AGENCY AGREEMENT

 

 

EXHIBIT 10.1

AGENCY AGREEMENT

March 30, 2007

Paramount Gold Mining Corp.

Suite 110

346 Waverley Street

Ottawa, Ontario

K2P 0W5

 

Attention:

Christopher Crupi, President & Chief Executive Officer

Dear Sirs/Mesdames:

Re:

Private Placement of Units

Blackmont Capital Inc. , Canaccord Capital Corporation, Haywood Securities Inc., and Raymond James Ltd. (collectively the “Agents” and individually an “Agent”) understand that:

(a)

Paramount Gold Mining Corp. (the “Corporation”) is authorized to issue, among other things, 100,000,000 Common Shares (as hereinafter defined);

(b)

as at March 30, 2007, 36,023,982 Common Shares were outstanding as fully paid and non-assessable shares and an aggregate of 2,863,750 Common Shares were reserved for issue pursuant to outstanding options, warrants, share incentive plans, convertible and exchangeable securities and other rights to acquire Common Shares;

(c)

the Corporation is prepared to issue and sell up to 9,525,000 units of the Corporation (collectively the “Offered Securities” or “Units” and individually an “Offered Security” or “Unit”), each Unit comprised of one Common Share and one-half of one warrant (each whole warrant a “Warrant”), each Warrant being exercisable to acquire one Common Share at an exercise price of $2.90 per Common Share for a period of 24 months after the Closing Date (as hereinafter defined) at a price of $2.10 per Offered Security for maximum aggregate gross proceeds of $20,002,500 on the terms and subject to the conditions contained hereinafter;

(d)

the Corporation has granted to the Agents an option, which may be exercised at any time during the 30 day period commencing on the Closing Date (the “Over-allotment Option”), to increase the size of the offering described above in paragraph (c) by up to an additional 1,428,750 Units; and

(e)

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 Corporation and the Agents, in the form attached hereto as Exhibit A.

 

Based upon the understanding of the Agents set out above and upon the terms and subject to the conditions contained hereinafter, upon the acceptance hereof by the Corporation, the Corporation hereby appoints the Agents to act as the sole and exclusive agent of the Corporation to solicit, on a best efforts basis, offers to purchase the Offered Securities, and the Agents hereby agree to act as such agents.  It is understood and agreed that the Agents are under no obligation to purchase any of the Offered Securities, although any of them may subscribe for and purchase Offered Securities if they so desire.

The terms and conditions of this Agreement are as follows:

1.

Definitions, Interpretation and Schedules

(a)

Definitions :  Whenever used in this Agreement:

(i)

“1933 Act” means the United States Securities Act of 1933 , as amended;

(ii)

“1934 Act” means the United States Securities Exchange Act of 1934 , as amended;

(iii)

“Agents” means Blackmont Capital Inc. , Canaccord Capital Corporation, Haywood Securities Inc., and Raymond James Ltd. and their respective U.S. Affiliates collectively;

(iv)

“Agreement” means the agreement resulting from the acceptance by the Corporation of the offer made by the Agents herein, including the schedules attached hereto, as amended or supplemented from time to time;

(v)

“Ancillary Documents” means all agreements, indentures, certificates (including the Warrant Certificates and the Broker Warrant Certificate) and documents executed and delivered, or to be executed and delivered, by the Corporation in connection with the transactions contemplated by this Agreement or the Subscription Agreements and includes the Subscription Agreements and the Registration Rights Agreement;

(vi)

“Auditor” means Cinnamon Jang Willoughby & Company, Chartered Accountants, the auditor of the Corporation;

(vii)

“Broker Shares” means the Common Shares which may be issued on the exercise of the Broker Warrant;

(viii)

“Broker Warrant Certificates” means the certificates representing the Broker Warrants;

(ix)

“Broker Warrants” means the non-transferable broker warrants issued to the Agents, each Broker Warrant will entitle the holder to acquire one Common Share at any time commencing on the Closing Date and prior to 5:00 p.m. (Toronto time) on the date which is 24 months after the Closing Date at an exercise price of $2.10 per Common Share;

 

(x)

“Business Day” means a day which is not a Saturday, Sunday or a statutory or civic holiday in the City of Toronto, Province of Ontario;

(xi)

“Closing” means the purchase and sale of the Offered Securities subscribed for by the Purchasers pursuant to the Subscription Agreements;

(xii)

“Closing Date” means March 30, 2007 or such other date as the Corporation and the Agents may mutually agree upon in writing;

(xiii)

“Closing Time” means 11:00 a.m. (Toronto time) on the Closing Date or such other time on the Closing Date as the Corporation and the Agents may mutually agree upon in writing;

