validly created,
authorized and issued and shall have the attributes corresponding
in all material respects to the description thereof set forth in
this Agreement and the Subscription Agreements;
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(viii)
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ensure that the
Unit Shares shall be duly issued as fully paid and non-assessable
securities in the capital of the Company, free of contractual
pre-emptive rights;
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(ix)
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ensure that the
Warrants shall be duly and validly created, authorized and issued
and shall have the attributes corresponding in all material
respects to the description thereof in this Agreement;
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(x)
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ensure that, at
all times prior to the expiry of the Warrants, a sufficient number
of Warrant Shares, are allotted and reserved for issuance, and,
upon exercise of the Warrants, shall be duly issued as fully paid
and non-assessable securities in the capital of the Company, free
of contractual pre-emptive rights;
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(xi)
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ensure that the
Compensation Options shall be duly and validly created, authorized
and issued;
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(xii)
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ensure that the
Common Shares and Warrants comprising the Units underlying the
Compensation Options shall be duly and validly created, authorized
and issued upon the exercise or deemed exercise of the Compensation
Options and shall have the attributes corresponding in all material
respects to the description thereof in this Agreement and the
Compensation Option Certificate;
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(xiii)
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ensure that, at
all times prior to the expiry of the Warrants underlying the
Compensation Options, a sufficient number of Warrant Shares are
allotted, created and reserved for issuance upon the due exercise
of such Warrants, as the case may be and upon such due exercise,
such Warrant Shares and shall be duly issued as fully paid and
non-assessable securities in the capital of the Company;
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(xiv)
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not to issue,
offer, sell, contract to sell or otherwise dispose of any
additional securities for 90 days after the Closing Date without
the prior written consent of the Agents, such consent not to be
unreasonably withheld, except in conjunction with:
(A) existing director or employee stock options, bonus or
purchase plans, or under such director or employee stock options or
bonuses granted subsequently in accordance with regulatory
approval; or (B) under any existing agreement or as a result
of the exercise of currently outstanding share purchase warrants or
options; or (C) in connection with a bona fide acquisition by
the Company (other than a direct or indirect acquisition, whether
by way of one or more transactions, of an entity, all or
substantially all of the assets of which are cash, marketable
securities or financial in nature or an acquisition that is
structured primarily to defeat the intent of this
provision),
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(xv)
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execute and
file with the Securities Regulators all forms, notices and
certificates required to be filed pursuant to the Securities Laws
in the time required by the applicable Securities Laws, including,
not later than 15 days after the Closing Date, file five copies of
a notice on Form D under the U.S. Securities Act (one of which will
be manually signed by a person duly authorized by the Company); to
otherwise comply with the requirements of Rule 503 under the U.S.
Securities Act; and to furnish promptly to the Agents evidence of
each such required timely filing (including a copy
thereof);
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(xvi)
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not to be or
become, at any time prior to the expiration of five years after the
Closing Time, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under
Section 8 of the Investment Company Act;
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(xvii)
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comply with the U.S. Securities
Act so as to permit the completion of the distribution of the Unit
Shares, Warrants and Warrant Shares contemplated hereby. At any
time when
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the Company is not subject to
Section 13 or 15(d) of the Exchange Act, for the benefit of
holders from time to time of Unit Shares, Warrants and Warrant
Shares, to furnish at its expense, upon request, to holders of such
securities and prospective purchasers of any such securities
information satisfying the requirements of subsection (d)(4)(i) of
Rule 144A under the U.S. Securities Act;
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(xviii)
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furnish to the
holders of the Unit Shares and Warrants, as soon as practicable
after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders’ equity
and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants), which requirement
will be satisfied by making publicly available the Company’s
Annual Report on Form 10-K (or any applicable successor thereto
under the Exchange Act), and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending March 31, 2007), consolidated
summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail, which requirement will be
satisfied by making publicly available the Company’s
Quarterly Report on Form 10-Q (or any applicable successor thereto
under the Exchange Act);
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(xix)
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the
Registration Statement and the Prospectus and any amendments or
supplements thereto will not and the Disclosure Documents do not,
as of their respective dates, contain an untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that
this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Agents or
their counsel;
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(xx)
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the Company
will timely file such reports pursuant to the Exchange Act as are
necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for
the purposes of, and to provide the Agents the benefits
contemplated by, the last paragraph of Section 11(a) of the
U.S. Securities Act;
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(xxi)
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the Company
shall use its best efforts to list the Common Shares on the Toronto
Stock Exchange or the TSX Venture Exchange within 120 days after
the Closing Date;
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(b) The Agents hereby covenant and agree to conduct
their activities in connection with the sale of the Units in
compliance with all applicable laws, including Securities Laws and
to obtain from each Purchaser a completed and executed Subscription
Agreement (including all certifications, forms and other
documentation contemplated thereby or as may be required by
applicable Securities Regulators) in a form acceptable to the
Company and the Agents relating to the Offering.