(xiv)

“Common Shares” means the shares of common stock, par value $0.001 per share, which the Corporation is authorized to issue as constituted on the date hereof;

(xv)

“Corporate Finance Fee” means the (i) $69,777, and (ii) 33,227 Broker Warrants, payable and issuable, as the case may be, by the Corporation to the Agents for services rendered in connection with the Offering;

(xvi)

“Corporation” means Paramount Gold Mining Corp., a corporation existing under the laws of the State of Delaware and includes any successor corporation thereto;

(xvii)

“Directed Selling Efforts” means “directed selling efforts” as defined in Regulation S;

(xviii)

“Final Prospectus” means the (final) non-offering prospectus of the Corporation to be filed in the Province of Ontario for the purpose of becoming a reporting issue in such province;

(xix)

“General Solicitation or General Advertising” means “general solicitation or general advertising” as used in Rule 502(c) of Regulation D;

(xx)

“Information” means all information regarding the Corporation that is, or becomes, publicly available together with all information prepared by the Corporation and provided to the Agents or to potential purchasers of the Offered Securities, if any, and includes, but is not limited to, all material change reports, press releases and financial statements of the Corporation;

(xxi)

“Lead Agent” means Blackmont Capital Inc.;

 

(xxii)

“Offered Securities” means up to 9,525,000 Units, together with any Units sold pursuant to the Over-allotment Option, to be issued and sold at the Purchase Price under the Offering;

(xxiii)

“Offering” means the offering for sale by the Corporation on a private placement basis of the Offered Securities;

(xxiv)

“Offering Jurisdictions” means the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Nova Scotia, the United States and the states and territories thereof and such other provinces and territories of Canada and other jurisdictions as may be mutually agreed upon by the Agents and the Corporation where the Offered Securities are offered to prospective purchasers or those provinces, territories or other jurisdictions where Purchasers reside, as the context permits or requires;

(xxv)

“Ontario Act” means the Securities Act (Ontario) and the regulations thereunder, together with the instruments, policies, rules, orders, codes, notices and interpretation notes of the Ontario Securities Commission, as amended, supplemented or replaced from time to time;

(xxvi)

“Over-allotment Option” has the meaning ascribed to such term on the first page of this Agreement;

(xxvii)

“Person” means an individual, a firm, a corporation, a syndicate, a partnership, a trust, an association, an unincorporated organization, a joint venture, an investment club, a government or an agency or political subdivision thereof and every other form of legal or business entity of any nature or kind whatsoever;

(xxviii)

“Preliminary Prospectus” means the preliminary non-offering prospectus of the Corporation to be filed in the Province of Ontario for the purpose of becoming a reporting issue in such province;

(xxix)

“Public Record” means the Corporation’s annual report on Form 10-KSB for the year ended June 30, 2006, as amended, the quarterly reports filed on Form 10-QSB for the quarters ended September 30, 2006, and December 31, 2006 as amended, and the current reports filed on Form 8-K since June 30, 2006;

(xxx)

“Purchase Price” means the price to be paid by the Purchasers for each Offered Security under the Offering, being $2.10 per Offered Security;

(xxxi)

“Purchasers” means the purchasers of the Offered Securities collectively;

 

(xxxii)

“Registrable 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;

(xxxiii)

“Registration Rights Agreement” shall have the meaning ascribed to such term on the face page of this Agreement;

(xxxiv)

“Registration Statement” has the meaning ascribed to such term in subsection 9(a)(iii) of this Agreement;

(xxxv)

“Regulation D” means Regulation D under the 1933 Act;

(xxxvi)

“Regulation S” means Regulation S under the 1933 Act;

(xxxvii)

“Rule 144” means Rule 144 under the 1933 Act;

(xxxviii)

“Rule 144A” means Rule 144A under the 1933 Act;

(xxxix)

“SEC” means the United States Securities and Exchange Commission;

(xl)

“Securities Commissions” means the securities regulatory authorities of the Offering Jurisdictions collectively, as the case may be;

(xli)

“Securities Laws” means the securities legislation and regulations of, and the instruments, policies, rules, orders, codes, notices and interpretation notes of the securities regulatory authorities of, the applicable jurisdiction or jurisdictions collectively (including those of the United States);

(xlii)

“State” means any one of the 50 states of the United States of America or the District of Columbia;

(xliii)

“Stock Exchange” means the TSX Venture Exchange;

(xliv)

“Subject Shares” means the Unit Shares, the Warrant Shares and the Broker Shares collectively;

(xlv)

“Subscription Agreements” means the subscription agreement to be entered into between the Corporation and each of the Purchasers with respect to the purchase of the Offered Securities collectively;