4. (a) Representations and Warranties of the
Company. The Company represents and warrants to the Agents and
to the Purchasers, and acknowledges that each of them is relying
upon such representations and warranties, that:
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(i)
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the Company and the Material
Subsidiaries (as hereinafter defined) have been duly incorporated
and are in good standing under the laws of their respective
jurisdictions, and are current and up-to-date in all material
respects with all filings required to be made by them in such
jurisdiction, have all requisite corporate power and authority and
are duly qualified and possess all certificates, authorizations,
permits and licences issued by the appropriate state, provincial,
municipal, federal regulatory agencies or bodies necessary (and has
not received or is aware of any modification or revocation to such
licences,
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authorizations, certificates or
permits) to carry on its business as now conducted and to own its
properties and assets and the Company and the Material Subsidiaries
have all requisite corporate power and authority to carry out their
obligations under the Transaction Documents;
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(ii)
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the Company has
no material subsidiaries other than as listed below (the
“Material Subsidiaries” ) and the Company
beneficially owns, directly or indirectly, the percentage indicated
below of the issued and outstanding shares in the capital of the
Material Subsidiaries free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances, claims or
demands of any kind whatsoever, all of such shares have been duly
authorized and validly issued and are outstanding as fully paid and
non-assessable shares and no person has any right, agreement or
option, present or future, contingent or absolute, or any right
capable of becoming a right, agreement or option, for the purchase
from the Company of any interest in any of such shares or for the
issue or allotment of any unissued shares in the capital of the
Material Subsidiaries or any other security convertible into or
exchangeable for any such shares:
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Jurisdiction of
Incorporation or
Continuance
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Beneficial
Equity/Voting
Ownership
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Sterling Mining de Mexico S.A. de
C.V.