(xlvi)

“Subsidiaries” means Paramount Gold de Mexico S.A. de C.V., a corporation existing under the laws of Mexico, and Compania Minera Paramount S.A.C., a corporation incorporated under the laws of Peru collectively;

 

(xlvii)

“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 Commissions or the SEC pursuant to Securities Laws;

(xlviii)

“Transfer Agent” means Manhattan Transfer Registrar Company, the registrar and transfer agent for the Common Shares;

(xlix)

“United States” means the “United States” as defined in Regulation S;

(l)

“Units” means the units of the Corporation being offered for sale by the Agents under the Offering, each Unit being comprised of one Unit Share and one-half of one Warrant;

(li)

“Unit Shares” means the Common Shares comprising part of the Units;

(lii)

“U.S. Affiliate” means the United States broker-dealer affiliate of the Agents;

(liii)

“U.S. Institutional Accredited Investor” means an “accredited investor” as defined in Rules 501(a)(1), (2), (3) and (7) of Regulation D;

(liv)

“U.S. Person” means a “U.S. person” as defined in Regulation S;

(lv)

“Warrant Certificates” means the certificates representing the Warrants;

(lvi)

“Warrant Shares” means the Common Shares which may be issued upon the exercise of the Warrants; and

(lvii)

“Warrants” means the warrants of the Corporation, one-half of one Warrant comprising part of each Unit, with each whole Warrant to entitle the holder thereof to acquire one Warrant Share at any time commencing on the Closing Date and prior to 5:00 p.m. (Toronto time) on the date which is 24 months after the Closing Date at an exercise price of $2.90 per Warrant Share.

(b)

Other Defined Terms :  Whenever used in this Agreement, the words and terms “affiliate”, “associate”, “material fact”, “material change”, “misrepresentation”, “senior officer” and “subsidiary” shall have the meaning given to such word or term in the Ontario Act unless specifically provided otherwise herein.

(c)

Plural and Gender :  Whenever used in this Agreement, words importing the singular number only shall include the plural and vice versa and words importing the masculine gender shall include the feminine gender and neuter.

 

(d)

Currency :  All references to monetary amounts in this Agreement are to lawful money of the United States.

(e)

Schedules :  The following schedules are attached to this Agreement and are deemed to be a part of and incorporated in this Agreement:

2.

The Offered Securities

(a)

Offered Securities :  The Offered Securities are up to 9,525,000 Units, each Unit comprised of one Common Share and one-half of one Warrant.

(b)

The Warrants :  The terms and conditions, and the material attributes and characteristics, of the Warrants shall be satisfactory to the Corporation and the Agents and consistent with the provisions of this Agreement.  Such terms and conditions, and material attributes and characteristics, will be contained in the Warrant Certificates which will contain, among other things, anti-dilution provisions and provisions for the appropriate adjustment in the class and number of Warrant Shares or other securities to be received on the exercise of Warrants upon the occurrence of certain events, including any subdivision, consolidation or reclassification of the Common Shares or any payment of dividends or the amalgamation of, or other reorganization involving, the Corporation.  Subject to adjustment in accordance with the provisions of the Warrant Certificates, each whole Warrant shall entitle the holder thereof to purchase one Warrant Share at any time commencing on the Closing Date and prior to 5:00 p.m. (Toronto time) on the date which is 24 months after the Closing Date at an exercise price of $2.90 per Warrant Share.

3.

The Offering

(a)

Sale on Exempt Basis :  The Agents will use the best efforts thereof to arrange for Purchasers in the Offering Jurisdictions.  The Agents shall offer for sale on behalf of the Corporation the Offered Securities in the Offering Jurisdictions in compliance with the Securities Laws of the Offering Jurisdictions and only to such Persons and in such manner so that, pursuant to the provisions of the Securities Laws of the Offering Jurisdictions, no prospectus, registration statement or offering memorandum or other similar document need be filed with, or delivered to, any Securities Commission in any Offering Jurisdiction in connection therewith.  The Agents shall offer the Units for sale on behalf of the Corporation in the United States only through Blackmont Capital Corp., the U.S. broker dealer affiliate of the Lead Agent, pursuant to an exemption from the registration requirements of the 1933 Act, in compliance with applicable state Securities Laws.

(b)

Agency Group :  The Corporation agrees that, subject to the consent of the Corporation, such consent not to be unreasonably withheld, the Agents have the right to invite one or more investment dealers to form an agency group to participate in the soliciting of offers to purchase the Offered Securities.  The Agents shall have the exclusive right to control all compensation arrangements between the members of the agency group.  The Corporation grants all of the rights and benefits of this Agreement to any investment dealer who is a member of any agency group formed by the Agents and appoints the Lead Agent as trustee of such rights and benefits for all such investment dealers, and the Lead

 

Agent hereby accepts such trust and agrees to hold such rights and benefits for and on behalf of all such investment dealers.  The Agents shall ensure that any investment dealer who is a member of any agency group formed by the Agents pursuant to the provisions of this subsection 3(b) or with whom the Agents have a contractual relationship with respect to the Offering, if any, agrees with the Agents to comply with the covenants and obligations given by the Agents herein.

(c)

Covenants of the Agents :  Each of the Agents covenants with the Corporation that (i) it will comply with the Securities Laws of the Offering Jurisdictions in which it solicits or procures subscriptions for Offered Securities in connection with the Offering, (ii) it will not solicit or procure subscriptions for Offered Securities so as to require the registration thereof or the filing of a prospectus with respect thereto under the laws of any jurisdiction, and (iii) it will obtain from each Purchaser an executed subscription agreement in a form acceptable to the Corporation and the Agents, acting reasonably.  Each of the Agents represents and warrants that it is, and, to the best of its knowledge, each member of any agency group formed by the Agents is, qualified to so act in the Offering Jurisdictions in which such member solicits or procures subscriptions for the Offered Securities.

(d)

Filings :  The Corporation undertakes to file or cause to be filed all forms and undertakings required to be filed by the Corporation in connection with the Offering so that the distribution of the Offered Securities may lawfully occur in the Offering Jurisdictions without the necessity of filing a prospectus or an offering memorandum in Canada and the Agents undertake to use the commercially reasonable efforts thereof to cause the Purchasers of the Offered Securities to complete (and it shall be a condition of closing in favour of the Corporation that the Purchasers complete and deliver to the Corporation) any forms and undertakings required by the Securities Laws of the Offering Jurisdictions.  All fees payable in connection with such filings shall be at the expense of the Corporation.

(e)

No Offering Memorandum :  Neither the Corporation nor the Agents shall (i) provide to prospective purchasers of Offered Securities any document or other material that would constitute an offering memorandum within the meaning of the Securities Laws of the Offering Jurisdictions or (ii) engage in any form of General Solicitation or General Advertising in connection with the offer and sale of the Offered Securities, including but not limited to, causing the sale of the Offered Securities 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 the Internet, or otherwise, or conduct any seminar or meeting relating to any offer and sale of the Offered Securities whose attendees have been invited by a General Solicitation or General Advertising.

4.

Due Diligence

The Corporation shall allow the Agents to conduct all due diligence investigations, including meeting with senior management of the Corporation and the Auditor, as the Agents shall consider appropriate in connection with the Offering.

5.

Deliveries By Closing Time

(a)

Deliveries :  By the Closing Time:

 

(i)

all actions required to be taken by or on behalf of the Corporation including, without limitation, the passing of all required resolutions of the directors, including committees of the directors, and shareholders of the Corporation, shall have occurred in order to complete the transactions contemplated by this Agreement and the Subscription Agreements, including, without limitation, to  issue the Offered Securities, to create and issue the Warrants and the Broker Warrants and to reserve for issue and conditionally issue the Warrant Shares and the Broker Shares, and a certified copy of all such resolutions shall have been delivered by the Corporation to the Agents;

(ii)

the Corporation shall have delivered or caused to be delivered to the Agents

A.

a favourable legal opinion of counsel to the Corporation, Gowling Lafleur Henderson LLP, who may rely on opinions of local counsel acceptable to the Agents, addressed to, among others, the Agents and the Purchasers,

B.

a favourable legal opinion of U.S. counsel to the Corporation addressed to, among others, the Agents and the Purchasers with respect to, among other things, the issue of the Unit Shares and the Warrants and the exercise of the Warrants and such other matters as the Agents may reasonably require,

C.

a favourable legal opinion of Lizárraga, Robles, Tapia y Cabrera S.C. counsel to the Corporation with respect to title to the San Miguel Groupings property of the Corporation located in the state of Chihuahua, Mexico and with respect to certain corporate matters of Paramount Gold Mexico S.A. de C.V., addressed to, among others, the Agents and the Purchasers,

D.

a certificate dated the Closing Date signed by an appropriate officer of the Corporation and addressed to, among others, the Agents and the Purchasers with respect to the articles and by-laws of the Corporation, the resolutions of the directors and shareholders, if any, of the Corporation and any other corporate action taken relating to this Agreement and the Ancillary Documents and with respect to such other matters as the Agents may reasonably request and including specimen signatures of the signing officers of the Corporation,

E.