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Mexico
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99%
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North American Silver, Limited
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Montana
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100%
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(iii)
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all consents,
approvals, permits, authorizations or filings as may be required
for the execution and delivery of the Transaction Documents, the
issuance and sale of the Unit Shares and Warrants, the issue and
sale of the Warrant Shares upon the exercise of the Warrants, the
issuance of the Compensation Options and the issuance of the Unit
Shares and Warrants upon exercise or of the Compensation Options,
the issue and sale of the Warrant Shares upon the exercise of the
Warrants comprising the Units underlying the Compensation Options,
all in conformance with this Agreement, and the consummation of the
transactions contemplated in this Agreement, have been made or
obtained, as applicable, except for the filing of the notification
on Form D with the SEC required to be made within 15 days of
Closing;
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(iv)
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each of the
execution and delivery of the Transaction Documents, the
performance by the Company of its obligations hereunder or
thereunder, the issuance and sale of the Unit Shares and Warrants,
the issue and sale of the Warrant Shares upon the exercise of the
Warrants, the issuance of the Compensation Options, the issuance of
the Unit Shares and Warrants upon exercise of the Compensation
Options, the consummation of the transactions contemplated in this
Agreement, do not and will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, (whether after notice or lapse of time or both),
(A) any statute, rule or regulation applicable to the Company
including, without limitation, Securities Laws or other applicable
securities laws; (B) the constating documents, articles or
resolutions of the Company which are in effect at the date hereof;
(C) any Debt Instruments, Material Agreement, mortgage, note,
indenture, contract, agreement, instrument, lease or other document
to which the Company is a party or by which it is bound; or
(D) any judgment, decree order, statute, rule, law or
regulation binding the Company or the property or assets of the
Company;
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(v)
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The Disclosure
Documents, when they were or are filed with the SEC, conformed or
will conform in all material respects to the applicable
requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder and when read together did not
and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements therein not misleading;
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(vi)
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the audited
financial statements of the Company as at and for the year ended
December 31, 2005 and unaudited interim financial statements
as at and for the nine month period ended September 30, 2006
(collectively, the “ Financial Statements ”)
have been prepared in accordance with generally accepted accounting
principles in the United States, as applicable, consistently
applied with prior periods, except as otherwise noted therein and
present fairly, in all material respects, the financial position
(including the assets and liabilities, whether absolute, contingent
or otherwise) of the Company as at such dates and results of
operations of the Company for the periods then ended and there has
been no material change in accounting policies or practices of the
Company or the Material Subsidiaries since December 31, 2005.
All disclosures in the Disclosure Documents regarding
“non-GAAP financial measures” (as such term is defined
by the rules and regulations of the SEC) comply with Regulation G,
to the extent applicable;
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(vii)
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there has been
no adverse material change to the Company or the Material
Subsidiaries (actual, proposed or prospective, whether financial or
otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or shareholders’ equity
of the Company or the Material Subsidiaries since
September 30, 2006, which has not been generally disclosed to
the public and, in all material respects, the business of the
Company and the Material Subsidiaries have been carried on in the
usual and ordinary course consistent with past practice since
September 30, 2006 to the extent that such past practice is
consistent with the current business direction of the Company and
the Material Subsidiaries;
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(viii)
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all taxes
(including income tax, capital tax, payroll taxes, employer health
tax, workers’ compensation payments, property taxes, custom
and land transfer taxes), duties, royalties, levies, imposts,
assessments, deductions, charges or withholdings and all
liabilities with respect thereto including any penalty and interest
payable with respect thereto (collectively, “ Taxes
”) due and payable or required to be collected or withheld
and remitted, by the Company and the Material Subsidiaries have
been paid, collected or withheld and remitted, as applicable. All
tax returns, declarations, remittances and filings required to be
filed by the Company and the Material Subsidiaries have been filed
with all appropriate governmental authorities and all such returns,
declarations, remittances and filings are complete and accurate and
no material fact or facts have been omitted therefrom which would
make any of them misleading. No examination of any tax return of
the Company or the Material Subsidiaries is currently in progress
and there are no issues or disputes outstanding with any
governmental authority respecting any taxes that have been paid, or
may be payable, by the Company and the Material Subsidiaries. There
are no agreements, waivers or other arrangements with any taxation
authority providing for an extension of time for any assessment or
reassessment of taxes with respect to the Company and the Material
Subsidiaries;
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(ix)
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the auditors
who audited the Financial Statements of the Company and the
Material Subsidiaries for the year ended December 31, 2005 and