a certificate dated the Closing Date addressed to, among others, the Agents and the Purchasers signed by the chief executive officer and the chief financial officer of the Corporation or any two other senior officers of the Corporation acceptable to the Agents substantially in the form of the certificate attached hereto as schedule A ,

F.

a Subscription Agreement from each Purchaser accepted by the Corporation,

G.

definitive certificates representing the Offered Securities registered in the names of the Purchasers or in such other name or names as the Purchasers or the Agents may direct,

 

H.

definitive certificates representing the Broker Warrants registered in the name of the Agents or in such other name or names as the Agents may direct, and

I.

such further documents as may be contemplated by this Agreement or as the Agents may reasonably require,

all in form and substance satisfactory to the Agents;

(iii)

the Corporation shall have delivered or cause to be delivered payment of the amount payable by the Corporation to the Agents by certified cheque or bank draft, including (i) the commission payable by the Corporation to the Agents as provided in section 7 of this Agreement against delivery from the Agents to the Corporation of a receipt for the payment of such commission, (ii) the expenses (excluding legal expenses) payable by the Corporation to the Agents as provided in section 15 of this Agreement against delivery from the Agents to the Corporation of a receipt for the payment of such expenses, and (iii) the legal expenses payable by the Corporation to counsel for the Agents as provided in section 15 of this Agreement against delivery from such legal counsel to the Corporation of a receipt for the payment of such legal expenses; and

(iv)

the Agents shall have delivered or cause to be delivered to the Corporation

A.

payment of the aggregate Purchase Price for the Units purchased by the Purchasers of Units net of (i) the commission payable by the Corporation to the Agents as provided in section 7 of this Agreement and (ii) the expenses payable by the Corporation to the Agents as provided in section 15 of this Agreement by cheque or bank draft payable to the Corporation against delivery from the Corporation to the Agents of a receipt for the aggregate net Purchase Price for such Units, and

B.

such further documents as may be contemplated by this Agreement or as the Corporation may reasonably require,

all in form and substance satisfactory to the Corporation.

6.

Closing

(a)

Closing :  The Closing shall be completed at the offices of counsel for the Corporation at the Closing Time on the Closing Date.

(b)

Conditions of Closing :  The following are conditions precedent to the obligation of the Agents to complete the Closing and of the Purchasers to purchase the Offered Securities, which conditions the Corporation hereby covenants and agrees to use the best efforts thereof to fulfill within the time set out herein therefor, and which conditions may be waived in writing in whole or in part by the Agents:

(i)

the Corporation shall have received all necessary approvals and consents, including all necessary regulatory approvals and consents required for the completion of the transaction contemplated by this Agreement, all in a form satisfactory to the Agents;

 

(ii)

receipt by the Agents of the documents set forth in section 5 of this Agreement to be delivered to the Agents;

(iii)

the representations and warranties of the Corporation contained herein being true and correct as of the Closing Time with the same force and effect as if made at and as of the Closing Time after giving effect to the transactions contemplated hereby;

(iv)

the Corporation having complied with all covenants, and satisfied all terms and conditions, contained herein to be complied with and satisfied by the Corporation at or prior to the Closing Time; and

(v)

the Agents not having previously terminated the obligations thereof pursuant to this Agreement.

7.

Fee

(a)

Commission :  In consideration of the agreement of the Agents to act as agents of the Corporation in respect of the Offering, and in consideration of the services performed and to be performed by the Agents in connection therewith, including, without limitation:

(i)

acting as agents of the Corporation to solicit, on a best efforts basis, offers to purchase the Offered Securities;

(ii)

participating in the preparation of the form of the Subscription Agreements and certain of the Ancillary Documents; and

(iii)

advising the Corporation with respect to the private placement of the Offered Securities;

the Corporation shall pay to the Agents or as the Agents may otherwise direct at the Closing Time against receipt of payment of the purchase price for the Offered Securities, a fee of 6% of the aggregate Purchase Price for the Offered Securities.

(b)

Taxes:  The Corporation and the Agents acknowledge and agree that if a separate fee would have been charged to the Corporation for the services described in clause 7(a)(i) above, such separate fee would represent more than 50% of the fee payable to the Agents, and the Corporation hereby further acknowledges and agrees that the Agents will rely on the foregoing statement in not charging federal goods and services tax on such fee and that the Corporation will forthwith pay to the Agents any such tax and any applicable interest and penalties for which the Agents are subsequently assessed by the Canadian Revenue Agency.

(c)

Broker Warrants :  In addition to the commission payable to the Agents pursuant to subsection 7(a) hereof, as additional consideration for the services performed and to be performed by the Agents hereunder, the Corporation shall issue to the Agents, or as the Agents may otherwise direct, at the Closing Time  Broker Warrants which entitle the holders thereof to acquire in the aggregate Common Shares equal in number to 6% of the number of Offered Securities sold, in form and substance satisfactory to the Agents.

 

(d)

Corporate Finance Fee :  In addition to the commission payable pursuant to the subsection 7(a) hereof and the Broker Warrants issuable pursuant to subsection 7(c) hereof, the Corporation shall pay the Corporate Finance Fee to the Agents, or as the Agents may otherwise direct, at the Closing Time.

(e)

Division of Commission, Broker Warrants and Corporate Finance Fee :  Notwithstanding which of the Agents has actually sold the Offered Securities, the commission payable to the Agents pursuant to subsection 7(a) hereof and the Broker Warrants to be issued to the Agents pursuant to subsection 7(c) and 7(d) hereof shall be divided between the Agents as to 50% thereof to Blackmont Capital Inc., as to 20% thereof to Canaccord Capital Corporation, as to 20% thereof to Haywood Securities Inc. and as to 10% thereof to Raymond James Ltd.

8.

Representations and Warranties

The Corporation hereby represents and warrants to the Agents and the Purchasers, and acknowledges that the Agents and the Purchasers are relying upon each of such representations and warranties in completing the Closing, as follows:

(a)

Incorporation and Organization :  The Corporation and each Subsidiary is a valid and subsisting corporation under the laws of its governing jurisdiction and has all requisite corporate power and authority to carry on its business as now conducted or proposed to be conducted and to own or lease and operate the property and assets thereof and the Corporation has all requisite corporate power and authority to enter into, execute and deliver this Agreement and the Ancillary Documents and to carry out the obligations thereof hereunder and thereunder.

(b)

Extra-provincial Registration :  The Corporation and each Subsidiary is  licensed, registered or qualified in all jurisdictions where the character of the property or assets thereof owned or leased or the nature of the activities conducted by it make licensing, registration or qualification necessary and is carrying on the business thereof in compliance with all applicable laws, rules and regulations of each such jurisdiction.

(c)

Authorized Capital :  The Corporation is authorized to issue, among other things, 100,000,000 Common Shares, of which, as of March 30, 2007, 36,023,982 Common Shares were issued and outstanding as fully paid and non-assessable shares.

(d)

Listing :  The Common Shares are, and at the time of issue of the Offered Securities will be, quoted for trading on the NA&D over-the-counter bulletin board market under the symbol “PGDP” and no order ceasing or suspending trading in any securities of the Corporation or the trading of any of the Corporation’s issued securities is currently outstanding and no proceedings for such purpose are, to the knowledge of the Corporation, pending or threatened.  Except as disclosed to the Agents, the Corporation has not issued, or agreed to issue, any Common Shares or any securities exchangeable or exercisable for, or convertible into, Common Shares at an effective price per Common Share which is less than the Purchase Price during the 30 day period immediately preceding the date hereof.

(e)

Certain Securities Law Matters :

 

(i)

none of the transactions contemplated by this Agreement including, without limitation, the use of the proceeds from the sale of the Units will violate or result in a violation of Section 7 of the 1934 Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System;

(ii)

there is and has been no failure on the part of the Corporation or any of the Corporation’s directors or officers, in their capacities as such, to comply in all material respects with any applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications;

(iii)

prior to the date hereof, neither the Corporation nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Corporation in connection with the offering of the Units;

(iv)

the Corporation is subject to Section 13 or 15(d) of the 1934 Act;

(v)

other than the notification filing on Form D required to be filed with the SEC 15 days after the Closing Date (and a Form 45-106F1 within 10 days after the Closing Date), all filings required to be made by the Corporation and the Subsidiaries pursuant to the Securities Laws and general corporate law applicable to them have been made and such filings were true and accurate as at the respective dates thereof and the Corporation has not filed any confidential material change reports;

(vi)

the Corporation is not, and after giving effect to the offering and sale of the Units, will not be an “investment company”, or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act;

(vii)

assuming compliance with the terms of the Subscription Agreement, and this Agreement, neither the Corporation nor any person acting on its behalf has offered or sold the Units (or any securities issuable on conversion thereof) by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act or, with respect to Units (or any such securities) sold outside the United States to non-U.S. persons (as defined in Rule 902 under the 1933 Act), by means of any Directed Selling Efforts and the Corporation, any affiliate of the Corporation and any person acting on its or their behalf has complied with and will implement the offering restriction requirements of Rule 902 under the 1933 Act;

(viii)

the Corporation and each of the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the

 

recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since June 30, 2006, there has been (1) no material weakness in the Corporation’s internal control over financial reporting (whether or not remediated) and (2) no change in the Corporation’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal controls over financial reporting;

(ix)

The principal executive officer and principal financial officer of the Corporation have made all certifications required by the Sarbanes-Oxley Act of 2002 and any related rules and regulations promulgated thereunder by the SEC, and the statements contained in all such certifications were complete and correct in all material respects as of the respective dates made. Neither the Corporation nor any of its officers has received notice from the SEC questioning or challenging the accuracy, completeness, content, form or manner of filing or submission of such certifications.