the year ended December 31, 2004 and who provided their audit
report thereon are independent public accountants as required under
the U.S. Securities Act and the Exchange Act;
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(x)
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the
Company’s auditors have not provided any material comments or
recommendations to the Company regarding its accounting policies,
internal control systems or other accounting or financial
practices;
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(xi)
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there has never
been a “reportable event” (within the meaning of
National Instrument 51-102) with the present or former auditors of
the Company;
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(xii)
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except as set
forth in Schedule “A” to this Agreement and as
otherwise disclosed to the Agents and their counsel, no holder of
outstanding securities of the Company will be entitled to any
contractual pre-emptive or any similar rights to subscribe for any
of the Common Shares or other securities of the Company and no
rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares in the capital of the Company
are outstanding, and except as set forth on Schedule
“A”, other than the holders of the Units Shares and
Warrants there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under
the U.S. Securities Act;
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(xiii)
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there is not,
in its articles of incorporation, by-laws or in any Debt
Instrument, Material Agreement, agreement, mortgage, note,
debenture, indenture or other instrument or document to which the
Company or the Material Subsidiaries is a party, any restriction
upon or impediment to, the declaration or payment of dividends by
the directors of the Company or the payment of dividends by the
Company to the holders of its Common Shares;
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(xiv)
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neither the
Company nor any of its subsidiaries are a party to or bound or
affected by any commitment, agreement or document containing any
covenant which expressly limits the freedom of the Company or the
Company’s subsidiaries to compete in any line of business,
transfer or move any of its assets or operations or which
materially or adversely affects the business practices, operations
or condition of the Company and the Company’s subsidiaries
taken as a whole;
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(xv)
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the Company and
the Material Subsidiaries have conducted and are conducting their
business in compliance in all material respects with all applicable
laws and regulations of each jurisdiction in which it holds assets
or carries on business (including, without limitation, all
applicable federal, provincial, municipal, local environmental
anti-pollution and licensing laws, regulations and other lawful
requirements of any Canadian, United States or foreign governmental
or regulatory body including exploration and exploitation permits
and concessions) and has not received a notice of non-compliance,
nor knows of, nor has reasonable grounds to know of, any facts that
could give rise to a notice of material non-compliance with any
such laws, regulations or permits;
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(xvi)
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the Company and
the Material Subsidiaries are not aware of any pending change or
contemplated change to any applicable law or regulation or
governmental position that would materially effect the business of
the Company or the Material Subsidiaries or the business or legal
environment under which the Company or the Material Subsidiaries
operate;
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- 11 -
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(xvii)
|
this Agreement
has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its
terms;
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(xviii)
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upon the
execution and delivery thereof, each of the Transaction Documents
shall constitute a valid and binding obligation of the Company and
each shall be enforceable against the Company in accordance with
its terms;
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(xix)
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at the Closing
Time, all necessary corporate action will have been taken by the
Company to: (a) validly create, authorize and issue the Unit
Shares and Warrants comprising the Units; (b) allot, reserve
and authorize the issuance of the Unit Shares as fully paid and
non-assessable securities in the capital of the Company;
(c) validly create, allot and authorize the issuance of the
Warrants; (d) validly allot, reserve and authorize the
issuance of the Warrant Shares upon the payment therefor as fully
paid non-assessable securities in the capital of the Company upon
the exercise of the Warrants; (e) validly create, allot and
authorize the issuance of the Compensation Options;
(f) validly allot, reserve and authorize the issuance of the
Unit Shares comprising part of the Units underlying the
Compensation Option Shares upon the payment therefor as fully paid
non-assessable securities in the capital of the Company upon the
exercise of such Warrants; (g) validly create, allot and
authorize the issuance of the Warrants comprising part of the Units
underlying the Compensation Options upon the exercise of the
Compensation Options; and (h) validly allot, reserve and
authorize the issuance of the Warrant Shares upon the payment
therefor as fully paid non-assessable securities in the capital of
the Company upon the exercise of the Warrants comprising part of
the Units underlying the Compensation Options;
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(xx)
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as of the close
of business on January 17, 2007, the authorized capital of the
Company consists of 40,000,000 Common Shares of which 25,148,568
Common Shares are issued and outstanding as fully paid and
non-assessable;
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(xxi)
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the currently
issued and outstanding Common Shares currently trade on the
Over-the-counter market and are quoted on the over-the counter
bulletin board under the symbol “SRLM” and no order
ceasing or suspendi
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