(f)

Rights to Acquire Securities :  No Person has any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement for the purchase, acquisition, subscription for or issue of any of the unissued shares or other securities of the Corporation, except, as at March 30, 2007, for an aggregate of 2,863,750 Common Shares were reserved for issue pursuant to outstanding options, warrants, share incentive plans, convertible, exercisable and exchangeable securities and other rights to acquire Common Shares.

(g)

Rights Plan:  The directors of the Corporation have not adopted a shareholder rights plan or a similar plan and the Corporation is not party to what is commonly referred to as a shareholder rights plan agreement.

(h)

No Pre-emptive Rights :  The issue of the Offered Securities will not be subject to any pre-emptive right or other contractual right to purchase securities granted by the Corporation or to which the Corporation is subject.

(i)

Offered Securities :  The execution of this Agreement and the Subscription Agreement and the issue by the Corporation to the Purchasers of the Offered Securities will be exempt from the registration and prospectus requirements of the Securities Laws of the Offering Jurisdictions and the United States.

(j)

Subsidiaries :  The Subsidiaries are the only subsidiaries of the Corporation.

(k)

Capital of Subsidiaries :  All of the outstanding shares of the Subsidiaries are issued and outstanding as fully paid and non-assessable shares and are legally and beneficially owned by the Corporation and no Person has any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement for the purchase, acquisition, subscription for or issue of any of the unissued shares or other securities of any of the Subsidiaries or for the purchase or acquisition of any of the outstanding shares or other securities of any of the Subsidiaries.

(l)

Issue of Offered Securities :  All necessary corporate action has been taken to authorize the issue and sale of, and the delivery of certificates representing, the Offered Securities and, upon payment of the requisite consideration therefor, the Unit Shares will be validly

 

issued as fully paid and non-assessable shares, and the Warrants will be validly issued and, upon the issue thereof, the Warrant Shares will be validly issued as fully paid and non-assessable shares.

(m)

Consents, Approvals and Conflicts :  None of the offering and sale of the Offered Securities, the execution and delivery of this Agreement or the Ancillary Documents, the compliance by the Corporation with the provisions of this Agreement and the Ancillary Documents or the consummation of the transactions contemplated herein and therein including, without limitation, the issue of the Offered Securities to the Purchasers for the consideration and upon the terms and conditions as set forth herein and the issue of the Warrant Shares for the consideration and upon the terms and conditions set forth in the Warrant Certificates, do or will (i) require the consent, approval, or authorization, order or agreement of, or registration or qualification with, any governmental agency, body or authority, court, stock exchange, securities regulatory authority or other Person, except (A) such as have been obtained, or (B) such as may be required under the Securities Laws of the Offering Jurisdictions and will be obtained by the Closing Date, or (ii) conflict with or result in any breach or violation of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Corporation or any Subsidiary is a party or by which any of them or any of the properties or assets thereof is bound, or the articles or by-laws or any other constating document of the Corporation or any Subsidiary or any resolution passed by the directors (or any committee thereof) or shareholders of the Corporation or any Subsidiary, or any statute or any judgment, decree, order, rule, policy or regulation of any court, governmental authority, arbitrator, stock exchange or securities regulatory authority applicable to the Corporation or any Subsidiary or any of the properties or assets thereof which could have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Corporation or any Subsidiary.

(n)

Authority and Authorization :  The Corporation has full corporate power and authority to enter into this Agreement and the Ancillary Documents and to do all acts and things and execute and deliver all documents as are required hereunder and thereunder to be done, observed, performed or executed and delivered by it in accordance with the terms hereof and thereof and the Corporation has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents and to observe and perform the provisions of this Agreement and the Ancillary Documents in accordance with the provisions hereof and thereof including, without limitation, the issue of the Offered Securities to the Purchasers for the consideration and upon the terms and conditions set forth herein and the issue of the Warrant Shares for the consideration and upon the terms and conditions set forth in the Warrant Certificates.

(o)

Validity and Enforceability :  Each of this Agreement and the Subscription Agreements has been authorized, executed and delivered by the Corporation and constitutes a valid and legally binding obligation of the Corporation enforceable against the Corporation in accordance with the terms thereof and upon being executed and delivered the Warrant Certificates will constitute valid and legally binding obligations of the Corporation enforceable against the Corporation in accordance with the terms thereof.

(p)

Broker Warrants :  

(i)

The Corporation has all requisite corporate power and authority to issue the Broker Warrants and to enter into, execute and deliver and to carry out the

 

obligations thereof under the Broker Warrant Certificates.  All necessary corporate action has been taken by the Corporation to authorize the issue of the Broker Warrants in accordance with the terms and conditions hereof and, when issued, the Broker Warrants will be validly issued and to authorize the creation, execution, delivery and performance of the Broker Warrant Certificates and to observe and perform the provisions of the Broker Warrant Certificates in accordance with the provisions thereof including, without limitation, the issue of the Broker Shares for the consideration and upon the terms and conditions set forth in the Broker Warrant Certificates.  

(ii)

The Broker Warrant Certificates constitute a valid and legally binding obligation of the Corporation enforceable against the Corporation in accordance with the terms thereof.  None of the issue of the Broker Warrants, the execution and delivery of the Broker Warrant Certificates, the compliance by the Corporation with the provisions of the Broker Warrant Certificates or the consummation of the transactions contemplated therein including, without limitation, the issue of the Broker Shares for the consideration and upon the terms and conditions set forth in the Broker Warrant Certificates, do or will (i) require the consent, approval, or authorization, order or agreement of, or registration or qualification with, any governmental agency, body or authority, court, stock exchange, securities regulatory authority or other Person, except (A) such as have been obtained, or (B) such as may be required under the Securities Laws of the Offering Jurisdictions and will be obtained by the Closing Date, or (ii) conflict with or result in any breach or violation of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Corporation is a party or by which it or any of the properties or assets thereof is bound, or the articles or by-laws of the Corporation or any resolution passed by the directors (or any committee thereof) or shareholders of the Corporation, or any statute or any judgment, decree, order, rule, policy or regulation of any court, governmental authority, any arbitrator, stock exchange or securities regulatory authority applicable to the Corporation or any of the properties or assets thereof which could have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Corporation.

(iii)

None of the issue of the Broker Warrants or the Broker Shares will be subject to any pre-emptive right or other contractual right to purchase securities granted by the Corporation or to which the Corporation is subject.  

(iv)

The issue by the Corporation to the Agents of the Broker Warrants will be exempt from the registration and prospectus requirements of the Securities Laws of the Province of Ontario.  

(q)

Public Disclosure :  Each of the documents in the Public Record which contains any of the Information is, as of the date thereof, in compliance in all material respects with applicable Securities Laws and did not contain any 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, in light of the circumstances under which they were made, not misleading and such documents collectively constitute full, true and plain disclosure of all material facts relating to the Corporation and do not contain any 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, in light of the circumstances under which they were made, not misleading, as of the date hereof.  There is no fact known to the Corporation which the Corporation has not publicly disclosed which materially adversely affects, or so far as the Corporation can reasonably foresee, will materially adversely affect, the assets, liabilities (contingent or otherwise), capital, affairs, business, prospects, operations or condition (financial or otherwise) of the Corporation or the ability of the Corporation to perform its obligations under this Agreement or the Ancillary Documents or which would otherwise be material to any Person intending to make an equity investment in the Corporation.

(r)

Timely Disclosure :  The Corporation is in compliance with all timely disclosure obligations under the 1933 Act and the 1934 Act and, without limiting the generality of the foregoing, there has not occurred any material adverse change in the assets, liabilities (contingent or otherwise), capital, affairs, business, prospects, operations or condition (financial or otherwise) of the Corporation or any Subsidiary which has not been publicly disclosed and none of the documents filed by or on behalf of the Corporation pursuant to applicable Securities Laws contain a misrepresentation (as such term is used in the 1934 Act or defined in the Securities Act (Ontario)) at the date of the filing thereof.

(s)

Accounting Controls :  The Corporation maintains a system of internal accounting controls sufficient to provide reasonable assurance that:  (i) transactions are completed in accordance with the general or a specific authorization of management of the Corporation; (ii) transactions are recorded as necessary to permit the preparation of consolidated financial statements for the Corporation in conformity with Canadian generally accepted accounting principles and to maintain asset accountability; (iii) access to assets of the Corporation and the Subsidiaries is permitted only in accordance with the general or a specific authorization of management of the Corporation; and (iv) the recorded accountability for assets of the Corporation and the Subsidiaries is compared with the existing assets of the Corporation and the Subsidiaries at reasonable intervals and appropriate action is taken with respect to any differences therein.

(t)

No Cease Trade Order :  No order preventing, ceasing or suspending trading in any securities of the Corporation o